Mr.
Joseph Tung
Advanced
Semiconductor Engineering, Inc.
Room
1901, TWTC International Trade Building, 19/F
333
Keelung Road, Section 1
Taipei
110
Taiwan,
Republic of China
(886-2)
8780-5489
|
Mr.
Kenneth S. J. Hsiang
ASE
Test Limited
10
West Fifth Street
Nantze
Export Processing Zone
Kaohsiung
Taiwan,
Republic of China
(886-7)
363-6641
|
Mark
J. Lehmkuhler, Esq.
Davis
Polk & Wardwell
18th
Floor, The Hong Kong Club Building
3A
Charter Road
Hong
Kong
(852)
2533-3300
|
William
Y. Chua, Esq.
Sullivan
& Cromwell LLP
28
th
Floor
Nine
Queen’s Road Central
Hong
Kong
(852)
2826-8688
|
o
|
a. The
filing of solicitation materials or an information statement subject
to
Regulation 14A, Regulation 14-C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
|
o
|
b. The
filing of a registration statement under the Securities Act of
1933.
|
o
|
c.
A
tender offer.
|
x |
d.
None of the above.
|
Transaction
Valuation*
|
Amount
of Filing Fee**
|
$867,185,237.32
|
$34,080.38
|
*
|
Calculated
solely for purposes of determining the filing fee. The filing fee
was
calculated based on the sum of (i) US$14.78 (the proposed cash payment
for
each ASE Test ordinary share listed on The Nasdaq Global Market)
multiplied by the sum of (x) 39,596,572 (the number of such shares
outstanding as of November 30, 2007 that are subject to the transaction)
and (y) 8,316,122 (the number of such shares issuable upon the exercise
of
options outstanding as of November 30, 2007 that have a per share
exercise
price lower than US$14.78), and (ii) US$0.185 (the proposed cash
payment,
payable in NT$ equivalent, for each ASE Test depositary share listed
on
the Taiwan Stock Exchange) multiplied by 859,652,000 (the number
of such
depositary shares outstanding as of November 30, 2007 that are subject
to
the transaction).
|
**
|
The
payment of the filing fee, calculated in accordance with Rule 0-11(b)
under the United States Securities Exchange Act of 1934, as amended,
equals .0000393 multiplied by the Transaction
Valuation.
|
¨
|
Check
box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and
identify the filing with which the offsetting fee was previously
paid.
Identify the previous filing by registration statement number, or
the Form
or Schedule and the date of its
filing.
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“PARTIES
TO THE SCHEME”
|
·
|
“Appendix
C – Information Relating to Directors and Executive Officers of ASE Test
and ASE Inc.”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“THE
COURT MEETING”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME”
|
·
|
“THE
SCHEME IMPLEMENTATION AGREEMENT”
|
·
|
“Appendix
A — Scheme Implementation
Agreement”
|
·
|
“Appendix
D — The Scheme”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“THE
COURT MEETING—Persons Entitled to Vote; Vote Required;
Quorum”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Effects of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Treatment of
Options”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Shareholders Outside the United States, the
Republic of China and the Republic of
Singapore”
|
·
|
“THE
SCHEME IMPLEMENTATION AGREEMENT—Scheme
Consideration”
|
·
|
“THE
SCHEME IMPLEMENTATION AGREEMENT—Treatment of
Options”
|
·
|
“Appendix
A — Scheme Implementation
Agreement”
|
·
|
“Appendix
D — The Scheme”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Appraisal
Rights”
|
·
|
“OTHER
IMPORTANT INFORMATION REGARDING ASE TEST—Transactions with
Affiliates”
|
·
|
“WHERE
YOU CAN FIND ADDITIONAL
INFORMATION”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Background of the
Scheme”
|
·
|
“THE
SCHEME IMPLEMENTATION AGREEMENT”
|
·
|
“WHERE
YOU CAN FIND ADDITIONAL
INFORMATION”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Background of the
Scheme”
|
·
|
“THE
SCHEME IMPLEMENTATION AGREEMENT”
|
·
|
“WHERE
YOU CAN FIND ADDITIONAL
INFORMATION”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“THE
COURT MEETING—Persons Entitled to Vote; Vote Required;
Quorum”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Effects of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Plans Following the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Effects on ASE Test if the Scheme Does Not
Become Effective”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Background of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Inc.’s Reasons for Effecting the Scheme;
Position as to Fairness”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Background of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Inc.’s Reasons for Effecting the Scheme;
Position as to Fairness”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Background of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Inc.’s Reasons for Effecting the Scheme;
Position as to Fairness”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Effects of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Effects on ASE Test if the Scheme Does Not
Become Effective”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—United States Federal Income Tax
Consequences”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Republic of China Income Tax
Consequences”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Background of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of Lehman
Brothers”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of ANZ
Singapore”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Inc.’s Reasons for the Scheme; Position
as to Fairness”
|
·
|
“Appendix
B – Opinion of Lehman Brothers
Inc.”
|
·
|
“Appendix
K – Opinion of ANZ Singapore
Limited”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of Lehman
Brothers”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of ANZ
Singapore”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Inc.’s Reasons for Effecting the Scheme;
Position as to Fairness”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Presentation of
Citi”
|
·
|
“Appendix
B – Opinion of Lehman Brothers
Inc.”
|
·
|
“Appendix
K – Opinion of ANZ Singapore
Limited”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“THE
COURT MEETING—Persons Entitled to Vote; Vote Required;
Quorum”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Inc.’s Reasons for Effecting the Scheme;
Position as to Fairness”
|
·
|
“THE
SCHEME IMPLEMENTATION AGREEMENT—Conditions to the
Scheme”
|
·
|
“Appendix
A – Scheme Implementation
Agreement”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Inc.’s Reasons for Effecting the Scheme;
Position as to Fairness”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Background of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Background of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of Lehman
Brothers”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of ANZ
Singapore”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Recommendation of ASE Test’s Independent
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Inc.’s Reasons for Effecting the Scheme;
Position as to Fairness”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME — Presentation of
Citi”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of Lehman
Brothers”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of ANZ
Singapore”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Presentation of
Citi”
|
·
|
“Appendix
B – Opinion of Lehman Brothers
Inc.”
|
·
|
“Appendix
K – Opinion of ANZ
Singapore”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of Lehman
Brothers”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Opinion of ANZ
Singapore”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Presentation of
Citi”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Financing
Arrangements”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Fees and
Expenses”
|
·
|
“THE
SCHEME IMPLEMENTATION AGREEMENT—Fees and
Expenses”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Financing
Arrangements”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“THE
COURT MEETING—Persons Entitled to Vote; Vote Required;
Quorum”
|
·
|
“OTHER
IMPORTANT INFORMATION REGARDING ASE TEST—Security Ownership of Certain
Beneficial Owners and Management”
|
·
|
“Appendix
A—Scheme Implementation Agreement”
|
·
|
“SUMMARY
TERM SHEET”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“THE
COURT MEETING—Purpose of the Court
Meeting”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Background of the
Scheme”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—Recommendation of ASE Test’s Independent
Directors”
|
·
|
“SPECIAL
FACTORS REGARDING THE SCHEME—ASE Inc.’s Reasons for Effecting the Scheme;
Position as to Fairness”
|
·
|
“THE
SCHEME IMPLEMENTATION AGREEMENT—Representations and
Warranties”
|
·
|
“OTHER
IMPORTANT INFORMATION REGARDING ASE TEST—Financial
Information”
|
·
|
“WHERE
YOU CAN FIND ADDITIONAL
INFORMATION”
|
·
|
“Appendix
F—Audited Consolidated Financial Statements of ASE Test and Its
Subsidiaries as of and for the Fiscal Years Ended December 31, 2004,
2005
and 2006”
|
·
|
“Appendix
G—Unaudited Consolidated Financial Statements of ASE Test and Its
Subsidiaries as of and for the Three Months and Nine Months Ended
September 30, 2006 and 2007”
|
·
|
“QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT
MEETING”
|
·
|
“THE
COURT MEETING—Solicitation of
Proxies”
|
(a)(1)
|
Form
of Scheme Document of ASE Test Limited
|
|
(a)(2)
|
Joint
Press Release dated September 4, 2007 (incorporated herein by reference
to
the reports on Form 6-K filed by ASE Test Limited and Advanced
Semiconductor Engineering, Inc., respectively, on September 4,
2007)
|
|
(a)(3)
|
Joint
Announcement dated September 4, 2007 (incorporated herein by reference
to
the reports on Form 6-K filed by ASE Test Limited and Advanced
Semiconductor Engineering, Inc., respectively, on September 5,
2007)
|
|
(b)(1)
|
Commitment
Letter by Citibank, N.A., Taipei Branch for up to US$750 million
NT$
equivalent term facility dated September 4, 2007
|
|
(b)(2)
|
Amendment
to Commitment Letter by Citibank, N.A., Taipei Branch dated November
30,
2007, extending the commitment termination date under the Commitment
Letter dated September 4, 2007
|
|
(c)(1)
|
Opinion
of Lehman Brothers Inc. dated September 4, 2007 (incorporated herein
by
reference to Appendix B to the Scheme Document)
|
|
(c)(2)
|
Presentation
of Lehman Brothers Inc. to the Special Committee of the Board of
Directors
of ASE Test Limited dated September 4, 2007
|
|
(c)(3)
|
Presentation
of Citigroup Global Markets Taiwan Ltd. to Advanced Semiconductor
Engineering, Inc. dated August 30, 2007
|
|
(c)(4)
|
Form
of Opinion of ANZ Singapore Limited (incorporated herein by reference
to
Appendix K of the Scheme Document)
|
|
(d)(1)
|
Scheme
Implementation Agreement dated September 4, 2007 between Advanced
Semiconductor Engineering, Inc. and ASE Test Limited (incorporated
herein
by reference to Appendix A to the Scheme Document)
|
|
(d)(2)
|
Form
of Undertaking delivered to ASE Test Limited and Advanced Semiconductor
Engineering, Inc. by affiliates of Advanced Semiconductor Engineering,
Inc.
|
|
(f)(1)
|
Not
Applicable
|
|
(g)(1)
|
Questions
and Answers relating to the Scheme dated October 30,
2007
|
|
(g)(2)
|
Form
of Proxy for the Court Meeting (incorporated herein by reference
to
Appendix E to the Scheme Document)
|
ASE
Test Limited
|
|||
By:
|
/s/ Kenneth S. J. Hsiang | ||
Name:
|
Kenneth
S. J. Hsiang
|
||
Title:
|
Chief
Financial Officer
|
Advanced
Semiconductor Engineering, Inc.
|
|||
By:
|
/s/ Joseph Tung | ||
Name:
|
Joseph
Tung
|
||
Title:
|
Chief
Financial Officer
|
Exhibit
Number
|
Description
|
(a)(1)
|
Form
of Scheme Document of ASE Test Limited
|
(a)(2)
|
Joint
Press Release dated September 4, 2007 (incorporated herein by reference
to
the reports on Form 6-K filed by ASE Test Limited and Advanced
Semiconductor Engineering, Inc., respectively, on September 4,
2007)
|
(a)(3)
|
Joint
Announcement dated September 4, 2007 (incorporated herein by reference
to
the reports on Form 6-K filed by ASE Test Limited and Advanced
Semiconductor Engineering, Inc., respectively, on September 5,
2007)
|
(b)(1)
|
Commitment
Letter by Citibank, N.A., Taipei Branch for up to US$750 million
NT$
equivalent term facility dated September 4, 2007
|
(b)(2)
|
Amendment
to Commitment Letter by Citibank, N.A., Taipei Branch dated November
30,
2007, extending the commitment termination date under the Commitment
Letter dated September 4, 2007
|
(c)(1)
|
Opinion
of Lehman Brothers Inc. dated September 4, 2007 (incorporated herein
by
reference to Appendix B to the Scheme Document)
|
(c)(2)
|
Presentation
of Lehman Brothers Inc. to the Special Committee of the Board of
Directors
of ASE Test Limited dated September 4, 2007
|
(c)(3)
|
Presentation
of Citigroup Global Markets Taiwan Ltd. to Advanced Semiconductor
Engineering, Inc. dated August 30, 2007
|
(c)(4)
|
Form
of Opinion of ANZ Singapore Limited (incorporated herein by reference
to
Appendix K of the Scheme Document)
|
(d)(1)
|
Scheme
Implementation Agreement dated September 4, 2007 between Advanced
Semiconductor Engineering, Inc. and ASE Test Limited (incorporated
herein
by reference to Appendix A to the Scheme Document)
|
(d)(2)
|
Form
of Undertaking delivered to ASE Test Limited and Advanced Semiconductor
Engineering, Inc. by affiliates of Advanced Semiconductor Engineering,
Inc.
|
(f)(1)
|
Not
Applicable
|
(g)(1)
|
Questions
and Answers relating to the Scheme dated October 30,
2007
|
(g)(2)
|
Form
of Proxy for the Court Meeting (incorporated herein by reference
to
Appendix E to the Scheme Document)
|
Very
truly yours,
|
|
[
Name/Title
]
|
Originating
Summons
|
)
|
Number
[
·
]
|
)
|
In
the Matter of
|
|
ASE
Test Limited
|
|
(RC
No. 199508552K)
|
|
and
|
|
In
the Matter of Section 210 of
|
|
the
Companies Act, Chapter 50
|
|
(Revised
Edition 2006)
|
Expression
|
Meaning
|
“
Scheme
Shareholders
”
|
Persons
who hold ordinary shares in the capital of ASE Test Limited, other
than
Advanced Semiconductor Engineering, Inc. and its subsidiaries, who
are
registered as holders of shares in the Register of Members of ASE
Test
Limited
|
ALLEN
& GLEDHILL LLP
|
|
One
Marina Boulevard #28-00
|
|
Singapore
018989
|
|
Solicitors
for
|
|
ASE
Test Limited
|
SUMMARY
TERM SHEET
|
1
|
QUESTIONS
AND ANSWERS ABOUT THE SCHEME AND THE COURT MEETING
|
9
|
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
14
|
THE
COURT MEETING
|
15
|
Date,
Time and Place
|
15
|
Purpose
of the Court Meeting
|
15
|
Persons
Entitled to Vote; Vote Required; Quorum
|
15
|
Voting
and Revocation of Proxies
|
15
|
Solicitation
of Proxies
|
16
|
PARTIES
TO THE SCHEME
|
17
|
ASE
Test
|
17
|
ASE
Inc.
|
17
|
SPECIAL
FACTORS REGARDING THE SCHEME
|
18
|
Background
of the Scheme
|
18
|
ASE
Test’s Reasons for the Scheme; Recommendation of ASE Test’s Board of
Directors
|
23
|
Opinion
of Lehman Brothers
|
26
|
Projected
Financial Information
|
33
|
Opinion
of ANZ Singapore
|
35
|
Recommendation
of ASE Test’s Independent Directors
|
37
|
ASE
Inc.’s Reasons for Effecting the Scheme; Position as to
Fairness
|
37
|
Presentation
of Citi
|
40
|
Effects
of the Scheme
|
42
|
Plans
Following the Scheme
|
43
|
Effects
on ASE Test if the Scheme Does Not Become Effective
|
43
|
Accounting
Treatment of the Scheme
|
43
|
Financing
Arrangements
|
43
|
Fees
and Expenses
|
45
|
Treatment
of Options
|
45
|
Implementation
of the Scheme
|
45
|
Closure
of Books
|
46
|
Settlement
and Registration Procedures
|
46
|
Shareholders
Outside the United States, the Republic of China or the Republic
of
Singapore
|
47
|
United
States Federal Income Tax Consequences
|
47
|
Republic
of China Income Tax Consequences
|
49
|
Appraisal
Rights
|
49
|
Regulatory
Matters
|
49
|
Responsibility
Statements
|
50
|
THE
SCHEME IMPLEMENTATION AGREEMENT
|
51
|
Structure
of the Scheme
|
51
|
Effective
Date of the Scheme
|
51
|
Scheme
Consideration
|
51
|
Treatment
of Options
|
51
|
Representations
and Warranties
|
52
|
Certain
Undertakings
|
52
|
Best
Endeavors
|
54
|
Appeal
Process
|
54
|
Non-Solicitation;
Fiduciary-Out
|
54
|
Publicity;
Confidentiality
|
54
|
Conditions
to the Scheme
|
55
|
Termination
Rights
|
55
|
Fees
and Expenses
|
56
|
Governing
Law; No Third-Party Beneficiary
|
56
|
PROVISIONS
FOR UNAFFILIATED ASE TEST SHAREHOLDERS
|
57
|
OTHER
IMPORTANT INFORMATION REGARDING ASE TEST
|
58
|
Share
Capital
|
58
|
Financial
Information
|
62
|
Comparative
Share Prices and Dividends
|
65
|
Security
Ownership of Certain Beneficial Owners and Management
|
67
|
Transactions
in ASE Test Shares
|
68
|
Transactions
with Affiliates
|
68
|
Agreements
with ASE Test Directors
|
69
|
Material
Litigation
|
69
|
Material
Changes
|
70
|
OTHER
IMPORTANT INFORMATION REGARDING ASE INC.
|
71
|
Financial
Information
|
71
|
DISCLOSURE
OF CERTAIN INTERESTS
|
74
|
Certain
Interests of ASE Test
|
74
|
Certain
Interests of ASE Test Directors
|
74
|
Certain
Interests of the Independent Financial Advisor
|
75
|
Certain
Interests of ASE Inc. and Its Concert Parties
|
76
|
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
|
81
|
Appendix
A
|
Scheme
Implementation Agreement
|
|
Appendix
B
|
Opinion
of Lehman Brothers Inc.
|
|
Appendix
C
|
Information
Relating to Directors and Executive Officers of ASE Test and ASE
Inc.
|
|
Appendix
D
|
The
Scheme
|
|
Appendix
E
|
Form
of Proxy for the Court Meeting
|
|
Appendix
F
|
Audited
Consolidated Financial Statements of ASE Test and Its Subsidiaries
as of
and for the Fiscal Year Ended December 31, 2004, 2005 and
2006
|
|
Appendix
G
|
Unaudited
Consolidated Financial Statements of ASE Test and Its Subsidiaries
as of
and for the Three Months and Nine Months Ended September 30, 2006
and
2007
|
|
Appendix
H
|
Letter
from ANZ Singapore Limited in Relation to the Unaudited Consolidated
Financial Statements of ASE Test and Its Subsidiaries as of and for
the
Nine Months Ended September 30, 2007
|
|
Appendix
I
|
Letter
from Deloitte & Touche in Relation to Projected Financial Information
of ASE Test
|
|
Appendix
J
|
Letter
from ANZ Singapore Limited in Relation to Projected Financial Information
of ASE Test
|
|
Appendix
K
|
Opinion
of ANZ Singapore Limited
|
|
Appendix
L
|
Rights
of ASE Test Shareholders in Respect of Voting, Dividends and
Capital
|
Accordingly,
the board of directors of ASE Test recommends that you vote FOR the
approval and adoption of the scheme.
For
a discussion of the material factors considered by the special committee
and the board of directors of ASE Test in reaching their conclusions
and
the reasons why the special committee and the board of directors
of ASE
Test determined that the scheme consideration is fair to the unaffiliated
ASE Test shareholders, see “Special Factors Regarding the Scheme—ASE
Test’s Reasons for the Scheme; Recommendation of ASE Test’s Board of
Directors” beginning on page [
·
].
|
Applicability
of Rules Related to “Going Private” Transactions; Positions as to the
Fairness of and Reasons for the Scheme
|
·
The
requirements of Rule 13e-3 under the Exchange Act, referred to herein
as
Rule 13e-3, apply to the scheme because ASE Inc. and ASE Test are
engaging
in a “going private” transaction under the Exchange Act. To
comply with the requirements of Rule 13e-3, ASE Inc. and ASE Test are
required to make certain statements as to, among other matters, their
purposes and reasons for the scheme, and their beliefs as to the
fairness
of the scheme to the unaffiliated ASE Test shareholders. See “Special
Factors Regarding the Scheme—ASE Test’s Reasons for the Scheme;
Recommendation of ASE Test’s Board of Directors” and “—ASE Inc.’s Reasons
for Effecting the Scheme; Position as to Fairness” beginning on pages
[
·
]
and
[
·
],
respectively.
|
|
Accounting
Treatment of the Scheme
|
The
scheme is expected to be accounted for using the purchase method
of
accounting for financial accounting purposes. See “Special
Factors Regarding the Scheme—Accounting Treatment of the Scheme” beginning
on page [
·
].
|
|
Appraisal
Rights
|
Once
the scheme is approved and adopted by the requisite majority of the
unaffiliated ASE Test shareholders, is sanctioned by the court and
becomes
effective, it will be binding on all ASE Test
shareholders. Dissenting ASE Test shareholders may file an
objection with the court against the granting of the court sanction,
but
no appraisal rights are available to dissenting ASE Test shareholders
in
connection with a scheme of arrangement effected under Singapore
law.
|
|
Conditions
to the Scheme
|
In
addition to the approval and adoption of the scheme by the unaffiliated
ASE Test shareholders, the scheme is subject to the satisfaction
or waiver
of a number of conditions, including the following:
·
the
making of required filings with each of the Investment Commission
of the
Republic of China, referred to herein as the ROC IC, and the Fair
Trade
Commission of the Republic of China, referred to herein as the ROC
FTC;
·
the
receipt of applicable regulatory approvals and such approvals not
being
revoked on or before the effective date of the scheme;
·
the
receipt of authorizations, consents, clearances, permissions and
approvals
necessary or required for the implementation of the scheme, except
as
would not be reasonably expected to have a material adverse effect
on ASE
Test or on the performance in all material respects by ASE Inc. of
its
obligations under the scheme implementation agreement;
·
the
accuracy of each party’s representations and warranties contained in the
scheme implementation agreement (disregarding any material or materiality
qualifications therein) in all material respects at and as of the
effective date of the scheme as if made at and as of such time, and
the
performance by each party in all material respects of all of its
obligations under the scheme implementation agreement required to
be
performed by it on or prior to the effective date of the
scheme;
·
the
sanction of the scheme by the court, and the lodgment of the court
order
with the Accounting and Corporate Regulatory Authority of Singapore,
referred to herein as the ACRA;
·
all
independent directors having joined in the recommendation of the
approval
and adoption of the scheme by the unaffiliated ASE Test
shareholders;
·
the
receipt of all approvals for the implementation of the treatment
of
outstanding ASE Test options; and
·
the
absence of any injunction or other court order or legal restraint
or
prohibition
|
Q:
|
What
is the scheme?
|
||
A:
|
On
September 4, 2007, ASE Inc. and ASE Test entered into a scheme
implementation agreement pursuant to which ASE Inc. would acquire
the
outstanding ASE Test ordinary shares held by ASE Test shareholders
(other
than ASE Inc. and its subsidiaries) by way of a scheme of arrangement
under Singapore law.
|
||
The
scheme is a court-supervised process under Section 210 of the Companies
Act, Chapter 50 of Singapore, in which a company proposes a transaction
to
its shareholders which, if approved and adopted by the requisite
statutory
majority of shareholders, is binding on all shareholders once sanctioned
by the court and becomes effective.
|
|||
Q:
|
Who
is entitled to the scheme consideration, and what will ASE Test
shareholders receive in the scheme? What is the effect of the
scheme?
|
||
A:
|
Upon
the effectiveness of the scheme, ASE Test shareholders (other than
ASE
Inc. and its subsidiaries) of record as of the books closure date
(as
described on page [
·
]
of this
scheme document) are entitled to receive the following scheme
consideration (net of applicable withholding tax, if any, and subject
to
reduction to the extent any dividend or other distribution is made
or paid
on or prior to the effectiveness of the scheme):
|
||
(i)
|
for
each ASE Test Nasdaq Share, US$14.78 in cash; and
|
||
(ii)
|
for
each ASE Test TDS, the NT$ equivalent of US$0.185 in cash (based
on the
prevailing exchange rate calculated in the manner described on page
[
·
]
of this
scheme document).
|
||
Upon
the effectiveness of the scheme, ASE Test will become an indirect
wholly-owned subsidiary of ASE Inc., and you
will no longer have
any interest
in ASE Test
’
s
future earnings or
growth. The ASE Test Nasdaq Shares and ASE Test TDSs will
thereafter be delisted from The NASDAQ Global Market and the Taiwan
Stock
Exchange, respectively, and the r
egistration
of the ASE Test
ordinary shares and ASE Test
’
s
reporting obligations under the
Exchange Act will be terminated upon application to the United States
Securities and Exchange Commission, referred to herein as the
SEC.
|
|||
The
scheme will become effective when a copy of the order of the court
sanctioning the scheme under Section 210 of the Companies Act, Chapter
50
of Singapore is duly lodged with the ACRA.
|
|||
Q:
|
What
is the legal effect of the statement by ASE Inc. that it does not
intend
to revise the scheme consideration?
|
||
A:
|
ASE
Inc. issued a statement on October 31, 2007, announcing that it does
not
intend to revise the scheme consideration. Accordingly,
pursuant to the provisions of Rule 20.2 of the Singapore Code, ASE
Inc.
will not be permitted to increase the scheme consideration or amend
the
terms of its offer in connection with the scheme. Furthermore,
in the event the scheme does not become effective due to the failure
to
obtain the requisite shareholder approval, pursuant to the provisions
of
Rule 33.1 of the Singapore Code, ASE Inc. will not be permitted to
make a
further or new offer for the shares of ASE Test for a period of 12
months
from the date of the court meeting, unless it obtains the prior consent
of
the SIC.
|
Q:
|
What
is the court meeting? Who will be entitled to
vote?
|
||
A:
|
The court meeting was directed to be convened by the court for the purpose of approving and adopting the scheme and will be held on [ · ] at [ · ][a.m./p.m.], Singapore time, at [ · ]. At the court meeting, all ASE Test |
|
shareholders
(other than ASE Inc. and its subsidiaries) of record as of [
·
]
will be entitled to vote on the proposal to approve and adopt the
scheme,
except that those ASE Test shareholders who are concert parties of
ASE
Inc. or affiliates of ASE Inc. will abstain from voting. See
“The Court Meeting” beginning on page [
·
]
and “Special
Factors Regarding the Scheme—Regulatory Matters” on page [
·
].
|
||
Q:
|
What
quorum and shareholder vote are required to approve and adopt the
scheme?
|
||
A:
|
A
quorum is required for the transaction of business at the court
meeting. The presence at the court meeting, in person or by
proxy, of unaffiliated ASE Test shareholders holding one-third of
the
outstanding ASE Test ordinary shares held by all unaffiliated ASE
Test
shareholders of record as of [
·
]
will
constitute a quorum.
|
||
The
affirmative vote of a majority in number of the unaffiliated ASE
Test
shareholders present and voting, either in person or by proxy, at
the
court meeting, representing not less than 75% in value of the ASE
Test
ordinary shares held by the unaffiliated ASE Test shareholders present
and
voting, either in person or by proxy, at the court meeting, is required
to
approve and adopt the scheme.
|
|||
Q:
|
How
do ASE Test’s board of directors and the independent directors recommend
that I vote? Why are there two sets of
recommendations?
|
||
A:
|
Upon
the recommendation of the special committee, the board of directors
of ASE
Test, with only the independent directors voting and the interested
directors abstaining from voting, unanimously determined that the
scheme
implementation agreement, the scheme and the other transactions
contemplated thereby are fair to and in the best interests of ASE
Test
shareholders (other than ASE Inc. and its subsidiaries), approved
the
scheme implementation agreement and the transactions contemplated
thereby,
and resolved to recommend the approval and adoption of the scheme
by the
unaffiliated ASE Test shareholders.
Accordingly, the board of
directors of ASE Test recommends that you vote FOR the approval and
adoption of the scheme.
For a discussion
of the material
factors considered by the special committee and the board of directors
of
ASE Test in reaching their conclusions and the reasons why the special
committee and the
board of directors
of ASE Test
determined that the
scheme consideration is fair to the unaffiliated ASE Test shareholders,
see “
Special Factors
Regarding the Scheme
—
ASE
Test
’
s
Reasons for the Scheme;
Recommendation of ASE Test
’
s
Board of Directors”
beginning
on page [
·
].
|
||
Pursuant
to the Singapore Code,
the independent directors are required to make a recommendation to
the ASE
Test shareholders (other than ASE Inc. and its subsidiaries) in relation
to the scheme.
Having
considered the
terms of the scheme, the recommendatio
ns
of the special
committee and the board of directors of ASE Test (with only the
independent directors voting and the interested directors abstaining
from
voting), the opinion of Lehman Brothers and the opinion of ANZ Singapore,
the independent directors
recommend
that you vote
FOR the approval and adoption of the scheme.
For
a discussion of
the material factors considered by the independent directors of ASE
Test
in reaching their recommendation, see “
Special Factors
Regarding the
Scheme
—
Recommendation
of
ASE Test
’
s
Independent
Directors”
beginning
on page [
·
].
|
|||
Q:
|
What
is the special committee and who are its
members?
|
||
A:
|
Following
the receipt of a proposal from ASE Inc. in respect of the scheme,
the
board of directors of ASE Test established a special committee comprised
of two independent directors to, among other things, review, evaluate,
negotiate and consider all matters which may arise in connection
with the
scheme. The members of the special committee are Mr. Albert
C.S. Yu and Mr. Guan Seng Sim.
|
||
Q:
|
Why
is there a separate independent financial advisor advising the independent
directors as to the scheme in addition to the financial advisor advising
the special committee of ASE Test?
|
||
A:
|
Following
the establishment of the special committee, the special committee
engaged
Lehman Brothers to act as its financial advisor with respect to its
evaluation of the scheme. Lehman Brothers advised and assisted
the special committee in the review, evaluation, negotiation and
consideration of the scheme, provided the special committee with
Lehman
Brothers’ analysis of the financial terms of the proposed scheme, and, on
September 4, 2007, rendered its oral and written opinion to the special
committee as to the fairness from a financial point of view of the
scheme
consideration to be received by the unaffiliated ASE Test shareholders
in
the scheme.
|
In
compliance with the Singapore Code, following the execution of the
scheme
implementation agreement, the independent directors engaged ANZ Singapore
as the independent financial advisor to advise them on the
scheme. Under the Singapore Code, the primary role of the
independent financial advisor is to render an opinion on the scheme
consideration to the independent directors after the scheme consideration
has been agreed upon between the parties. On [
·
], ANZ
Singapore rendered its written opinion to the independent directors
that,
based upon and having considered the information that has been made
available to it and the factors set out in its opinion, as of the
date of
its opinion, the scheme consideration is fair from a financial point
of
view to ASE Test shareholders (other than ASE Inc. and its
subsidiaries).
|
|||
Q:
|
What
do I need to do now?
|
||
A:
|
You
should carefully read and consider the information contained in this
scheme document. We encourage you to vote by submitting your
proxy whether or not you plan to attend the court meeting, so that
your
vote will be counted if you later decide not to attend the court
meeting.
|
||
If
you are a record holder of ASE Test ordinary shares as of [
·
],
please
complete, sign, date and return the enclosed proxy form as soon as
possible, and no later than [
·
]. Your
signed proxy form must be received no later than [
·
]
in order for
your vote to be counted at the court meeting.
|
|||
If
you hold ASE Test Nasdaq Shares in “street name” through a broker, you may
submit your voting instructions by mail, by telephone or by the Internet
in accordance with the procedures provided by your broker. If
you are a record holder of ASE Test TDSs or if you hold ASE Test
TDSs in
“street name” through a broker, you should follow the procedures provided
by the depositary of ASE Test TDSs.
|
|||
Q:
|
If
my ASE Test Nasdaq Shares are held in “street name” by my broker, will my
broker vote my shares for me?
|
||
A:
|
If
you hold your ASE Test Nasdaq Shares in “street name”, you should follow
the procedures provided by your broker regarding how to instruct
your
broker to vote your shares.
|
||
Q:
|
If
I hold ASE Test TDSs representing ASE Test ordinary shares, how will
my
shares be voted?
|
||
A:
|
If
you are a record holder of ASE Test TDSs or if you hold ASE Test
TDSs in
“street name” through a broker, you should follow the procedures provided
by the depositary of ASE Test TDSs in order to submit your voting
instructions.
|
||
Q:
|
How
are votes counted?
|
||
A:
|
You
may vote FOR or AGAINST the approval and adoption of the scheme,
or you
may abstain from voting on the scheme. Abstentions will not be
counted as votes cast or shares voting on the proposal, but will
count for
the purpose of determining whether a quorum is
present.
|
Q:
|
Can
I revoke or change my vote?
|
||
A:
|
Yes,
you can change your vote at any time before your proxy is voted at
the
court meeting. If you are a record holder of ASE Test ordinary shares,
you
may revoke your proxy by notifying the Secretary of ASE Test in writing
or
by delivering a new proxy, in each case, dated after the date of
the proxy
being revoked. In addition, you may revoke your proxy by attending
the
court meeting and voting in person. However, simply attending the
court
meeting will not revoke your proxy. If you have instructed a broker
to
vote your shares or hold your shares in the form of ASE Test TDSs,
the
above-described options for changing your vote do not apply; instead,
you
must follow the instructions received from your broker or the depositary
of ASE Test TDSs, as applicable, to change your vote.
|
||
Q:
|
Who
will count the votes at the court meeting?
|
||
A:
|
At
the court meeting, a representative of [
·
]
will count
the votes and act as an inspector of voting.
|
||
Q:
|
What
does it mean if I get more than one proxy card or voting instruction
card?
|
||
A:
|
If
your ASE Test Nasdaq Shares or ASE Test TDSs are registered differently
or
held in more than one account, you will receive more than one proxy
card
or voting instruction card. Please complete and return all of
the proxy cards and voting instruction cards you receive to ensure
that
all your ASE Test Nasdaq Shares or ASE Test TDSs are
voted.
|
||
Q:
|
When
is the scheme expected to become effective?
|
||
A:
|
If
the scheme is approved and adopted by the requisite majority of the
unaffiliated ASE Test shareholders at the court meeting and all other
conditions to the scheme are satisfied, it is anticipated that the
scheme
will become effective during the first quarter of
2008. However, it is possible that factors outside of the
control of either ASE Inc. or ASE Test could result in the scheme
becoming
effective at a later time or not becoming effective at
all.
|
||
Q:
|
Should
I send in my share certificates now?
|
||
A:
|
No. You
will be notified of the procedures to surrender your share certificates
and receive the scheme consideration after the scheme has become
effective.
|
||
Q:
|
Is
the scheme expected to be taxable to me?
|
||
A:
|
It
is expected that the scheme will be a taxable disposition for most
holders
of ASE Test ordinary shares. U.S. holders (as defined on page
[
·
])
should see “Special Factors Regarding the Scheme—United States Federal
Income Tax Consequences” beginning on page [
·
]. Taiwan
holders should see “Special Factors Regarding the Scheme—Republic of China
Income Tax Consequences” beginning on page [
·
].
|
||
Q:
|
Am
I entitled to appraisal rights?
|
||
A:
|
No.
Once the scheme is approved and adopted by the unaffiliated ASE Test
shareholders and sanctioned by the court and becomes effective, it
will be
binding on all ASE Test shareholders. Dissenting ASE Test
shareholders may file an objection with the court against the granting
of
the court sanction, but no appraisal rights are available to dissenting
shareholders in connection with a scheme of arrangement effected
under
Singapore law.
|
||
Q:
|
Who
should I contact with additional questions?
|
||
A:
|
If
you have more questions about
the scheme, need assistance in submitting your proxy or voting your
shares, or need additional copies of the scheme do
cument or the
enclosed proxy form,
you should contact
MacKenzie
|
||
MacKenzie
Partners, Inc.
|
|
105
Madison Avenue
|
|
New
York, NY 10016
|
|
In
the U.S.:
|
|
(1-212)
929-5500 (call collect)
|
|
or
|
|
(1-800)
322-2885 (call toll-free)
|
|
In
Asia and Europe:
|
|
(44-020)
7170-4155
|
|
·
|
the
occurrence of any event,
change or other circumstance that could give rise to the termination
of
the
scheme
implementation
agreement;
|
|
||
|
·
|
the
outcome of
any legal proceeding
that may be
instituted against
ASE Test
,
ASE
Inc.,
members of
their
respective
board
of directors and others
relating to the
scheme or
the
scheme
implementation
agreement;
|
|
||
|
·
|
the
inability to complete the
scheme
due to the fa
ilure to obtain
the
requisite
shareholder
approval or the failure to
satisfy other
conditions
to the
scheme
;
|
|
||
|
·
|
a
ny
significant delay in the expected
completion of the
scheme or failure
to complete the
scheme for any other reasons
;
|
|
||
|
·
|
t
he
effect of the ann
ouncement of
the scheme on ASE
Test
’
s
or ASE Inc.
’
s
operating
results and business
generally;
|
|
||
|
·
|
regulatory
review, approvals or
restrictions;
|
|
||
|
·
|
general
economic and market
conditions; and
|
|
||
|
·
|
the
amount of
the costs,
fees, expenses and
charges related to the
scheme
and the terms
and conditions
of
the financing for the
scheme
.
|
Date:
|
[
·
]
|
|
Time:
|
[
·
][a.m./p.m.],
Singapore time
|
|
Place:
|
[
·
]
|
·
|
the
per share scheme consideration
represents:
|
o
|
a
premium of approximately 25.6% above the last transacted price of
each ASE
Test Nasdaq Share on The NASDAQ Global Market of US$11.77 as of August
31,
2007, the last full trading day of ASE Test Nasdaq Shares on The
NASDAQ
Global Market prior to the announcement of the
scheme;
|
o
|
a
premium of approximately 28.1% above the average of the last transacted
prices of ASE Test Nasdaq Shares on The NASDAQ Global Market of US$11.54
over the one-week period ended August 31, 2007, the last full trading
day
of ASE Test Nasdaq Shares on the NASDAQ Global Market prior to the
announcement of the scheme;
|
o
|
a
premium of approximately 25.6% above the average of the last transacted
prices of ASE Test Nasdaq Shares on The NASDAQ Global Market of US$11.77
over the one-month period ended August 31, 2007, the last full trading
day
of ASE Test Nasdaq Shares on the NASDAQ Global Market prior to the
announcement of the scheme; and
|
o
|
a
premium of approximately 30.9% above the average of the last transacted
prices of ASE Test Nasdaq Shares on The NASDAQ Global Market of US$11.29
over the twelve-month period ended August 31, 2007, the last full
trading
day of ASE Test Nasdaq Shares on the NASDAQ Global Market prior to
the
announcement of the scheme;
|
·
|
the
efforts made by the special committee and its financial and legal
advisors
to negotiate and execute a scheme implementation agreement containing
financial and other terms favorable to ASE Test, the fact that the
scheme
consideration and the terms and conditions of the scheme implementation
agreement were arrived at after arm’s-length negotiations between ASE Inc.
and the special committee (advised by financial and legal advisors)
on a
willing-seller, willing-buyer basis, after
multiple negotiating
sessions and
discussions
,
which resulted in an increase in the scheme consideration
from
US$14.30 per ASE Test Nasdaq Share to US$14.78 per ASE Test Nasdaq
Share,
and the business judgment of the special committee that, based upon
the
negotiations that had transpired, a price higher than US$14.78 could
not
likely be obtained
;
|
·
|
the
analyses and presentations of Lehman Brothers to the special committee,
and Lehman Brothers’ written opinion that, as of the date of the scheme
implementation agreement, the scheme consideration is fair to the
unaffiliated ASE Test shareholders from a financial point of
view;
|
·
|
the
scheme provides for an all cash consideration, which allows the
unaffiliated ASE Test shareholders to realize their investment for
a cash
consideration that is at a significant premium over the market prices
of
ASE Test Nasdaq Shares and ASE Test TDSs prior to the announcement
of the
scheme, an option which may not otherwise be readily available to
such
shareholders due to the low trading liquidity of ASE Test Nasdaq
Shares
and ASE Test TDSs;
|
·
|
ASE
Inc.’s indirect ownership of a majority of the outstanding ASE Test
ordinary shares and the fact that, as a practical matter, ASE Test
is
unlikely to attract and complete any alternative acquisition proposal
given ASE Inc.’s ownership position in ASE
Test;
|
·
|
the
fact that the terms of the scheme implementation agreement contain
a
“fiduciary-out” exception as described below in “The Scheme Implementation
Agreement—Non-Solicitation; Fiduciary-Out”, which allows ASE Test, under
certain circumstances, to change or withdraw its recommendation and
terminate the scheme implementation
agreement;
|
·
|
the
likelihood and anticipated timing of the receipt of required regulatory
approvals for the scheme and the completion of the scheme;
and
|
·
|
the
financial commitment obtained by ASE Inc., that the scheme is not
conditioned upon the receipt of financing by ASE Inc. and that ASE
Inc.
has the financial resources to complete the
scheme.
|
·
|
the
scheme is structured so that the
affirmative vote of a majority in number of the unaffiliated ASE
Test
shareholders
present
and voti
ng, either
in
person or by proxy, at the court meeting, representing not less
|
|
than
75% in value of ASE Test
ordinary shares held by the unaffiliated ASE Test shareholders
present
and voting,
either in person or by proxy, at the court meeting, is required
f
or its
approval and
adoption;
|
·
|
the
quorum for the court meeting
is voluntarily set by the parties to require the presence at the
court
meeting, in person or by proxy, of unaffiliated ASE Test shareholders
holding one-third of the outstanding ASE Test ordi
nary shares
held by all
unaffiliated ASE Test shareholders, which is a higher threshold than
that
required by Singapore law or the Articles of Association of ASE Test
(which requires a quorum consisting of the presence of ASE Test
shareholders holding not
less
than one-third of the
outstanding ASE Test ordinary shares held by all ASE Test
shareholders);
|
·
|
t
he
special committee consisted
entirely of directors
of
ASE Test
who are n
ot
affiliated
with
ASE Inc. and
are independent for
purposes of the scheme;
|
·
|
the
fact that the special committee had the ultimate authority on behalf
of
ASE Test to decide whether or not to proceed with a transaction,
subject
to the approval of the scheme implementation agreement by the board
of
directors of ASE Test;
|
·
|
t
he
special
com
mittee
retained
and received advice and
assistance from
its
own financial and legal advisors,
each of which has extensive experience in transactions similar to
the
scheme and
in
evaluating, negotiating and analyzing the terms of the
scheme;
|
·
|
the
fact that the terms of the scheme implementation agreement contain
a
“fiduciary-out” exception, which allows ASE Test, under certain
circumstances, to change or withdraw its recommendation and terminate
the
scheme implementation agreement;
|
·
|
the
financial and legal a
dvisors
to
the special committee
reported directly
to
the special committee and took direction
s
exclusi
vely from the
special committee;
and
|
·
|
members
of the special committee will not receive any consideration pursuant
to
the scheme that is different from that received by any other unaffiliated
ASE Test shareholder.
|
·
|
a
s
a result of the scheme, ASE Test
will become an indirect wholly-owned subsidiary of ASE Inc., and
ASE Test
shareholders (other than
ASE Inc. and its subsidiaries)
w
ill
cease
to have any ownership
interest in ASE Test or
participate
in
ASE Test
’
s
future
e
arnings or
growth;
|
·
|
given
ASE Inc.
’
s
controlling
ownership
position
in
ASE Test and
the likelihood
that no feasible
competing
acquisition
proposals
would emerge
,
no
third
parties
were contacted
regarding such
competing acquisition proposals
, and the
specia
l
committee and the board of
directors of ASE Test
did not
consider
the potential valuation
of ASE Test ordinary shares
available in
alternative
acquisition
transactions;
|
·
|
the
receipt of scheme
consideration by ASE Test shareholders (other than
ASE Inc. and its
subsidiaries)
may be taxable
to such shareholders;
|
·
|
the
scheme is conditioned on the
satisfaction or waiver of certain conditions, and there is no assurance
that all or any of the conditions will be satisfied or waived in
a timely
manner or at all; a
nd
|
·
|
the
risks and costs to ASE
Test if the scheme does not become effective or is otherwise terminated,
including potentially negative market reaction, fees and expenses
incurred, and diversion of
resources.
|
·
|
the
scheme implementation agreement and correspondences between ASE Inc.
and
ASE Test, including the specific terms of the
scheme;
|
·
|
publicly
available information concerning ASE Test that Lehman Brothers believed
to
be relevant to its analysis, including ASE Test’s Annual Report on Form
20-F, as amended, for the fiscal year ended December 31, 2006 and
ASE
Test’s unaudited financial results of ASE Test for the six months ended
June 30, 2007;
|
·
|
financial
and operating information with respect to ASE Test’s business, operations
and prospects furnished to Lehman Brothers by ASE Test, consisting
of
financial projections of ASE Test prepared by ASE Test’s management for
the fiscal year ending December 31, 2007, referred to herein as the
projections, and management accounts for July
2007;
|
·
|
the
trading history of the ASE Test Nasdaq Shares and ASE Test TDSs from
September 1, 2006 through August 31, 2007 and a comparison of that
trading
history with those of the NASDAQ Composite Index and other companies
that
Lehman Brothers deemed relevant;
|
·
|
a
comparison of ASE Test’s historical financial results and present
financial condition with those of other companies that Lehman Brothers
deemed relevant;
|
·
|
a
comparison of the financial terms of the scheme with the financial
terms
of other transactions that Lehman Brothers deemed relevant;
and
|
·
|
independent
equity research analysts’ estimates of ASE Test’s future financial
performance.
|
|
Comparison of
Enterprise
Value
to
Estimated
2007 EBITDA Ratios
|
Comparison of
Enterprise
Value
to
Estimated
2007 EBIT Ratios
|
||||||
Low
of Selected
Companies
|
3.4x
|
8.2x
|
||||||
High
of Selected
Companies
|
5.0x
|
11.3x
|
||||||
ASE
Test as of August 31,
2007
|
3.7x
|
8.5x
|
||||||
ASE
Test at Proposed
Scheme
Consi
deration
|
5.1x
|
11.6x
|
Implied
Per
Share
Equity
Reference
Range
for ASE
Test
|
Per
Share
Consideration
|
|||||
US
$11.19
–
US
$13.81
|
US
$
|
14.78
|
Implied
Per
Share
Equity
Reference
Range
for ASE
Test
(With
20% Control
Premium)
|
Per
Share
Conside
ration
|
||||
US
$1
3.43
-
US
$1
6.57
|
US
$
|
14.78
|
Date
Announced
|
|
Acquiror
|
|
Target
|
June
26,
2007
|
|
Affinity
Equity Partners and TPG
Capital
|
|
United
Test and
Assembly
Center
Ltd.
|
March
1,
2007
|
|
Singapore
Technologies
Semiconductors
|
|
STATS
ChipPAC
Ltd.
|
|
|
Transaction
Implied
Enterprise
Value/
Acquisition
Year
EBITDA
|
Low
of Selected
Transactions
|
|
5.0x
|
High
of Selected
Transactions
|
|
5.9x
|
ASE
Test at Proposed Per Share
Scheme
Consideration
|
|
5.1x
|
Impl
ied
Per
Share
Equity
Reference
Range
for ASE
Test
|
Per Share
Consideration
|
|||||
US
$13.52 -
US
$15.85
|
US
$
|
14.78
|
Implied
Per Share Equity Reference Range for ASE
Test
|
|
Per
Share
Consideration
|
|
US
$12.94 -
US
$15.30
|
|
US
$
|
14.78
|
Period
Prior to Announcement
|
||||||
Research
Analysts’ Price Targets
|
|
Target Price
|
|
Per
Share
Consideration
|
||
Average
|
|
US
$
|
1
4
.00
|
|
US
$
|
14.7
8
|
Low
|
|
US
$
|
13.00
|
|
||
High
|
|
US
$
|
15.00
|
|
(US$
in thousands)
|
Q307
|
Q407
|
2007
|
2007
(Adjusted)
(1)
|
||||
Net
Sales
|
126,819
|
127,378
|
466,439
|
—
|
||||
Gross
Profit
|
49,398
|
50,381
|
159,587
|
—
|
||||
EBITDA
|
64,220
|
66,364
|
212,592
|
239,257
|
||||
EBIT
|
34,961
|
35,974
|
94,099
|
105,372
|
||||
Net
Income (ROC GAAP)
|
33,740
|
36,423
|
85,537
|
—
|
||||
Net
Income (U.S. GAAP)
|
21,532
|
30,412
|
78,260
|
—
|
(1)
|
As
described above under
“
—Opinion
of Lehman
Brothers” on page [
·
],
the projected EBITDA and EBIT of ASE Test are adjusted to appropriately
take into account stock-based compensation expenses not reflected
under
ROC GAAP and ASE Test’s 30% shareholding in ASE Korea by adding the
estimated proportionate shares of ASE Korea’s EBITDA and EBIT to ASE
Test’s estimated EBITDA and EBIT,
respectively.
|
|
·
|
Projected
revenue is derived using a bottom-up approach, which reflects
expected
revenue to be generated from each
customer;
|
|
·
|
Cost
of goods sold is estimated based on detailed projections of each
expense
item, including raw material, direct and indirect labor, rent,
depreciation and amortization
expenses;
|
|
·
|
Fixed
costs are estimated based on historical expenses incurred in
the fiscal
first and second quarter periods of 2007, and variable costs
are based on
estimates on sales volume, forecasted headcount and other factors;
and
|
|
·
|
Operating
expense is comprised of research and development expenses, as
well as
sales and marketing and general administrative costs, whereby
such
expenses are estimated based on costs incurred in fiscal first
and second
quarter periods of 2007, taking into consideration forecasted
headcount,
salary adjustments, and other relevant
factors.
|
|
(i)
|
ASE
Test’s (x) enterprise value, referred to herein as EV, to EBITDA for
the
last 12 months and normalized by eliminating non-recurring items,
referred
to herein as EV / LTM EBITDA, and (y) EV to consensus EBITDA
estimates for
fiscal year 2007, referred to herein as EV /FY07E EBITDA, as
implied by
the scheme consideration, exceed both the mean and median EV
/ LTM EBITDA
and EV / FY07E EBITDA multiples of the selected broadly comparable
medium
capitalization companies (as described in ANZ Singapore’s
opinion);
|
|
(ii)
|
ASE
Test’s (x) EV to EBIT for the last 12 months and normalized by eliminating
non-recurring items, referred to herein as EV / LTM EBIT, and
(y) EV to
consensus EBIT estimates for fiscal year 2007, referred to herein as EV /
FY07E EBIT, as implied by the scheme consideration, exceed both
the mean
and median EV / LTM EBIT and EV / FY07E EBIT multiples of the
selected
broadly comparable medium capitalization companies (as described
in ANZ
Singapore’s opinion);
|
|
(iii)
|
ASE
Test’s (x) price to earnings per share ratio for the last 12 months
and
normalized by eliminating non-recurring items, referred to herein
as LTM
PER, and (y) consensus PER estimates for fiscal year 2007, referred
to
herein as FY07E PER, as implied by the scheme consideration,
exceed both
the mean and median LTM PER and FY07E PER multiples of the
selected broadly comparable medium capitalization companies (as
described
in ANZ Singapore’s opinion);
|
|
(iv)
|
ASE
Test’s price to net tangible assets per share, referred to herein
as Price
/ NTA, as implied by the scheme consideration, exceeds both the
mean and
median Price / NTA multiples of the selected broadly comparable
medium
capitalization companies (as described in ANZ Singapore’s
opinion);
|
|
(v)
|
the
price of ASE Test Nasdaq Shares for the 12-month period prior
to September
4, 2007, the date of the announcement of the execution of the
scheme
implementation agreement, up to August 31, 2007, the last full
trading
date of ASE Test Nasdaq Shares on The NASDAQ Global Market prior
to
September 4, 2007, had outperformed against the NASDAQ Composite
Index and
the Philadelphia Stock Exchange Semiconductor Index, and underperformed
against the Comparable Companies Index (as described in ANZ Singapore’s
opinion); the price of ASE Test Nasdaq Shares for the 12-month
period
prior to September 4, 2007, up to the date set forth in the written
opinion, had outperformed the NASDAQ Composite Index, the Philadelphia
Stock Exchange Semiconductor Index and the Comparable Companies
Index;
|
|
(vi)
|
the
scheme consideration represents a 25.6% premium to the last transacted
price of ASE Test Nasdaq Shares on The NASDAQ Global Market of
US$11.77 as
of August 31, 2007, the date of the last full trading day of
ASE Test
Nasdaq Shares on the NASDAQ Global Market prior to the announcement
of the
scheme, and a premium to the volume weighted average price, referred
to
|
|
|
herein
as VWAP, of ASE Test Nasdaq Shares over the 30-day, 60-day,
90-day and
180-day periods preceding September 4, 2007, except in the
case of ASE
Test TDS where the scheme consideration represents a small
discount to the
VWAP over the 60-day and 90-day periods for ASE Test
TDSs;
|
|
(vii)
|
the
premium implied by the scheme consideration exceeds the mean
and median of
the premia to the last traded price before the respective announcement
dates and the 7-day, 30-day average prices of the selected privatizations
set forth in the written opinion but is below the mean and median
of the
premia to the 90-day average prices of such selected
privatizations;
|
(viii)
|
the
valuation multiples implied by the scheme consideration may be
considered
to be generally comparable to the transaction multiples implied
by the
privatization of United Test and Assembly Center
Ltd.;
|
|
(ix)
|
the
trading volumes of ASE Test Nasdaq Shares and ASE Test TDSs appear
to be
relatively low; and
|
|
(x)
|
as
of the date set forth in the written opinion, there is no publicly
available evidence of an alternative offer for ASE Test ordinary
shares
from any third party for a consideration that is above the terms
of the
scheme as proposed by ASE Inc.
|
|
·
|
the
scheme is intended to
simplify
the corporate structure of the ASE group by making ASE
Test a wholly-owned subsidiary of ASE Inc., thereby reducing the
costs and administrative burden associated with operating ASE
Test as a
publicly traded company, including the costs associated with
regulatory
filings and compliance
requirements;
|
|
·
|
the
scheme is intended
to
enhance
the
promotion of one common brand and identity and eliminate investor
confusion between ASE Inc. and ASE
Test;
|
|
·
|
the
scheme is intended
to
increase
flexibility of ASE Inc. to make investment and other business
decisions
within the ASE group, including efficient allocation of resources
between
the various businesses within the ASE group;
and
|
|
·
|
provide
liquidity to ASE
Test shareholders at a premium
price.
|
|
·
|
the
per share scheme
consideration represents:
|
|
o
|
a
premium of approximately 25.6% above the last transacted price
of each ASE
Test Nasdaq Share on The NASDAQ Global Market of US$11.77 as
of August 31,
2007, the last full trading day of ASE Test Nasdaq Shares on
The NASDAQ
Global Market prior to the announcement of the
scheme;
|
|
o
|
a
premium of approximately 28.1% above the average of the last
transacted
prices of ASE Test Nasdaq Shares on The NASDAQ Global Market
of US$11.54
over the one-week period ended August 31, 2007, the last full
trading day
of ASE Test Nasdaq Shares on the NASDAQ Global Market prior to
the
announcement of the scheme;
|
|
o
|
a
premium of approximately 25.6% above the average of the last
transacted
prices of ASE Test Nasdaq Shares on The NASDAQ Global Market
of US$11.77
over the one-month period ended August 31, 2007, the last full
trading day
of ASE Test Nasdaq Shares on the NASDAQ Global Market prior to
the
announcement of the scheme; and
|
|
o
|
a
premium of approximately 30.9% above the average of the last
transacted
prices of ASE Test Nasdaq Shares on The NASDAQ Global Market
of US$11.29
over the twelve-month period ended August 31, 2007, the last
full trading
day of ASE Test Nasdaq Shares on the NASDAQ Global Market prior
to the
announcement of the scheme;
|
|
·
|
the
efforts made by the special committee and its financial and legal
advisors
to negotiate and execute a scheme implementation agreement containing
financial and other terms favorable to ASE Test, the fact that
the scheme
consideration and the terms and conditions of the scheme implementation
agreement were arrived at after arm’s-length negotiations between ASE Inc.
and the special committee (advised by financial and legal advisors)
on a
willing-seller, willing-buyer basis, after
multiple negotiating
sessions and
discussions
,
which resulted
in an
increase in the scheme consideration from US$14.30 per ASE Test
Nasdaq
Share to US$14.78 per ASE Test Nasdaq Share, and the
business
judgment
of the special
|
|
|
committee
that, based
upon
the negotiations that had
transpired, a price higher than US$14.78 could not likely be
obtained;
|
|
·
|
the
written opinion of the financial advisor to the special committee
that, as
of the date of the scheme implementation agreement, the scheme
consideration is fair to the unaffiliated ASE Test shareholders
from a
financial point of view;
|
|
·
|
the
written opinion of the IFA that, as of the date of the opinion,
the scheme
consideration to be received by ASE Test shareholders (other
than ASE Inc.
and its subsidiaries) is fair to such ASE Test shareholders from
a
financial point of view;
|
|
·
|
the
scheme provides for an all cash consideration, which allows the
unaffiliated ASE Test shareholders to realize their investment
for a cash
consideration that is at a significant premium over the market
prices of
ASE Test Nasdaq Shares and ASE Test TDSs prior to the announcement
of the
scheme, an option which may not otherwise be readily available
to such
shareholders due to the low trading liquidity of ASE Test Nasdaq
Shares
and ASE Test TDSs;
|
|
·
|
ASE
Inc.’s indirect ownership of a majority of the outstanding ASE Test
ordinary shares as of the date of this scheme document and the
fact that,
as a practical matter, ASE Test is unlikely to attract and complete
any
alternative acquisition proposal given ASE Inc.’s ownership position in
ASE Test;
|
|
·
|
the
fact that the terms of the scheme implementation agreement contain
a
“fiduciary-out” exception as described below in “The Scheme Implementation
Agreement—Non-Solicitation; Fiduciary-Out”, which allows ASE Test, under
certain circumstances, to change or withdraw its recommendation
and
terminate the scheme implementation
agreement;
|
|
·
|
the
likelihood and anticipated timing of the receipt of required
regulatory
approvals for the scheme and the completion of the
scheme;
|
|
·
|
the
financial commitment obtained by ASE Inc., that the scheme is
not
conditioned upon the receipt of financing by ASE Inc., and that
ASE Inc.
has the financial resources to complete the
scheme;
|
|
·
|
the
scheme
is structured so that
t
he affirmative
vote
of a majority in number of the unaffiliated ASE Test shareholders
present
and voting,
either in person or by proxy, at the court meeting, representing
not less
than 75% in value of ASE Test ordinary shares held by the unaffiliated
ASE
T
est shareholders
present
and voting,
either in person or by proxy, at the court meeting, is required
for its
approval and adoption;
|
|
·
|
the
quorum for the court meeting
is voluntarily set by the parties to require the presence at
the court
meeting, in person
or
by proxy, of unaffiliated ASE Test shareholders holding one-third
of the
outstanding ASE Test ordinary shares held by all unaffiliated
ASE Test
shareholders, which is a higher threshold than that required
by Singapore
law or the Articles of Associatio
n
of ASE Test (which requires a
quorum consisting of the presence of ASE Test shareholders holding
not
less than one-third of the outstanding ASE Test ordinary shares
held by
all ASE Test shareholders);
|
|
·
|
t
he
special
committee consisted entirely of
directors
who are
n
ot
affiliated
with
ASE Inc.
and are independent for
purposes of the scheme;
|
|
·
|
the
fact that the special committee had the ultimate authority on
behalf of
ASE Test to decide whether or not to proceed with a
transaction, subject to the approval of the scheme implementation
agreement by the board of directors of ASE
Test;
|
|
·
|
t
he
special
committee retained and received
advice and assistance from
its
own
financial and legal advisors,
each of which has extensive experience in transactions similar
to the
s
cheme
and in evaluating,
negotiating and analyzing the terms of the
scheme;
|
|
·
|
t
he
financial
and legal advisors of
the special committee
reported
directly to the special
committee and took direction
s
exclusi
vely from
the special committee;
and
|
|
·
|
members
of the special committee will not receive any consideration pursuant
to
the scheme that is different from that received by any other
unaffiliated
ASE Test shareholder.
|
Filing
fees
|
US$
|
100,000
|
|
Financial
advisor fees and expenses
|
4,000,000
|
||
Legal
fees and
expenses
|
4,000,000
|
||
Printing
and solicitation costs
|
200,000
|
||
Miscellaneous
|
100,000
|
||
Total
|
US$
|
8,400,000
|
(i)
|
Entitlements
to the scheme consideration will be determined on the basis of
the ASE
Test shareholders (other than ASE Inc. and its subsidiaries)
and their
holdings of ASE Test ordinary shares appearing on the Register
of Members
on the books closure date, which is tentatively scheduled on
[
·
]
at 5:00
p.m., Singapore time.
|
(ii)
|
Each
ASE Test shareholder is strongly encouraged to take necessary
actions to
ensure that the ASE Test ordinary shares owned by such shareholder
are
registered in his or her name, or, if such shareholder is a holder
of ASE
Test Nasdaq Shares in “street name” through a broker or in the form of ASE
Test TDSs, such shares are in accounts in his or her name, by
the books
closure date, which is tentatively scheduled for [
·
]
at 5:00
p.m., Singapore time.
|
(iii)
|
On
the effective date of the scheme, each existing share certificate
representing an interest in ASE Test ordinary shares held by
an ASE Test
shareholder (other than ASE Inc. and its subsidiaries) will cease
to be
evidence of title to the ASE Test ordinary shares represented
thereby.
Within 10 calendar days after the effective date of the scheme,
ASE Inc.
will make payment of the scheme consideration to each ASE Test
shareholder
(other than ASE Inc. and its subsidiaries) based on his or her
holding of
ASE Test ordinary shares as of the books closure
date.
|
|
·
|
certain
financial institutions;
|
|
·
|
insurance
companies;
|
|
·
|
dealers
and traders in securities or foreign
currencies;
|
|
·
|
persons
holding shares as part of a hedge, straddle, conversion or other
integrated transaction;
|
|
·
|
persons
whose functional currency for U.S. federal income tax purposes
is not the
U.S. dollar;
|
|
·
|
partnerships
or other entities classified as partnerships for U.S. federal
income tax
purposes;
|
|
·
|
persons
liable for the alternative minimum
tax;
|
|
·
|
tax-exempt
organizations;
|
|
·
|
persons
holding shares that own or are deemed to own 10% or more of our
voting
stock; or
|
|
·
|
persons
who acquired ASE Test ordinary shares pursuant to the exercise
of any
employee stock option or otherwise as
compensation.
|
|
(a)
|
for
each ASE Test Nasdaq Share held by such ASE Test shareholder,
US$14.78 in
cash; and
|
|
(b)
|
for
each ASE Test TDS held by such ASE Test shareholder, the NT$
equivalent of
US$0.185 in cash determined as of the books closure date based
on the noon
buying rate as of the books closure date, referred to as the
prevailing
exchange rate elsewhere in this scheme
document.
|
·
|
For
each in-the-money ASE
Test option, the existing terms of each such option will be
amended to
permit the option to be, and each such option will be, deemed
to have been
exercised by ASE Test as of the books closure date on behalf
of the option
holder on a cashless basis through a broker, and the broker
will
|
|
advance
the full cash exercise price of such option to ASE Test.
The ASE Test
ordinary shares issued upon such mandatory exercise of each
in-the-money
ASE Test option will be acquired by ASE Inc. for the scheme
consideration
of US$14.78 per ASE Test Nasdaq Share in cash, and as a result
the option
holder will receive a cash payment equal to (i) the number
of ASE Test
ordinary shares issued pursuant to such mandatory exercise
multiplied by
the per share scheme consideration, less (ii) the total exercise
price of
such option advanced by the broker
plus
any interest due on such
amount and any fees and charges of the
broker.
|
·
|
For
each out-of-the-money ASE Test option, the option will be cancelled
on the
effective date of the scheme without any payment to the option
holder.
|
·
|
due
incorporation and valid
existence;
|
·
|
corporate
authority to enter into and perform its obligations under the
scheme
implementation agreement;
|
·
|
validity
and enforceability of the terms of the scheme implementation
agreement;
and
|
·
|
due
authorization and non-contravention of the execution and delivery
of the
scheme implementation
agreement.
|
·
|
the
preparation of its audited accounts in accordance with applicable
laws and
on a consistent basis in accordance with generally accepted
accounting
principles, standards and practices in the Republic of
China;
|
·
|
the
unanimous resolution by its independent directors to approve
the scheme
implementation agreement, the scheme and the transactions contemplated
thereby and to recommend that unaffiliated ASE Test shareholders
approve
and adopt the scheme; and
|
·
|
the
receipt of a written opinion
of Lehman Brothers, financial advisor to the special committee,
to the
effect that, as of the date of the scheme implementation agreement,
the
scheme consideration is fair to the unaffiliated ASE Test shareholders
from a financial point of
view.
|
·
|
give
ASE Inc. and its advisors reasonable access to the offices,
properties,
books and records of, and information relating to, ASE Test
and its
subsidiaries, referred to herein as the ASE Test group companies,
and
authorize and direct its officers, employees, auditors, lawyers
and other
advisors to reasonably assist and cooperate with ASE Inc.,
for the
implementation of the scheme, provided that such access and
review will
not unreasonably interfere with the conduct of the business
or operations
of the ASE Test group;
|
·
|
take
all steps required to be taken by it in relation to the scheme
and use all
best endeavors to procure that the scheme is implemented on
the terms set
out in the scheme implementation
agreement;
|
·
|
use
best endeavors to obtain all authorizations, consents, clearances,
permissions and approvals as are within its control or influence
and which
are necessary or appropriate for the implementation of the
scheme;
|
·
|
not
declare or pay any dividend or make any distribution, or issue
or agree to
issue any shares or securities convertible into equity securities
or grant
any option, other than the issuance of shares upon the valid
exercise of
existing options on or prior to the third business day prior
to the books
closure date and pursuant to the treatment of
options;
|
·
|
except
as would not be material to the ASE Test group taken as a whole,
dispose
of any assets or equity interests or assume or incur any liabilities
other
than in the ordinary course of
business;
|
·
|
procure
that each member of the ASE Test group
will:
|
|
o
|
conduct
its business in the ordinary course and not enter into any transaction
or
agreement or take any action other than in the ordinary course
and in a
reasonable and prudent manner, consistent with past
practices;
|
|
o
|
use
all reasonable efforts to preserve and protect its properties
and
assets;
|
|
o
|
not
enter into any extraordinary transaction nor issue or grant any
securities
(other than upon the exercise of currently outstanding stock
options, if
any) or any rights, options, warrants or debt convertible into
or
exercisable or exchangeable for any
securities;
|
|
o
|
not
incur any liabilities other than in the ordinary course of business
consistent with past practices; and
|
|
o
|
not
permit a restructuring pursuant to which it will not be able
to perform
its obligations under the scheme implementation
agreement.
|
·
|
the
filing by ASE Inc. with the ROC IC for the increase of ASE
Inc.’s
investment in ASE Test;
|
·
|
the
filing by ASE Inc. with the ROC FTC for ASE Inc.’s acquisition of the
remaining outstanding ASE Test ordinary shares not held by
ASE Inc. and
its subsidiaries;
|
·
|
the
receipt of all applicable regulatory approvals and such approvals
not
being revoked on or prior to the effective
date;
|
·
|
the
receipt by ASE Test of all authorizations, consents, clearances,
permissions and approvals as are necessary or required, and
that would be
reasonably expected to have a material adverse effect on the
ASE Test
group if not obtained, for or in respect of the implementation
of the
scheme, and the receipt by ASE Inc. of all authorizations,
consents,
clearances, permissions and approvals as are necessary or required,
and
which would be reasonably expected to have a material adverse
effect on
the performance by ASE Inc. of its obligations under the scheme
implementation agreement in all material respects if not obtained,
for or
in respect of the implementation of the
scheme;
|
·
|
the
accuracy of each party’s representations and warranties contained in the
scheme implementation agreement (disregarding any material
or materiality
qualifications therein) in all material respects at and as
of the
effective date as if made at and as of such time, and the performance
by
each party in all material respects of all of its obligations
under the
scheme implementation agreement required to be performed by
it on or prior
to the effective date;
|
·
|
the
approval and adoption of the scheme by the requisite majority
of the
unaffiliated ASE Test shareholders at the court
meeting;
|
·
|
the
sanction of the scheme by the
court;
|
·
|
the
lodgment of the court order with the
ACRA;
|
·
|
if
and to the extent the Singapore Code applies, any director
of ASE Test who
is considered to be independent for the purposes of the scheme
and
required under such code to recommend the approval and adoption
of the
scheme by the unaffiliated ASE Test shareholders having (i)
joined in the
recommendation of the board of directors of ASE Test for approval
and
adoption of the scheme by the unaffiliated ASE Test shareholders,
(ii)
joined in the determination by the board of directors of ASE
Test that the
scheme implementation agreement and the transaction contemplated
thereby
are fair to and in the best interest of ASE Test shareholders
(other than
ASE Inc. and its subsidiaries), and (iii) joined in the approval
by the
board of directors of ASE Test of the scheme implementation
agreement and
the transactions contemplated
thereby;
|
·
|
the
receipt of all approvals for the implementation of the treatment
of
options; and
|
·
|
no
injunction or other order being issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing
the
completion of the scheme.
|
·
|
by
either party upon the issuance of a final and non-appealable
order,
decree, ruling or other action by a court of competent jurisdiction
permanently prohibiting the
scheme;
|
·
|
if
there is a material beach by any party of its obligations under
the scheme
implementation agreement, by the party not in default after
prior
consultation with the SIC and any other applicable government
authority,
upon 14 days’ advance written notice to the other
party;
|
·
|
by
either party if the approval and adoption of the scheme by
the
unaffiliated ASE Test shareholders at the court meeting is
not obtained or
if the court does not sanction the scheme and such court decision
is final
and non-appealable;
|
·
|
by
either party if conditions to the scheme are not satisfied
(or waived) on
or prior to June 4, 2008 or such other date as the parties
may agree in
writing (subject to any required consent of SIC or any other
regulatory or
governmental authority (if necessary)),
provided
that a party
whose breach of the scheme implementation agreement has resulted
in the
conditions to the scheme not being satisfied on or prior to
the date
described above may not terminate the scheme implementation
agreement
pursuant to this provision;
|
·
|
by
ASE Inc. if ASE Test or its directors have withdrawn or modified
in any
manner adverse to ASE Inc. the recommendation of the board
of directors of
ASE Test for approval and adoption of the scheme by the unaffiliated
ASE
Test shareholders, or approved or recommended an alternative
acquisition
proposal, or otherwise failed to comply with the non-solicitation
provisions of the scheme implementation agreement, or if ASE
Test takes
any action or makes any public statement, or authorizes or
permits any of
its independent directors to take any action or make any public
statement,
inconsistent with the recommendation of the board of directors
of ASE Test
in favor of the scheme;
|
·
|
by
ASE Test if, in accordance with and pursuant to the “fiduciary-out”
exception described above in “The Scheme Implementation Agreement –
Non-Solicitation; Fiduciary Out”, ASE Test or its directors have withdrawn
or modified in any manner adverse to ASE Inc. the recommendation
of the
board of directors of ASE Test of approval and adoption of
the scheme by
the unaffiliated ASE Test shareholders, or approved or recommended
an
alternative acquisition proposal;
or
|
·
|
upon
the mutual written consent of the
parties.
|
Date
of Grant
|
Exercise
Price
|
ASE
Test options
(1)
|
Exercise
Period
|
|||||||
(US$)
|
||||||||||
1999
ASE Test share option plan
|
||||||||||
Directors
|
||||||||||
Jason
C.S. Chang
|
August
10, 1999
|
20
|
20,000
|
August
10, 1999 to
August
10, 2009
|
||||||
Richard
H.P. Chang
|
August
10, 1999
|
20
|
20,000
|
August
10, 1999 to
August
10, 2009
|
||||||
Joseph
Tung
|
—
|
—
|
—
|
—
|
||||||
Jeffrey
Chen
|
—
|
—
|
—
|
—
|
||||||
Alan
T.C. Cheng
|
—
|
—
|
—
|
—
|
||||||
Raymond
Lo
|
August
10, 1999
|
20
|
15,000
|
August
10, 1999 to
August
10, 2009
|
||||||
April
19, 2000
|
25
|
35,000
|
April
19, 2000 to
April
19, 2010
|
|||||||
Freddie
Liu
|
August
10, 1999
|
20
|
10,000
|
August
10, 1999 to
August
10, 2009
|
||||||
Ko-Chien
Chin
|
—
|
—
|
—
|
—
|
||||||
Albert
C.S. Yu
|
—
|
—
|
—
|
—
|
||||||
Guan
Seng Sim
|
—
|
—
|
—
|
—
|
||||||
David
D.H. Tsang
|
—
|
—
|
—
|
—
|
||||||
Employees
|
August
10, 1999
|
20
|
241,500
|
August
10, 1999 to
August
10, 2009
|
||||||
April
19, 2000
|
25
|
140,000
|
April
19, 2000 to
April
19, 2010
|
Date
of Grant
|
Exercise
Price
|
ASE
Test options
(1)
|
Exercise
Period
|
|||||||
(US$)
|
||||||||||
November
13, 2001
|
9
|
10,000
|
November
13, 2001 to
November
13, 2011
|
|||||||
May
4, 2004
|
6.5
|
20,000
|
May
4, 2004 to
May
5, 2014
|
|||||||
2000
ASE Test share option plan
|
||||||||||
Directors
|
||||||||||
Jason
C.S. Chang
|
January
5, 2001
|
8.875
|
1,800,000
|
January
5, 2001 to
January
5, 2011
|
||||||
November
13, 2001
|
9
|
20,000
|
November
13, 2001 to
November
13, 2011
|
|||||||
December
11, 2003
|
12.95
|
400,000
|
December
11, 2003 to
December
11, 2013
|
|||||||
Richard
H.P. Chang
|
January
5, 2001
|
8.875
|
1,000,000
|
January
5, 2001 to
January
5, 2011
|
||||||
November
13, 2001
|
9
|
20,000
|
November
13, 2001 to
November
13, 2011
|
|||||||
November
7, 2002
|
6.1
|
20,000
|
November
7, 2002 to
November
7, 2012
|
|||||||
December
11, 2003
|
12.95
|
200,000
|
December
11, 2003 to
December
11, 2013
|
|||||||
Joseph
Tung
|
January
5, 2001
|
8.875
|
140,000
|
January
5, 2001 to
January
5, 2011
|
||||||
November
13, 2001
|
9
|
20,000
|
November
13, 2001 to
November
13, 2011
|
|||||||
November
7, 2002
|
6.1
|
20,000
|
November
7, 2002 to
November
7, 2012
|
|||||||
December
11, 2003
|
12.95
|
30,000
|
December
11, 2003 to
December
11, 2013
|
|||||||
Jeffrey
Chen
|
January
5, 2001
|
8.875
|
120,000
|
January
5, 2001 to
January
5, 2011
|
||||||
November
13, 2001
|
9
|
20,000
|
November
13, 2001 to
November
13, 2011
|
|||||||
November
7, 2002
|
6.1
|
20,000
|
November
7, 2002 to
November
7, 2012
|
|||||||
December
11, 2003
|
12.95
|
40,000
|
December
11, 2003 to
December
11, 2013
|
|||||||
Alan
T.C. Cheng
|
November
13, 2001
|
9
|
20,000
|
November
13, 2001 to
November
, 2011
|
||||||
November
7, 2002
|
6.1
|
20,000
|
November
7, 2002 to
November
7, 2012
|
|||||||
Raymond
Lo
|
January
5, 2001
|
8.875
|
115,000
|
January
5, 2001 to
January
5, 2011
|
||||||
November
13, 2001
|
9
|
20,000
|
November
13, 2001 to
November
13, 2011
|
|||||||
November
7, 2002
|
6.1
|
20,000
|
November
7, 2002 to
November
7, 2012
|
|||||||
December
11, 2003
|
12.95
|
50,000
|
December
11, 2003 to
December
11, 2013
|
|||||||
Freddie
Liu
|
January
5, 2001
|
8.875
|
30,000
|
January
5, 2001 to
January
5, 2011
|
||||||
December
11, 2003
|
12.95
|
15,000
|
December
11, 2003 to
December
11, 2013
|
Date
of Grant
|
Exercise
Price
|
ASE
Test options
(1)
|
Exercise
Period
|
|||||||
(US$)
|
||||||||||
Ko-Chien
Chin
|
January
5, 2001
|
8.875
|
160,000
|
January
5, 2001 to
January
5, 2011
|
||||||
November
13, 2001
|
9
|
20,000
|
November
13, 2001 to
November
13, 2011
|
|||||||
November
7, 2002
|
6.1
|
20,000
|
November
7, 2002 to
November
7, 2012
|
|||||||
December
11, 2003
|
12.95
|
70,000
|
December
11,2003 to
December
11, 2013
|
|||||||
Albert
C.S. Yu
|
November
13, 2001
|
9
|
20,000
|
November
13, 2001 to
November
13, 2011
|
||||||
November
7, 2002
|
6.1
|
20,000
|
November
7, 2002 to
November
7, 2012
|
|||||||
Guan
Seng Sim
|
—
|
—
|
—
|
—
|
||||||
David
D.H. Tsang
|
November
13, 2001
|
9
|
20,000
|
November
13, 2001 to
November
13, 2011
|
||||||
November
7, 2002
|
6.1
|
20,000
|
November
7, 2002 to
November
7, 2012
|
|||||||
Employees
|
January
5, 2001
|
8.875
|
2,075,422
|
January
5, 2001 to
January
5, 2011
|
||||||
April
12, 2001
|
11.5
|
176,450
|
April
12, 2001 to
April
12, 2011
|
|||||||
November
13, 2001
|
9
|
83,500
|
November
13, 2001 to
November
13, 2011
|
|||||||
May
7, 2002
|
12
|
33,000
|
May
7, 2002 to
May
7, 2012
|
|||||||
July
24, 2002
|
8
|
5,000
|
July
24,2002 to
July
24, 2012
|
|||||||
November
7, 2002
|
6.1
|
29,500
|
November
7, 2002 to
November
7, 2012
|
|||||||
December
11, 2003
|
12.95
|
1,025,500
|
December
11, 2003 to
December
11, 2013
|
|||||||
May
4, 2004
|
6.5
|
120,000
|
May
4, 2004 to
May
4, 2014
|
|||||||
2004
ASE Test share option plan
|
||||||||||
Directors
|
||||||||||
Jason
C.S. Chang
|
—
|
—
|
—
|
—
|
||||||
Richard
H.P. Chang
|
—
|
—
|
—
|
—
|
||||||
Joseph
Tung
|
—
|
—
|
—
|
—
|
||||||
Jeffrey
Chen
|
—
|
—
|
—
|
—
|
||||||
Alan
T.C. Cheng
|
—
|
—
|
—
|
—
|
||||||
Raymond
Lo
|
—
|
—
|
—
|
—
|
||||||
Freddie
Liu
|
—
|
—
|
—
|
—
|
||||||
Ko-Chien
Chin
|
—
|
—
|
—
|
—
|
||||||
Albert
C.S. Yu
|
—
|
—
|
—
|
—
|
||||||
Guan
Seng Sim
|
—
|
—
|
—
|
—
|
||||||
David
D.H. Tsang
|
—
|
—
|
—
|
—
|
||||||
Employees
|
August
9, 2004
|
5.5
|
60,000
|
August
9, 2004 to
August
9, 2014
|
||||||
October
22, 2004
|
6.1
|
21,000
|
October
22, 2004 to
October
22, 2014
|
(1)
|
Each
ASE Test option is exercisable into one ASE Test ordinary
share.
|
ASE
Test and Subsidiaries
|
||||||||||||||||||||
Year
Ended and as of December 31,
|
Nine
Months Ended and as of September 30,
|
|||||||||||||||||||
2004
|
2005
|
2006
|
2006
|
2007
|
||||||||||||||||
(in
US$ thousands, except shares, per share data, operating data
and
percentages)
|
(in
US$ thousands)
(unaudited)
|
|||||||||||||||||||
U.S.
GAAP:
|
||||||||||||||||||||
Net
revenues
|
$ |
427,763
|
$ |
420,929
|
$ |
517,706
|
$ |
408,045
|
$ |
340,430
|
||||||||||
Cost
of revenues
|
342,394
|
335,155
|
335,943
|
264,408
|
237,238
|
|||||||||||||||
Gross
profit
|
85,369
|
85,774
|
181,763
|
143,637
|
103,192
|
|||||||||||||||
Operating
expenses
|
109,456 | (6) |
123,931
|
69,972
|
25,742
|
53,409
|
||||||||||||||
Income
(loss) from operations
|
(24,087 | ) | (38,157 | ) |
111,791
|
117,895
|
49,783
|
|||||||||||||
Non-operating
income (expense)
|
3,800
|
(5,591 | ) |
25,437
|
(3,793 | ) |
14,772
|
|||||||||||||
Income
(loss) from continuing operations before income taxes
|
(20,287 | ) | (43,748 | ) |
137,228
|
114,102
|
64,555
|
|||||||||||||
Income
tax expense (benefit)
|
(21,209 | ) |
2,537
|
20,291
|
25,513
|
19,147
|
||||||||||||||
Discontinued
operations
(5)
|
16,968
|
10,839
|
—
|
—
|
—
|
|||||||||||||||
Cumulative
effect of change in accounting principles
(7)
|
––
|
––
|
381
|
––
|
––
|
|||||||||||||||
Net
income (loss)
|
$ |
17,890
|
$ | (35,446 | ) | $ |
117,318
|
$ |
88,589
|
$ |
45,408
|
|||||||||
Earnings
(loss) per share:
|
||||||||||||||||||||
Basic
|
$ |
0.18
|
$ | (0.35 | ) | $ |
1.17
|
$ |
0.89
|
$ |
0.45
|
|||||||||
Diluted
|
$ |
0.18
|
$ | (0.35 | ) | $ |
1.17
|
$ |
0.88
|
$ |
0.44
|
|||||||||
Shares
used in earnings per share calculation:
|
||||||||||||||||||||
Basic
|
100,037,524
|
100,059,031
|
100,081,418
|
100,073,675
|
100,481,805
|
|||||||||||||||
Diluted
|
100,111,113
|
100,059,031
|
100,234,402
|
100,127,625
|
102,558,617
|
|||||||||||||||
Consolidated
Balance Sheet Data:
|
||||||||||||||||||||
ROC
GAAP:
|
||||||||||||||||||||
Current
assets
|
$ |
227,026
|
$ |
285,487
|
$ |
305,554
|
$ |
350,413
|
$ |
371,730
|
||||||||||
Long-term
investments
|
133,699
|
140,225
|
281,830
|
239,888
|
318,142
|
|||||||||||||||
Property,
plant and equipment, net
|
634,796
|
430,079
|
389,435
|
398,148
|
359,108
|
|||||||||||||||
Total
assets
|
1,083,109
|
940,339
|
1,044,428
|
1,073,554
|
1,110,346
|
|||||||||||||||
Current
liabilities
|
201,884
|
128,219
|
102,716
|
155,934
|
100,478
|
|||||||||||||||
Long-term
debts
|
273,020
|
245,303
|
85,706
|
141,550
|
65,510
|
|||||||||||||||
Total
liabilities
|
483,518
|
382,134
|
201,300
|
309,530
|
176,470
|
|||||||||||||||
Capital
stock
|
25,015
|
25,015
|
25,035
|
25,023
|
25,294
|
|||||||||||||||
Cash
dividend on ordinary shares
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Shareholders’
equity
|
599,591
|
558,205
|
843,128
|
764,024
|
933,876
|
|||||||||||||||
U.S.
GAAP:
|
||||||||||||||||||||
Current
assets
|
$ |
227,026
|
$ |
285,487
|
$ |
305,554
|
$ |
350,413
|
$ |
371,730
|
||||||||||
Long-term
investments
|
53,381
|
60,366
|
78,371
|
73,683
|
90,075
|
|||||||||||||||
Property,
plant and equipment, net
|
632,289
|
427,005
|
380,863
|
389,345
|
351,596
|
|||||||||||||||
Total
assets
|
1,015,599
|
877,687
|
844,990
|
912,317
|
893,094
|
|||||||||||||||
Current
liabilities
|
206,660
|
128,228
|
111,506
|
163,656
|
103,215
|
|||||||||||||||
Long-term
debts
|
273,020
|
245,303
|
85,706
|
141,550
|
65,510
|
|||||||||||||||
Total
liabilities
|
488,389
|
382,231
|
211,879
|
317,332
|
180,990
|
|||||||||||||||
Shareholders’
equity
|
527,210
|
495,456
|
633,111
|
594,985
|
712,104
|
|||||||||||||||
Consolidated
Statement of Cash Flow Data:
ROC
GAAP:
|
||||||||||||||||||||
Depreciation
and amortization
|
$ |
164,908
|
$ |
154,302
|
$ |
120,638
|
$ |
90,310
|
$ |
87,661
|
||||||||||
Acquisition
of property, plant and equipment
|
210,656
|
47,875
|
87,408
|
71,965
|
57,290
|
|||||||||||||||
Net
cash provided by operating activities
|
153,712
|
170,064
|
252,775
|
194,216
|
131,337
|
|||||||||||||||
Net
cash provided by (used in) investing activities
|
(253,621 | ) |
13,779
|
(121,596 | ) | (126,320 | ) | (77,911 | ) | |||||||||||
Net
cash provided by (used in) financing activities
|
69,375
|
(84,447 | ) | (184,387 | ) | (78,068 | ) | (31,187 | ) | |||||||||||
Net
cash inflow (outflow)
|
(31,460 | ) |
98,722
|
(48,496 | ) | (7,188 | ) |
23,472
|
||||||||||||
Segment
Net Revenues:
|
||||||||||||||||||||
Testing
|
$ |
343,116
|
$ |
346,639
|
$ |
423,341
|
$ |
335,407
|
$ |
259,457
|
||||||||||
Packaging
|
84,647
|
74,290
|
94,365
|
72,638
|
80,973
|
|||||||||||||||
Percentage
of Net Revenues:
|
||||||||||||||||||||
Testing
|
80.2 | % | 82.4 | % | 81.8 | % | 82.2 | % | 76.2 | % | ||||||||||
Packaging
|
19.8 | % | 17.6 | % | 18.2 | % | 17.8 | % | 23.8 | % |
ASE
Test and Subsidiaries
|
||||||||||||||||||||
Year
Ended and as of December 31,
|
Nine
Months Ended and as of September 30,
|
|||||||||||||||||||
2004
|
2005
|
2006
|
2006
|
2007
|
||||||||||||||||
(in
US$ thousands, except shares, per share data, operating data
and
percentages)
|
(in
US$ thousands)
(unaudited)
|
|||||||||||||||||||
Operating
Data:
|
||||||||||||||||||||
Gross
margin
|
20.4 | % | 21.4 | % | 37.7 | % | 39.1 | % | 32.3 | % | ||||||||||
Operating
margin
|
2.4 | % | 3.3 | % | 25.5 | % | 27.5 | % | 16.9 | % | ||||||||||
ROC
GAAP net margin
|
5.9 | % | (8.4 | )% | 29.1 | % | 28.8 | % | 15.7 | % | ||||||||||
U.S.
GAAP net margin
|
4.2 | % | (8.4 | )% | 22.7 | % | 21.7 | % | 13.3 | % |
(1)
|
Includes
selling expenses and general and administrative expenses, but excludes
goodwill amortization.
|
(2)
|
Included
in general and administrative expenses in our consolidated financial
statements.
|
(3)
|
Includes
investment income from ASE (Korea) Inc., a wholly owned subsidiary
of ASE
Investment (Labuan) of which ASE Test holds 30.0%, and prior to
their
merger into ASE Inc. on August 1, 2004, ASE (Chung Li) Inc. and
ASE
Material Inc.
|
(4)
|
As
a
result of ASE Test’s adoption of the ROC Statement of Financial Accounting
Standard, or ROC SFAS, No. 34 “Financial Instruments: Recognition and
Measurement”, and ROC SFAS No. 36, “Financial Instruments: Disclosure and
Presentation”, the balances in 2004 and 2005 were reclassified to be
consistent with the classification used in our consolidated financial
statements for 2006.
|
(5)
|
Amount
for 2005 includes income from discontinued operations of $3.9 million
and
gain on disposal of discontinued operations of $6.9 million in
2005, both
of which are net of income tax expense. In October 2005, ASE
Test disposed of its camera module assembly operations in Malaysia.
Such
operations were formerly classified as part of ASE Test’s packaging
operations. Information from ASE Test’s consolidated statements of income
for the years ended December 31, 2004 and 2005 has been adjusted
to
reflect the reclassification of ASE Test’s camera module assembly
operations as discontinued operations. Information from its consolidated
statements of cash flows was appropriately not
adjusted.
|
(6)
|
Includes
impairment of goodwill.
|
(7)
|
Represents
the cumulative effect of ASE Test’s adoption of U.S. Statement of
Financial Accounting Standard, or U.S. SFAS No. 123R “Share-Based
Payment”.
|
Year
Ended December 31
|
Nine
Months Ended
September
30
|
|||||||||||||||||||
2004
|
2005
|
2006
|
2006
|
2007
|
||||||||||||||||
(in
US$ thousands)
|
(in
US$ thousands)
(unaudited)
|
|||||||||||||||||||
Earnings
|
||||||||||||||||||||
Pretax
income (loss) from continuing operations before adjustment for
minority
interests or income (loss) from equity investees
|
$ | (22,882 | ) | $ | (50,423 | ) | $ |
145,331
|
$ |
123,220
|
$ |
66,536
|
||||||||
Plus
items
|
||||||||||||||||||||
Fixed
charges
|
9,609
|
13,622
|
13,568
|
10,853
|
4,592
|
|||||||||||||||
Amortization
of capitalized interest
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Distributed
income of equity investees
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Registrants
share of pre-tax losses of equity investees for which charges arising
from
guarantees are included in fixed charges
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Less
items
|
||||||||||||||||||||
Interest
capitalized
|
2,844
|
878
|
403
|
317
|
137
|
|||||||||||||||
Preference
security dividend requirements of consolidated
subsidiaries
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
The
minority interest in pre-tax income of subsidiaries that have not
incurred
fixed charges
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Total
earnings
|
$ | (16,117 | ) | $ | (37,679 | ) | $ |
158,496
|
$ |
133,756
|
$ |
70,991
|
||||||||
Fixed
Charges
|
||||||||||||||||||||
Interest
expense and capitalized
|
$ |
9,609
|
$ |
13,622
|
$ |
13,568
|
$ |
10,853
|
$ |
4,592
|
||||||||||
Interest
rate swap interest income included in interest expense
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Estimate
of interest in rental expense
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Total
fixed charges
|
$ |
9,609
|
$ |
13,622
|
$ |
13,568
|
$ |
10,853
|
$ |
4,592
|
||||||||||
Ratio
of earning to fixed charges
|
(1.68 | ) | (2.77 | ) |
11.68
|
12.32
|
15.46
|
ASE
Test Nasdaq Shares
|
Price
|
|||||||||||
High
|
Low
|
Closing
(1)
|
||||||||||
Year
Ending December 31, 2008
|
||||||||||||
First
Quarter (through January 3, 2008)
|
US$14.28
|
|
US$14.12
|
US$
–
|
||||||||
January
2008 (through January 3, 2008)
|
14.28
|
14.12
|
14.17
|
|||||||||
Year
Ended December 31, 2007
|
||||||||||||
Fourth
Quarter
|
14.70
|
13.91
|
–
|
|||||||||
December
2007
|
14.70
|
14.01
|
14.19
|
|||||||||
November
2007
|
14.57
|
13.91
|
14.28
|
|||||||||
October
2007
|
14.61
|
14.36
|
14.50
|
|||||||||
Third
Quarter
|
15.40
|
10.07
|
–
|
|||||||||
September
2007
|
14.75
|
14.10
|
14.37
|
|||||||||
August
2007
|
13.80
|
10.07
|
11.77
|
|||||||||
July
2007
|
15.40
|
12.87
|
13.48
|
|||||||||
Second
Quarter
|
15.25
|
11.43
|
–
|
|||||||||
June
2007
|
15.25
|
12.50
|
14.07
|
|||||||||
May
2007
|
13.00
|
11.86
|
12.89
|
|||||||||
April
2007
|
13.10
|
11.43
|
12.83
|
|||||||||
First
Quarter
|
11.96
|
10.15
|
–
|
|||||||||
March
2007
|
11.96
|
10.86
|
11.38
|
|||||||||
February
2007
|
11.96
|
10.76
|
11.12
|
|||||||||
January
2007
|
11.73
|
10.15
|
10.99
|
|||||||||
Year
Ended December 31, 2006
|
||||||||||||
Fourth
Quarter
|
11.68
|
7.92
|
–
|
|||||||||
Third
Quarter
|
9.78
|
7.21
|
–
|
|||||||||
Second
Quarter
|
11.85
|
8.10
|
–
|
|||||||||
First
Quarter
|
9.85
|
6.65
|
–
|
|||||||||
Year
Ended December 31, 2005
|
||||||||||||
Fourth
Quarter
|
8.15
|
5.33
|
–
|
|||||||||
Third
Quarter
|
8.37
|
5.49
|
–
|
|||||||||
Second
Quarter
|
6.97
|
4.65
|
–
|
|||||||||
First
Quarter
|
6.98
|
4.50
|
–
|
|
(1)
|
Closing
price for a given month refers to the closing price on the last
trading
day of such month.
|
ASE
Test TDSs
|
Price
|
|||||||||||
High
|
Low
|
Closing
(1)
|
||||||||||
Year
Ending December 31, 2008
|
||||||||||||
First
Quarter (through January 4, 2008)
|
NT$5.73
|
NT$5.64
|
NT$
–
|
|||||||||
January
2008 (through January 4, 2008)
|
5.73
|
5.64
|
5.67
|
|||||||||
Year
Ended December 31, 2007
|
||||||||||||
Fourth
Quarter
|
6.10
|
5.53
|
–
|
|||||||||
December
2007
|
5.75
|
5.53
|
5.70
|
|||||||||
November
2007
|
5.96
|
5.55
|
5.64
|
|||||||||
October
2007
|
6.10
|
5.82
|
5.83
|
|||||||||
Third
Quarter
|
7.05
|
4.44
|
–
|
|||||||||
September
2007
|
6.17
|
5.09
|
5.88
|
|||||||||
August
2007
|
6.20
|
4.44
|
5.08
|
|||||||||
July
2007
|
7.05
|
5.83
|
6.14
|
|||||||||
Second
Quarter
|
6.85
|
5.05
|
–
|
|||||||||
June
2007
|
6.85
|
5.37
|
6.28
|
|||||||||
May
2007
|
5.55
|
5.05
|
5.45
|
|||||||||
April
2007
|
5.95
|
5.20
|
5.43
|
|||||||||
First
Quarter
|
5.74
|
4.40
|
–
|
|||||||||
March
2007
|
5.70
|
4.58
|
5.20
|
|||||||||
February
2007
|
5.06
|
4.46
|
5.01
|
|||||||||
January
2007
|
5.74
|
4.40
|
4.76
|
|||||||||
Year
Ended December 31, 2006
|
||||||||||||
Fourth
Quarter
|
5.29
|
3.45
|
–
|
|||||||||
Third
Quarter
|
4.14
|
3.15
|
–
|
|||||||||
Second
Quarter
|
5.13
|
3.45
|
–
|
|||||||||
First
Quarter
|
3.96
|
2.84
|
–
|
|||||||||
Year
Ended December 31, 2005
|
||||||||||||
Fourth
Quarter
|
3.43
|
2.32
|
–
|
|||||||||
Third
Quarter
|
3.31
|
2.56
|
–
|
|||||||||
Second
Quarter
|
3.11
|
2.35
|
–
|
|||||||||
First
Quarter
|
3.12
|
2.54
|
–
|
|
(1)
|
Closing
price for a given month refers to the closing price on the last
trading
day of such month.
|
Name
of Beneficial Owner
|
Shares
Beneficially
Owned
(1)
|
Percent
of Outstanding Shares
(2)
|
||
ASE
Inc.
|
||||
J
& R Holding Limited
(3)
|
39,837,143
|
39.32%
|
||
ASE
Holding Limited
(3)
|
11,148,000
|
11.00%
|
||
Jason
C.S. Chang
(4)
|
2,343,908
|
2.31%
|
||
Nen-Yao
Chang
(5)
|
12,000
|
*
|
||
Richard
H.P. Chang
(6)
|
2,266,276
|
2.24%
|
||
Kenneth
Hsiang
(7)
|
36,000
|
*
|
||
Raymond
Lo
(8)
|
245,000
|
*
|
||
Kwai
Mun Lee
(9)
|
16,000
|
*
|
||
Tien
Wu
(10)
|
221,000
|
*
|
||
Joseph
Tung
(11)
|
347,000
|
*
|
||
Shyh-Ling
Lin
(12)
|
6,460
|
*
|
||
Jeffrey
Chen
(13)
|
192,000
|
*
|
||
Freddie
Liu
(14)
|
68,000
|
*
|
||
Ko-Chien
Chin
(15)
|
260,672
|
*
|
||
Alan
Tien-Cheng Cheng
(16)
|
40,000
|
*
|
||
Guan
Seng Sim
|
—
|
—
|
||
Albert
C.S. Yu
(17)
|
85,176
|
*
|
||
David
D.H. Tsang
(18)
|
40,000
|
*
|
||
Sang
Jin Maeng
(19)
|
24,000
|
*
|
*
|
Less
than 1%
|
(1)
|
Beneficial
ownership is determined pursuant to Rule 13d-3 of the Exchange
Act.
|
(2)
|
Applicable
percentage of ownership is calculated based on 101,327,365
ASE Test
ordinary shares outstanding as of November 30, 2007.
|
(3)
|
J
& R Holding Limited and ASE Holding Limited are wholly-owned
subsidiaries of ASE Inc. The address of each of J & R
Holding Limited and ASE Holding Limited is Room 1901, TWTC
International
Trade Building, 19F, 333 Keelung Road., Sec.1, Taipei 110,
Taiwan,
Republic of China.
|
(4)
|
Includes
options to acquire 2,160,000 shares which were exercisable
as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(5)
|
Nen-Yao
Chang is the son of Richard H.P. Chang. The address of Nen-Yao
Chang is Room 1901, TWTC International Trade Building, 19F,
333 Keelung
Road., Sec.1, Taipei 110, Taiwan, Republic of China. Includes
options to acquire 12,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(6)
|
Includes
options to acquire 1,220,000 shares which were exercisable
as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(7)
|
Includes
options to acquire 36,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(8)
|
Includes
options to acquire 245,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(9)
|
Includes
options to acquire 16,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(10)
|
Includes
options to acquire 210,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30,
2007.
|
(11)
|
Includes
options to acquire 204,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(12)
|
Shyh-Ling
Lin is the wife of Joseph Tung. The address of Shyh-Ling Lin is
Room 1901, TWTC International Trade Building, 19F, 333 Keelung
Road.,
Sec.1, Taipei 110, Taiwan, Republic of China.
|
(13)
|
Includes
options to acquire 192,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(14)
|
Includes
options to acquire 52,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(15)
|
Includes
options to acquire 256,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(16)
|
Includes
options to acquire 40,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(17)
|
Includes
options to acquire 40,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(18)
|
Includes
options to acquire 40,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30, 2007.
|
(19)
|
Includes
options to acquire 24,000 shares which were exercisable as
of November 30, 2007 or become exercisable within 60 days
following November 30,
2007.
|
ASE
Inc. and its Subsidiaries
|
||||||||||||||||
Year
Ended December 31
|
Nine
Months Ended
September
30
|
|||||||||||||||
2004
|
2005
|
2006
|
2007
|
|||||||||||||
NT$
|
NT$
|
NT$
|
NT$
|
|||||||||||||
(unaudited)
|
||||||||||||||||
(in
millions, except earnings per share)
|
||||||||||||||||
Net
revenues
|
$ |
75,237.7
|
$ |
84,035.8
|
$ |
100,423.6
|
$ |
72,187.4
|
||||||||
Cost
of revenues
|
(59,641.1 | ) | (69,518.0 | ) | (71,643.3 | ) | (52,357.8 | ) | ||||||||
Gross
profit
|
15,596.6
|
14,517.8
|
28,780.3
|
19,829.6
|
||||||||||||
Total
operating expenses
|
(8,639.8 | ) | (8,698.6 | ) | (8,333.9 | ) | (7,061.5 | ) | ||||||||
Income
from operations
|
6,956.8
|
5,819.2
|
20,446.4
|
12,768.1
|
||||||||||||
Exceptional
items
|
—
|
(8,838.1 | ) (1) | 4,574.5 | (2) |
—
|
||||||||||
Non-operating
expense
|
(3,993.9 | ) | (2,654.9 | ) | (2,769.5 | ) | (1,072.2 | ) | ||||||||
Income
(loss) before income tax
|
2,962.9
|
(5,673.8 | ) |
22,251.4
|
11,695.9
|
|||||||||||
Income tax
benefit (expense)
|
1,397.0
|
118.6
|
(2,084.8 | ) | (2,192.9 | ) | ||||||||||
Income
(loss) from continuing operations
|
4,359.9
|
(5,555.2 | ) |
20,166.6
|
9,503.0
|
|||||||||||
Discontinued
operations
(3)
|
568.2
|
353.7
|
—
|
—
|
||||||||||||
Cumulative
effect of change in accounting principle
(4)
|
(26.8 | ) |
—
|
(342.5 | ) |
—
|
||||||||||
Minority
interests in net loss (income) of subsidiaries
|
(691.6 | ) |
510.3
|
(2,407.9 | ) | (1,042.0 | ) | |||||||||
Net
income (loss) attributable to shareholders of parent
company
|
$ |
4,209.7
|
$ | (4,691.2 | ) | $ |
17,416.2
|
$ |
8,461.0
|
|||||||
Earnings
(loss) per common share
(5)
|
||||||||||||||||
-
Basic
|
$ |
0.99
|
$ | (1.07 | ) | $ |
3.95
|
$ |
1.63
|
|||||||
-
Diluted
|
$ |
0.96
|
$ | (1.07 | ) | $ |
3.77
|
$ |
1.58
|
|||||||
Dividends
per common share
(6)
|
$ |
0.57
|
$ |
1.00
|
$ |
—
|
$ |
1.48
|
(1)
|
The
loss in 2005 was caused by fire damage to ASE Inc. and its subsidiaries’
production line and facilities in Chung Li, Taiwan, on May 1,
2005.
|
(2)
|
The
gain in 2006 was the result of an insurance settlement and impairment
recovery in respect of the fire damage to ASE Inc. and its subsidiaries’
production line and facilities in Chung Li, Taiwan, on May 1,
2005.
|
(3)
|
The
amount for 2005 includes income from discontinued operations of
NT$121.0
million and gain on disposal of discontinued operations of NT$232.7
million, net of income tax expense. In October 2005, ASE Test disposed
of
its camera module assembly operations in Malaysia. Such
operations were formerly classified as part of its packaging operations.
The information in the annual report from ASE Inc.’s consolidated
statements of income for the years ended December 31, 2004 and
2005 has
been adjusted to reflect the reclassification of ASE Test’s camera module
assembly operations as discontinued operations. The information
from the consolidated statements of cash flows was
appropriately not adjusted.
|
(4)
|
The
amount for 2006 represents the cumulative effect of ASE Inc.’s adoption of
ROC SFAS No. 34 “Financial Instrument: Recognition and Measurement” and
ROC SFAS, No. 36 “Financial Instruments: Disclosure and Presentation”. The
amount for 2004 represents the cumulative effect of ASE Inc.’s
introduction of enterprise resource planning. In order to increase
their
ability to effectively monitor its
|
|
entire
organization’s resource allocation, ASE Inc. switched from using the
weighted-average method to using the moving-average method to
price their
raw materials and supplies.
|
(5)
|
The
denominators for diluted earnings per ASE Inc. common share and
diluted
earnings per equivalent ASE Inc. ADS are calculated to account
for the
potential exercise of options and conversion of ASE Inc.’s convertible
bonds into ASE Inc. common shares.
|
(6)
|
Dividends
per ASE Inc. common share issued as a stock
dividend.
|
ASE
Inc. and Its Subsidiaries
|
||||||||||
As
of December 31,
|
As
of September 30,
|
|||||||||
2006
|
2007
|
|||||||||
NT$
|
NT$
|
|||||||||
(unaudited)
|
||||||||||
(in
millions)
|
||||||||||
Current
assets
|
$ |
48,762.8
|
$ |
52,233.3
|
||||||
Long-term
investments
|
5,734.5
|
4,812.5
|
||||||||
Property,
plant and equipment, net
|
73,543.8
|
80,056.5
|
||||||||
Intangible
assets
|
3,435.7
|
4,030.8
|
||||||||
Other
assets
|
5,564.1
|
5,730.9
|
||||||||
Total
assets
|
137,040.9
|
146,864.0
|
||||||||
Current
liabilities
|
28,010.2
|
30,994.5
|
||||||||
Long-term
debts
|
29,398.3
|
28,484.4
|
||||||||
Other
liabilities
|
2,505.6
|
3,096.5
|
||||||||
Total
liabilities
|
59,914.1
|
62,575.4
|
||||||||
Net
assets
|
$ |
77,126.8
|
$ |
84,288.6
|
||||||
Capital
stock
|
45,925.1
|
53,929.0
|
||||||||
Other
equity
|
20,094.8
|
17,100.1
|
||||||||
Minority
interests
|
11,106.9
|
13,259.5
|
||||||||
Total
shareholders’ equity
|
$ |
77,126.8
|
$ |
84,288.6
|
|
·
|
The
newly released ROC SFAS No. 34, “Financial
Instruments: Recognition and Measurement” and No. 36,
“Financial Instruments: Disclosure and Presentation”: ASE Inc. had
categorized its financial assets and liabilities upon the initial
adoption
of the newly released ROC SFAS No. 34 and No. 36. The
adjustments made to the carrying amounts of the financial instruments
categorized as financial assets or liabilities at fair value through
profit or loss were included in the cumulative effect of changes
in
accounting principles; on the other hand, the adjustments made
to the
carrying amounts of those categorized as available-for-sale financial
assets were recognized as adjustments to shareholders’ equity. Deferred
exchange losses for cash-flow hedges were reclassified as adjustments
to
shareholders’ equity; and
|
|
·
|
The
newly revised ROC SFAS No. 5, “Long-term Investments under Equity Method”
and No. 25, “Business Combinations” : ASE Inc. adopted the newly revised
ROC SFAS No. 5 and ROC SFAS No. 25, which prescribe that investment
premiums, representing goodwill, be ceased from amortization and
be
assessed for impairment at least on an annual
basis.
|
ASE
Test Ordinary Shares
|
||||||||||||||||||||
Direct Interest
(1)
|
Deemed Interest
(2)
|
ASE
Test Options
(5)
|
||||||||||||||||||
ASE
Test Director
|
No.
of Shares
|
% | (3) |
No.
of Shares
|
% | (3) | ||||||||||||||
Jason
C.S. Chang
|
183,908
|
0.181
|
—
|
2,240,000
|
||||||||||||||||
Richard
H.P. Chang
|
1,046,276
|
1.033
|
—
|
1,260,000
|
||||||||||||||||
Joseph
Tung
|
143,000
|
0.141
|
6,460 | (4) |
0.006
|
210,000
|
||||||||||||||
Jeffrey
Chen
|
—
|
—
|
—
|
200,000
|
||||||||||||||||
Alan
T.C. Cheng
|
—
|
—
|
—
|
40,000
|
||||||||||||||||
Raymond
Lo
|
—
|
—
|
—
|
255,000
|
||||||||||||||||
Freddie
Liu
|
16,000
|
0.016
|
—
|
55,000
|
||||||||||||||||
Ko-Chien
Chin
|
4,672
|
0.005
|
—
|
270,000
|
||||||||||||||||
Albert
C.S. Yu
|
45,176
|
0.045
|
—
|
40,000
|
||||||||||||||||
Guan
Seng Sim
|
—
|
—
|
—
|
—
|
||||||||||||||||
David
D.H. Tsang
|
—
|
—
|
—
|
40,000
|
(1)
|
Direct
interest refers to ASE Test ordinary shares directly
held.
|
(2)
|
Deemed
interest refers to ASE Test ordinary shares indirectly held or
ASE Test
ordinary shares deemed to be held under Section 7 of the Companies
Act,
Chapter 50 of Singapore.
|
(3)
|
Applicable
percentage of ownership is calculated based on 101,327,365 ASE
Test
ordinary shares outstanding as of November 30,
2007.
|
(4)
|
Mr.
Joseph Tung is deemed to be interested in 6,460 ASE Test ordinary
shares
held by his spouse pursuant to Section 164 of the Companies Act,
Chapter
50 of Singapore.
|
(5)
|
Each
ASE Test option is exercisable into one ASE Test ordinary
share.
|
ASE
Inc. Common Shares
|
||||||||||||||||||||
Direct Interest
(1)
|
Deemed Interest
(2)
|
|||||||||||||||||||
ASE
Test Director
|
No.
of Shares
|
% | (3) |
No.
of Shares
|
% | (3) |
ASE
Inc. Options
(4)
|
|||||||||||||
Jason
C.S. Chang
|
55,411,981
|
1.014
|
—
|
—
|
2,480,000
|
|||||||||||||||
Richard
H.P. Chang
|
71,314,948
|
1.305
|
—
|
—
|
1,520,000
|
|||||||||||||||
Joseph
Tung
|
2,387,327
|
0.044
|
—
|
—
|
300,000
|
|||||||||||||||
Jeffrey
Chen
|
205,717
|
0.004
|
—
|
—
|
1,050,000
|
|||||||||||||||
Alan
T.C. Cheng
|
439,772
|
0.008
|
—
|
—
|
—
|
|||||||||||||||
Raymond
Lo
|
1,114,220
|
0.020
|
—
|
—
|
1,150,000
|
|||||||||||||||
Freddie
Liu
|
403,572
|
0.007
|
—
|
—
|
550,000
|
|||||||||||||||
Ko-Chien
Chin
|
1,016,642
|
0.0186
|
—
|
—
|
1,800,000
|
|||||||||||||||
Albert
C.S. Yu
|
33
|
0.0000006
|
—
|
—
|
—
|
|||||||||||||||
Guan
Seng Sim
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
David
D.H. Tsang
|
—
|
—
|
—
|
—
|
—
|
(1)
|
Direct
interest refers to ASE Inc. common shares directly
held.
|
(2)
|
Deemed
interest refers to ASE Inc. common shares indirectly
held.
|
(3)
|
Applicable
percentage of ownership is calculated based on 5,465,166,609 ASE
Inc.
common shares outstanding as of November 30,
2007.
|
(4)
|
Each
ASE Inc. option is exercisable into one ASE Inc. common
share
|
ASE
Test Ordinary Shares
|
||||||||||||||||
Direct
Interest
(1)
|
Deemed
Interest
(2)
|
|||||||||||||||
Name
|
No.
of Shares
|
% | (3) |
No.
of Shares
|
% | (3) | ||||||||||
Tien
Wu
|
11,000
|
0.01
|
—
|
—
|
||||||||||||
Joseph
Tung
|
143,000
|
0.14
|
6,460 | (4) |
0.006
|
|||||||||||
Shyh-Ling
Lin
(5)
|
6,460
|
0.006
|
—
|
—
|
||||||||||||
Jason
C. S. Chang
|
183,908
|
0.18
|
—
|
—
|
||||||||||||
Richard
H. P. Chang
|
1,046,276
|
1.03
|
—
|
—
|
||||||||||||
Freddie
Liu
|
16,000
|
0.02
|
—
|
—
|
||||||||||||
Ko-Chien
Chin
|
4,672
|
0.01
|
—
|
—
|
||||||||||||
ASE
Inc.
|
—
|
—
|
50,985,143 | (6) |
50.32
|
|||||||||||
J
& R Holding Limited
|
39,837,143
|
39.31
|
—
|
—
|
||||||||||||
ASE
Holding Limited
|
11,148,000
|
11.00
|
—
|
—
|
||||||||||||
De-Way
Hsiang
(7)
|
18,000
|
0.02
|
—
|
—
|
||||||||||||
Lai
Heng Choong
(7)
|
10,000
|
0.01
|
—
|
—
|
||||||||||||
John
Ho
(7)
|
492
|
Not
material
|
—
|
—
|
||||||||||||
David
Pan
(7)
|
4,700
|
Not
material
|
—
|
—
|
(1)
|
Direct
interest refers to ASE Test ordinary shares directly
held.
|
(2)
|
Deemed
interest refers to ASE Test ordinary shares indirectly held or
ASE Test
ordinary shares deemed to be held under Section 7 of the Companies
Act,
Chapter 50 of Singapore.
|
(3)
|
Applicable
percentage of ownership is calculated based on 101,327,365 ASE
Test
ordinary shares outstanding as of November 30,
2007.
|
(4)
|
Mr.
Joseph Tung is deemed to be interested in 6,460 ASE Test ordinary
shares
held by his spouse pursuant to Section 164 of the Companies Act,
Chapter
50 of Singapore.
|
(5)
|
Ms.
Shyh-Ling Lin is the spouse of Mr. Joseph Tung and is presumed
to be
acting in concert with ASE Inc. under the Singapore
Code.
|
(6)
|
ASE
Inc. is deemed interested in the ASE Test ordinary shares held
by its
wholly-owned subsidiaries, J & R Holding Limited and ASE Holding
Limited, pursuant to Section 7 of the Companies Act, Chapter 50
of
Singapore.
|
(7) |
Each
of Mr. De-Way Hsiang, Ms. Lai Heng Choong, Mr. John Ho and Mr.
David Pan
is a director of one or more subsidiaries of ASE Inc. and is presumed
to
be acting in concert with ASE Inc. under the Singapore
Code.
|
ASE
Test Options
|
|||||||||
Name
|
No.
of ASE Test Options
|
Exercise
Price (US$)
|
Exercise
Period
|
||||||
Jeffrey
Chen
|
120,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
20,000
|
9
|
November
13, 2001 to November 13, 2011
|
|||||||
20,000
|
6.1
|
November
7, 2002 to November 7, 2012
|
|||||||
28,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
4,000
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
4,000
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
4,000
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Alan
T. C. Cheng
|
20,000
|
9
|
November
13, 2001 to November 13, 2011
|
||||||
20,000
|
6.1
|
November
7, 2002 to November 7, 2012
|
|||||||
Tien
Wu
|
20,000
|
20
|
August
10, 1999 to August 10, 2009
|
||||||
50,000
|
25
|
April
19, 2000 to April 19, 2010
|
|||||||
100,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
|||||||
35,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
5,000
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
5,000
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
5,000
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Joseph
Tung
|
140,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
20,000
|
9
|
November
13, 2001 to November 13, 2011
|
|||||||
20,000
|
6.1
|
November
7, 2002 to November 7, 2012
|
|||||||
21,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
3,000
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
3,000
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
3,000
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Jason
C. S. Chang
|
20,000
|
20
|
August
10, 1999 to August 10, 2009
|
||||||
1,800,000 |
8.875
|
January
5, 2001 to January 5, 2011
|
|||||||
20,000
|
9
|
November
13, 2001 to November 13, 2011
|
|||||||
355,000 | (1) |
12.95
|
December
11, 2003 to December 11, 2013
|
||||||
40,000
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
40,000
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
40,000
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Richard
H. P. Chang
|
20,000
|
20
|
August
10, 1999 to August 10, 2009
|
||||||
1,000,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
|||||||
20,000
|
9
|
November
13, 2001 to November 13, 2011
|
|||||||
20,000
|
6.1
|
November
7, 2002 to November 7, 2012
|
|||||||
140,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
20,000
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
20,000
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
20,000
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Raymond
Lo
|
15,000
|
20
|
August
10, 1999 to August 10, 2009
|
||||||
35,000
|
25
|
April
19, 2000 to April 19, 2010
|
|||||||
115,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
|||||||
20,000
|
9
|
November
13, 2001 to November 13, 2011
|
|||||||
20,000
|
6.1
|
November
7, 2002 to November 7, 2012
|
|||||||
35,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
5,000
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
5,000
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
5,000
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Freddie
Liu
|
10,000
|
20
|
August
10, 1999 to August 10, 2009
|
ASE
Test Options
|
|||||||||
Name
|
No.
of ASE Test Options
|
Exercise
Price (US$)
|
Exercise
Period
|
||||||
30,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
|||||||
10,500
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
1,500
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
1,500
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
1,500
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Ko-Chien
Chin
|
160,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
20,000
|
9
|
November
13, 2001 to November 13, 2011
|
|||||||
20,000
|
6.1
|
November
7, 2002 to November 7, 2012
|
|||||||
49,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
7,000
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
7,000
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
7,000
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Kenneth
Hsiang
|
10,000
|
20
|
August
10, 1999 to August 10, 2009
|
||||||
10,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
|||||||
14,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
2,000
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
2,000
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
2,000
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Kwai
Mun Lee
(2)
|
12,000
|
9.79
|
April
18, 2006 to April 18, 2016
|
||||||
4,000
|
9.79
|
January
1, 2008 to April 18, 2016
|
|||||||
4,000
|
9.79
|
July
1, 2008 to April 18, 2016
|
|||||||
4,000
|
9.79
|
January
1, 2009 to April 18, 2016
|
|||||||
4,000
|
9.79
|
July
1, 2009 to April 18, 2016
|
|||||||
4,000
|
9.79
|
January
1, 2010 to April 18, 2016
|
|||||||
4,000
|
9.79
|
July
1, 2010 to April 18, 2016
|
|||||||
4,000
|
9.79
|
January
1, 2011 to April 18, 2016
|
|||||||
Sang
Jin Maeng
(2)
|
21,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
||||||
3,000
|
12.95
|
January
1, 2008 to December 11, 2013
|
|||||||
3,000
|
12.95
|
July
1, 2008 to December 11, 2013
|
|||||||
3,000
|
12.95
|
January
1, 2009 to December 11, 2013
|
|||||||
Yao
Hung-Ying Chang
(3)
|
20,000
|
9
|
November
13, 2001 to November 13, 2011
|
||||||
De-Way
Hsiang
(4)
|
20,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
30,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
Lai
Heng Choong
(4)
|
10,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
Lee
Chun-Che
(4)
|
100,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
50,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
Tien-Szu
Chen
(4)
|
50,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
||||||
Lee
Chih-Chiang
(4)
|
30,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
20,000
|
11.5
|
April
12, 2001 to April 12, 2011
|
|||||||
25,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
Hsu
Ching-Ju
(4)
|
80,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
40,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
John
Ho
(4)
|
80,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
30,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
Sam
Liu
(4)
|
140,000
|
6.5
|
May
4, 2004 to May 4, 2014
|
||||||
60,000
|
5.5
|
August
9, 2004 to August 9, 2014
|
|||||||
Harvey
Wu
(4)
|
100,000
|
11.5
|
April
12, 2001 to April 12, 2011
|
||||||
30,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
Yen-Yi
Tseng
(4)
|
15,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
30,000
|
12.95
|
December
11, 2003 to December 11, 2013
|
|||||||
David
Pan
(4)
|
200,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
20,000
|
9
|
November
11, 2001 to November 11, 2011
|
|||||||
2,000
|
6.1
|
November
7, 2002 to November 7, 2012
|
|||||||
Chang
Fu Sing
(4)
|
40,000
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
Wu
Chun Ting
(4)
|
1,500
|
11.5
|
April
12, 2001 to April 12, 2011
|
||||||
Benjamin
M. Arias
(4)
|
4,500
|
8.875
|
January
5, 2001 to January 5, 2011
|
||||||
Ching-Hua
Chen
(4)
|
15,000 | 12.95 |
December
11, 2003 to December 11, 2013
|
(1) |
This
includes 75,000 ASE Test options held by Mr. Jason C.S. Chang's
children.
Mr. Jason C.S. Chang and his children are presumed to be acting
in concert
with ASE Inc. under the Singapore Code.
|
(2)
|
Mr.
Kwai Mun Lee and Mr. Sang-Jin Maeng are executive officers of
ASE Inc. and
directors of a subsidiary of ASE
Inc.
|
(3)
|
Ms.
Yao Hung-Ying Chang is the mother of Mr. Jason C.S. Chang and Mr.
Richard H.P. Chang and is presumed to be acting in concert with
ASE Inc.
under the Singapore Code.
|
(4)
|
Each
of Mr. De-Way Hsiang, Ms. Lai Heng Choong, Mr. Lee Chun-Che, Mr.
Tien-Szu
Chen, Mr. Lee Chih Chiang, Mr. Hsu Ching-Ju, Mr. John Ho, Mr. Sam
Liu, Mr.
Harvey Wu, Mr. Yen-Yi Tseng, Mr. David Pan, Mr. Chang Fu Sing,
Mr. Wu Chun
Ting, Mr. Benjamin M. Arias and Mr. Ching-Hua Chen is a director of
one or more subsidiaries of ASE Inc. and is presumed to be acting
in
concert with ASE Inc. under the Singapore
Code.
|
ASE
Test Options
|
|||||||||
Name
|
Date
of Exercise
|
No.
of ASE Test
Options
Exercised
|
Exercise
Price /
Share
(US$)
|
||||||
De-Way
Hsiang
(1)
|
June
18, 2007
|
6,000
|
8.875
|
||||||
June
20, 2007
|
9,000
|
8.875
|
|||||||
July
2, 2007
|
5,000
|
8.875
|
|||||||
July
9, 2007
|
3,000
|
8.875
|
|||||||
July
23, 2007
|
7,000
|
8.875
|
|||||||
August
9, 2007
|
2,000
|
8.875
|
|||||||
Lai
Heng Choong
(1)
|
June
20, 2007
|
2,000
|
8.875
|
||||||
July
3, 2007
|
2,000
|
8.875
|
|||||||
July
9, 2007
|
2,000
|
8.875
|
|||||||
August
9, 2007
|
2,000
|
8.875
|
|||||||
Tien-Szu Chen (1) | June 22, 2007 |
28,000
|
8.875 |
(1)
|
Each
of Mr. De-Way Hsiang, Ms. Lai Heng Choong and Mr. Tien-Szu Chen
is a
director of one or more subsidiaries of ASE Inc. and is presumed
to be acting in concert with ASE Inc. under the Singapore Code.
Each of
Mr. De-Way Hsiang and Ms. Lai Heng Choong had sold ASE Test ordinary
shares obtained pursuant to the exercise of their respective
ASE Test
options, details of which are set out in the table
below.
|
ASE
Test Ordinary Shares
|
|||||||||
Name
|
Dealing
Date
|
No.
of ASE Test
Ordinary
Shares
Bought/(Sold)
|
Net
Consideration
(1)
Per
ASE Test
Ordinary
Share (US$)
|
||||||
De-Way
Hsiang
(2)
|
June
18, 2007
|
(4,000)
|
14.50
|
||||||
June
18, 2007
|
(2,000)
|
14.29
|
|||||||
June
20, 2007
|
(4,000)
|
15.00
|
|||||||
June
20, 2007
|
(5,000)
|
15.136
|
|||||||
July
2, 2007
|
(5,000)
|
14.571
|
|||||||
July
9, 2007
|
(3,000)
|
15.30
|
|||||||
July
23, 2007
|
(7,000)
|
14.25
|
|||||||
August
9, 2007
|
(2,000)
|
11.643
|
|||||||
Lai
Heng Choong
(2)
|
June
20, 2007
|
(2,000)
|
14.90
|
||||||
July
3, 2007
|
(2,000)
|
14.80
|
|||||||
July
9, 2007
|
(2,000)
|
15.30
|
|||||||
August
9, 2007
|
(2,000)
|
12.00
|
|||||||
Tien-Szu
Chen
(2)
|
June 22, 2007 |
(28,000)
|
14.89
|
||||||
Chang
Fu Sing
(2)
|
July
30, 2007
|
(2,000)
|
13.34
|
||||||
August
20, 2007
|
(2,000)
|
11.0425
|
|||||||
September
14, 2007
|
(4,000)
|
14.336
|
|||||||
September
24, 2007
|
(4,000)
|
14.34
|
(1)
|
Excludes
Goods and Services Tax, Stamp Duties, and Clearing
Fee.
|
(2)
|
Each
of Mr. De-Way Hsiang, Ms. Lai Heng Choong, Mr. Tien-Szu Chen and
Mr. Chang
Fu Sing is a director of one or more subsidiaries of ASE Inc. and is
presumed to be acting in concert with ASE Inc. under the Singapore
Code.
|
DATED
THIS 4
th
DAY OF SEPTEMBER 2007
|
CLAUSE |
CONTENTS
|
PAGE | |
1.
|
INTERPRETATION
|
1
|
|
2.
|
THE
PRIVATISATION
|
5
|
|
3.
|
CONDITIONS
|
6
|
|
4.
|
UNDERTAKINGS
|
8
|
|
5.
|
REPRESENTATIONS
AND
WARRANTIES
|
13
|
|
6.
|
ANNOUN
CEMENTS
|
15
|
|
7.
|
MISCELLANEOUS
|
15
|
|
8.
|
TERMINATION
|
17
|
|
9.
|
COUNTERPARTS
|
18
|
|
10.
|
CONTRACTS
(RIGHTS OF THIRD
PARTIES) ACT, CHAPTER 53B OF
SINGAPORE
|
18
|
|
11.
|
GOVERNING
LAW
|
18
|
(1)
|
ADVANCED
SEMICONDUCTOR ENGINEERING, INC.
(Company Registration Number
76027628), a company incorporated and existing under the laws of
the
Republic of China, Taiwan, and having its registered office at
26 Chin
3
rd
Road,
Nantze Export Processing Zone, Nantze, Kaohsiung, Taiwan ("
ASE
Inc.
"); and
|
(2)
|
ASE
TEST LIMITED
(Company Registration Number 199508552K), a company
incorporated and existing under the laws of Singapore and having
its
registered office at One Marina Boulevard, #28-00, Singapore 018989
("
ASE
Test
"),
|
(A)
|
ASE
Inc. is a
public company limited by shares incorporated in the ROC under
the laws of
the ROC.
|
(B)
|
ASE
Test is a
public company limited by shares incorporated in Singapore under
the laws
of Singapore and whose ASE Test NASDAQ Shares (as defined below)
are
listed and quoted on NASDAQ (as defined below) and whose ASE Test
TDSs (as
defined below) are listed and quoted on the TSE (as defined below)
through
its Taiwan depository shares issuance. As at the date of this
Agreement, ASE Test has a total of 101,028,341 issued ASE Test
Shares (as
defined below).
|
(C)
|
The
Parties
propose a privatisation of ASE Test through the acquisition by
ASE Inc. of
ASE Test Shares with the consequence that ASE Test becomes an indirect
wholly-owned subsidiary of ASE Inc. and have entered into this
Agreement
with a view to setting out their understanding and agreement on
the manner
in which the privatisation will be
effected.
|
1.
|
INTERPRETATION
|
1.1
|
Definitions
|
1.2
|
Modification
of Statutes
: Any reference in this Agreement to a statutory provision
shall include that provision and any regulations made in pursuance
thereof
as from time to time modified or re-enacted, whether before or
after the
date of this Agreement, so far as such modification or re-enactment
applies or is capable of applying to any transactions entered into
and (so
far as liability thereunder may exist or can arise) shall include
also any
past statutory provision or regulation (as from time to time modified
or
re-enacted) which such provision or regulation has directly or
indirectly replaced.
|
1.3
|
Miscellaneous
:
The headings in this Agreement are inserted for convenience only
and shall
be ignored in construing this Agreement. Unless the context otherwise
requires, words (including words defined in this Agreement) denoting
the
singular number only shall include the plural and
vice versa
. The
words "
written
" and "
in
writing
" include any means of visible reproduction.
References to "
Clauses
",
"
Schedule
" and "
Recitals
"
are to the clauses of, schedule and recitals to this Agreement.
Any
reference to a "
paragraph
" is to a reference to a
paragraph of the Clause in which such reference appears. The attached
Schedule forms part of this Agreement and has the same force and
effect as
if expressly set out in the body of this Agreement. A reference
to a time
of day is a reference to Singapore
time.
|
1.4
|
Any
thing or
obligation to be done under this Agreement which requires or falls
to be
done on a stipulated day, shall be done on the next succeeding
Business
Day, if the day upon which that thing or obligation to be done
falls on a
day which is not a Business Day.
|
2.
|
THE
PRIVATISATION
|
|
2.1
|
Privatisation
by way of the Scheme
: The Parties agree that the privatisation of ASE
Test shall be effected by way of the Scheme which will involve,
inter
alia
, the transfer to ASE Inc. on the Effective Date
of all
the ASE Test Shares held by the Eligible ASE Test Shareholders
of record
as of the Books Closure Date, and, in the case of ASE Test Shares
issued
pursuant to the Options Proposal, as of the Effective Date, each
fully
paid, free from all Encumbrances, ranking
pari passu
in all
respects with the ASE Test Shares then in issue, and together with
all
rights, benefits and entitlements attaching thereto as at the Effective
Date and thereafter attaching thereto (including all voting rights
and the
right to receive and retain all dividends and other distributions
(if any)
which may be announced, declared, paid or made thereon by ASE Test
on or
after the Effective Date, but excluding the right to receive and
retain
all dividends and distributions (if any), the record date of which
falls
before the Effective Date, together with all interest accrued
thereon).
|
2.2
|
Scheme
Consideration
: Eligible ASE Test Shareholders of record as of the
Books Closure Date will be entitled to receive the following consideration
from ASE Inc. upon the Scheme becoming effective ("
Scheme
Consideration
"):
|
|
(a)
|
for
each ASE
Test NASDAQ Share held by such Eligible ASE Test Shareholder, US$14.78
in
cash ("
Per-Share Scheme Consideration
");
and
|
|
(b)
|
for
each ASE
Test TDS held by such Eligible ASE Test Shareholder, the NT$ equivalent
of
US$0.185 in cash determined as of the Books Closure Date based
on the Noon
Buying Rate as of the Books Closure Date ("
Per-TDS Scheme
Consideration
");
|
2.3
|
Effective
Date of the Scheme
: The Parties agree that, subject to the fulfilment
of all Scheme Conditions, the effective date of the Scheme shall
occur
upon the lodgment of a copy of the Court Order with the ACRA to
give
effect to the Scheme in accordance with its terms, or such other
date as
ASE Inc. and ASE Test may agree in writing (the “
Effective
Date
”).
|
2.4
|
Delisting
of ASE Test
: Subject to the approval of the TSE, NASDAQ and the SEC,
upon and following the Effective Date, ASE Inc. will proceed to
delist the
ASE Test NASDAQ Shares from NASDAQ and the ASE Test TDSs from the
TSE and
terminate the registration of the ASE Test NASDAQ Shares under
the U.S.
Exchange Act.
|
3.
|
CONDITIONS
|
3.1
|
Scheme
Conditions
. The Parties agree that the Scheme shall be conditional
upon the following occurring on or prior to the Conditions Long-Stop
Date
and not withdrawn or revoked prior to the Effective
Date:
|
|
(a)
|
Filings
:
the making of all requisite:
|
|
(i)
|
filings
with
the IC for the increase of ASE Inc.'s investment in ASE Test;
and
|
|
(ii)
|
filings
with
the FTC for ASE Inc.'s acquisition of the remaining
outstanding ASE Test Shares not held by ASE Inc. and its
subsidiaries.
|
|
(b)
|
Regulatory
Approvals
: the receipt of all applicable regulatory approvals and such
approvals not being revoked on or before the Effective Date, including
without limitation:
|
|
(i)
|
the
approval
of the IC for the increase of ASE Inc.'s investment in ASE
Test;
|
|
(ii)
|
the
approval
of the FTC for ASE Inc.'s acquisition of the remaining outstanding
ASE
Test Shares not held by ASE Inc. and its
subsidiaries;
|
|
(iii)
|
the
receipt of
confirmation from the SIC that ASE Inc. may proceed with the Scheme
as set
out herein and in the Scheme Document, and that the Code does not
apply to
the Scheme, or alternatively where the SIC rules that the Code
applies to
the Scheme, that rules 14, 15, 16, 17, 20.1, 21, 22, 28, 29 and
33.2 and
note 1(b) to rule 19 of the Code do not apply to the
Scheme.
|
|
(c)
|
Authorisations
:
in addition to the approvals aforementioned in Clause 3.1(b)
above:
|
|
(i)
|
(in
relation
to ASE Test only) the obtaining of all authorisations, consents,
clearances, permissions and approvals as are necessary or required,
and
that would be reasonably expected to have a material adverse effect
on the
ASE Test Group if not obtained, by ASE Test under any and all applicable
laws, from all relevant governmental, statutory, regulatory bodies,
and
third parties in ROC, Singapore and the US, and under the contracts
entered into by any ASE Test Group Company, for or in respect of
the
implementation of the Scheme, including (but not limited to) the
resulting
change of ownership of the ASE Test Group;
and
|
|
(ii)
|
(in
relation
to ASE Inc. only) the obtaining of all authorisations, consents,
clearances, permissions and approvals as are necessary or required,
and
which would be reasonably expected to have a material adverse effect
on
the performance by ASE Inc. of its obligations under this Agreement
in all
material respects if not obtained, by ASE Inc. under any and all
applicable laws, from all relevant governmental, statutory, regulatory
bodies, and third parties in the ROC, Singapore and the US, and
under the
contracts entered into by any ASE Inc. Group Company, for or in
respect of
the implementation of the Scheme;
|
|
(d)
|
Accuracy
of
Representations
; Performance of
Obligations
|
|
(i)
|
(in
relation
to ASE Test only) the representations and warranties of ASE Test
contained
in this Agreement (disregarding any material or materiality qualifications
therein) shall be true and correct in all material respects at
and as of
the Effective Date as if made at and as of such time, and ASE Test
shall
have performed in all material respects all of its obligations
under
this Agreement required to be performed by it on or prior to
the Effective Date; and
|
|
(ii)
|
(in
relation
to ASE Inc. only) the representations and warranties of ASE Inc.
contained
in this Agreement (disregarding any material or materiality qualifications
therein) shall be true and correct in all material respects at
and as of
the Effective Date as if made at and as of such time, and ASE Inc.
shall
have performed in all material respects all of its obligations
under this
Agreement required to be performed by it on or prior to the Effective
Date.
|
|
(e)
|
Court
Meeting
: the receipt of the approval of the Scheme by the requisite
majority of Unaffiliated ASE Test Shareholders present and voting,
either
in person or by proxy, at the Court Meeting (with a quorum of 1/3
of the
ASE Test Shares held by all Unaffiliated ASE Test Shareholders)
to approve
the Scheme in compliance with Section 210 of the Companies
Act;
|
|
(f)
|
Court
Sanction
: the sanction of the Scheme by the
Court;
|
|
(g)
|
ACRA
Registration
: the lodgement of the Court Order with
ACRA;
|
|
(h)
|
Independent
Director Recommendation
: if and to the extent the Code applies, any
director of ASE Test who is considered to be independent for the
purposes
of the Scheme and required under the Code to recommend the approval
and
adoption of the Scheme by Unaffiliated ASE Test Shareholders having
(i)
joined in the ASE Test Board Recommendation (as defined below),
(ii)
joined in the determination by the board of directors of ASE Test
that
this Agreement, the Scheme and the transaction contemplated hereby
and
thereby are fair to and in the best interest of the Eligible
|
|
|
ASE
Test
Shareholders, and (iii) joined in the approval and adoption by
the board
of directors of ASE Test of this Agreement and the transactions
contemplated hereby;
|
|
(i)
|
Options
Proposal
: the receipt of all approvals for the implementation of the
Options Proposal; and
|
|
(j)
|
No
Injunctions
: no injunction or other order being issued by any court of
competent jurisdiction or no other legal restraint or prohibition
preventing the consummation of the Scheme or proposed transactions
or any
part thereof being in effect on the Effective
Date.
|
|
3.2
|
Waiver
.
|
|
(a)
|
the
Scheme
Conditions set out in Clause 3.1(c) may be waived in whole or in
part by
ASE Inc. unless such waiver would result in civil or criminal liabilities
to any director or executive officer of ASE Test (and ASE Inc.,
upon the
request of the Special Committee, shall deliver to ASE Test a legal
opinion to such effect in respect of any such proposed
waiver);
|
|
(b)
|
the
Scheme
Conditions set out in Clause 3.1(d)(i) may be waived in whole or
in part
by ASE Inc.;
|
|
(c)
|
the
Scheme
Conditions set out in Clause 3.1(d)(ii) may be waived in whole
or in part
by ASE Test; and
|
|
(d)
|
the
Scheme
Conditions set out in Clause 3.1(h) may be waived in whole or in
part by
ASE Inc.
|
4.
|
UNDERTAKINGS
|
4.1
|
Effective
Date of Undertakings
. Each undertaking given pursuant to this Clause 4
shall, unless otherwise stated, be effective from the date of this
Agreement until the earlier of the Effective Date (but including
the
Effective Date) or the date on which this Agreement is terminated
pursuant
to Clause 8 hereof.
|
4.2
|
ASE
Test
Undertakings
. Subject as provided in this Clause, ASE Test hereby
irrevocably undertakes with ASE Inc.
that:
|
|
(a)
|
Provision
of Information
: ASE Test will and will procure that its
subsidiary(ies) (i) give ASE Inc. and its advisers reasonable access
to
the offices, properties, books and records of the ASE Test Group
Companies, (ii) furnish ASE Inc. and its advisers with such information
relating to the ASE Test Group Companies (including without limitation,
information relating to the assets, business, financial position,
liabilities, management, operations, and results of operations
of, but
excluding forecasts and projections of, the ASE Test Group Companies)
as
ASE Inc. and its advisers may reasonably request, and (iii) authorise
and
direct its officers, employees (if any), auditors, lawyers and
other
advisers to reasonably assist and co-operate with ASE Inc., for
the
implementation of the Scheme;
provided
, that any such access and
review pursuant to Clause 4.2(a)(i) and (ii) shall be granted and
conducted in a manner as not to interfere unreasonably with the
conduct of
the business or operations of the ASE Test Group Companies. To
the extent
that legal or equitable or contractual obligations in relation
to third
parties may limit ASE Test's obligations to
|
|
|
comply
with
this sub-paragraph (a), ASE Test shall forthwith inform ASE
Inc. of that
fact and consult with ASE Inc. as to the steps which may be
taken to
obtain any necessary third party consents to enable it to comply
with this
sub-paragraph (a), or to the extent that the matter is of high
commercial
sensitivity, as determined by ASE Test in its sole discretion,
which may
limit ASE Test's ability to provide certain information such
as forecasts
and projections, to otherwise arrange within those constraints
that ASE
Inc. is informed of that part of the information that is material
to the
Scheme;
|
|
(b)
|
Announcement
:
it will release the Announcement, jointly with ASE Inc., on the
date of
this Agreement;
|
|
(c)
|
Implementation
of the Scheme
: it will take all steps required to be taken by it in
relation to the Scheme and will use all best endeavours to procure
that
the Scheme is implemented on the terms set out in this Agreement
and to be
set out in the Scheme Document, including without limitation, (i)
seeking
the dates for the relevant Court Hearings, (ii) despatching the
Scheme
Document and appropriate forms of proxy for use at the Court Meeting
promptly following approval thereof (where required) by the Court
to its
shareholders in accordance with its Articles of Association, (iii)
in the
event of the Scheme being approved by the requisite majority at
the Court
Meeting, promptly applying to the Court for, and diligently seeking
its
sanction of, the Scheme (including without limitation, diligently
resisting any application of a party, including any Unaffiliated
ASE Test
Shareholder, to the Court to seek orders to delay or prevent the
Scheme
from being effected), and (iv) in the event of the Court Order
being
obtained, promptly delivering the same to the ACRA for lodgement
as
contemplated by this Agreement;
|
|
(d)
|
Authorisations
:
it will use best endeavours to obtain all authorisations, consents,
clearances, permissions and approvals as are within its control
or
influence and which are necessary or appropriate for or in respect
of the
implementation of the Scheme and the resulting change of ownership
of the
ASE Test Group, so as to ensure that as a result of the Scheme
or their
implementation thereof:
|
|
(i)
|
no
moneys
borrowed by, and no other indebtedness (actual or contingent) that
is of
an amount equal to or exceeding US$1,000,000 or which may adversely
affect
the ability of ASE Test to perform and comply with its obligations
under
this Agreement, of, any ASE Test Group Company are or become repayable
or
capable of being declared repayable immediately or earlier than
the stated
repayment date and the ability of any such member to borrow moneys
or
incur any other indebtedness is not withdrawn or
inhibited;
|
|
(ii)
|
no
agreement,
arrangement, licence, permit, franchise or other instrument which
benefits
any member of the ASE Test Group and which is material to the business
of
the ASE Test Group taken as a whole is terminated, suspended or
materially
adversely modified and no additional material obligation or liability
arises or any action is taken or arises thereunder which prejudices
any
ASE Test Group Company;
|
|
(iii)
|
no
interest or
business of any ASE Test Group Company in or with any other person,
firm,
company or body (or any arrangements relating to such interest
or
business) which is material to the business of the ASE Test Group
taken as
a whole is terminated or materially and adversely limited, modified
or
otherwise affected;
|
|
(iv)
|
no
asset of
any ASE Test Group Company which is material to the business of
the ASE
Test Group taken as a whole is or falls to be disposed of, divested
or
charged and no right arises under which any such asset or interest
could
be required to be disposed of, divested or charged;
and
|
|
(v)
|
no
security
interest over any material part of the business, property or assets
of any
ASE Test Group Company becomes
enforceable,
|
|
(i)
|
declare
or pay
any dividend or make any distribution (in cash or in kind) to its
shareholders; or
|
|
(ii)
|
save
for the
ASE Test Shares issued on or prior to the Books Closure Date pursuant
to
the valid exercise on or prior to the third Business Day prior
to the
Books Closure Date of existing ASE Test Options in accordance with
the
terms of the ASE Test Share Option Plans and save for the transactions
contemplated by the Options Proposal as set out in the attached
Schedule,
create, allot or issue any shares or other securities convertible
into
equity securities, or create, issue or grant any option or right
to
subscribe in respect of any of its share capital, or agree to do
any of
the foregoing; or
|
|
(iii)
|
except
as set
forth in Clause 4.2(e)(ii), issue any equity securities, upon exercise
of
options, conversion of other securities or otherwise from the date
of this
Agreement to (and including) the Effective
Date;
|
|
(f)
|
No
Material
Disposal
: it will not, and will procure that no ASE Test Group Company
will, except as would not be material in the context of the ASE
Test Group
taken as a whole:
|
(i)
|
dispose
of any
assets, including shares or other interests in any ASE Test Group
Company
or in any other entity in which it has an interest, or voluntarily
assume,
acquire or incur any liabilities (including contingent liabilities),
in
each case otherwise than in the ordinary and normal course of business
of
ASE Test Group; or
|
|
(ii)
|
carry
on its
business in any respect otherwise than in the ordinary and normal
course
of business of ASE Test Group and so as to maintain the same as
a going
concern;
|
|
(g)
|
No
Action
: except as provided in Section 4.7, it will take no action
which may be materially prejudicial to the successful completion
of the
Scheme;
|
|
(h)
|
Notification
of Circumstance
: it will notify ASE Inc. of any matter or circumstance
which might cause or result in any of the Scheme Conditions to
be
unfulfilled or incapable of fulfilment as soon as possible after
becoming
aware of it and, on request from time to time, to confirm to ASE
Inc. in
writing that there are no such matters or circumstances of which
it is
aware (other than as previously
notified);
|
|
(i)
|
Directors'
Responsibility
: it will use its best endeavours to procure that its
directors will take responsibility for the information in the Scheme
Document and the Schedule
|
(j)
|
Normal
Dealing
: it will and will procure that each member of the ASE Test
Group will:
|
|
(i)
|
conduct
its
business in the ordinary course and not enter into any transaction
or
agreement or take any action other than in the ordinary course
and in a
reasonable and prudent manner, consistent with past
practices;
|
|
(ii)
|
use
all
reasonable efforts to preserve and protect its properties and
assets;
|
|
(iii)
|
not
enter into
any extraordinary transactions nor issue or grant any securities
(other
than upon the exercise of currently outstanding stock options,
if any) or
any rights, options, warrants or debt convertible into or exercisable
or
exchangeable for any securities;
|
|
(iv)
|
not
incur any
liabilities other than in the ordinary course of business, consistent
with
past practices; and
|
|
(v)
|
not
permit a
restructuring pursuant to which it will not be able to perform
its
obligations under this Agreement.
|
4.3
|
ASE
Inc.
Undertakings
: ASE Inc. hereby irrevocably undertakes with ASE Test
that:
|
(a)
|
Announcement
:
it will release the Announcement, jointly with ASE Test, on the
date of
this Agreement;
|
|
(b)
|
Satisfaction
of consideration
: subject to the fulfilment or waiver of the Scheme
Conditions, it will be bound by the Scheme, and will pay the Scheme
Consideration pursuant to the Scheme on the terms set out in this
Agreement and the Scheme Document;
|
|
(c)
|
Directors'
Responsibility
: it will use its best endeavours to procure that its
directors will take responsibility for the information in the Scheme
Document and the Schedule 13E-3 concerning ASE Inc. and its directors
as
required by applicable law and
regulation;
|
|
(d)
|
Notification
of Circumstance
: it will notify ASE Test of any matter or circumstance
which might cause or result in any of the Scheme Conditions to
be
unfulfilled or incapable of fulfilment as soon as possible after
becoming
aware of it and, on request from time to time, to confirm to ASE
Test in
writing that there are no such matters or circumstances of which
it is
aware (other than as previously
notified);
|
|
(e)
|
No
restructuring
: it will not permit a restructuring pursuant to which it
will not be able to perform its obligations under this Agreement;
and
|
|
(f)
|
No
action
: it will take no action which may be materially prejudicial
to
the successful completion of the
Scheme.
|
4.4
|
Options
Proposal
: Each of ASE Inc. and ASE Test agrees and undertakes that
it
shall take such steps to implement the Options Proposal as set
out in the
attached Schedule. ASE Inc. agrees that it shall use its best
efforts to
obtain all requisite approvals and shall take all other necessary
actions
to implement and to give effect to the Options Proposal. ASE
Test agrees
that it shall, and shall procure that the Options Committee shall,
to the
extent permitted by the provisions of the ASE Test Share Option
Plans,
cancel all ASE Test Options which remain
|
|
outstanding
after the Effective Date, and shall take such steps as may be necessary
to
give effect to the Options
Proposal.
|
4.5
|
Mutual
Undertakings and Co-operation
: Each Party undertakes
to:
|
|
(a)
|
Preparation
of Documents
: (x) cooperate with one another (i) in connection with
the preparation of the Scheme Document and the Schedule 13E-3,
(ii) in
determining whether any action by or in respect of, or filing with,
any
Governmental Authority is required, or any actions, consents, approvals
or
waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (iii) in taking such actions
or making
any such filings, furnishing information required in connection
therewith
or with the Scheme Document or the Schedule 13E-3 and seeking timely
to
obtain any such actions, consents, approvals or waivers; and (y)
it shall
give the other party and the other party’s counsel a reasonable
opportunity to review and comment on the Scheme Document and the
Schedule
13E-3, in each case each time before either such document (or any
amendment thereto) is filed with the SEC, SIC, the Court or any
other
Governmental Authority, and it shall give reasonable and good faith
consideration to any comments made by such party and its counsel;
and (z)
it shall provide the other party and the other party’s counsel with (A)
any comments or other communications, whether written or oral,
that it or
its counsel may receive from time to time from the SEC or its staff
with
respect to the Schedule 13E-3 or from the SEC, SIC, the Court or
any other
Governmental Authority, as applicable, with respect to the Scheme
Document, promptly after receipt of those comments or other communications
and (B) a reasonable opportunity to participate in the response
to those
comments and to provide comments on that response (to which reasonable
and
good faith consideration shall be given), including by participating
in
any discussions or meetings with the SEC, SIC, the Court or any
other
Governmental Authority, as applicable;
and
|
|
(b)
|
Fulfilment
of Conditions
: use best endeavors
to:
|
|
(i)
|
procure
the
fulfilment of each of the Scheme Conditions as are within its control
or
influence and to promptly notify the other Party (and supply all
relevant
information to the other Party) of any event or circumstance of
which it
becomes aware which would be likely to have a significant impact
on the
fulfilment of such conditions; provided
that:
|
|
(x)
|
where
any
approval or consent which is required to be obtained by it is
granted
subject to any condition, such condition must be reasonably acceptable
to
the Party on which such condition is imposed or applied, and
the Parties
hereto understand and agree that (A) such endeavors of ASE Inc.
shall not
be deemed to include (aa) ASE Inc. or any of its subsidiaries
(including
ASE Test or any of its subsidiaries) entering into any settlement,
undertaking, consent decree, stipulation or agreement with any
Governmental Authority in connection with the transactions contemplated
hereby or (bb) divesting or otherwise holding separate (including
by
establishing a trust or otherwise), or taking any other action
(or
otherwise agreeing to do any of the foregoing) with respect to
any of its
or its subsidiaries (including ASE Test or any of its subsidiaries)
or any
of their respective affiliates’ businesses, assets or properties and (B)
such endeavors of ASE Test shall not be deemed to include the
making of
any commitment that is not contingent upon the Scheme becoming
|
|
|
effective
and
that would reasonably be expected to have a material adverse effect
on the
ASE Test Group; and
|
|
(y)
|
where
any
condition imposed or applied is required to be fulfilled by a particular
date, procure that such condition is so
fulfilled,
|
4.6
|
Appeal
Process
: If the Court refuses to make any orders convening the Court
Meeting or approving the Scheme, subject to Clause 4.7, ASE Test
must
appeal the Court's decision to the fullest extent possible (except
to the
extent that the Parties agree otherwise). If an appeal to the Court's
decision is made by ASE Test, ASE Inc. shall provide all reasonable
assistance as ASE Test and its advisers may reasonably request
for the
purposes of the appeal. For the avoidance of doubt, ASE Test shall
bear
its own legal costs and other costs and expenses incurred by it
in
connection with obtaining the orders of the Court and (if applicable)
the
appeal.
|
4.7
|
Exercise
of
Fiduciary Duties
: ASE Test shall not, nor shall it authorize or permit
any of its independent directors to, directly or indirectly, withdraw
or
modify in a manner adverse to ASE Inc. the ASE Test Board Recommendation
(as defined below) (or take any action or make any public statement
inconsistent with the ASE Test Board Recommendation) or approve
or
recommend an alternative acquisition proposal. Notwithstanding
the foregoing or any other provision in Clause 4, neither ASE Inc.
nor ASE
Test nor any of their respective directors will be obligated to
take any
action (or refrain from taking any action, as the case may be)
if, and
only to the extent that, a majority of the disinterested directors
of ASE
Inc. or ASE Test, respectively, conclude in good faith that taking
such
action (or refraining from taking such action, as the case may
be) would
constitute a breach of fiduciary duties on the part of the directors
of
ASE Inc. to the shareholders of ASE Inc. or of the directors of
ASE Test
to the ASE Test Shareholders,
respectively.
|
5.
|
REPRESENTATIONS
AND WARRANTIES
|
5.1
|
Representations
and Warranties of ASE Test
. ASE Test hereby warrants and
represents to ASE Inc., as at the date of this Agreement, as
follows:
|
|
(a)
|
Due
incorporation
: it and its subsidiaries are companies duly incorporated
and validly existing under the laws of their respective countries
of
incorporation and each such company respectively has the power
and
authority to conduct the business which it conducts and/or proposes
to
conduct and to own, lease and operate its property and other
assets;
|
|
(b)
|
Capacity
:
it has the power to enter into, exercise its rights and perform
and comply
with its obligations under this
Agreement;
|
|
(c)
|
Enforceability
:
the execution and delivery of this Agreement and the consummation
of the
transactions contemplated hereby have been duly authorized by its
board of
directors and by all other necessary corporate actions, and its
obligations under this Agreement are valid, binding and enforceable
in
accordance with its terms;
|
|
(d)
|
Execution
:
the execution and delivery of, and the performance by it of its
obligations under this Agreement will
not:
|
|
(i)
|
result
in a
breach of any provision of its memorandum or articles of association
or
any of its or its subsidiaries’ constituent
documents;
|
|
(ii)
|
result
in a
breach of any writ, order, injunction, judgment or decree of any
court,
governmental agency or regulatory body to which it or any of its
subsidiaries is a party or is bound;
and
|
|
(iii)
|
result
in a
breach of or give a third party a right to terminate or modify,
or result
in the creation of any Encumbrance or constitute a default under
any
agreement, license or other instrument to which it or any of its
subsidiaries is a party, except where any such matter or occurrence
would
not have a material adverse effect;
|
|
(e)
|
Financial
Statements
: its Audited Accounts have been prepared in accordance with
all applicable laws and on a consistent basis in accordance with
accounting principles, standards and practices generally accepted
at the
date hereof in the ROC so as to give a true and fair view of its
state of
affairs at the date of the Audited
Accounts;
|
|
(f)
|
Board
Recommendation
: the independent directors of ASE Test, acting upon the
recommendation of the Special Committee have (i) unanimously determined
that this Agreement,
the Scheme and the transactions
contemplated hereby and thereby are fair to and in the best interests
of
the Eligible ASE Test Shareholders, (ii) unanimously approved and
adopted
this Agreement and the transactions contemplated hereby and (iii)
unanimously resolved to recommend approval and adoption of the
Scheme by
the Unaffiliated ASE Test Shareholders (such recommendation, the
“
ASE Test Board Recommendation
”);
and
|
|
(g)
|
Opinion
of
Financial Advisor
: the Special Committee has received the written
opinion of Lehman Brothers Inc. (the
“
FA
”
),
financial
advisor to the Special Committee, to the effect that, as of the
date of
this Agreement, the Scheme Consideration is fair to the Unaffiliated
ASE
Test Shareholders from a financial point of view, and the FA has
consented
to the reproduction of such opinion in the Scheme Document, the
Schedule
13E-3 or any other filings with the
SEC.
|
5.2
|
Representations
and Warranties of ASE Inc.
. ASE Inc. hereby warrants and
represents to ASE Test, as at the date of this Agreement, as
follows:
|
|
(a)
|
Due
incorporation
: it is duly incorporated and validly existing under the
laws of its country of incorporation and it has the power and authority
to
conduct the business which it conducts and/or proposes to conduct
and to
own, lease and operate its property and other
assets;
|
|
(b)
|
Capacity
:
it has the power to enter into, exercise its rights and perform
and comply
with its obligations under this
Agreement;
|
|
(c)
|
Enforceability
:
the execution and delivery of this Agreement and the consummation
of the
transactions contemplated hereby have been duly authorized by its
board of
directors and by all other necessary corporate actions, and its
obligations under this Agreement are valid, binding and enforceable
in
accordance with its terms;
|
|
(d)
|
Execution
:
the execution and delivery of, and the performance by it of its
obligations under this Agreement will
not:
|
|
(i)
|
result
in a
breach of any provision of its memorandum or articles of association
or
any agreement to which it is a party;
and
|
|
(ii)
|
result
in a
breach of any writ, order, injunction, judgment or decree of any
court,
governmental agency or regulatory body to which it is a party or
is bound,
which breach would reasonably be expected to have a material adverse
effect on the performance of ASE Inc. of its obligations for or
in respect
of the implementation of the
Scheme.
|
|
(e)
|
Sufficiency
of Financial Resources
: it has sufficient resources to acquire all the
ASE Test Shares held as of the Books Closure Date and satisfy its
obligations under the Options Proposal pursuant to the
Scheme.
|
6.
|
ANNOUNCEMENTS
|
6.1
|
Initial
Announcement
. The Parties agree that the Announcement shall
be jointly released by ASE Inc. and ASE Test to the TSE, NYSE and
NASDAQ
and filed with the SEC on Form 6-K on or promptly following the
Announcement Date.
|
6.2
|
Further
Announcements
. No Party shall issue any press release, make
any other public statement or schedule any press conference or
conference
call with investors or analysts concerning this Agreement or the
Scheme
except as may be required by Applicable Law or any listing agreement
with
or rule of any securities exchange or association, without the
prior
approval of the other Party (such approval not to be unreasonably
withheld
or delayed), and each Party shall, subject to Applicable Law or
any
listing agreement with or rule of any securities exchange or association,
consult in advance with the other Party regarding the content,
timing and
manner of dissemination of any such press release, public statement,
press
conference or conference call required to be issued, made or conducted
by
any Applicable Law or any listing agreement with or rule of any
securities
exchange or association, and shall not issue any such press release,
make
any such other public statement or schedule any such press conference
or
conference call before such consultation. Each such
communication shall, subject to the requirements of Applicable
Law or any
listing agreement with or rule of any securities exchange or association,
be consistent with the disclosure set forth in the Scheme Document,
the
Schedule 13E-3 and any other formal announcement or circular issued
to
shareholders, employees, Governmental Authority or any securities
exchange
or association.
|
7.
|
MISCELLANEOUS
|
7.1
|
Successors
and Assigns
. This Agreement shall be binding on and shall enure for
the benefit of the Parties and their respective successors and
assigns.
Any reference in this Agreement to any of the Parties shall be
construed
accordingly. The Parties agree that the benefit of any provision
of this
Agreement may not be assigned by any Party without the consent
of the
other Parties.
|
7.2
|
Variation
.
No variation of this Agreement shall be effective unless agreed
to by the
Parties in writing and signed by or on behalf of each
Party.
|
7.3
|
Time
of the
Essence
. Time shall be of the essence of this Agreement, both as
regards the dates and periods mentioned and as regards any dates
and
periods which may be substituted for them in accordance with this
Agreement or by agreement in writing between the
Parties.
|
7.4
|
Costs
.
The Parties shall bear their respective fees, costs and expenses
incurred
in connection with this Agreement.
|
7.5
|
Entire
Agreement
. This Agreement and any other documents delivered pursuant
to this Agreement shall (a) contain the entire agreement of the
Parties
with respect to the subject matter hereof and (b) supersede all
prior
agreements, arrangements, understanding, promises, covenants,
representations and communications between the Parties, whether
written or
oral, with respect to the subject matter
hereof.
|
7.6
|
Release,
Indulgence
and Waiver
. Any liability to a Party under this
Agreement may in whole or in part be released, compounded or compromised,
or time or indulgence given, by that Party in its absolute discretion
as
regards the Party under such liability without in any way prejudicing
or
affecting its rights against the other Party under the same or
a like
liability. No failure of any party to exercise, and no delay by
it in exercising, any right, power or remedy in connection with
this
Agreement (each, a "
Right
") will operate as a
waiver thereof, nor will any single or partial exercise of any
Right
preclude any other or further exercise of such Right or the exercise
of
any other Right.
|
7.7
|
Further
Assurance
. At any time after the date of this Agreement, each Party
shall, and shall use all reasonable endeavours to procure that
any
necessary third party shall, execute such documents and do such
acts and
things as may be reasonably required for the purpose of giving
effect to
the provisions of this Agreement.
|
7.8
|
Invalidity
.
If any provision in this Agreement shall be held to be illegal,
invalid or
unenforceable, in whole or in part, under any enactment or rule
of law,
such provision or part shall to that extent be deemed not to form
part of
this Agreement but the legality, validity and enforceability of
the
remainder of this Agreement shall not be
affected.
|
7.9
|
C
onfidentiality
.
Subject to Clause 6, each Party undertakes to keep confidential,
and shall
not disclose to any person (except to its professional advisers
and its
concert parties and associates (both within the meaning of the
Code) on a
need to know basis), the existence of this Agreement or any information
relating to the terms of or the transactions contemplated by this
Agreement or any information provided pursuant to the terms of
this
Agreement, unless and to the extent required by any applicable
law or
regulation, without the prior written consent of the other Party
(such
consent not to be unreasonably withheld). This Clause 7.9 however,
shall
not prohibit disclosure or use of any information if and to the
extent
that the information becomes publicly available (other than by
breach of
this Agreement) or the information is independently developed after
completion of this Agreement.
|
7.10
|
N
otices
.
All notices, demands or other communications required or permitted
to be
given or made under or in connection with this Agreement shall
be in
writing and delivered personally or sent by prepaid registered
post or by
fax addressed to the intended recipient thereof at its address,
fax number
and marked for the attention of such person (if any), set out
against its
name below (or to such other address or fax number as such
Party may from
time to time notify the others). Any such notice, demand or
communication shall be deemed to have been duly served (if
given or made
by fax) immediately or (if given or made by letter) immediately
if hand
delivered or seven (7) Business Days after posting and in proving
the same
it shall be sufficient to show that the envelope containing
the same was
duly addressed, stamped and
posted.
|
ASE Inc.: | Advanced Semiconductor Engineering, Inc. | ||
Room #1901, 19/F TWTC International Trade Building | |||
333 Keelung Rd., Section 1 | |||
Taipei 110 | |||
Taiwan, Republic of China |
7.11
|
Equitable
Remedies
. Without prejudice to any other rights or remedies a Party
may have, the Parties each acknowledge and agree that damages may
not be
an adequate remedy for any breach of this Agreement and the Parties
shall
be entitled to the remedies of injunction, specific performance
and other
equitable relief (but for the avoidance of doubt no right of rescission
or, unless expressly permitted, termination) for any threatened
or actual
breach of this Agreement.
|
7.12
|
No
Merger
. The rights and obligations of the Parties will not merge
on
completion of any transaction under this Agreement. They will survive
the
execution and delivery of any assignment or other document entered
into
for the purpose of implementing any transaction relating to the
Scheme.
|
8.
|
TERMINATION
|
8.1
|
Termination
by Court Order or Notice or Breach
. Without prejudice to any other
right of termination under this Agreement, this Agreement may be
terminated as follows:
|
|
(a)
|
by
either
Party if any court of competent jurisdiction has issued an order,
decree
or ruling or taken any other action permanently enjoining, restraining
or
otherwise prohibiting the Scheme or any part thereof, or has refused
to do
anything necessary to permit the Scheme or any part thereof, and
such
order, decree, ruling, other action or refusal shall have become
final and
non-appealable; or
|
|
(b)
|
if
there shall
have been a breach by any Party of its obligations under this Agreement
and such breach is material in the context of the Scheme, by the
Party not
in default and having the benefit of such obligations, after prior
consultation with the SIC and any other applicable Government Authority,
by fourteen (14) days' written notice to the other Party;
or
|
|
(c)
|
by
either
Party (i) if the approval of the Scheme by Unaffiliated ASE Test
Shareholders present and voting at the Court Meeting shall not
have been
obtained or (ii) if the Court does not sanction the Scheme and
such court
decision is final and nonappealable;
or
|
|
(d)
|
by
either
Party if the Scheme Conditions are not satisfied (or waived) on
or prior
to the Conditions Long-Stop Date (subject to any required consent
of the
SIC or any other regulatory or governmental authority (if necessary)),
provided that a Party whose breach of this Agreement has resulted
in the
Scheme Conditions not being satisfied on or prior to the Conditions
Long-Stop Date shall not be entitled to terminate the Agreement
pursuant
to this clause (d); or
|
|
(e)
|
by
ASE Inc. if
ASE Test or its directors shall have withdrawn or modified in any
manner
adverse to ASE Inc. the ASE Test Board Recommendation, or approved
or
recommended an alternative acquisition proposal, or otherwise failed
to
comply with Clause 4.7; or
|
|
(f)
|
by
ASE Test
if, in accordance with and pursuant to Clause 4.7, ASE Test or
its
directors shall have withdrawn or modified in any manner adverse
to ASE
Inc. the ASE Test Board Recommendation, or approved or recommended
an
alternative acquisition proposal;
or
|
|
(g)
|
upon
the
mutual written consent of the
Parties.
|
8.2
|
Termination
without Prejudice to Rights
. Any termination of this Agreement shall
be without prejudice to any rights which a Party may have against
any
other Party for any breach by that Party prior to the termination
of this
Agreement. Notwithstanding the termination of this Agreement pursuant
to
this Clause 8, the Parties agree that the provisions of Clauses
6 and 7.9
shall survive and continue to be binding on the
Parties.
|
8.3
|
Consultation
with Other Parties
. In the event any Party intends to
consult the SIC or any other applicable Government Authority in
relation
to the termination of this Agreement, it shall give prior written
notice
of such intention to the other
Party.
|
9.
|
COUNTERPARTS
|
10.
|
CONTRACTS
(RIGHTS OF THIRD PARTIES) ACT
, CHAPTER 53B OF
SINGAPORE
|
11.
|
GOVERNING
LAW
|
|
This
Agreement
and the documents to be entered into pursuant to it shall be governed
by
and construed in accordance with the laws of
Singapore.
|
(a)
|
In-the-Money
ASE Test Options.
Upon the Scheme becoming effective, each
ASE Test Option which is outstanding as of the Books Closure Date
(whether
vested or unvested as of the Effective Date), the exercise price
of which
is lower than the product of (i) the number of ASE Test NASDAQ
Shares into
which such ASE Test Option is exercisable and (ii) the Per-Share
Scheme
Consideration (each, an “
In-the-Money ASE Test
Option
”) shall be deemed to have been exercised as of the
Books Closure Date by the holder of such ASE Test Option on a “cashless”
basis (a “
Mandatory Cashless
Exercise
”). The existing terms of each
In-the-Money ASE Test Option (the “
Pre-Existing Option
Terms
”) shall be amended (the “
Option
Amendment
”), effective upon the Scheme becoming effective, to
permit the mandatory cashless exercise of such ASE Test
Option. Under the terms of such amendment, for each
In-The-Money ASE Test Option: (i) a broker appointed by ASE Test
and
acting on behalf of the holder of such In-The-Money ASE Test Option
will
advance the full cash exercise price of such In-The-Money ASE Test
Option
on behalf of such holder to ASE Test; (ii) ASE Test will issue
the full
number of ASE Test NASDAQ Shares into which such In-The-Money ASE
Test
Option is exercisable, to such broker to be held by such broker
on behalf
of such holder; (iii) each ASE Test NASDAQ Share issued in respect
of the
exercise of such In-The-Money ASE Test Option shall be subject
to the
Scheme and shall immediately upon issuance be converted into the
right to
receive the Per-Share Scheme Consideration; (iv) ASE Inc. shall
pay the
Per-Share Scheme Consideration in respect of each such ASE Test
NASDAQ
Share issued to such broker; (v) the broker will retain a portion
of the
Per-Share Scheme Consideration in respect of each such ASE Test
NASDAQ
Share issued to such broker in an amount sufficient to reimburse
the
amount of the cash exercise price advanced by such broker to ASE
Test on
behalf of such holder, plus any interest due on such amount and
any other
fees and charges of such broker relating to such exercise, and
the broker
will remit to such holder the remainder of the Per-Share Scheme
Consideration in respect of each such ASE Test NASDAQ Share issued
to such
broker pursuant to the exercise of such In-The-Money ASE Test
Option.
|
(b)
|
Out-of-the-Money
options.
Each ASE Test Option which is outstanding as of
the Books Closure Date (whether vested or unvested as of the Effective
Date) and the exercise price of which is equal to or higher than
the
product of (x) the number of ASE Test NASDAQ Shares that such ASE
Test
Option is exercisable into and (y) the Per-Share Scheme Consideration
(an
“
Out-of-the-Money ASE Test Option
”) shall be
cancelled on the Effective Date without any consideration to be
paid to
the holder of such Out-of-the-Money ASE Test
Option.
|
SIGNED
by
/s/ Jason C.S. Chang
on
behalf
of
ADVANCED
SEMICONDUCTOR
ENGINEERING,
INC.
in
the
presence of:
|
)
)
)
)
|
SIGNED
by
/s/ Albert Yu
on
behalf
of
ASE
TEST LIMITED
in
the
presence of:
|
)
)
)
)
|
Very
truly yours,
|
||
LEHMAN
BROTHERS
|
Name
and Office
|
Present
Principal Occupation or Employment and Material Positions Held
During the
Past Five Years
|
Business
Address
|
Country
of Citizenship
|
|||
Jason
C.S. Chang
Chairman
and Chief Executive Officer
|
Chairman
and Chief Executive Officer, ASE Inc. and ASE Test
|
Room
1901, TWTC International Trade Building, 19F, 333, Keelung Road,
Sec. 1,
Taipei 110, Taiwan, Republic of China
|
ROC
|
|||
Richard
H.P. Chang
Vice-Chairman
|
Vice
Chairman, ASE Inc. and ASE Test
|
Room
1901, TWTC International Trade Building, 19F, 333, Keelung Road.,
Sec. 1,
Taipei 110, Taiwan, Republic of China
|
ROC
|
|||
Kenneth
Hsiang
Chief
Financial Officer
|
Chief
Financial Officer, ASE Test
|
46800
Bayside Parkway, Fremont, CA 94538, U.S.A.
|
U.S.A.
|
|||
Raymond
Lo
Director
|
General
Manager, ASE Inc.
|
10
West 5th Street, Nantze Export Processing Zone, Kaohsiung, Taiwan,
Republic of China
|
ROC
|
|||
Kwai
Mun Lee
President,
ASE Test Malaysia and ASE Singapore Pte Ltd.
|
President,
ASE Test Malaysia, Phase 4, Bayan Lepas, Free Industrial Zone,
11900
Penang, Malaysia; President, ASE Singapore Pte Ltd., 7 Ang Mo
Kio Street
64, #01-01, Singapore 569086
|
7
Ang Mo Kio Street 64, #01-01, Singapore 569086
|
Malaysia
|
|||
Tien
Wu
Chief
Executive Officer, ISE Labs
|
Chief
Operating Officer, ASE Inc.; WW Sales, ASE Inc. (January 2002
– October
2005)
|
26
Chin 3rd Road, Nantze Export Processing Zone, Kaohsiung, Taiwan,
Republic
of China
|
ROC
|
|||
Joseph
Tung
Director
|
Chief
Financial Officer, ASE Inc.;
|
Room
1901, TWTC International Trade Building, 19F, 333, Keelung Road.,
Sec. 1,
Taipei 110, Taiwan, Republic of China
|
ROC
|
|||
Jeffrey
Chen
Director
|
Vice
President, ASE Inc.
|
Room
1901, TWTC International Trade Building, 19F, 333, Keelung Road.,
Sec. 1,
Taipei 110, Taiwan, Republic of China
|
ROC
|
|||
Freddie
Liu
Director
|
Vice
President, ASE Inc.; Chief Financial Officer (March 2004 – January 2007),
ASE Test
|
Room
1901, TWTC International Trade Building, 19F, 333, Keelung Road.,
Sec. 1,
Taipei 110, Taiwan, Republic of China
|
ROC
|
|||
Ko-Chien
Chin
Director
|
Director
(1984-2005) and General Manager (1990-2005), ASE Inc.
|
3F,
No.122, Jen-Ai Road, Section 3, Taipei, Taiwan, Republic of
China
|
ROC
|
|||
Alan
Tien-Cheng Cheng
Director
|
President,
H.R. Silvine Group, No.313, Yung Ho Road, Chung Ho City, Taipei
Hsien,
Taiwan, Republic of China
|
No.313,
Yung Ho Road, Chung Ho City, Taipei Hsien, Taiwan, Republic of
China
|
ROC
|
Name
and Office
|
Present
Principal Occupation or Employment and Material Positions Held
During the
Past Five Years
|
Business
Address
|
Country
of Citizenship
|
|||
Guan
Seng Sim
Director
|
Partner,
Baker Tilly TFWLCL, 15 Beach Road #03-10, Beach Centre, Singapore
189677
|
15
Beach Road #03-10, Beach Centre, Singapore 189677
|
Singapore
|
|||
Albert
C.S. Yu
Director
|
Chairman,
ChinaTimes Inc., No.132 Da Le Street, Taipei, Taiwan, Republic
of China;
Chairman (December 26, 2005-November 2007), China Television
Company,
No.120, Chongyang Road, Nangang District, Taipei, Taiwan, Republic
of
China
|
No.132
Da Le Street, Taipei, Taiwan, Republic of China
|
ROC
|
|||
David
D.H. Tsang
Director
|
Partner,
Acorn Campus Ventures, 3 Results Way, Cupertino, CA 95014,
U.S.A.
|
3
Results Way, Cupertino, CA 95014, U.S.A.
|
U.S.A.
|
Name
and Office
|
Present
Principal Occupation or Employment and Material Positions Held
During the
Past Five Years
|
Business
Address
|
Country
of Citizenship
|
|||
Jason
C.S. Chang
Chairman
and Chief Executive Officer
|
Chairman
and Chief Executive Officer, ASE Inc. and ASE Test
|
Room
1901, TWTC International Trade Building, 19F, 333, Keelung Road.,
Sec. 1,
Taipei 110, Taiwan, Republic of China
|
ROC
|
|||
Richard
H.P. Chang
Vice-Chairman
|
Vice
Chairman, ASE Inc. and ASE Test
|
Room
1901, TWTC International Trade Building, 19F, 333, Keelung Road.,
Sec. 1,
Taipei 110, Taiwan, Republic of China
|
ROC
|
|||
Tien
Wu
Director
and Chief Operating Officer
|
Chief
Operating Officer, ASE Inc.; Director of Worldwide Sales, ASE
Inc.
(January 2002 – October 2005)
|
26
Chin 3rd Road, Nantze Export Processing Zone, Kaohsiung, Taiwan,
Republic
of China
|
ROC
|
|||
Joseph
Tung
Director
and Chief Financial Officer
|
Chief
Financial Officer, ASE Inc.
|
Room
1901, TWTC International Trade Building, 19F, 333, Keelung Road.,
Sec. 1,
Taipei 110, Taiwan, Republic of China
|
ROC
|
|||
Raymond
Lo
Director
and General Manager
|
General
Manager, ASE Inc.
|
10
West 5th Street, Nantze Export Processing Zone, Kaohsiung, Taiwan,
Republic of China
|
ROC
|
|||
Jeffrey
Chen
Director
and Vice President
|
Vice
President, ASE Inc.
|
Room
1901, TWTC International Trade Building, 19F, 333, Keelung Road.,
Sec. 1,
Taipei 110, Taiwan, Republic of China
|
ROC
|
|||
Alan
Tien-Cheng Cheng
Director
|
President,
H.R. Silvine Group, No.313,
Yung
Ho Road, Chung Ho City, Taipei Hsien, Taiwan, Republic of
China
|
No.313,
Yung Ho Road, Chung Ho City, Taipei Hsien, Taiwan, Republic of
China
|
ROC
|
Name
and Office
|
Present
Principal Occupation or Employment and Material Positions
Held During the
Past Five Years
|
Business
Address
|
Country
of Citizenship
|
Kwai
Mun Lee
President,
ASE Test Malaysia and ASE Singapore Pte Ltd.
|
President,
ASE Test Malaysia, Phase 4, Bayan Lepas, Free Industrial Zone,
11900
Penang, Malaysia; President, ASE Singapore Pte Ltd., 7 Ang
Mo Kio Street
64, #01-01, Singapore 569086
|
7
Ang Mo Kio Street 64, #01-01, Singapore 569086
|
Malaysia
|
Sang
Jin Maeng
President
and General Manager, ASE Korea
|
President
and General Manager, ASE Korea
|
494,
Munbal-ri, Gyoha-eup, Paju-si, Gyeonggi-do, Korea
|
Republic
of Korea
|
THE
SCHEME
|
Originating Summons | ) |
Number [ · ] of 2007 | ) |
In
the Matter of
ASE
Test Limited
(RC
No. 199508552K)
and
In
the Matter of Section 210 of
the
Companies Act, Chapter 50
(Revised
Edition 2006)
|
(A)
|
In
this Scheme of Arrangement, unless inconsistent with the subject
or
context:
|
(i)
|
the
following expressions shall bear the following
meanings:
|
“
Act
”
|
the
Companies Act, Chapter 50 of Singapore
|
|
“
ASE
Inc.”
|
Advanced
Semiconductor Engineering, Inc.
|
“
ASE
Test Nasdaq Shares
”
|
Shares
listed on NASDAQ
|
|
“
ASE
Test TDSs
”
|
Taiwan
depository shares representing ownership interests in Shares
and listed
and quoted on the Taiwan Stock Exchange
|
|
“
ASE
Test Options
”
|
options
granted by ASE Test under the 1999, 2000 and 2004 ASE Test share
option
plans
|
|
“
Books
Closure Date
”
|
[
·
]
or such date
to be announced (before the Effective Date), being the date on
which the
Register of Transfers and the Register of Members of the Company
will be
closed for the purposes of determining the entitlement of the
Scheme
Shareholders to the Scheme Consideration
|
|
“
Business
Day
”
|
a
day (excluding Saturdays, Sundays and gazetted public holidays)
on which
commercial banks are open for business in Singapore, New York
City and
Taipei
|
|
“
Company
”
|
ASE
Test Limited
|
|
“
Court
”
|
the
High Court of the Republic of Singapore
|
|
“
Court
Meeting
”
|
the
meeting of the holders of the Eligible Shares convened by the
direction of
the Court to consider the Scheme and including any adjournment
thereof
|
|
“
Directors
”
|
the
directors of the Company
|
|
“
Effective
Date
”
|
the
date on which this Scheme becomes effective in accordance with
Clause 6 of
this Scheme
|
|
“
Eligible
Shares
”
|
All
of the issued Shares other than those held by ASE Inc. and its
subsidiaries
|
|
“
Entitled
Scheme
Shareholders
”
|
Scheme
Shareholders of record as of the Books Closure Date and all holders
of
Shares issued pursuant to any exercise of any ASE Test options
as of the
Books Closure Date
|
|
“
Implementation
Agreement
”
|
the
scheme implementation agreement dated 4 September 2007 entered
into
between ASE Inc. and the Company
|
|
“
Latest
Practicable Date
”
|
[
·
],
being the
latest practicable date prior to the printing of the document
containing
this Scheme for the purpose of ascertaining certain information
for
inclusion herein
|
|
“
Noon
Buying Rate
”
|
as
of any date of determination, the rate published by the Federal
Reserve
Bank of New York for spot purchases of NT$ as of 12:00 noon on
the New
York Business Day
|
(ii)
|
the
term “
Scheme Shareholder
” includes a person entitled by
transmission;
|
(iii)
|
any
reference to a statutory provision shall include such provision
and any
regulations made in pursuance thereof as from time to time modified
or
re-enacted, whether before or after the date of this
Scheme;
|
(iv)
|
words
denoting the singular number shall include the plural and vice
versa;
|
(v)
|
words
importing persons shall include corporations;
and
|
(vi)
|
all
timing referred to is made by reference to Singapore
time.
|
(A)
|
The
Company was incorporated in Singapore on 1 December 1995. As
of the Latest
Practicable Date, the Company had
[
·
]
Shares
in
issue and ASE Inc. holds [
·
]
Shares,
which is approximately [
·
]
per cent. of
the share capital of the Company.
|
(B)
|
As
of the Latest Practicable Date, there were outstanding ASE Test
Options to
subscribe for an aggregate of [
·
]
Shares. If
all the outstanding ASE Test Options are fully exercised, the
total number
of Shares in issue would be [
·
].
Shares
issued on or prior to the Books Closure Date pursuant to the
valid
exercise on or prior to the third Business Day prior to the Books
Closure
Date of existing ASE Test Options and Shares issued on the Effective
Date
pursuant to the mandatory exercise of in-the-money options under
the
option treatment as set forth in the Implementation Agreement
will form
part of the Eligible Shares.
|
(C)
|
The
primary purpose of this Scheme is the acquisition by ASE Inc.
of all the
Eligible Shares.
|
(D)
|
The
parties have entered into an Implementation Agreement to set
out their
respective obligations with respect to the
Scheme.
|
(E)
|
ASE
Inc. has agreed to appear by Counsel at the hearing of the Originating
Summons to sanction this Scheme and to consent thereto, and to
undertake
to the Court to be bound thereby and to execute and do and procure
to be
executed and done all such documents, acts and things as may
be necessary
or desirable to be executed and done by it for the purpose of
giving
effect to this Scheme.
|
1.
|
(a)
|
With
effect from the Effective Date, all of the [
·
]
Eligible
Shares shall be transferred, fully paid, free from all encumbrances,
ranking
pari passu
in all respects with the Shares then in issue,
and together with all rights, benefits and entitlements attaching
thereto
as of the Effective Date and thereafter attaching thereto (including
all
voting rights and the right to receive and retain all dividends
and other
distributions (if any) which may be announced, declared, paid
or made
thereon by ASE Test on or after the Effective Date, but excluding
the
right to receive and retain all dividends and distributions (if
any), the
record date of which falls before the Effective Date, together
with all
interest accrued thereon).
|
|
(b)
|
For
the purpose of giving effect to the transfer of the Eligible
Shares
provided for in Clause 1(a) of this Scheme, the Company shall
authorise
any person to execute or effect on behalf of all such Scheme
Shareholders
an instrument or instruction of transfer of all the Eligible
Shares held
by such Scheme Shareholders and every such instrument or instruction
of
transfer so executed shall be effective as if it had been executed
by the
relevant Scheme Shareholder.
|
2.
|
In
consideration for the transfer of the Eligible Shares provided
for in
Clause 1(a) of this Scheme, ASE Inc. shall pay or procure that
there shall
be paid to each Scheme Shareholder the Scheme Consideration for
each
Eligible Share transferred by that Scheme
Shareholder.
|
3.
|
ASE
Inc. shall, not later than 10 calendar days after the Effective
Date, and
against the transfer of the Eligible Shares provided for in Clause
1(b) of
this Scheme, make payment of the Scheme Consideration payable
on the
transfer of the Eligible Shares pursuant to this Scheme to each
Entitled
Scheme Shareholder by
making
payment of the aggregate Scheme Consideration payable to such
Entitled
Scheme Shareholder to its paying agent. The paying agent will
(i)
send
a cheque for the aggregate Scheme Consideration payable
to
such Entitled Scheme Shareholder
(net
of applicable withholding tax, if any)
made out in favour of such
Entitled Scheme Shareholder by first class mail to his address in the
Register of Members of the Company at the close of business on
the Books
Closure Date, at the sole risk of such Entitled Scheme Shareholder,
or in
the case of joint Entitled Scheme Shareholders, to the first
named
Entitled Scheme Shareholder made out in favour of such Entitled
Scheme
Shareholders by first class mail to his address in the Register of
Members of the Company at the close of business on the Books
Closure Date,
at the sole risk of such Entitled Scheme Shareholders
;
or
(ii) credit the aggregate Scheme Consideration payable to such
Entitled
Scheme Shareholder (net of applicable withholding tax, if any)
to the
designated bank account of such Entitled Scheme
Shareholder.
|
4.
|
(a)
|
The
encashment of any cheque
,
or
as the case may be, the crediting in the designated bank
account
of an Entitled Scheme Shareholder,
referred to in Clause 3 of
this Scheme, shall be a good discharge to ASE Inc., the Company
and
the paying agent for the moneys represented
thereby
.
|
|
(b)
|
On
or after the day falling six calendar months after the posting
of the
cheques by ASE Inc. pursuant to Clause 3 of this Scheme, ASE
Inc. shall
have the right to cancel or countermand payment of any such cheque
which
has not then been cashed (or has been returned uncashed) and
shall place
all moneys represented thereby in a bank account in the Company’s name
with a licensed bank in Singapore selected by the Company. The
Company
shall hold such moneys until the expiration of six years from
the
Effective Date and shall prior to such date make payments thereout
of the
sums payable to pursuant to Clause 2 of this Scheme to persons
who satisfy
the Company that they are respectively entitled thereto and the
cheques
referred to in Clause 3 of this
|
THE
SCHEME
|
|
(c)
|
On
the expiration of six years from the Effective Date, ASE Inc.
shall be
released from any further obligation to make any payments under
this
Scheme and the Company shall transfer to ASE Inc. the balance
(if any) of
the sums then standing to the credit of the bank account referred
to in
Clause 4(b) of this Scheme including accrued interest subject,
if
applicable, to the deduction of interest, tax or any withholding
tax or
any other deduction required by law and subject to the deduction
of any
expenses.
|
|
(d)
|
Clause
4(c) of this Scheme shall take effect subject to any prohibition
or
condition imposed by law.
|
5.
|
On
and from the Effective Date, each existing certificate representing
a
former holding of the Eligible Shares shall cease to have effect
as a
document for title of the shares comprised therein and each of
the Scheme
Shareholders shall be bound at the request of ASE Inc. to deliver
his
existing share certificates for his holdings of the Eligible
Shares for
cancellation to the [
·
]
at
[
address
].
|
6.
|
This
Scheme shall become effective upon a copy of the Order of the
Court
sanctioning this Scheme under Section 210 of the Act being duly
lodged
with the Accounting and Corporate Regulatory Authority in
Singapore.
|
7.
|
Unless
this Scheme shall have become effective as aforesaid on or before
4 June
2008 or such later date as the Court, on the application of the
Company or
ASE Inc., may allow, this Scheme shall
lapse.
|
8.
|
The
Company and ASE Inc. may jointly consent for and on behalf of
all
concerned to any modification of, or amendment to, this Scheme
or to any
condition which the Court may think fit to approve or
impose.
|
9.
|
In
the event that the Scheme does not become effective for any reason,
the
costs and expenses incurred by the Company in connection with
the Scheme
will be borne by the Company.
|
10.
|
This
Scheme shall be governed by, and construed in accordance with,
the laws of
Singapore, and the Company, ASE Inc. and the Scheme Shareholders
submit to
the non-exclusive jurisdiction of the courts of Singapore. Save
as
provided for in this Scheme, a person who is not a party to this
Scheme
has no rights under the Contracts (Rights of Third Parties) Act,
Chapter
53B of Singapore, to enforce any term or provision of this
Scheme.
|
FORM
OF PROXY FOR THE COURT
MEETING
|
Originating
Summons
|
) |
Number
[
·
]
of
[
·
]
|
) |
In
the Matter of
ASE
Test Limited
(RC
No. 199508552K)
and
In
the Matter of Section 210 of
the
Companies Act, Chapter 50
(Revised
Edition 2006)
|
FOR
the Scheme
(Note
4)
|
AGAINST
the Scheme
(Note
4)
|
ABSTAIN
(Note
4)
|
(Signature)
|
(Signature)
|
(Signature)
|
1. | Full name(s) and address(es) are to be inserted in BLOCK CAPITALS. |
2.
|
Please
insert the total number of Ordinary Shares held by you and in respect
of
which you wish to cast your vote. This form of proxy shall be deemed
to
relate to all the Ordinary Shares registered in your name(s) in
the
Register of Members.
|
3.
|
If
any other proxy is to be appointed, please strike out the words
“the
Chairman of the Meeting” and insert the name, NRIC / passport number and
address of the proxy desired in the blank space provided. IF THE
BOX IS
LEFT BLANK OR INCOMPLETE, THE CHAIRMAN OF THE MEETING SHALL BE
DEEMED TO
BE APPOINTED AS YOUR PROXY.
|
4.
|
IMPORTANT:
If
you wish to vote “FOR” the Scheme, sign in the box marked “FOR the
Scheme”. If you wish to vote “AGAINST” the Scheme, sign in the box marked
“AGAINST the Scheme”. If you wish to abstain from voting on the Scheme,
sign in the box marked “ABSTAIN.” DO NOT SIGN IN MORE THAN ONE BOX. If you
sign in MORE THAN ONE BOX, your vote will be counted “FOR” the
Scheme.
|
5.
|
You
are requested to lodge this form of proxy at [
·
],
not later
than [
·
],
but if this form is not so lodged it must be handed to the Chairman
at the
Meeting.
|
6.
|
In
the case of joint holders of Ordinary Shares, any one of such persons
may
vote, but if more than one of such persons be present at the Meeting,
the
person whose name stands first on the Register of Members shall
alone be
entitled to vote.
|
7.
|
This
form of proxy must be signed by you or your attorney duly authorised
in
writing, or if you are a corporation, must either be executed under
seal
or under the hand of an officer or attorney duly authorised. The
signature
need not be witnessed.
|
8.
|
Any
alteration made to this form of proxy should be initialled by the
person
who signs it.
|
9.
|
You
may appoint one (and not more than one) person as your proxy to
attend and
vote in your stead. The proxy need not be a member of the Company
but must
attend the Meeting in person to represent
you.
|
10.
|
The
Company shall be entitled to reject this form of proxy if it is
incomplete, improperly completed or illegible or where the true
intentions
of the appointer are not ascertainable from the instructions of
the
appointer specified in this form of
proxy.
|
ASSETS
|
2005
|
2006
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
2005
|
2006
|
||||||||||||
Cash
(Notes 2 and 4)
|
$ |
138,211
|
$ |
89,715
|
Financial
liabilities at fair value through profit
|
||||||||||||
Financial
assets at fair value through profit or
|
or
loss (Notes 2, 3, 5 and 17)
|
$ |
172
|
$ |
262
|
||||||||||||
loss
(Notes 2, 3, 5 and 17)
|
176
|
-
|
Notes
and accounts payable
|
12,758
|
12,251
|
||||||||||||
Available-for-sale
financial assets - current
|
Payable
to related parties (Note 18)
|
10,347
|
5,137
|
||||||||||||||
(Notes
2, 6 and 17)
|
-
|
89,341
|
Payable
for property, plant and equipment
|
10,737
|
8,769
|
||||||||||||
Notes
and accounts receivable, net (Notes 2 and 7)
|
77,334
|
57,875
|
Income
tax payable (Note 2)
|
635
|
8,316
|
||||||||||||
Receivables
from related parties (Note 18)
|
20,277
|
14,618
|
Current
portion of long-term debts (Notes 12, 17,
|
||||||||||||||
Inventories,
net (Notes 2 and 8)
|
21,239
|
16,935
|
19
and 20)
|
49,743
|
34,418
|
||||||||||||
Deferred
income tax assets, net (Notes 2 and 16)
|
8,933
|
23,561
|
Accrued
expenses (Note 14)
|
37,986
|
21,725
|
||||||||||||
Pledged
time deposit (Note 19)
|
1,902
|
-
|
Other
(Note 3)
|
5,841
|
11,838
|
||||||||||||
Prepayments
and other (Note 3)
|
17,415
|
13,509
|
|||||||||||||||
Total
current liabilities
|
128,219
|
102,716
|
|||||||||||||||
Total
current assets
|
285,487
|
305,554
|
|||||||||||||||
LONG-TERM
DEBTS (Notes 12, 17, 19 and 20)
|
245,303
|
85,706
|
|||||||||||||||
LONG-TERM
INVESTMENTS
|
|||||||||||||||||
Available-for-sale
financial assets (Notes 2, 3, 6
|
ACCRUED
PENSION COST (Notes 2 and 14)
|
6,412
|
6,648
|
||||||||||||||
and
17)
|
81,251
|
204,851
|
|||||||||||||||
Equity
method investments (Notes 2, 3 and 9)
|
57,974
|
75,979
|
DEFERRED
INCOME TAX LIABILITIES (Notes 2 and 16)
|
-
|
608
|
||||||||||||
Financial
assets carried at cost (Notes 2 and 3)
|
1,000
|
1,000
|
|||||||||||||||
OTHER
LIABILITIES
|
2,200
|
5,622
|
|||||||||||||||
140,225
|
281,830
|
||||||||||||||||
Total
liabilities
|
382,134
|
201,300
|
|||||||||||||||
PROPERTY,
PLANT AND EQUIPMENT, NET
|
|||||||||||||||||
(Notes
2, 10, 15, 18, 19, 20, 21, 22 and 23)
|
430,079
|
389,435
|
SHAREHOLDERS'
EQUITY (Notes 1, 2 and 13)
|
||||||||||||||
Capital
stock - $0.25 par value
|
|||||||||||||||||
GOODWILL
(Notes 2, 3 and 11)
|
20,646
|
20,646
|
Authorized
- 600,000 thousand shares
|
||||||||||||||
Issued
and outstanding - 100,059 thousand shares
|
|||||||||||||||||
OTHER
ASSETS
|
in
2005 and 100,138 thousand shares in 2006
|
25,015
|
25,035
|
||||||||||||||
Deferred
income tax assets, net (Notes 2 and 16)
|
30,964
|
13,123
|
Additional
paid-in capital
|
455,059
|
455,717
|
||||||||||||
Deferred
charges, net (Note 2)
|
10,492
|
5,733
|
Retained
earnings
|
125,954
|
276,723
|
||||||||||||
Other
(Notes 17 and 19)
|
22,446
|
28,107
|
Unrealized
gain on financial instruments
|
-
|
123,962
|
||||||||||||
Cumulative
translation adjustments
|
(47,823 | ) | (38,309 | ) | |||||||||||||
Total
other assets
|
63,902
|
46,963
|
|||||||||||||||
Total
shareholders’ equity
|
558,205
|
843,128
|
|||||||||||||||
TOTAL
|
$ |
940,339
|
$ |
1,044,428
|
TOTAL
|
$ |
940,339
|
$ |
1,044,428
|
2004
|
2005
|
2006
|
||||||||||
NET
REVENUES (Notes 2, 18 and 22)
|
$ |
427,763
|
$ |
420,929
|
$ | |||||||
COST
OF REVENUES (Notes 15, 18 and 20)
|
340,663
|
330,786
|
322,654
|
|||||||||
GROSS
PROFIT
|
87,100
|
90,143
|
195,052
|
|||||||||
OPERATING
EXPENSES (Notes 15, 18 and 20)
|
||||||||||||
Selling
(Note 2)
|
11,393
|
11,235
|
8,149
|
|||||||||
General
and administrative
|
42,474
|
39,891
|
33,931
|
|||||||||
Research
and development (Note 2)
|
23,223
|
24,993
|
20,714
|
|||||||||
Total
operating expenses
|
77,090
|
76,119
|
62,794
|
|||||||||
INCOME
FROM OPERATIONS
|
10,010
|
14,024
|
132,258
|
|||||||||
NON-OPERATING
INCOME (EXPENSES)
|
||||||||||||
Interest
income
|
578
|
1,598
|
3,369
|
|||||||||
Interest
expense (Notes 2 and 10)
|
(6,765 | ) | (12,744 | ) | (13,165 | ) | ||||||
Equity
in earnings of equity method investees (Notes 2 and 9)
|
9,844
|
6,637
|
18,005
|
|||||||||
Impairment
loss on assets (Notes 2, 3 and 11)
|
(26,500 | ) |
-
|
-
|
||||||||
Gain
(Loss) on valuation of financial assets, net (Notes 2, 3 and
5)
|
314
|
685
|
(961 | ) | ||||||||
Loss
on valuation of financial liabilities, net (Notes 2, 3 and
5)
|
-
|
-
|
(770 | ) | ||||||||
Foreign
exchange gain (loss), net (Notes 2 and 3)
|
(139 | ) |
703
|
294
|
||||||||
Gain
on insurance settlement and impairment recovery (Note 21)
|
-
|
-
|
32,145
|
|||||||||
Loss
on fire damage (Note 21)
|
-
|
(51,224 | ) |
-
|
||||||||
Other
|
(380 | ) | (3,465 | ) | (7,839 | ) | ||||||
Net
non-operating income (expenses)
|
(23,048 | ) | (57,810 | ) |
31,078
|
|||||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX
|
(13,038 | ) | (43,786 | ) |
163,336
|
|||||||
INCOME
TAX EXPENSE (BENEFIT) (Notes 2 and 16)
|
(21,209 | ) |
2,537
|
12,567
|
||||||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
8,171
|
(46,323 | ) |
150,769
|
||||||||
2004
|
2005
|
2006
|
||||||||||
DISCONTINUED
OPERATIONS (Note 23)
|
||||||||||||
Income
from discontinued operations, net of income tax expense of $21
in 2004 and
$66 in 2005
|
$ |
16,968
|
$ |
3,929
|
$ |
-
|
||||||
Gain
on disposal of discontinued operations, net of income tax expense
of $59
in 2005
|
-
|
6,910
|
-
|
|||||||||
16,968
|
10,839
|
-
|
||||||||||
NET
INCOME (LOSS)
|
$ |
25,139
|
$ | (35,484 | ) | $ |
150,769
|
EARNINGS
(LOSS) PER SHARE
|
||||||||||||
Basic
|
||||||||||||
Earnings
(loss) from continuing operations
|
$ |
0.08
|
$ | (0.46 | ) | $ |
1.51
|
|||||
Earnings
from discontinued operations
|
0.17
|
0.11
|
-
|
|||||||||
$ |
0.25
|
$ | (0.35 | ) | $ |
1.51
|
||||||
Diluted
|
$ |
0.25
|
$ | (0.35 | ) | $ |
1.50
|
|||||
WEIGHTED-AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING
|
||||||||||||
Basic
|
100,037,524
|
100,059,031
|
100,081,418
|
|||||||||
Diluted
|
100,111,113
|
100,059,031
|
100,338,261
|
Capital
Stock
|
||||||||||||||||||||||||||||||||
Additional
Paid-in
Capital
|
Earnings
|
Unrealized
Gain
(Loss)
on
Financial
Instruments
|
Net
Loss not
Recognized
in
Periodic
Pension
Cost
|
Cumulative
Translation
Adjustments
|
Total
Shareholders'
Equity
|
|||||||||||||||||||||||||||
BALANCE,
JANUARY 1, 2004
|
99,546,216
|
$ |
24,887
|
$ |
450,635
|
$ | $ | (400 | ) | $ | (578 | ) | $ | (64,856 | ) | $ | ||||||||||||||||
Issuance
of shares under stock option plans
|
512,815
|
128
|
4,424
|
-
|
-
|
-
|
-
|
4,552
|
||||||||||||||||||||||||
Net
income in 2004
|
-
|
-
|
-
|
25,139
|
-
|
-
|
-
|
25,139
|
||||||||||||||||||||||||
Reversal
of unrealized loss on financial instruments
|
-
|
-
|
-
|
-
|
340
|
-
|
-
|
340
|
||||||||||||||||||||||||
Reversal
of net loss not recognized in periodic pension cost
|
-
|
-
|
-
|
-
|
-
|
578
|
-
|
578
|
||||||||||||||||||||||||
Translation
adjustments
|
-
|
-
|
-
|
-
|
-
|
-
|
22,995
|
22,995
|
||||||||||||||||||||||||
BALANCE,
DECEMBER 31, 2004
|
100,059,031
|
25,015
|
455,059
|
161,438
|
(60 | ) |
-
|
(41,861 | ) |
599,591
|
||||||||||||||||||||||
Net
loss in 2005
|
-
|
-
|
-
|
(35,484 | ) |
-
|
-
|
-
|
(35,484 | ) | ||||||||||||||||||||||
Reversal
of unrealized loss on financial instruments
|
-
|
-
|
-
|
-
|
60
|
-
|
-
|
60
|
||||||||||||||||||||||||
Translation
adjustments
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,962 | ) | (5,962 | ) | ||||||||||||||||||||||
BALANCE,
DECEMBER 31, 2005
|
100,059,031
|
25,015
|
455,059
|
125,954
|
-
|
-
|
(47,823 | ) |
558,205
|
|||||||||||||||||||||||
Effect
of initial adoption of ROC SFAS No. 34
|
-
|
-
|
-
|
-
|
83,751
|
-
|
-
|
83,751
|
||||||||||||||||||||||||
Issuance
of shares under stock option plans
|
79,201
|
20
|
658
|
-
|
-
|
-
|
-
|
678
|
||||||||||||||||||||||||
Net
income in 2006
|
-
|
-
|
-
|
150,769
|
-
|
-
|
-
|
150,769
|
||||||||||||||||||||||||
Unrealized
gain on financial instruments
|
-
|
-
|
-
|
-
|
40,211
|
-
|
-
|
40,211
|
||||||||||||||||||||||||
Translation
adjustments
|
-
|
-
|
-
|
-
|
-
|
-
|
9,514
|
9,514
|
||||||||||||||||||||||||
BALANCE,
DECEMBER 31, 2006
|
100,138,232
|
$ |
25,035
|
$ |
455,717
|
$ |
276,723
|
$ |
123,962
|
$ |
-
|
$ | (38,309 | ) | $ |
843,128
|
2004
|
2005
|
2006
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net
income (loss)
|
$ |
25,139
|
$ | (35,484 | ) | $ |
150,769
|
|||||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||||||
Depreciation
and amortization
|
164,908
|
154,302
|
120,638
|
|||||||||
Impairment
loss on assets
|
26,500
|
-
|
-
|
|||||||||
Loss
on fire damage (gain on insurance settlement and impairment
recovery)
|
-
|
42,086
|
(32,145 | ) | ||||||||
Provision
(reversal) for doubtful accounts and sales allowances
|
2,491
|
1,422
|
(2,081 | ) | ||||||||
Allowance
for inventory obsolescence
|
914
|
959
|
4,845
|
|||||||||
Equity
in earnings of equity method investees
|
(9,844 | ) | (6,637 | ) | (18,005 | ) | ||||||
Gain
on disposal of discontinued operations
|
-
|
(6,910 | ) |
-
|
||||||||
Loss
(gain) on disposal of assets
|
34
|
3,542
|
(960 | ) | ||||||||
Deferred
income taxes
|
(20,597 | ) |
3,947
|
3,821
|
||||||||
Other
|
(219 | ) |
2,450
|
7,389
|
||||||||
Changes
in operating assets and liabilities
|
||||||||||||
Financial
instruments at fair value through profit or loss
|
(104 | ) |
166
|
266
|
||||||||
Notes
and accounts receivable
|
(9,123 | ) |
10,446
|
21,540
|
||||||||
Receivable
from related parties
|
1,565
|
(11,758 | ) |
2,185
|
||||||||
Inventories
|
(23,161 | ) |
16,009
|
(541 | ) | |||||||
Prepayments
and other
|
(6,723 | ) | (1,695 | ) | (6,853 | ) | ||||||
Notes
and accounts payable
|
(4,123 | ) | (5,733 | ) | (507 | ) | ||||||
Payable
to related parties
|
3,841
|
(268 | ) | (3,627 | ) | |||||||
Income
tax payable
|
(971 | ) | (2,571 | ) |
7,681
|
|||||||
Accrued
pension cost
|
1,868
|
1,293
|
236
|
|||||||||
Accrued
expenses and other
|
1,317
|
4,498
|
(1,876 | ) | ||||||||
Net
cash provided by operating activities
|
153,712
|
170,064
|
252,775
|
|||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Acquisitions
of available-for-sale financial assets-current
|
(24,524 | ) | (3,117 | ) | (154,865 | ) | ||||||
Proceeds
from sale of available-for-sale financial assets-current
|
10,524
|
23,562
|
65,924
|
|||||||||
Acquisition
of property, plant and equipment
|
(228,610 | ) | (66,116 | ) | (76,005 | ) | ||||||
Proceeds
from sale of property, plant and equipment
|
28,671
|
48,174
|
22,135
|
|||||||||
Acquisition
of long-term investments in shares of stock
|
(19,613 | ) |
-
|
-
|
||||||||
Increase
in pledged time deposits
|
(288 | ) | (332 | ) | (1,368 | ) | ||||||
Proceeds
from disposal of discontinued operations
|
-
|
17,316
|
1,800
|
|||||||||
Increase
in other assets
|
(19,781 | ) | (6,077 | ) | (6,137 | ) |
2004
|
2005
|
2006
|
||||||||||
Proceeds
from insurance claims
|
$ |
-
|
$ |
369
|
$ |
26,920
|
||||||
Net
cash provided by (used in) investing activities
|
(253,621 | ) |
13,779
|
(121,596 | ) | |||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds
from issuance of shares
|
5,488
|
-
|
678
|
|||||||||
Increase
(decrease) in short-term borrowings
|
18,693
|
(35,789 | ) |
-
|
||||||||
Increase
(decrease) in commercial paper
|
9,935
|
(28,474 | ) |
-
|
||||||||
Proceeds
from long-term debts
|
121,511
|
138,113
|
-
|
|||||||||
Repayments
of long-term debts
|
(86,252 | ) | (162,694 | ) | (188,104 | ) | ||||||
Collection
of accounts receivable sold
|
-
|
4,397
|
516
|
|||||||||
Increase
in other liabilities
|
-
|
-
|
2,523
|
|||||||||
Net
cash provided by (used in) financing activities
|
69,375
|
(84,447 | ) | (184,387 | ) | |||||||
EFFECT
OF EXCHANGE RATE CHANGES ON CASH
|
(926 | ) | (674 | ) |
4,712
|
|||||||
NET
INCREASE (DECREASE) IN CASH
|
(31,460 | ) |
98,722
|
(48,496 | ) | |||||||
CASH
, BEGINNING OF YEAR
|
70,949
|
39,489
|
138,211
|
|||||||||
CASH
, END OF YEAR
|
$ |
39,489
|
$ |
138,211
|
$ |
89,715
|
||||||
SUPPLEMENTAL
INFORMATION
|
||||||||||||
Interest
paid (excluding capitalized interest)
|
$ |
6,795
|
$ |
12,267
|
$ |
14,403
|
||||||
Income
tax paid
|
$ |
243
|
$ |
219
|
$ |
1,708
|
||||||
Cash
paid for acquisition of property, plant and equipment
|
||||||||||||
Acquisition
of property, plant and equipment
|
$ |
210,656
|
$ |
47,875
|
$ |
87,408
|
||||||
Decrease
in payable
|
25,338
|
21,410
|
990
|
|||||||||
Increase
in capital lease obligation
|
(7,384 | ) | (3,169 | ) | (12,393 | ) | ||||||
$ |
228,610
|
$ |
66,116
|
$ |
76,005
|
|||||||
Cash
received from sales of property, plant and equipment
|
||||||||||||
Sales
price
|
$ |
31,530
|
$ |
50,795
|
$ |
20,002
|
||||||
Decrease
(increase) in receivable
|
(2,859 | ) |
3,018
|
2,133
|
||||||||
Proceeds
from disposal of discontinued operations
|
-
|
(5,639 | ) |
-
|
||||||||
$ |
28,671
|
$ |
48,174
|
$ |
22,135
|
2004
|
2005
|
2006
|
||||||||||
Cash
received from disposal of discontinued operations
|
||||||||||||
Sales
price
|
$ |
-
|
$ |
19,116
|
$ |
-
|
||||||
Decrease
(increase) in receivable
|
-
|
(1,800 | ) |
1,800
|
||||||||
$ |
-
|
$ |
17,316
|
$ |
1,800
|
|||||||
Cash
received from issuance of ordinary shares
|
||||||||||||
Issuance
of ordinary shares, net of issuance cost
|
$ |
4,552
|
$ |
-
|
$ |
678
|
||||||
Decrease
in receivable for issuance of ordinary shares
|
936
|
-
|
-
|
|||||||||
$ |
5,488
|
$ |
-
|
$ |
678
|
|
Overview
|
|
ASE
Test Limited (“ASE Test” or the “Company”) is a Singapore holding company
which, through an exchange of its shares with its parent company,
Advanced
Semiconductor Engineering, Inc. (“ASE Inc.”), and other individuals,
acquired substantially all of the shares of ASE Test, Inc. in May
1996. The exchange was accounted for as a reorganization of
companies under common control. Since June 1996, the Company’s
shares have been traded on the NASDAQ Global Market in the United
States
under the symbol “ASTSF”.
|
|
J
& R Holding Limited, a shareholder of the Company, offered 6,000,000
and 5,000,000 shares of the Company’s common stock in December 1997 and
February 1999, respectively, in the form of Taiwan Depositary Receipts
(“TDRs”). The TDRs are traded on the Taiwan Stock Exchange
under the symbol “9101” and each TDR represents 0.0125 share of the
Company’s stock.
|
|
Set
forth below is a brief overview of the Company’s organization
structure.
|
|
The
Company has four direct
subsidiaries:
|
|
ASE
Holdings (Singapore) Pte Ltd. has a wholly-owned subsidiary, ASE
Electronics (M) Sdn. Bhd. (“ASE Test Malaysia”) (incorporated in Malaysia
in February 1991), which is engaged in the packaging and testing
of
semiconductors. ASE Test Malaysia disposed of its camera module
operations on October 3, 2005 (See Note
23).
|
|
ASE
Test Holdings has a wholly-owned subsidiary, ISE Labs, Inc. (“ISE Labs”)
(incorporated in California, United States in November
1983). ISE Labs and its wholly-owned subsidiaries, ISE Labs
Hong Kong Limited, which was dissolved in 2005, ASE Singapore Pte
Ltd.,
ISE Technology, Inc. and Digital Testing Services Inc., are engaged
in the
front-end engineering testing and final testing of
semiconductors.
|
|
As
of December 31, 2005 and 2006, the Company had approximately 5,600
and
5,300 employees, respectively.
|
|
The
accompanying consolidated financial statements have been prepared
in
conformity with the Business Accounting Law, Guidelines Governing
Business
Accounting, and accounting principles generally accepted in the
Republic
of China (“ROC GAAP”). Under these law, guidelines and
principles, the Company should reasonably estimate the amounts
of
allowances for doubtful accounts, allowance for sales discounts,
inventory
obsolescence, depreciation of property, plant, and equipment, loss
on
impairment of assets, pension costs, gain (loss) on valuation of
financial
instruments and valuation allowance for deferred income tax
assets. Actual results may differ from these estimates.
Significant accounting policies are summarized as
follows:
|
|
Basis
of Presentation
|
|
The
Company prepares its consolidated financial statements using the
aforementioned law, guidelines and principles with a reconciliation
to
accounting principles generally accepted in the United States of
America
(“U.S. GAAP”) (See Note 24) to be consistent with the basis of
presentation of the consolidated financial statements of ASE
Inc. The accompanying consolidated balance sheets are presented
as of December 31, 2005 and 2006 and the accompanying consolidated
statements of income, changes in shareholders’ equity and cash flows are
presented for the three years ended December 31, 2004, 2005 and
2006.
|
|
Basis
of Consolidation
|
|
The
consolidated financial statements include the accounts of the Company
and
all of the aforementioned
subsidiaries.
|
|
All
significant intercompany accounts and transactions have been
eliminated.
|
|
Current
and Noncurrent Assets and
Liabilities
|
|
Current
assets include cash, financial assets held for trading purposes
and assets
expected to be converted to cash, sold or consumed within one year
from
the balance sheet date. Current liabilities are obligations
incurred for trading purposes and obligations expected to be settled
within one year from the balance sheet date. Assets and
liabilities that are not classified as current are noncurrent assets
and
liabilities, respectively.
|
|
Financial
Assets / Liabilities at Fair Value Through Profit or
Loss
|
|
Financial
instruments at fair value through profit or loss consist of financial
assets or financial liabilities held or incurred for trading
purposes. These financial instruments are initially recognized
at fair value, with associated transaction costs expensed as
incurred. The financial instruments are subsequently remeasured
at fair value, and changes in fair value are recognized in current
income
(loss). A regular way purchase or sale of financial assets is
recognized and derecognized using settlement date
accounting.
|
|
Derivatives
which do not qualify for hedge accounting are recorded as financial
assets
or liabilities at fair value through profit or loss. Fair
values
of derivatives with no active market are estimated using valuation
techniques.
|
|
Available-for-Sale
Financial Assets
|
|
Available-for-sale
financial assets are initially recognized at fair value plus transaction
costs that are directly attributable to the
acquisition. Changes in fair value of financial assets are
reported in a separate component of shareholders’ equity. The
corresponding accumulated gains or losses are recognized in earnings
when
the financial asset is derecognized from the balance sheet. A
regular way purchase or sale of financial assets is accounted for
using
settlement date accounting.
|
|
Fair
values of beneficiary certificates of open-end mutual funds and
publicly
traded stocks are
determined
using the
net asset value and closing-price at the balance sheet
date
,
respectively.
|
|
If
certain objective evidence indicates that such available-for-sale
financial asset is impaired, a loss is recognized
currently. If, in a subsequent period, the amount of the
impairment loss decreases, for equity securities, the previously
recognized impairment loss is reversed to the extent of the decrease
and
recorded as an adjustment to shareholders’
equity.
|
|
Revenue
Recognition, Accounts Receivable and Allowances for Doubtful Accounts
and
Sales Allowances
|
|
Revenues
from semiconductor packaging services are recognized upon
shipment. Revenues from semiconductor testing services are
recognized upon completion of the services or shipment. The
Company does not take ownership of: (i) bare semiconductor
wafers received from customers that the Company packages into finished
semiconductors, and (ii) packaged semiconductors received from
customers
that the Company tests as to whether they meet certain performance
specifications. The title and risk of loss remain with the
customer for those bare semiconductors and/or packaged
semiconductors. Accordingly, costs of customer-supplied
semiconductor materials are not included in the accompanying consolidated
financial statements. Other criteria the Company uses to
determine when to recognize revenue are: (i) existence of
persuasive evidence of an arrangement, (ii) the selling price
is fixed or determinable and (iii) collectibility is reasonably
assured.
|
|
Revenues
are determined using the fair value taking into account related
sales
discounts agreed to by the Company and customers. Since the
receivables from sales are collectible within one year and such
transactions are frequent, the fair value of receivables is equivalent
to
the nominal amount of cash
received.
|
|
Allowance
for doubtful accounts is provided based on an evaluation of the
collectibility of receivables. The Company determines the
amount of allowance for doubtful accounts by examining the aging
analysis
of the outstanding accounts receivable and current trends in the
credit
quality of its customers. An appropriate sales allowance, based
on historical experience, is also recognized in the same period
the sale
is recognized.
|
|
Accounts
Receivable Securitization
|
|
Accounts
receivable securitization is the transfer of a designated pool
of accounts
receivable to a bank, which in turn issues beneficial securities
or
asset-backed securities based on the accounts receivable. Under
ROC Statement of Financial Accounting Standards (“ROC SFAS”) No. 33,
“Accounting for Transfers of Financial Assets and Extinguishments
of
Liabilities”, such transfer of financial assets in which the transferor
surrenders control over those assets is accounted for as a sale
to the
extent that consideration other than beneficial interests in the
transferred assets is received in exchange. The difference
between the book value of accounts receivable and total proceeds
received
is recorded as a gain or loss on disposal of financial
assets.
|
|
Inventories
|
|
Inventories
including raw materials (materials received from customers for
processing,
mainly semiconductor wafers are excluded from inventories as title
and
risk of loss remain with the customers), supplies and spare parts,
finished goods and work in process are stated at the lower of cost
or
market value. Market value represents net realizable value for
finished
goods and work in process, and replacement cost for raw materials,
supplies and spare parts.
|
|
Raw
materials, supplies and spare parts are recorded at moving average
cost or
weighted average cost; others are recorded at standard cost and
adjusted
to the approximate weighted average cost at the balance sheet
date. Estimated losses on scrap and slow-moving items are
recognized and included in the allowance for
losses.
|
|
Equity
Method Investments
|
|
Investments
in companies of which the Company owns at least 20% of the outstanding
voting shares or where the Company exercises significant influence
over
the investee company’s operating and financial policy decisions are
accounted for using the equity method. Prior to January 1,
2006, the difference, if any, between the cost of investment and
the
Company’s proportionate equity in the fair value of the net assets of the
investees at the time of investments or at the time the equity
method of
accounting is first applied to a particular investment, was amortized
on
the straight-line method over 10 years. Effective January 1,
2006, pursuant to the revised ROC SFAS No. 5, “Long-term Investments under
Equity Method” (“ROC SFAS No. 5”), the cost of an investment shall be
analyzed and the difference between the cost of investment and
the fair
value of identifiable net assets acquired, representing goodwill,
shall
not be amortized and instead shall be tested for impairment
annually. The accounting treatment for the investment premiums
acquired before January 1, 2006 is the same as that for goodwill
which is
no longer being amortized. When an indication of impairment is
identified, the carrying amount of the investment is reduced, with
the
related impairment loss recognized in
earnings.
|
|
Financial
Assets Carried at Cost
|
|
Investments
that do not have a quoted market price in an active market and
whose fair
value cannot be reliably measured are carried at their original
cost, such
as non-publicly traded stocks. The costs of financial assets
sold are determined using the weighted-average method. If there
is objective evidence which indicates that a financial asset is
impaired,
a loss is recognized. A subsequent reversal of such impairment
loss is not allowed.
|
|
Property,
Plant and Equipment
|
|
Property,
plant and equipment, except for machinery and equipment under operating
leases, are stated at cost less accumulated depreciation and accumulated
impairment. Machinery and equipment held under capital leases
are recorded as an asset and an obligation at an amount equal to
the lower
of: (i) present value at the beginning of the lease term of the
minimum lease payments during the lease term (including the payment
called
for under any bargain purchase option); or (ii) fair value of
the leased machinery and equipment at the inception of the
lease. Machinery in transit, construction in progress and
prepayments under construction are stated at cost. These
include the cost of machinery, construction, down payments and
other
direct costs plus interest charges attributable to the borrowings
used to
finance the acquisitions of these assets. Major overhauls and
improvements are capitalized, while maintenance and repairs are
expensed
as incurred.
|
|
Depreciation
is computed using the straight-line method over estimated service
lives,
which range as follows: buildings and improvements, 2 to 40
years; machinery and equipment, 2 to 6 years; furniture and fixtures,
2 to
8 years; and leased assets, 2 to 6 years. Leasehold
improvements and improvements on building and business flats are
amortized
on a straight-line basis over the shorter of the useful life of
the
improvements or the lease term of the building. In the event
that an asset depreciated to its residual value is still in service,
its
residual value is depreciated over its re-estimated service
life.
|
|
When
property, plant and equipment are retired or disposed of, their
costs and
accumulated depreciation are removed from the accounts and any
gain or
loss is credited or charged to
income.
|
|
Asset
Impairment
|
|
The
Company evaluates whether or not there are indications that assets
(primarily property, plant and equipment, deferred charges and
goodwill)
may be impaired on the balance sheet date. If there are
indications, the Company estimates the recoverable amount for the
asset.
If an asset’s recoverable amount is lower than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount
by
recording a charge to the accumulated impairment account of the
asset and
such a reduction is recognized as impairment loss in current period
income. When the recoverable amount subsequently increases,
then the impairment loss previously recognized would be reversed
and
recorded as a gain. However, the carrying
|
|
Deferred
Charges
|
|
Deferred
charges consist of certain intangibles and other assets, including
tools,
utility, telecommunications and computer network systems. The
amounts are amortized over the following periods: tools, 2
years; utility, telecommunications and computer network systems,
2 - 5
years; and others, 2 - 5 years.
|
|
Goodwill
|
|
Goodwill
represents the excess of the consideration paid for an acquisition
over
the fair value of identifiable net assets acquired. Prior to
January 1, 2006, goodwill was amortized using the straight-line
method
over the estimated life of 10 years. Effective January 1, 2006,
pursuant to the newly revised SFAS No. 25, “Business
Combinations-Accounting Treatment under Purchase Method” (“ROC SFAS No.
25”), goodwill is no longer amortized and instead is tested for impairment
annually.
|
|
Employee
Stock Options
|
|
All
stock-based compensation for awards granted or modified after January
1,
2004 is accounted for by an interpretation issued by the Accounting
Research and Development Foundation
(
“ARDF”
)
of the ROC. The compensation cost is measured based on the
intrinsic value method, for which the compensation cost for stock
options
is measured as the excess, if any, of the quoted market price of
the
Company’s stock at the date of the grant over the amount an employee must
pay to acquire the stock. Total compensation cost is recognized
over the requisite service or vesting
period.
|
|
Pension
Costs
|
|
For
employees under defined benefit pension plans, pension costs are
recorded
based on actuarial calculations. Pension costs include service
cost, interest, amortization of unrecognized net obligation and
expected
return on plan assets.
|
|
For
employees under defined contribution pension plans, pension costs
are
recorded based on the actual contribution made to employees’ personal
pension accounts.
|
|
Shipping
and Handling Costs
|
|
Shipping
and handling costs are recorded as selling expenses and the amounts
in
2004, 2005 and 2006 were $1,705 thousand, $1,382 thousand and $1,498
thousand, respectively.
|
|
Research
and Development Costs
|
|
Research
and development costs are charged to expense as
incurred.
|
|
Income
Taxes
|
|
The
Company uses an inter-period tax allocation method for income
tax. Tax effects of deductible temporary differences, unused
tax credits and operating loss carryforward are recognized as deferred
income tax assets, while taxable temporary differences are recognized
as
deferred income tax liabilities. A valuation allowance is
provided to the extent that it is more likely than not that deferred
income tax assets will not be
realized.
|
|
Tax
credits of ASE Test, Inc. from investments in machinery and equipment,
research and development and employees’ training costs are recognized in
the year acquired and expensed. Capital allowances of ASE Test
Malaysia from investment in industrial buildings, machinery and
equipment
are recognized in the year in which they are
acquired.
|
|
Adjustments
of prior years’ income taxes are added to or deducted from the current
year’s tax provision.
|
|
Income
taxes on undistributed earnings (10%) of ASE Test, Inc., the Company’s
Taiwan based subsidiary, are recorded as an expense in the year
of
shareholders’ approval.
|
|
Foreign
Currency Transactions and Translation of Foreign-currency Financial
Statements
|
|
The
functional and reporting currency of ASE Test is U.S. dollar, while
the
functional currencies of its major subsidiaries, ASE Test, Inc.,
ASE Test
Malaysia and ISE Labs, Inc. are their local currencies, namely,
New Taiwan
dollar, Malaysia Ringgit and U.S. dollar, respectively. Foreign
currency transactions, except for derivative transactions, are
recorded in
the local currencies at the rates of exchange in effect when the
transactions occur. Gains or losses resulting from the
application of different foreign exchange rates when foreign-currency
assets and liabilities denominated in foreign-currencies are settled
are
credited or charged to income in the year of settlement. At the
end of year, monetary assets and liabilities denominated in
foreign-currencies are revalued at the prevailing exchange rates
and the
resulting gains or losses are recognized in current period
income.
|
|
The
financial statements of the Company’s subsidiaries are translated into
U.S. dollars at the end of year using the following
rates: Assets and liabilities, current rates at the balance
sheet date; shareholders’ equity, historical rates; and income and
expenses, average rates during the year. The net resulting
translation adjustment is reported as a separate component of
shareholders’ equity.
|
|
Recent
Accounting Pronouncements
|
|
In
July 2006, the ROC ARDF issued ROC SFAS No. 37, “Intangible Assets”, which
is required to be applied by the Company on January 1,
2007.
The standard
p
rovides
guidance on initial recognition and measurement, amortization,
presentation and disclosure of intangible assets
. An
intangible asset should be measured initially at cost. For an
intangible asset of a finite useful life; the carrying amount shall
be
amortized over its useful life. On the other hand, for an intangible
asset
with an indefinite useful life, the carrying amount shall not be
amortized. Intangible assets shall be evaluated for impairment
at least annually as required by ROC SFAS No. 35,
“
Accounting
for
Impairment of Assets
”
(“ROC
SFAS
No. 35”). The Company does not expect the adoption of the
standard on January 1, 2007 to have a significant impact on its
results of
operations and financial position.
|
|
In
November 2006, the ROC ARDF issued ROC SFAS No. 38, “Non-current Assets
Held for Sale and Discontinued Operations” (“ROC SFAS No. 38”), which is
also required to be applied by the Company on January 1, 2007.
Under ROC
SFAS No. 38, assets classified as held-for-sale shall be measured
at the
lower of carrying amounts or fair values and ceased to be depreciated
or
amortized. Any impairment loss shall be recognized in current
earnings. Assets classified as held-for-sale shall be presented
separately on the balance sheet. ROC SFAS No. 38 also requires
the Company to disclose information of discontinued operations
separately
on the statements of income and cash flows or in a
footnote.
The Company does not expect the adoption
of the standard on January 1, 2007 to have a significant impact
on its
results of operations and financial
position.
|
|
In
March 2007, the ROC ARDF issued an interpretation which requires
ROC
companies to recognize compensation expenses for bonuses paid to
employees, directors and supervisors beginning January 1,
2008. Such bonuses are currently recorded as appropriations of
earnings under ROC GAAP. On March 30, 2007, the ROC Financial Supervisory
Commission also issued an interpretation which requires that bonuses
granted to employees, directors and supervisors in the form of
shares be
valued at fair market value for purposes of compensation
expenses.
|
|
Reclassifications
|
|
Certain
accounts in the consolidated financial statements as of December
31, 2005
and for the years ended December 31, 2004 and 2005 have been reclassified
to conform to the consolidated financial statements as of and for
the year
ended December 31, 2006.
|
|
On
January 1, 2006, the Company adopted the newly released ROC SFAS
No. 34,
“Financial Instruments: Recognition and Measurement” (“ROC SFAS No. 34”)
and No. 36, “Financial Instruments: Disclosure and Presentation” (“ROC
SFAS No. 36”) and other revisions of previously released
SFASs.
|
|
The
Company had categorized its financial assets and liabilities upon
initial
adoption of the newly released SFASs. The adjustments made to
the carrying amounts of the financial instruments categorized as
financial
assets or liabilities at fair value through profit or loss were
included
in the cumulative effect of changes in accounting principles; on
the other
hand, the adjustments made to the carrying amounts of those categorized
as
available-for-sale financial assets were recognized as adjustments
to
shareholders’ equity.
|
|
Upon
adoption of ROC SFAS No. 34 and No. 36 in January, carrying amounts
of the
available-for-sale financial assets were adjusted to fair value,
and the
Company recognized $83,751 thousand of unrealized gains as a separate
component of shareholders’ equity as at January 1,
2006. Besides, there was no effect on net income for the year
ended December 31, 2006.
|
|
Effective
January 1, 2006, the Company adopted the newly revised ROC SFAS
No. 5 and
No. 25, which prescribe that investment premiums, representing
goodwill,
be assessed for impairment at least on an annual basis instead
of being
amortized. Such a change in accounting principle resulted in an
increase in net income of $4,966 thousand and basic earnings per
share
(after income tax) of $0.05 for the year ended December 31,
2006.
|
|
Upon
the adoption of ROC SFAS No. 34, certain accounts in the consolidated
financial statements as of December 31, 2005 and for the years
ended
December 31, 2004 and 2005 were reclassified to conform to the
consolidated financial statements as of and for the year ended
December
31, 2006. The previously issued consolidated financial
statements as of December 31, 2005 and for the years ended December
31,
2004 and 2005 were not required to be
restated.
|
|
Certain
accounting policies prior to the adoption of the newly released
SFASs are
summarized as follows:
|
1)
|
Short-term
investments
|
|
Short-term
investments were recorded at historical cost and were carried at
the lower
of cost or market value as of the balance sheet date. An
allowance or decline in value was provided and is charged to current
income when the aggregate carrying amount of the investments exceeded
the
aggregate market value. A reversal of the allowance was
recorded for a subsequent recovery in the aggregate market
value.
|
2)
|
Long-term
Investments
|
|
Investments
in companies wherein the Company did not exercise significant influence
were carried at the lower of cost or market value. Allowances
for decline in market value and unrealized loss on long-term investments
in shares of stock (a deduction account in shareholders’ equity) were
|
3)
|
Derivative
financial instruments
|
(a)
|
Forward
exchange contracts
|
|
Premiums
or discounts on foreign currency forward exchange contracts which
had been
acquired to manage the risk associated with assets and liabilities
denominated in foreign currencies arising from the difference between
the
forward rate and the spot rate at the date of each contract were
deferred
and amortized using the straight-line method over the contract
periods. At year end, balances of the forward exchange
receivables or payables were restated based on prevailing exchange
rates
and the resulting gain or loss was credited or charged to
income. Any exchange gain or loss when the contract was settled
was also credited or charged to income. In addition, the
receivables and payables related to the forward contracts are netted
with
the resulting amount presented as either an other current asset
or other
current liability.
|
(b)
|
Option
contracts
|
|
Written
option contracts to purchase or sell foreign currencies entered
into for
hedging purposes are not recorded as assets or liabilities on the
contract
dates. Gains or losses upon settlement were credited or charged
to income. Amounts received or paid were amortized over each
contract period. At year end, the outstanding written option
contracts were marked to market with charges to current
income.
|
|
When
the Company had a legally enforceable right to set off the recognized
amount and intends either to settle on a net basis, or to realize
the
asset and the liability simultaneously, the difference between
receivables
and payables was accounted for as either a current asset or current
liability; otherwise, the receivables and payables should be accounted
for
as an other current asset and other current liability,
respectively.
|
|
Certain
accounts in the consolidated financial statements as of December
31, 2005
and for the years ended December 31, 2004 and 2005 have been reclassified
to conform to the classifications prescribed by the newly released
SFASs. The reclassifications of the account balances of certain
accounts are summarized as follows:
|
Before
Reclassification
|
After
Reclassification
|
|||||||
Balance
sheet as of December
31, 2005
|
||||||||
Prepayments
and other current
assets
|
$ |
17,591
|
$ |
17,415
|
||||
Long-term
investments
|
140,225
|
-
|
||||||
Other
current
liabilities
|
6,013
|
5,841
|
||||||
Financial
assets at fair value
through profit or loss
|
-
|
176
|
||||||
Available-for-sale
financial
assets – noncurrent
|
-
|
81,251
|
||||||
Equity
method
investments
|
-
|
57,974
|
||||||
Financial
assets carried at
cost-noncurrent
|
-
|
1,000
|
||||||
Financial
liabilities at fair
value through profit or loss
|
-
|
172
|
||||||
Statement
of income for
2005
|
||||||||
Foreign
exchange gain,
net
|
1,388
|
703
|
||||||
Gain
on valuation of financial
assets, net
|
-
|
685
|
||||||
Before
Reclassification
|
After
Reclassification
|
|||||||
Statement
of income for
2004
|
||||||||
Foreign
exchange gain (loss),
net
|
$ |
175
|
$ | (139 | ) | |||
Gain
on valuation of financial
assets, net
|
-
|
314
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Cash
on hand
|
$ |
22
|
$ |
21
|
||||
Checking
and saving
accounts
|
77,382
|
62,162
|
||||||
Time
deposits
|
60,807
|
27,532
|
||||||
$ |
138,211
|
$ |
89,715
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Financial
assets held for
trading
|
||||||||
Forward
exchange
contracts
|
$ |
176
|
$ |
-
|
||||
Financial
liabilities incurred
for trading
|
||||||||
Forward
exchange
contracts
|
$ |
172
|
$ |
262
|
|
The
Company entered into derivative contracts during the years ended
December
31, 2005 and 2006 to manage exposures to foreign exchange rate
risk. The derivative contracts entered into by the Company did
not qualify for hedge accounting prescribed by ROC SFAS No. 34 and
therefore were classified as financial instruments at fair value
through
profit or loss.
|
|
Outstanding
put forward contracts as of December 31, 2005 and
2006:
|
Currency
|
Maturity
Date
|
Contract
Amount
(in
Thousands)
|
December
31, 2005
|
||
USD/JPY
|
2006/03/02
|
USD
172 / JPY 20,000
|
December
31, 2006
|
||
USD/NTD
|
2007/01/22~2007/03/01
|
USD
42,000/NTD 1,352,500
|
|
For
the years ended December 31, 2005 and 2006, financial instruments
held or
incurred for trading purposes resulted in net gains of $685 thousand
and
net losses of $1,731 thousand,
respectively.
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Current
|
||||||||
Open-end
mutual
funds
|
$ |
-
|
$ |
89,341
|
||||
Noncurrent
|
||||||||
Publicly-traded
stocks
|
$ |
81,251
|
$ |
204,851
|
|
As
of December 31, 2005 and 2006, the Company held 180,132,187 shares
of
common stock of ASE Inc. With respect to the trust arrangement,
in order
to comply with applicable Singapore laws, which provide that the
Company
may not acquire, directly or indirectly, shares in its parent company,
ASE
Inc., a trust was established jointly by ASE Inc. and the Company
to hold
and dispose of the ASE Inc. shares acquired by the Company in connection
with the merger (Note 9). Pursuant to the trust agreement, the
Company’s rights with respect to the ASE Inc. shares held in trust are
limited to the right to receive the proceeds from the sale of the
shares
and any cash dividends declared while the shares remain in
trust. The trustee is authorized to sell the shares, subject to
market conditions, when such shares become available for resale
under ROC
law and in accordance with volume limitations under ROC law, at
its sole
discretion; provided such shares are sold (i) in compliance
with ROC laws and regulations, (ii) in an orderly manner in
order to minimize the impact on the trading price of the shares,
and (iii) in a manner consistent with its fiduciary duties owed
to the Company.
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Notes
receivable
|
$ |
68
|
$ |
180
|
||||
Accounts
receivable
|
82,744
|
60,017
|
||||||
Allowance
for doubtful accounts
(Note 2)
|
(5,023 | ) | (2,175 | ) | ||||
Allowance
for sales allowances
(Note 2)
|
(455 | ) | (147 | ) | ||||
$ |
77,334
|
$ |
57,875
|
|
The
changes in allowances for sales allowances and doubtful accounts
are as
follows:
|
Doubtful
|
Sales
|
|||||||
Accounts
|
Allowances
|
|||||||
Balance
at January 1,
2004
|
$ |
2,386
|
$ |
880
|
||||
Additions
|
2,391
|
100
|
||||||
Write-offs
|
(233 | ) | (111 | ) | ||||
Balance
at December 31,
2004
|
4,544
|
869
|
||||||
Additions
|
1,109
|
313
|
||||||
Write-offs
|
(630 | ) | (727 | ) | ||||
Balance
at December 31,
2005
|
5,023
|
455
|
||||||
Additions
|
56
|
-
|
||||||
Reversal
|
(1,932 | ) | (205 | ) | ||||
Write-offs
|
(972 | ) | (103 | ) | ||||
Balance
at December 31,
2006
|
$ |
2,175
|
$ |
147
|
|
In
November 2005, ASE Test, Inc. and its parent company, ASE Inc.,
entered
into a $100 million, three-year revolving accounts receivable
securitization agreement with a bank and the credit line was increased
to
$200 million in June, 2006.
|
|
Under
the agreement, ASE Test, Inc. and ASE Inc. transferred a pool of
accounts
receivable to the bank, who issued securities backed by these accounts
receivable. Proceeds received from the bank were the net
carrying value of the pool of accounts receivable, less a deferred
purchase price receivable at 20% of accounts receivable sold, guarantee
deposit, program fee and other related expenses. The Company
lost control of these accounts receivable at the time of transfer
to the
bank, and therefore the transaction was accounted for as a sale
of
accounts receivable, for which the book value of the accounts receivable
was derecognized and the difference between the book value and
the
proceeds received was recorded as a non-operating loss. The
loss on sale of accounts receivable was $74 thousand and $1,028
thousand
for the years ended December 31, 2005 and 2006,
respectively.
|
|
After
the transfer of the accounts receivable, the Company continues
to service,
administer, and collect these accounts receivable on behalf of
the
bank. The Company collects on the initial receivables and
transfers certain new accounts receivable having similar value
to replace
the collected receivables. Collected receivables not yet
replaced by new accounts receivable due to timing difference are
recorded
as other current liability on the balance sheet, which amounted
to $4,397
thousand and $4,913 thousand as of December 31, 2005 and 2006,
respectively. Total accounts receivable sold was $9,525
thousand and $12,463 thousand as of December 31, 2005 and 2006,
respectively.
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Raw
materials
|
$ |
9,334
|
$ |
10,304
|
||||
Work
in process
|
4,272
|
2,333
|
||||||
Finished
goods
|
2,393
|
1,831
|
||||||
Supplies
and spare
parts
|
6,460
|
5,810
|
||||||
Supplies
in
transit
|
434
|
694
|
||||||
22,893
|
20,972
|
|||||||
Allowance
for
obsolescence
|
(1,654 | ) | (4,037 | ) | ||||
$ |
21,239
|
$ |
16,935
|
|
The
changes in allowance for obsolescence are as
follows:
|
Balance
at January 1,
2004
|
$ |
876
|
||
Additions
|
914
|
|||
Write-offs
|
(1,150 | ) | ||
Balance
at December 31,
2004
|
640
|
|||
Additions
|
2,204
|
|||
Write-offs
|
(1,190 | ) | ||
Balance
at December 31,
2005
|
1,654
|
|||
Additions
|
4,845
|
|||
Write-offs
|
(2,462 | ) | ||
Balance
at December 31,
2006
|
$ |
4,037
|
|
The
investment in ASE Investment (Labuan) Inc. (incorporated in Malaysia
in
June 1999) was made in connection with the acquisition of the operation
of
the Motorola Semiconductor Products Sector Businesses in Paju,
Korea. As of December 31, 2005 and 2006, the Company held a 30%
ownership interest in ASE Investment (Labuan) Inc. at a carrying
amount of
$57,974 thousand and $75,979 thousand,
respectively.
|
|
Investment
income under the equity method was as
follows:
|
2004
|
2005
|
2006
|
||||||||||
ASE
Investment (Labuan)
Inc.
|
$ |
3,569
|
$ |
6,637
|
$ |
18,005
|
||||||
ASE
Material
Inc.
|
1,068
|
-
|
-
|
|||||||||
ASE
(Chung Li)
Inc.
|
5,207
|
-
|
-
|
|||||||||
$ |
9,844
|
$ |
6,637
|
$ |
18,005
|
|
ASE
Material Inc. and ASE (Chung Li) Inc. were merged into ASE Inc.
and the
Company received ASE Inc.’s shares in exchange for its ownership interest
in the two companies.
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Cost
|
||||||||
Buildings
and
improvements
|
$ |
113,688
|
$ |
114,296
|
||||
Machinery
and
equipment
|
1,001,430
|
927,249
|
||||||
Furniture
and
fixtures
|
19,091
|
18,964
|
||||||
Leased
assets - machinery and
equipment
|
10,464
|
23,259
|
||||||
Machinery
in transit and
prepayments
|
15,137
|
8,515
|
||||||
Construction
in
progress
|
372
|
12
|
||||||
1,160,182
|
1,092,295
|
|||||||
Accumulated
depreciation
|
||||||||
Buildings
and
improvements
|
46,713
|
52,700
|
||||||
Machinery
and
equipment
|
634,835
|
630,496
|
||||||
Furniture
and
fixtures
|
13,310
|
14,581
|
||||||
Leased
assets - machinery and
equipment
|
2,074
|
5,083
|
||||||
696,932
|
702,860
|
|||||||
Accumulated
impairment
|
||||||||
Buildings
and
improvements
|
402
|
-
|
||||||
Machinery
and
equipment
|
28,549
|
-
|
||||||
Furniture
and
fixtures
|
271
|
-
|
||||||
Machinery
in transit and
prepayments
|
3,834
|
-
|
||||||
Construction
in
progress
|
115
|
-
|
||||||
33,171
|
-
|
|||||||
$ |
430,079
|
$ |
389,435
|
|
Capitalized
interest consists of the following:
|
2004
|
2005
|
2006
|
||||||||||
Total
interest expense
including capitalized interest
|
$ |
9,609
|
$ |
13,622
|
$ |
13,568
|
||||||
Less: capitalized
interest
|
2,844
|
878
|
403
|
|||||||||
Interest
expense
|
$ |
6,765
|
$ |
12,744
|
$ |
13,165
|
||||||
Capitalization
rate
|
2.46-3.93 | % | 2.32-3.94 | % | 1.75-5.67 | % |
|
The
Company adopted ROC SFAS No. 35 on December 31, 2004, and recognized
an
impairment loss on goodwill of $26,500 thousand, which was determined
based on the amount by which the carrying amount of the cash-generating
unit exceeded its recoverable amount. The Company identified
the goodwill related to the cash generating unit of ISE
Labs. The recoverable amount was the “value-in-use” of ISE
Labs, which was determined based on six-years of projected cash
flows,
discounted at a rate of 9.58%. The Company attributed the
impairment of goodwill associated with the acquisition of ISE Labs
primarily to a downward revision in the forecasted revenue of ISE
Labs. The reduction in forecasted revenues was made in response
to company estimates and industry trend data that suggested the
outlook
for semiconductor industry, and ISE Labs in particular, was less
favorable
than in prior years, including the year in which the Company acquired
its
interest in ISE Labs. The Company performed its annual goodwill
impairment test on December 31, 2005 and 2006, and found no
impairment. As described in Note 2, the goodwill was no longer
amortized under ROC SFAS No. 25 after January 1, 2006. Amortization
of the
goodwill is reflected in general and administrative expenses in
the
consolidated statements of income and was $10,105 thousand and
$4,966
thousand for each of the years ended December 31, 2004 and
2005.
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Bank
loans
|
$ |
288,094
|
$ |
105,039
|
||||
Capital
lease obligation (Note
20)
|
6,952
|
15,085
|
||||||
295,046
|
120,124
|
|||||||
Less: Current
portion
|
(49,743 | ) | (34,418 | ) | ||||
$ |
245,303
|
$ |
85,706
|
a.
|
Bank
loans
|
December
31
|
||||||||
2005
|
2006
|
|||||||
ASE
Test, Inc.
|
||||||||
Repayment
at maturity in August
2007, interest at 1.98% and
2.25%
as of
December 31, 2005 and 2006, respectively
|
$ |
15,216
|
$ |
15,339
|
||||
Repayable
by December 2009 in
quarterly installments, interest at
2.50%
and 2.69% as
of December 31, 2005 and 2006, respectively
|
7,273
|
5,640
|
||||||
Repayable
by May 2008 in
semi-annual installments, interest at
3.10%
as of
December 31, 2005 and 2006, respectively
|
7,303
|
3,682
|
||||||
Others,
repaid in 2006,
interest from 2.50% to 3.70% as of December 31,
2005
|
48,107
|
-
|
||||||
77,899
|
24,661
|
December
31
|
||||||||
2005
|
2006
|
|||||||
ISE
Labs
|
||||||||
Repayable
by March 2009 in quarterly installments, interest at 4.70%
and
6.10% as of December 31, 2005 and 2006, respectively
|
$ |
1,745
|
$ |
1,235
|
||||
Repayable
by July 2009 in quarterly installments, interest at 4.20%
and
6.10% as of December 31, 2005 and 2006, respectively
|
1,523
|
1,143
|
||||||
Repaid
in September 2006, interest at 5.25% as of December 31,
2005
|
607
|
-
|
||||||
3,875
|
2,378
|
|||||||
ASE
Test Malaysia
|
||||||||
Repaid
in March 2006, interest from 5.00% to 5.29% as of December
31,
2005
|
13,320
|
-
|
||||||
ASE
Test Finance
|
||||||||
Repayable
in semi-annual installments from August 2008 to August 2010,
interest
at 5.45% and 6.23% as of December 31, 2005 and 2006,
respectively
|
78,000
|
78,000
|
||||||
Repaid
in December 2006, interest at 5.73% as of December 31,
2005
|
115,000
|
-
|
||||||
193,000
|
78,000
|
|||||||
$ |
288,094
|
$ |
105,039
|
|
Bank
loans obtained by ASE Test Finance were restricted for the use
in the
redemption of ASE Test Finance’s and the Company’s loans. The
Company and ASE Inc. provided guarantees for ASE Test Finance’s payment
obligations under the $78,000 thousand loan. Under the
guaranty, the Company is required to maintain certain financial
ratios and
the tangible net worth of the Company shall not be less than $450
million
at any time.
|
|
Several
loan agreements specify the following non-financial
covenants:
|
|
Without
the prior written consent from the majority of the banks, the Company
should not:
|
|
a)
|
Pledge
its assets, assume liabilities or dispose of assets in excess of
20% of
total assets, unless the transaction involves a transfer of assets
between
affiliates. Assets in exchange for other comparable or superior
as to type are excluded from this covenant;
or
|
|
b)
|
Merge
with any other entity or make investments in excess of $100 million
or
acquire material assets from another
entity.
|
|
The
abovementioned bank loan contracts have variable interest rates
and are
subject to adjustments by banks or changes in prime rate. In
addition, several of the loan agreements have default provisions,
whereby
a default under one loan agreement may also trigger cross-defaults
under
other loan agreements.
|
|
As
of December 31, 2005 and 2006, the Company was in compliance with
its
financial and non-financial
covenants.
|
|
Long-term
debt by currencies other than U.S. dollars as of December 31, 2005
and
2006 is as follows:
|
December
31
|
|||
2005
|
2006
|
||
(In
thousands)
|
(In
thousands)
|
||
New
Taiwan
dollars
|
NT$ 2,559,760
|
NT$ 803,845
|
|
Such
amounts have been translated into U.S. dollars at the spot rates
quoted by
the Bank of Taiwan of NT$32.86 to US$1 and NT$32.596 to US$1 as
of
December 31, 2005 and 2006,
respectively.
|
|
As
of December 31, 2006, the maturities of long-term debts are as
follows:
|
2007
|
$ |
34,418
|
||
2008
|
20,564
|
|||
2009
|
33,940
|
|||
2010
|
31,202
|
|||
$ |
120,124
|
|
As
stipulated by the Company Law of the ROC, the Company's subsidiary
in the
ROC is required to make an appropriation for legal capital reserve
at 10%
of net income as determined in accordance with ROC GAAP. Use of
the legal capital reserve is restricted to certain purposes, including
the
offset of a deficit, and the transfer of up to 50% of the legal
capital
reserve to capital stock when the legal capital reserve has reached
50% of
total capital stock. As of December 31, 2006, the legal capital
reserve approximated US$26,770 thousand and was not available for
distribution.
|
|
As
of December 31, 2006, the Company had three stock option plans,
the 1999,
2000 and 2004 Option Plans. Stock options granted under these
plans are exercisable for ordinary shares of the Company and vest
ratably
over a period of three or five years. The options expire five
or ten years from the date of
grant.
|
|
Information
regarding stock options granted or modified after January 1, 2004
is
presented below:
|
|
ASE
Test
|
2004
|
2005
|
2006
|
||||||||||||||||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||||||||||||||||||
Average
|
Weighted
|
Average
|
Weighted
|
Average
|
Weighted
|
|||||||||||||||||||||||||||||||
Exercise
|
Average
|
Exercise
|
Average
|
Exercise
|
Average
|
|||||||||||||||||||||||||||||||
Number
of
|
Price
|
Grant
Date
|
Number
of
|
Price
|
Grant
Date
|
Number
of
|
Price
|
Grant
Date
|
||||||||||||||||||||||||||||
Shares
|
Per
Share
|
Fair
Value
|
Shares
|
Per
Share
|
Fair
Value
|
Shares
|
Per
Share
|
Fair
Value
|
||||||||||||||||||||||||||||
Beginning
outstanding
balance
|
-
|
$ |
-
|
260,000
|
$ |
6.18
|
292,500
|
$ |
6.21
|
|||||||||||||||||||||||||||
Options
granted
|
260,000
|
6.18
|
$ |
6.18
|
32,500
|
6.50
|
$ |
6.50
|
130,000
|
9.60
|
$ |
9.60
|
||||||||||||||||||||||||
Options
exercised
|
-
|
-
|
-
|
-
|
(9,000 | ) |
6.10
|
|||||||||||||||||||||||||||||
Options
forfeited
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||||
Options
expired
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||||
Ending
outstanding
balance
|
260,000
|
6.18
|
292,500
|
6.21
|
413,500
|
7.28
|
|
Options
outstanding on December 31, 2006, the related weighted average
exercise
price and remaining contractual life information are as
follows:
|
Outstanding
Shares
|
Exercisable
Shares
|
Weighted
Average
Remaining
Life
(Years)
|
||||||||||||
Options
with exercise price
of:
|
||||||||||||||
$5.50
|
60,000
|
24,000
|
7.6
|
|||||||||||
$6.10
|
51,000
|
15,000
|
7.8
|
|||||||||||
$6.50
|
172,500
|
76,500
|
7.6
|
|||||||||||
$9.79
|
115,000
|
11,500
|
9.3
|
|||||||||||
$8.10
|
15,000
|
7,500
|
9.6
|
|||||||||||
413,500
|
134,500
|
|
The
Company has computed, for pro forma disclosure purposes, the fair
value of
options granted using the Black-Scholes option pricing model with
the
following assumptions:
|
2004
|
2005
|
2006
|
|
Risk-free
interest
rate
|
3.50%-3.88%
|
3.88%
|
4.88%
|
Expected
life
|
5
years
|
5
years
|
3-5
years
|
Expected
volatility
|
78.28%
|
59.06%
|
59.95-62.03%
|
Expected
dividend
|
0%
|
0%
|
0%
|
|
ASE
Inc.
|
|
ASE
Inc., the parent company, has two option plans, which were adopted
in 2002
and 2004. Under the terms of the plans, stock options are
granted to employees including those of the Company. The option
rights expire ten years from the date of grant. On the second
anniversary of the grant date, 40% of the options become vested
and the
remaining options vest ratably over a period of three years
thereafter.
|
|
Information
regarding the ASE Inc.’s stock option plans for the Company and its
subsidiaries is as follows:
|
2004
|
2005
|
2006
|
||||||||||||||||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||||||||||||||||||
Average
|
Weighted
|
Average
|
Weighted
|
Average
|
Weighted
|
|||||||||||||||||||||||||||||||
Exercise
|
Average
|
Exercise
|
Average
|
Exercise
|
Average
|
|||||||||||||||||||||||||||||||
Number
of
|
Price
|
Grant
Date
|
Number
of
|
Price
|
Grant
Date
|
Number
of
|
Price
|
Grant
Date
|
||||||||||||||||||||||||||||
Shares
|
Per
Share
|
Fair
Value
|
Shares
|
Per
Share
|
Fair
Value
|
Shares
|
Per
Share
|
Fair
Value
|
||||||||||||||||||||||||||||
Beginning
outstanding
balance
|
38,852,400
|
$ |
0.58
|
61,752,100
|
$ |
0.60
|
52,926,580
|
$ |
0.60
|
|||||||||||||||||||||||||||
Options
granted
|
25,499,500
|
0.79
|
$ |
0.79
|
3,000,000
|
0.57
|
$ |
0.57
|
-
|
-
|
$ |
-
|
||||||||||||||||||||||||
Options
forfeited
|
(2,261,800 | ) |
0.58
|
(5,126,800 | ) |
0.58
|
(2,489,000 | ) |
0.62
|
|||||||||||||||||||||||||||
Options
expired
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||||
Options
exercised
|
(338,000 | ) |
0.56
|
(6,698,720 | ) |
0.49
|
(9,908,710 | ) |
0.58
|
|||||||||||||||||||||||||||
Ending
outstanding
balance
|
61,752,100
|
0.67
|
52,926,580
|
0.60
|
40,528,870
|
0.61
|
|
Options
outstanding on December 31, 2006, the related weighted average
exercise
price and remaining contractual life information are as
follows:
|
Outstanding
Shares
|
Exercisable
Shares
|
Weighted
Average
Remaining
Life
(Years)
|
||||||||||||
Options
with exercise
price
|
||||||||||||||
$0.49
|
15,222,300
|
9,936,500
|
6.0
|
|||||||||||
$0.64
|
4,327,170
|
2,302,690
|
6.6
|
|||||||||||
$0.70
|
18,564,400
|
7,372,700
|
7.5
|
|||||||||||
$0.57
|
2,415,000
|
-
|
8.4
|
|||||||||||
40,528,870
|
19,611,890
|
|
The
fair value of the common stock options issued was determined using
a
Black-Scholes option pricing model with the following
assumptions:
|
2004
|
2005
|
|
Risk-free
interest
rate
|
2.50%
|
1.80%
|
Expected
life
|
5
years
|
5
years
|
Expected
volatility
|
59%
|
47%
|
Expected
dividend
|
3%
|
3%
|
|
For
purposes of pro forma disclosure, the estimated fair values of
the options
are amortized to expense ratably over the option vesting
periods. Had the Company recorded compensation costs based on
the estimated grant date fair value, the Company’s net income (loss) and
earnings (loss) per share (in U.S. dollars) would have been as
follows:
|
2004
|
2005
|
2006
|
||||||||||
Net
income
(loss)
|
$ |
25,139
|
$ | (35,484 | ) | $ |
150,769
|
|||||
Stock-based
compensation
expense (net of related tax effect)
|
||||||||||||
From
the
Company
|
(97 | ) | (209 | ) | (317 | ) | ||||||
From
ASE Inc.
|
(2,407 | ) | (9,084 | ) | (8,486 | ) | ||||||
Pro
forma net income
(loss)
|
$ |
22,635
|
$ | (44,777 | ) | $ |
141,966
|
|||||
Basic
EPS As
reported
|
$ |
0.25
|
$ | (0.35 | ) | $ |
1.51
|
|||||
Pro
forma
|
$ |
0.23
|
$ | (0.45 | ) | $ |
1.42
|
|||||
Diluted
EPS As
reported
|
$ |
0.25
|
$ | (0.35 | ) | $ |
1.50
|
|||||
Pro
forma
|
$ |
0.23
|
$ | (0.45 | ) | $ |
1.41
|
|
The
Labor Pension Act (the “Act”), which took effect in the ROC on July 1,
2005, provides for a pension mechanism that is deemed a defined
contribution pension plan. The employees who were subject to
the Labor Standards Law of the ROC before the enforcement of this
Act may
choose to be subject to the pension mechanism under this Act or
may
continue to be subject to the pension mechanism under the Labor
Standards
Law. For those employees who were subject to the Labor
Standards Law before July 1, 2005, work for the same company after
July 1,
2005 and choose to be subject to the pension mechanism under the
Act,
their service years as of July 1, 2005 will be retained. Under
the Act, the rate of an employer’s monthly contribution to the employees’
personal pension accounts should not be less than 6% of each employee’s
monthly salary or wage. Thus, since July 1, 2005, ASE Test,
Inc. has made monthly contributions based on each employee’s salary or
wage to personal pension accounts, and recognized pension costs
of $885
thousand and $1,984 thousand for each year ended December 31, 2005
and
2006.
|
|
ASE
Test, Inc. has a defined benefit pension plan for its regular
employees. Retirement benefits are based on the length of
service and average salaries or wages of the last six months before
retirement. ASE Test, Inc. makes monthly contributions, at 2%
of salaries and wages, to plan assets which are in the name of,
and are
administered by, the employee pension plan committee and are deposited
in
the Central Trust of China (the “CTC”), an ROC government
agency. Besides, ASE Test, Inc. also accrued pension cost of
executive managers. Pension cost for executive managers was $11
thousand and $288 thousand in 2005 and 2006, respectively. As
of December 31, 2005 and 2006, accrued pension cost of aforementioned
plan
was $11 thousand and $299 thousand,
respectively.
|
|
ISE
Labs, Inc. has a defined contribution plan (“401k plan”) for eligible
employees. This plan permits employees to make contributions up
to the maximum limits allowable under the U.S. Internal Revenue
Code
Section 401k. ASE Test Malaysia and ASE Singapore Pte Ltd. also
have a defined contribution plan. The Company has no other
post-retirement or post-employment benefit
plans.
|
|
As
of December 31, 2006, allocations by investment type of the plan
assets
deposited in the CTC are as
follows:
|
|
Information
about the defined benefit plans for ASE Test Inc. is summarized
as
follows:
|
|
a.
|
Components
of net periodic pension cost for the
year:
|
2004
|
2005
|
2006
|
||||||||||
Service
cost
|
$ |
1,906
|
$ |
1,705
|
$ |
301
|
||||||
Interest
|
349
|
373
|
308
|
|||||||||
Projected
return on plan assets
|
(78 | ) | (117 | ) | (109 | ) | ||||||
Amortization
|
172
|
69
|
11
|
|||||||||
Net
periodic pension cost
|
$ |
2,349
|
$ |
2,030
|
$ |
511
|
|
b.
|
Reconciliation
of funded status of the plan and accrued pension cost at December
31,
2004, 2005 and 2006:
|
December
31
|
||||||||||||
2004
|
2005
|
2006
|
||||||||||
Vested
benefit obligation
|
$ |
38
|
$ |
16
|
$ |
98
|
||||||
Non-vested
benefit obligation
|
6,978
|
6,424
|
7,255
|
|||||||||
Accumulated
benefit obligation
|
7,016
|
6,440
|
7,353
|
|||||||||
Additional
benefits based on future salaries
|
5,644
|
4,638
|
5,140
|
|||||||||
Projected
benefit obligation
|
12,660
|
11,078
|
12,493
|
|||||||||
Fair
value of plan assets
|
(3,154 | ) | (3,668 | ) | (4,318 | ) | ||||||
Funded
status
|
9,506
|
7,410
|
8,175
|
|||||||||
Unrecognized
net transition obligation
|
(163 | ) | (148 | ) | (138 | ) | ||||||
Unrecognized
actuarial loss
|
(4,172 | ) | (814 | ) | (1,646 | ) | ||||||
Accrued
expense
|
(52 | ) | (47 | ) | (42 | ) | ||||||
|
||||||||||||
Accrued
pension cost
|
$ |
5,119
|
$ |
6,401
|
$ |
6,349
|
Vested
obligation
|
$ |
42
|
$ |
17
|
$ |
98
|
||||||
c. Actuarial assumption
|
|||
Discount
rate
|
3.25%
|
2.75%
|
2.25%
|
Increase
in future salary level
|
3.00%
|
2.5-3.0%
|
2.5-3.0%
|
Expected
rate of return on plan assets
|
3.25%
|
2.75%
|
2.50%
|
|
d.
|
ASE
Test, Inc. expects to make contributions of $554 thousand to its
defined
pension plan in 2007.
|
|
e
|
Expected
benefit payments:
|
Year
of
Payments
|
||||
2007
|
$ |
105
|
||
2008
|
8
|
|||
2009
|
58
|
|||
2010
|
42
|
|||
2011
|
52
|
|||
2012
and
thereafter
|
1,483
|
|
Plan
assets and obligations reflected herein were measured as of December
31,
2006.
|
2004
|
2005
|
2006
|
||||||||||||||||||||||||||||||||||
Cost
of
|
Operating
|
Cost
of
|
Operating
|
Cost
of
|
Operating
|
|||||||||||||||||||||||||||||||
Revenues
|
Expenses
|
Total
|
Revenues
|
Expenses
|
Total
|
Revenues
|
Expenses
|
Total
|
||||||||||||||||||||||||||||
Employees
benefits
|
||||||||||||||||||||||||||||||||||||
Salary
|
$ |
63,555
|
$ |
19,393
|
$ |
82,948
|
$ |
51,573
|
$ |
20,350
|
$ |
71,923
|
$ |
58,183
|
$ |
22,111
|
$ |
80,294
|
||||||||||||||||||
Insurance
|
4,281
|
1,575
|
5,856
|
3,561
|
1,360
|
4,921
|
4,129
|
1,826
|
5,955
|
|||||||||||||||||||||||||||
Pension
costs
|
4,019
|
1,397
|
5,416
|
3,864
|
1,477
|
5,341
|
3,584
|
1,500
|
5,084
|
|||||||||||||||||||||||||||
Other
|
5,829
|
1,668
|
7,497
|
7,619
|
2,009
|
9,628
|
5,831
|
1,314
|
7,145
|
|||||||||||||||||||||||||||
$ |
77,684
|
$ |
24,033
|
$ |
101,717
|
$ |
66,617
|
$ |
25,196
|
$ |
91,813
|
$ |
71,727
|
$ |
26,751
|
$ |
98,478
|
|||||||||||||||||||
Depreciation
|
$ |
141,839
|
$ |
2,441
|
$ |
144,280
|
$ |
138,084
|
$ |
2,691
|
$ |
140,775
|
$ |
110,830
|
$ |
2,732
|
$ |
113,562
|
||||||||||||||||||
Amortization
|
9,339
|
11,289
|
20,628
|
6,875
|
6,652
|
13,527
|
5,276
|
1,800
|
7,076
|
16.
|
INCOME
TAX
|
a.
|
Income
tax expense (benefit) attributable to continuing operations is
summarized
as follows:
|
2004
|
2005
|
2006
|
||||||||||
Tax
expense (benefit) based on
pre-tax accounting income
(loss)
from
continuing operations at statutory rate
|
$ |
10,478
|
$ | (4,169 | ) | $ |
38,973
|
|||||
Add
(deduct) tax effects
of:
|
||||||||||||
Permanent
differences
|
||||||||||||
Tax-exempt
income - tax
holiday
|
(6,146 | ) |
-
|
(6,450 | ) | |||||||
Other
|
(937 | ) |
181
|
(40 | ) | |||||||
Temporary
differences
|
||||||||||||
Depreciation
and capital
allowance
|
(1,501 | ) |
1,035
|
(11,569 | ) | |||||||
Depreciation
|
(945 | ) | (597 | ) |
5,995
|
|||||||
Other
|
3,028
|
53
|
2,089
|
|||||||||
3,977
|
(3,497 | ) |
28,998
|
2004
|
2005
|
2006
|
||||||||||
Loss
carryforward
|
$ |
-
|
$ |
7,101
|
$ | (5,356 | ) | |||||
Income
taxes on undistributed
earnings
|
2,244
|
2,369
|
-
|
|||||||||
Credits
for investments,
investment in machinery and
equipment,
and research and development
|
(4,494 | ) | (5,637 | ) | (14,802 | ) | ||||||
Net
change in deferred income tax
for the year
|
(22,936 | ) |
4,991
|
3,821
|
||||||||
Adjustment
of prior years’ income
tax
|
-
|
(2,790 | ) | (94 | ) | |||||||
Income
tax expense
(benefit)
|
$ | (21,209 | ) | $ |
2,537
|
$ |
12,567
|
|
(Concluded)
|
2004
|
2005
|
2006
|
||||||||||
Domestic
entity
|
$ |
509
|
$ |
1,079
|
$ |
3,580
|
||||||
Foreign
entities
|
||||||||||||
ASE
Test, Inc. (25% statutory
rate)
|
8,708
|
(4,314 | ) |
32,090
|
||||||||
ASE
Test Malaysia (28%
statutory rate)
|
1,765
|
745
|
3,646
|
|||||||||
ISE
Labs (federal tax rate 35%
and state tax rate 6%)
|
(504 | ) | (1,679 | ) | (343 | ) | ||||||
$ |
10,478
|
$ | (4,169 | ) | $ |
38,973
|
b.
|
Deferred
income tax assets and liabilities are summarized as
follows:
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Current
deferred income tax assets
|
||||||||
Unused
tax
credits
|
$ |
9,267
|
$ |
22,639
|
||||
Loss
carryforward
|
4,067
|
-
|
||||||
Other
|
1,880
|
1,241
|
||||||
15,214
|
23,880
|
|||||||
Less
: valuation
allowance
|
(6,281 | ) | (319 | ) | ||||
$ |
8,933
|
$ |
23,561
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Noncurrent
deferred income tax
assets
|
||||||||
Unused
tax
credits
|
$ |
29,528
|
$ |
9,706
|
||||
Tax
effect of unabsorbed
capital allowance
|
10,263
|
6,284
|
||||||
Loss
carryforward
|
9,294
|
8,196
|
||||||
Other
|
(2,818 | ) | (17 | ) | ||||
46,267
|
24,169
|
|||||||
Less
: valuation
allowance
|
(15,303 | ) | (11,046 | ) | ||||
$ |
30,964
|
$ |
13,123
|
|||||
Noncurrent
deferred income tax
liabilities
|
$ |
-
|
$ |
608
|
c.
|
As
of December 31, 2006, unused tax credits which can be utilized
to offset
future income tax, are set forth
below:
|
Year of Expiry
|
||||
2007
|
$ |
10,045
|
||
2008
|
9,883
|
|||
2009
|
2,392
|
|||
2010
|
2,578
|
|||
2011
and thereafter
|
7,447
|
|||
$ |
32,345
|
a.
|
Fair
values of financial instruments were as
follows:
|
b.
|
Methods
and assumptions used in the determination of fair values of financial
instruments were as
below
:
|
|
1)
|
The
aforementioned financial instruments do not include cash, notes
and
accounts receivable, receivables from related parties, pledged
time
deposit-current, notes and accounts payable, payable to related
parties,
accrued expenses and payables for property, plant and
equipment. These financial instruments’ carrying amounts
approximate their fair values.
|
|
2)
|
Fair
values of available-for-sale financial assets are determined based
on
their quoted market prices. Fair values of derivatives were
determined using valuation techniques incorporating estimates and
assumptions that were consistent with prevailing market
conditions.
|
|
3)
|
The
carrying amount of pledged time deposit reflects its fair
value.
|
|
4)
|
Fair
values of long-term debts were based on the present value of expected
cash
flows discounted at current interest rates of similar long-term
debts. The carrying amount of long-term debts approximates
their fair value.
|
c.
|
The
Company recognized $314 thousand and $685 thousand of gains for
the years
ended December 31, 2004 and 2005, respectively, and $1,731 thousand
of
losses for the year ended December 31, 2006 for the changes in
fair value
of derivatives determined using valuation
techniques.
|
d.
|
As
of December 31, 2005 and 2006, financial assets exposed to fair
value
interest rate risk were $5,031 thousand and $6,081 thousand, respectively,
financial liabilities exposed to fair value interest rate risk
were
$20,644 thousand and $1,781 thousand, respectively. Financial
assets exposed to cash flow interest rate risk were $77,439 thousand
and
$62,088 thousand, respectively, and financial liabilities exposed
to cash
flow interest rate risk were $267,096 thousand and $101,358 thousand,
respectively.
|
e.
|
For
the years ended December 31, 2004, 2005 and 2006, the Company recognized
interest income of $578 thousand, $1,598 thousand and $3,369 thousand,
and
interest expense (including capitalized interest) of $9,609 thousand,
$13,622 thousand and $13,568 thousand, respectively, for those
financial
assets or liabilities that are not categorized as financial assets
or
liabilities at fair value through profit and
loss.
|
|
f.
|
The
derivative instruments employed by the Company is to mitigate risks
arising from the ordinary business operation. All derivative
transactions engaged by the Company should be designated into two
purposes: hedging and speculating which are governed by separated
internal
guidelines and controls. Derivative transactions enter for
hedging purposes must hedge the risk against fluctuation in foreign
exchange and interest rates arising from operating
activities. The currency and the amount of derivative
instruments held by the Company must match the Company’s assets and
liabilities.
|
g.
|
Information
about financial risk
|
|
1)
|
Market
risk
|
|
2)
|
Credit
risk
|
|
3)
|
Liquidity
risk
|
4)
|
Cash
flow interest rate
risk
|
a.
|
Related
parties
|
Related
Parties
|
Relationship
|
||
ASE
Inc.
|
Parent
company
|
||
ASE
Korea, Inc.
|
Affiliate
|
||
Hung
Ching Development & Construction Co. (“HCDC”)
|
Affiliate
|
||
ASE
(Shanghai) Inc.
|
Affiliate
|
||
ASE
(U.S.) Inc.
|
Affiliate
(starting August, 2004)
|
||
ASE
Japan Co., Ltd. (“ASE Japan”)
|
Affiliate
(starting May, 2004)
|
||
ASE
Material Inc.
|
Affiliate
(merged into ASE Inc. in
August,
2004)
|
||
ASE
Electronics, Inc. (“ASEE”)
|
Affiliate
(starting August, 2006)
|
b.
|
Significant
related party transactions:
|
2004
|
2005
|
2006
|
||||||||||
1) Revenue
|
||||||||||||
ASE
Inc.
|
$ |
16,760
|
$ |
44,552
|
$ |
45,086
|
||||||
Other
|
446
|
-
|
-
|
|||||||||
$ |
17,206
|
$ |
44,552
|
$ |
45,086
|
2004
|
2005
|
2006
|
||||||||||
2) Purchase
of
machinery and equipment
|
||||||||||||
ASE
Korea, Inc.
|
$ |
146
|
$ |
990
|
$ |
7,144
|
||||||
ASE
Inc.
|
-
|
1,124
|
4,716
|
|||||||||
ASE
(Chung Li) Inc.
|
1,235
|
-
|
-
|
|||||||||
Other
|
4
|
-
|
-
|
|||||||||
$ |
1,385
|
$ |
2,114
|
$ |
11,860
|
|||||||
3) Purchase
of
buildings - HCDC
|
$ |
2,995
|
$ |
7,293
|
$ |
-
|
||||||
4) Purchase
of raw
materials
|
||||||||||||
ASE
Inc.
|
$ |
2,650
|
$ |
5,577
|
$ |
3,123
|
||||||
ASE
Material Inc.
|
3,353
|
-
|
-
|
|||||||||
Other
|
-
|
4
|
1,041
|
|||||||||
$ |
6,003
|
$ |
5,581
|
$ |
4,164
|
|||||||
5) Sale
of property,
plant and equipment
|
||||||||||||
ASE
Korea, Inc.
|
$ |
2,943
|
$ |
14,119
|
$ |
5,067
|
||||||
ASE
Inc.
|
9,790
|
1,598
|
337
|
|||||||||
ASE
Japan
|
-
|
1,540
|
1,194
|
|||||||||
Other
|
1,046
|
55
|
-
|
|||||||||
$ |
13,779
|
$ |
17,312
|
$ |
6,598
|
c.
|
Balances
at year end:
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Receivable
|
||||||||
ASE
Inc.
|
$ |
16,394
|
$ |
13,811
|
||||
ASE
Korea, Inc.
|
3,416
|
73
|
||||||
Other
|
467
|
734
|
||||||
$ |
20,277
|
$ |
14,618
|
|||||
Payable
|
||||||||
ASE
Inc.
|
$ |
9,082
|
$ |
4,207
|
||||
ASEE
|
-
|
565
|
||||||
Other
|
1,265
|
365
|
||||||
$ |
10,347
|
$ |
5,137
|
|
The
following assets have been pledged or mortgaged as collaterals
for bank
loans and as guarantees for the employment of foreign labor and
the lease
of office buildings:
|
December
31
|
||||||||
2005
|
2006
|
|||||||
Machinery
and equipment,
net
|
$ |
28,021
|
$ |
7,326
|
||||
Pledged
time
deposit
|
3,908
|
5,276
|
||||||
$ |
31,929
|
$ |
12,602
|
|
Included
in other assets-other are $2,006 thousand and $5,276 thousand of
time
deposit which have been pledged as collateral as of December 31,
2005 and
2006, respectively.
|
a.
|
Lease
commitments
|
|
1)
|
Operating
leases
|
$ |
20,081
|
|||
2008
|
7,701
|
|||
2009
|
5,144
|
|||
2010
|
3,215
|
|||
2011
and
thereafter
|
655
|
|||
Total
minimum lease payments
|
$ |
36,796
|
2)
|
Capital
leases
|
2007
|
$ |
14,591
|
||
2008
|
847
|
|||
2009
|
36
|
|||
2010
|
3
|
|||
Total
minimum lease
payments
|
15,477
|
|||
Less: Imputed
interest
|
(392 | ) | ||
Present
value of future lease
obligations
|
15,085
|
|||
Capital
lease obligation,
current
|
(14,225 | ) | ||
Capital
lease obligation,
long-term
|
$ |
860
|
b.
|
The
Company had unused letters of credit of $43 thousand as of December
31,
2006.
|
c.
|
The
Company had commitments to certain vendors to purchase property,
plant and
equipment of approximately $52,000 thousand, and had prepaid $360
thousand
as of December 31, 2006.
|
d.
|
At
December 31, 2006, the Company did not have any significant unasserted
claims or pending
litigations.
|
|
a. |
Geographical
information, net revenues
|
2004
|
2005
|
2006
|
||||||||||||||||||||||
Area
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
||||||||||||||||||
North
America
|
$ |
236,527
|
55
|
$ |
260,224
|
62
|
$ |
320,895
|
62
|
|||||||||||||||
Asia
|
152,485
|
36
|
104,179
|
25
|
114,235
|
22
|
||||||||||||||||||
Europe
|
38,740
|
9
|
56,526
|
13
|
82,558
|
16
|
||||||||||||||||||
Australia
|
11
|
-
|
-
|
-
|
18
|
-
|
||||||||||||||||||
$ |
427,763
|
100
|
$ |
420,929
|
100
|
$ |
517,706
|
100
|
b.
|
Geographical
information- long-lived assets
|
December
31
|
||||||||||||||||
2005
|
2006
|
|||||||||||||||
Amount
|
%
|
Amount
|
%
|
|||||||||||||
Asia
|
||||||||||||||||
Taiwan
|
$ |
306,060
|
71
|
$ |
282,309
|
73
|
||||||||||
Malaysia
|
76,194
|
18
|
56,300
|
14
|
||||||||||||
Singapore
|
36,847
|
8
|
38,222
|
10
|
||||||||||||
United
States
|
10,978
|
3
|
12,604
|
3
|
||||||||||||
$ |
430,079
|
100
|
$ |
389,435
|
100
|
c.
|
Major
customers
|
d.
|
Operating
segment information
|
Testing
|
|
Packaging
|
Other
|
Total
|
||||||||||||
2004
|
||||||||||||||||
Revenue
from external
customers
|
$ |
343,116
|
$ |
84,647
|
$ |
-
|
$ |
427,763
|
||||||||
Interest
income
|
154
|
83
|
341
|
578
|
||||||||||||
Interest
expense
|
(1,069 | ) | (255 | ) | (5,441 | ) | (6,765 | ) | ||||||||
Net
interest
expense
|
(915 | ) | (172 | ) | (5,100 | ) | (6,187 | ) | ||||||||
Depreciation
and
amortization
|
138,328
|
18,601
|
-
|
156,929
|
||||||||||||
Impairment
loss on
assets
|
(26,500 | ) |
-
|
-
|
(26,500 | ) | ||||||||||
Segment
profit
(loss)
|
(6,248 | ) | (10,456 | ) |
3,666
|
(13,038 | ) | |||||||||
Segment
assets
|
782,089
|
149,820
|
151,200
|
1,083,109
|
||||||||||||
Expenditures
for segment
assets
|
174,382
|
36,274
|
-
|
210,656
|
||||||||||||
Goodwill
|
25,612
|
-
|
-
|
25,612
|
||||||||||||
Testing
|
Packaging
|
Other
|
Total
|
|||||||||||||
2005
|
||||||||||||||||
Revenue
from external
customers
|
$ |
346,639
|
$ |
74,290
|
$ |
-
|
$ |
420,929
|
||||||||
Interest
income
|
868
|
574
|
156
|
1,598
|
||||||||||||
Interest
expense
|
(3,418 | ) | (427 | ) | (8,899 | ) | (12,744 | ) | ||||||||
Net
interest revenue
(expense)
|
(2,550 | ) |
147
|
(8,743 | ) | (11,146 | ) | |||||||||
Depreciation
and
amortization
|
134,383
|
15,239
|
-
|
149,622
|
||||||||||||
Loss
on fire
damage
|
(51,224 | ) |
-
|
-
|
(51,224 | ) | ||||||||||
Segment
loss
|
(31,709 | ) | (9,372 | ) | (2,705 | ) | (43,786 | ) | ||||||||
Segment
assets
|
669,190
|
125,561
|
145,588
|
940,339
|
||||||||||||
Expenditures
for segment
assets
|
48,844
|
1,842
|
-
|
50,686
|
||||||||||||
Goodwill
|
20,646
|
-
|
-
|
20,646
|
||||||||||||
2006
|
||||||||||||||||
Revenue
from external
customers
|
423,341
|
94,365
|
-
|
517,706
|
||||||||||||
Interest
income
|
1,379
|
1,432
|
558
|
3,369
|
||||||||||||
Interest
expense
|
(2,302 | ) | (117 | ) | (10,746 | ) | (13,165 | ) | ||||||||
Net
interest
expense
|
(923 | ) |
1,315
|
(10,188 | ) | (9,796 | ) | |||||||||
Depreciation
and
amortization
|
108,410
|
12,228
|
-
|
120,638
|
||||||||||||
Gain
on insurance settlement and
impairment recovery
|
32,145
|
-
|
-
|
32,145
|
||||||||||||
Segment
profit
|
149,369
|
8,040
|
5,927
|
163,336
|
||||||||||||
Segment
assets
|
682,364
|
83,605
|
278,459
|
1,044,428
|
||||||||||||
Expenditures
for segment
assets
|
85,038
|
2,370
|
-
|
87,408
|
||||||||||||
Goodwill
|
20,646
|
-
|
-
|
20,646
|
|
(Concluded)
|
2004
|
From
January
1, 2005 to
October
3, 2005
|
|||||||
Net
revenues
|
$ |
193,375
|
$ |
66,493
|
||||
Cost
of revenues
|
173,389
|
59,819
|
||||||
Gross
profit
|
19,986
|
6,674
|
||||||
Operating
expenses
|
2,229
|
1,422
|
||||||
Non-operating
expenses
|
768
|
1,257
|
||||||
Income
from discontinued operations before
income
tax
|
16,989
|
3,995
|
||||||
Income
tax expense
|
21
|
66
|
||||||
Income
from discontinued operations
|
16,968
|
3,929
|
||||||
2004
|
From
January
1, 2005 to
October
3, 2005
|
|||||||
Gain
on disposal of assets
|
$ |
-
|
$ |
6,969
|
||||
Income
tax expense
|
-
|
59
|
||||||
Gain
on disposal of discontinued operations
|
-
|
6,910
|
||||||
Total
|
$ |
16,968
|
$ |
10,839
|
|
(Concluded)
|
24.
|
SUMMARY
OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED
BY THE
COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES
OF AMERICA
|
a.
|
Pension
benefits
|
b.
|
Marketable
securities
|
c.
|
Bonuses
to employees, directors and
supervisors
|
2004
|
2005
|
|
2006
|
|||||||||
Cost
of revenues
|
$ |
2,591
|
$ | (1,546 | ) | $ |
8,079
|
|||||
Selling,
general and
administrative expenses
|
1,080
|
(1,420 | ) |
3,872
|
||||||||
Research
and
development
|
418
|
(236 | ) |
1,235
|
||||||||
$ |
4,089
|
$ | (3,202 | ) | $ |
13,186
|
d.
|
Depreciation
of buildings
|
e.
|
Depreciation
on the excess of book value on transfer of buildings between
related
parties
|
f.
|
Impairment
of long-lived assets
|
g.
|
Derivative financial
instruments
|
h.
|
Stock-based
compensation
|
i.
|
Goodwill
|
j.
|
Undistributed
earnings tax
|
k.
|
Investments
in parent company accounted for as treasury
stock
|
l.
|
Earnings
per share
|
2004
|
2005
|
2006
|
||||||||||
e. Depreciation
on the excess of book value of buildings
transferred
between related parties
|
$ | (518 | ) | $ | (505 | ) | $ | (492 | ) | |||
f. Impairment
loss reversal, net
|
-
|
-
|
(3,638 | ) | ||||||||
i.
Goodwill
|
||||||||||||
Amortization
|
||||||||||||
-
Consolidated
subsidiary
|
30,315
|
35,281
|
35,281
|
|||||||||
-
Equity-method
investee
|
1,044
|
1,392
|
1,392
|
|||||||||
Impairment
|
(15,000 | ) | (15,000 | ) | (15,000 | ) | ||||||
j.
Undistributed earnings tax
|
-
|
-
|
(8,936 | ) | ||||||||
k. Investment
in parent company accounted
for
as treasury stock
|
(81,362 | ) | (81,422 | ) | (81,422 | ) | ||||||
k. Unrealized
gain on investment in parent company
accounted
for as treasury stock
|
-
|
-
|
(123,429 | ) | ||||||||
Cumulative
translation
adjustments on U.S. GAAP
adjustments
|
60
|
242
|
172
|
|||||||||
Net
decrease in shareholders’
equity
|
(72,381 | ) | (62,749 | ) | (210,017 | ) | ||||||
Shareholders’
equity
based on
U.S. GAAP
|
$ |
527,210
|
$ |
495,456
|
$ |
633,111
|
||||||
Changes
in shareholders’
equity based on U.S. GAAP
|
||||||||||||
Balance,
beginning of
year
|
$ |
562,499
|
$ |
527,210
|
$ |
495,456
|
||||||
Net
income (loss) for the
year
|
17,890
|
(35,446 | ) |
117,318
|
||||||||
Issuance
of new shares under
stock option plans
|
4,552
|
-
|
678
|
|||||||||
Unrecognized
pension
cost
|
646
|
-
|
-
|
|||||||||
Adjustment
of pension cost
upon adoption of U.S.
SFAS
No. 158
|
-
|
-
|
(1,712 | ) | ||||||||
ASE
Inc. shares to be
distributed as bonus to employees
|
1,525
|
1,556
|
4,343
|
|||||||||
Stock
option
compensation
|
(1,856 | ) |
7,423
|
7,051
|
||||||||
Cumulative
translation
adjustments for subsidiaries
|
22,976
|
(5,780 | ) |
9,444
|
||||||||
Unrealized
gain on financial
instruments
|
400
|
-
|
533
|
|||||||||
Long-term
investment in parent
company accounted for as
treasury
stock
|
(81,422 | ) |
-
|
-
|
||||||||
Cash
dividend income from the
parent company
|
-
|
493
|
-
|
|||||||||
Balance,
end of
year
|
$ |
527,210
|
$ |
495,456
|
$ |
633,111
|
2005
|
2006
|
|||||||
Available-for-sale
financial assets - noncurrent
|
||||||||
As
reported
|
$ |
81,251
|
$ |
204,851
|
||||
U.S.
GAAP
adjustments
|
||||||||
Treasury
stock
|
(81,422 | ) | (81,422 | ) |
2005
|
2006
|
|||||||
Effect
of change in exchange
rate
|
$ |
171
|
$ |
-
|
||||
Unrealized
gain on financial
instruments
|
-
|
(123,429 | ) | |||||
As
adjusted
|
$ |
-
|
$ |
-
|
||||
Equity
method
investments
|
||||||||
As
reported
|
$ |
57,974
|
$ |
75,979
|
||||
U.S.
GAAP
adjustment
|
||||||||
Goodwill
amortization
|
1,392
|
1,392
|
||||||
As
adjusted
|
$ |
59,366
|
$ |
77,371
|
||||
Building
and
improvements
|
||||||||
As
reported
|
$ |
66,573
|
$ |
61,596
|
||||
U.S.
GAAP
adjustments
|
||||||||
Effect
of adjustments on
depreciation of buildings
|
(2,700 | ) | (3,364 | ) | ||||
Excess
of adjustments on
buildings transferred between related parties
|
(505 | ) | (492 | ) | ||||
Effect
of change in exchange
rate
|
131
|
134
|
||||||
As
adjusted
|
$ |
63,499
|
$ |
57,874
|
||||
Machinery
and
equipment
|
||||||||
As
reported
|
$ |
338,046
|
$ |
296,753
|
||||
U.S.
GAAP
adjustment
|
||||||||
Impairment
recovery
|
-
|
(5,641 | ) | |||||
Depreciation
|
-
|
791
|
||||||
As
adjusted
|
$ |
338,046
|
$ |
291,903
|
||||
Goodwill
|
||||||||
|
||||||||
As
reported
|
$ |
20,646
|
$ |
20,646
|
||||
U.S.
GAAP
adjustments
|
||||||||
Goodwill
impairment
|
(15,000 | ) | (15,000 | ) | ||||
Goodwill
amortization
|
35,281
|
35,281
|
||||||
As
adjusted
|
$ |
40,927
|
$ |
40,927
|
||||
Deferred
income tax assets
- noncurrent
|
||||||||
As
reported
|
$ |
30,964
|
$ |
13,123
|
||||
U.S.
GAAP
adjustments
|
||||||||
Undistributed
earnings
tax
|
-
|
(8,936 | ) | |||||
Effect
of impairment
recovery
|
-
|
1,212
|
||||||
Effect
of change in exchange
rate
|
-
|
36
|
||||||
As
adjusted
|
$ |
30,964
|
$ |
5,435
|
||||
2005
|
2006
|
|||||||
Accrued
expenses
|
||||||||
As
reported
|
$ |
37,986
|
$ |
21,725
|
||||
U.S.
GAAP
adjustments
|
||||||||
Bonus
to employees, directors
and supervisors
|
-
|
8,843
|
||||||
Effect
of change in exchange
rate
|
9
|
(53 | ) | |||||
As
adjusted
|
$ |
37,995
|
$ |
30,515
|
||||
Accrued
pension
cost
|
||||||||
As
reported
|
$ |
6,412
|
$ |
6,648
|
||||
U.S.
GAAP
adjustments
|
||||||||
Pension
benefits
|
37
|
26
|
||||||
Unrecognized
pension cost on
adoption of U.S. SFAS No. 158
|
-
|
1,712
|
||||||
Effect
of change in exchange
rate
|
51
|
51
|
||||||
As
adjusted
|
$ |
6,500
|
$ |
8,437
|
a.
|
Recently
issued accounting standards
|
b.
|
Pension
|
2004
|
|
2005
|
2006
|
|||||||||
Components
of net periodic pension cost
|
||||||||||||
Service
cost
|
$ |
1,906
|
$ |
1,705
|
$ |
301
|
||||||
Interest
cost
|
349
|
373
|
308
|
|||||||||
Expected
return on plan
assets
|
(78 | ) | (117 | ) | (109 | ) | ||||||
Amortization
of prior service
cost
|
165
|
59
|
-
|
|||||||||
Net
periodic pension
cost
|
$ |
2,342
|
$ |
2,020
|
$ |
500
|
||||||
Change
in benefit
obligation
|
||||||||||||
Benefit
obligation at beginning
of year
|
$ |
10,855
|
$ |
12,660
|
$ |
11,078
|
||||||
Service
cost
|
1,906
|
1,705
|
301
|
|||||||||
Interest
cost
|
349
|
373
|
308
|
|||||||||
Actuarial
gain
(loss)
|
(1,038 | ) | (3,325 | ) |
815
|
|||||||
Benefits
paid
|
(163 | ) |
-
|
(95 | ) | |||||||
Exchange
difference
|
751
|
(335 | ) |
86
|
||||||||
Benefit
obligation at end of
year
|
12,660
|
11,078
|
12,493
|
|||||||||
Change
in plan
assets
|
||||||||||||
Fair
value of plan assets at
beginning of year
|
2,386
|
3,154
|
3,668
|
|||||||||
Employer
contribution
|
554
|
570
|
620
|
|||||||||
Actual
return on plan
assets
|
32
|
49
|
97
|
|||||||||
Benefits
paid
|
-
|
-
|
(95 | ) | ||||||||
Exchange
difference
|
182
|
(105 | ) |
28
|
||||||||
|
3,154
|
3,668
|
4,318
|
|||||||||
Funded
status
|
9,506
|
7,410
|
8,175
|
|||||||||
Unrecognized
actuarial
loss
|
(4,240 | ) | (874 | ) |
-
|
|||||||
Accrued
expense
|
(52 | ) | (47 | ) | (37 | ) | ||||||
Net
amount recognized (recognized
as accrued pension cost)
|
$ |
5,214
|
$ |
6,489
|
$ |
8,138
|
||||||
Actuarial
assumptions:
|
||||||||||||
Discount
rate
|
3.25 | % | 2.75 | % | 2.25 | % | ||||||
Rate
of compensation
increase
|
3.00 | % | 2.5%-3.0 | % | 2.5%-3.0 | % | ||||||
Expected
return on plan
assets
|
3.25 | % | 2.75 | % | 2.50 | % |
c.
|
Income
tax (benefit)
|
2004
|
2005
|
2006
|
||||||||||
Tax
expense (benefit) based on
pre-tax accounting income
(loss)
from continuing
operations at statutory rate |
$ |
9,920
|
$ | (4,481 | ) | $ |
33,818
|
|||||
Add
(deduct) tax effects of:
|
||||||||||||
Permanent
differences
|
||||||||||||
Bonuses
to directors, supervisors and employees
|
1,022
|
(801 | ) |
3,297
|
||||||||
Stock
option compensation
|
(464 | ) |
1,113
|
1,858
|
||||||||
Tax-exempt
income - tax holiday
|
(6,146 | ) |
-
|
(6,450 | ) | |||||||
Other
|
(937 | ) |
181
|
(40 | ) |
2004
|
|
2005
|
2006
|
|||||||||
Deferred
|
$ | (26,848 | ) | $ | (155 | ) | $ | (15,678 | ) | |||
Loss
carryforward
|
-
|
7,101
|
(5,356 | ) | ||||||||
Income
taxes on undistributed earnings
|
2,244
|
2,369
|
8,936
|
|||||||||
Adjustment
of prior years’ income tax
|
-
|
(2,790 | ) | (94 | ) | |||||||
Income
tax expense (benefit)
|
$ | (21,209 | ) | $ |
2,537
|
$ |
20,291
|
2004
|
|
2005
|
2006
|
|||||||||
Domestic
entity
|
$ |
509
|
$ |
1,079
|
$ |
3,580
|
||||||
Foreign
entities
|
||||||||||||
ASE
Test, Inc. (25% statutory
rate)
|
8,150
|
(4,626 | ) |
26,935
|
||||||||
ASE
Test Malaysia (28%
statutory rate)
|
1,765
|
745
|
3,646
|
|||||||||
ISE
Labs (federal tax rate 35%
and state tax rate 6%)
|
(504 | ) | (1,679 | ) | (343 | ) | ||||||
$ |
9,920
|
$ | (4,481 | ) | $ |
33,818
|
2005
|
|
2006
|
||||||
Current
deferred income tax
assets
|
||||||||
Unused
tax
credits
|
$ |
9,267
|
$ |
22,639
|
||||
Loss
carryforward
|
4,067
|
-
|
||||||
Other
|
1,880
|
1,241
|
||||||
15,214
|
23,880
|
|||||||
Less:
valuation
allowance
|
(6,281 | ) | (319 | ) | ||||
$ |
8,933
|
$ |
23,561
|
|||||
Noncurrent
deferred income tax
assets
|
||||||||
Unused
tax
credits
|
$ |
29,528
|
$ |
2,018
|
||||
Tax
effect of unabsorbed
capital allowance
|
10,263
|
6,284
|
||||||
Loss
carryforward
|
9,294
|
8,196
|
||||||
Other
|
(2,818 | ) | (17 | ) | ||||
46,267
|
16,481
|
|||||||
Less:
valuation
allowance
|
(15,303 | ) | (11,046 | ) | ||||
$ |
30,964
|
$ |
5,435
|
|||||
Noncurrent
deferred income tax
liabilities
|
$ |
-
|
$ |
608
|
d.
|
Earnings
(loss) per share
|
2004
|
2005
|
2006
|
||||||||||
Net
income (loss) under U.S.
GAAP
|
||||||||||||
Income
(loss) from continuing operations
|
$ |
922
|
$ | (46,285 | ) | $ |
116,937
|
|||||
Discontinued
operations
|
16,968
|
10,839
|
-
|
|||||||||
Cumulative
effect of a change in accounting principle, net of tax
|
-
|
-
|
381
|
|||||||||
$ |
17,890
|
$ | (35,446 | ) | $ |
117,318
|
||||||
Weighted
average number of
shares, as adjusted - denominator
|
||||||||||||
Basic
|
100,037,524
|
100,059,031
|
100,081,418
|
|||||||||
Effect
of dilutive
securities
|
73,589
|
-
|
152,984
|
|||||||||
Diluted
|
100,111,113
|
100,059,031
|
100,234,402
|
|||||||||
Earnings
(loss) per share (in
U.S. dollars)
|
||||||||||||
Basic
|
||||||||||||
Earnings
(loss) from continuing
operations
|
$ |
0.01
|
$ | (0.46 | ) | $ |
1.17
|
|||||
Earnings
from discontinued
operations
|
0.17
|
0.11
|
-
|
|||||||||
Earnings
from cumulative effect
of a change in accounting principle
|
-
|
-
|
-
|
|||||||||
$ |
0.18
|
$ | (0.35 | ) | $ |
1.17
|
||||||
Diluted
|
||||||||||||
Earnings
(loss) from continuing
operations
|
$ |
0.01
|
$ | (0.46 | ) | $ |
1.17
|
|||||
Earnings
from discontinued
operations
|
0.17
|
0.11
|
-
|
|||||||||
Earnings
from cumulative effect
of a change in accounting principle
|
-
|
-
|
-
|
|||||||||
$ |
0.18
|
$ | (0.35 | ) | $ |
1.17
|
e.
|
Stock
option plans
|
Weighted
|
|||||||||||||||
Average
|
Weighted
|
Aggregate
|
|||||||||||||
Exercise
|
Average
|
Intrinsic
|
|||||||||||||
Number
of
|
Price
|
Grant
Date
|
Value
(In
|
||||||||||||
Shares
|
Per
Share
|
Fair
Value
|
thousands)
|
||||||||||||
Beginning
outstanding balance -
January 1, 2004
|
13,301,418
|
11.80
|
|||||||||||||
Options
granted
|
260,000
|
6.18
|
$ |
6.18
|
|||||||||||
Options
exercised
|
(512,815 | ) |
8.90
|
||||||||||||
Options
forfeited
|
(417,815 | ) |
11.82
|
||||||||||||
Options
expired
|
(1,753,340 | ) |
20.00
|
||||||||||||
Ending
outstanding balance -
December 31, 2004
|
10,877,448
|
10.48
|
|||||||||||||
Options
granted
|
32,500
|
6.50
|
$ |
6.50
|
|||||||||||
Options
exercised
|
-
|
-
|
|||||||||||||
Options
forfeited
|
(358,884 | ) |
10.97
|
||||||||||||
Options
expired
|
(60,000 | ) |
25.00
|
||||||||||||
Ending
outstanding balance -
December 31, 2005
|
10,491,064
|
10.37
|
|||||||||||||
Options
granted
|
130,000
|
9.60
|
$ |
9.60
|
|||||||||||
Options
exercised
|
(79,201 | ) |
8.56
|
||||||||||||
Options
forfeited
|
(216,825 | ) |
11.60
|
||||||||||||
Options
expired
|
-
|
-
|
|||||||||||||
|
|||||||||||||||
Ending
outstanding balance -
December 31, 2006
|
10,325,038
|
10.34
|
$
|
16,660
|
|||||||||||
Ending
exercisable balance -
December 31, 2006
|
9,025,838
|
10.18
|
$ |
15,479
|
Outstanding
|
Exercisable
|
|||||||||||||||||||||||||
|
Number
of
Shares
|
Weighted
Average
Price
|
Weighted
Average
Remaining
Life
(Years)
|
Number
of
Shares
|
Weighted
Average
Price
|
Weighted
Average
Remaining
Life
(Years)
|
||||||||||||||||||||
Options
with exercise price of:
|
||||||||||||||||||||||||||
$20-$25
|
596,900
|
$ |
22.35
|
2.93
|
596,900
|
$ |
22.35
|
2.94
|
||||||||||||||||||
$11.5-$12.95
|
2,139,450
|
12.81
|
6.48
|
1,176,450
|
12.70
|
6.69
|
||||||||||||||||||||
$5.5-$9.79
|
7,588,688
|
8.70
|
4.34
|
7,252,488
|
8.77
|
4.17
|
||||||||||||||||||||
10,325,038
|
4.74
|
9,025,838
|
4.39
|
2004
|
2005
|
2006
|
||||||||||
Risk-free
interest
rate
|
3.50-3.88%
|
3.88%
|
4.88%
|
|||||||||
Expected
life
|
|
5
years
|
|
5
years
|
|
3-5
years
|
||||||
Expected
volatility
|
78.28%
|
59.06%
|
59.95%-62.03%
|
|||||||||
Expected
dividend
|
0%
|
0%
|
0%
|
Weighted
|
|||||||||||||||
Average
|
Weighted
|
Aggregate
|
|||||||||||||
Exercise
|
Average
|
Intrinsic
|
|||||||||||||
Number
of
|
Price
|
Grant
Date
|
Value
(In
|
||||||||||||
Shares
|
Per
Share
|
Fair
Value
|
thousands)
|
||||||||||||
Beginning
outstanding balance -
January 1, 2004
|
38,852,400
|
$ |
0.58
|
||||||||||||
Options
granted
|
25,499,500
|
0.79
|
$ |
0.79
|
|||||||||||
Options
forfeited
|
(2,261,800 | ) |
0.58
|
||||||||||||
Options
expired
|
-
|
-
|
|||||||||||||
Options
exercised
|
(338,000 | ) |
0.56
|
||||||||||||
Ending
outstanding balance -
December 31, 2004
|
61,752,100
|
0.60
|
|||||||||||||
Options
granted
|
3,000,000
|
0.57
|
$ |
0.57
|
|||||||||||
Options
forfeited
|
(5,126,800 | ) |
0.58
|
||||||||||||
Options
expired
|
-
|
-
|
|||||||||||||
Options
exercised
|
(6,698,720 | ) |
0.49
|
||||||||||||
Ending
outstanding balance -
December 31, 2005
|
52,926,580
|
0.60
|
|||||||||||||
Options
granted
|
-
|
-
|
$ |
-
|
|||||||||||
Options
forfeited
|
(2,489,000 | ) |
0.62
|
||||||||||||
Options
expired
|
-
|
-
|
|||||||||||||
Options
exercised
|
(9,908,710 | ) |
0.58
|
||||||||||||
Ending
outstanding balance -
December 31, 2006
|
40,528,870
|
0.61
|
$ |
21,392
|
|||||||||||
Ending
exercisable balance -
December 31, 2006
|
19,611,890
|
0.59
|
$ |
$10,736
|
Outstanding
|
Exercisable
|
|||||||||||||||||
Number
of Shares
|
Weighted
Average
Remaining
Life
(Years)
|
Number
of Shares
|
Weighted
Average
Remaining
Life
(Years)
|
|||||||||||||||
Options
with exercise price
|
||||||||||||||||||
$0.49
|
15,222,300
|
6.0
|
9,936,500
|
6.0
|
||||||||||||||
$0.64
|
4,327,170
|
6.6
|
2,302,690
|
6.6
|
||||||||||||||
$0.70
|
18,564,400
|
7.5
|
7,372,700
|
7.5
|
||||||||||||||
$0.57
|
2,415,000
|
8.4
|
-
|
-
|
||||||||||||||
40,528,870
|
6.9
|
19,611,890
|
6.6
|
2004
|
2005
|
|||||||
Risk-free
interest
rate
|
2.50%
|
|
|
1.80%
|
||||
Expected
life
|
|
5
years
|
|
5
years
|
||||
Expected
dividend
|
3.00%
|
3.00%
|
||||||
Expected
volatility
|
59%
|
47%
|
2004
|
2005
|
|||||||
Net
income (loss) based on U.S.
GAAP
|
$ |
17,890
|
$ | (35,446 | ) | |||
Stock-based
compensation expense
(net of related tax effect)
|
||||||||
From
the
Company
|
(13,998 | ) | (10,525 | ) | ||||
From
ASE Inc.
|
(836 | ) | (1,660 | ) | ||||
Pro
forma net income
(loss)
|
$ |
3,056
|
$ | (47,631 | ) | |||
Basic
earnings (loss) per
share
|
||||||||
As
reported
|
$ |
0.18
|
$ | (0.35 | ) | |||
Pro
forma
|
$ |
0.03
|
$ | (0.48 | ) | |||
Diluted
earnings (loss) per
share
|
||||||||
As
reported
|
$ |
0.18
|
$ | (0.35 | ) | |||
Pro
forma
|
$ |
0.03
|
$ | (0.48 | ) |
|
f.
|
According
to U.S. SFAS No. 130, “Reporting Comprehensive Income”, the statements of
comprehensive income (loss) for the years ended December 31, 2004,
2005
and 2006 are presented below:
|
2004
|
|
2005
|
2006
|
|||||||||
Net
income (loss) based on U.S.
GAAP
|
$ |
17,890
|
$ | (35,446 | ) | $ |
117,318
|
|||||
Translation
adjustment on
subsidiaries
|
22,976
|
(5,780 | ) |
9,444
|
||||||||
Unrecognized
pension
cost
|
646
|
-
|
-
|
|||||||||
Unrealized
gain on financial
instruments
|
400
|
-
|
533
|
|||||||||
Comprehensive
income
(loss)
|
$ |
41,912
|
$ | (41,226 | ) | $ |
127,295
|
g.
|
Goodwill
|
September
30,
|
December
31,
|
September
30,
|
September
30,
|
December
31,
|
September
30,
|
||||||||||||||||||||
2006
|
2006
|
2006
|
2007
|
||||||||||||||||||||||
ASSETS
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||||
Cash
(Notes 2 and 4)
|
$ |
131,023
|
$ |
89,715
|
$ |
113,187
|
Short-term
borrowings
|
$ |
2,900
|
$ |
-
|
$ |
-
|
||||||||||||
Financial
assets at fair value through profit or loss (Notes
|
Financial
liabilities at fair value through profit or loss
|
||||||||||||||||||||||||
2,
3, 5 and 16)
|
-
|
-
|
566
|
(Notes
2, 3, 5 and 16)
|
480
|
262
|
-
|
||||||||||||||||||
Available-for-sale
financial assets - current (Notes 2, 3, 6
|
Notes
and accounts payable
|
9,819
|
12,251
|
15,759
|
|||||||||||||||||||||
and
16)
|
95,768
|
89,341
|
126,033
|
Payable
to related parties (Note 17)
|
3,554
|
5,137
|
7,939
|
||||||||||||||||||
Hedging
derivative assets - current (Notes 2, 3 and 16)
|
-
|
-
|
636
|
Payable
for property, plant and equipment
|
10,794
|
8,769
|
12,700
|
||||||||||||||||||
Notes
and accounts receivable, net (Notes 2 and 7)
|
69,302
|
57,875
|
76,867
|
Income
tax payable (Note 2)
|
7,828
|
8,316
|
3,111
|
||||||||||||||||||
Receivables
from related parties (Note 17)
|
25,175
|
14,618
|
19,042
|
Current
portion of long-term debts (Notes 11, 16 and 19)
|
76,682
|
34,418
|
20,282
|
||||||||||||||||||
Inventories,
net (Notes 2 and 8)
|
14,208
|
16,935
|
11,844
|
Accrued
expenses (Note 13)
|
37,322
|
21,725
|
26,152
|
||||||||||||||||||
Deferred
income tax assets, net (Notes 2 and 15)
|
1,957
|
23,561
|
5,707
|
Other
(Note 7)
|
6,555
|
11,838
|
14,535
|
||||||||||||||||||
Prepayments
and other
|
12,980
|
13,509
|
17,848
|
||||||||||||||||||||||
Total
current liabilities
|
155,934
|
102,716
|
100,478
|
||||||||||||||||||||||
Total
current assets
|
350,413
|
305,554
|
371,730
|
||||||||||||||||||||||
LONG-TERM
DEBTS (Notes 11, 16 and 19)
|
141,550
|
85,706
|
65,510
|
||||||||||||||||||||||
LONG-TERM
INVESTMENTS
|
|||||||||||||||||||||||||
Available-for-sale
financial assets (Notes 2, 3, 6 and 16)
|
167,597
|
204,851
|
229,459
|
ACCRUED
PENSION COST (Notes 2 and 13)
|
6,332
|
6,648
|
6,670
|
||||||||||||||||||
Equity
method investments (Notes 2, and 9)
|
71,291
|
75,979
|
87,683
|
||||||||||||||||||||||
Financial
assets carried at cost (Note 2)
|
1,000
|
1,000
|
1,000
|
DEFERRED
INCOME TAX LIABILITIES (Notes 2 and
|
1,289
|
608
|
577
|
||||||||||||||||||
15)
|
|||||||||||||||||||||||||
Total
long-term investments
|
239,888
|
281,830
|
318,142
|
||||||||||||||||||||||
OTHER
LIABILITIES
|
4,425
|
5,622
|
3,235
|
||||||||||||||||||||||
PROPERTY,
PLANT, AND EQUIPMENT, NET (Notes 2,
|
|||||||||||||||||||||||||
10,
14, 17, 18, 19 and 20)
|
398,148
|
389,435
|
359,108
|
Total
liabilities
|
309,530
|
201,300
|
176,470
|
||||||||||||||||||
GOODWILL
(Notes 2 and 3)
|
20,646
|
20,646
|
20,646
|
SHAREHOLDERS’
EQUITY (Notes 1, 2 and 12)
|
|||||||||||||||||||||
Capital
stock - $0.25 par value
|
|||||||||||||||||||||||||
OTHER
ASSETS
|
Authorized
- 600,000
thousand
shares
|
||||||||||||||||||||||||
Deferred
income tax assets, net (Notes 2 and 15)
|
27,937
|
13,123
|
11,636
|
Issued
and outstanding -
100,090
thousand shares in
|
|||||||||||||||||||||
Deferred
charges, net (Note 2)
|
6,745
|
5,733
|
4,175
|
September
30, 2006,
100,138
thousand shares in
|
|||||||||||||||||||||
Other
(Notes 16 and 18)
|
29,777
|
28,107
|
24,909
|
December
31, 2006, and
101,177
thousand shares
|
|||||||||||||||||||||
in
September 30, 2007
|
25,023
|
25,035
|
25,294
|
||||||||||||||||||||||
Total
other assets
|
64,459
|
46,963
|
40,720
|
Additional
paid-in capital
|
455,302
|
455,717
|
464,703
|
||||||||||||||||||
Retained
earnings
|
243,522
|
276,723
|
330,155
|
||||||||||||||||||||||
Unrealized
gain on financial instruments
|
86,662
|
123,962
|
149,549
|
||||||||||||||||||||||
Cumulative
translation adjustments
|
(46,485 | ) | (38,309 | ) | (35,825 | ) | |||||||||||||||||||
Total
shareholders’ equity
|
764,024
|
843,128
|
933,876
|
||||||||||||||||||||||
TOTAL
|
$ |
1,073,554
|
$ |
1,044,428
|
$ |
1,110,346
|
TOTAL
|
$ |
1,073,554
|
$ |
1,044,428
|
$ |
1,110,346
|
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2006
|
2007
|
2006
|
2007
|
|||||||||||||
NET
REVENUES (Notes 2 and 17)
|
$ |
136,842
|
$ |
128,189
|
$ |
408,045
|
$ |
340,430
|
||||||||
COST
OF REVENUES (Notes 14, 17 and 19)
|
81,110
|
77,889
|
248,700
|
230,336
|
||||||||||||
GROSS
PROFIT
|
55,732
|
50,300
|
159,345
|
110,094
|
||||||||||||
OPERATING
EXPENSES (Notes 14, 17 and 19)
|
||||||||||||||||
Selling
(Note 2)
|
2,144
|
1,613
|
6,206
|
4,474
|
||||||||||||
General
and administrative
|
8,900
|
9,521
|
25,364
|
33,891
|
||||||||||||
Research
and development (Note 2)
|
5,039
|
4,733
|
15,430
|
14,146
|
||||||||||||
Total
operating expenses
|
16,083
|
15,867
|
47,000
|
52,511
|
||||||||||||
INCOME
FROM OPERATIONS
|
39,649
|
34,433
|
112,345
|
57,583
|
||||||||||||
NON-OPERATING
INCOME (EXPENSES)
|
||||||||||||||||
Interest
income (Note 16)
|
948
|
987
|
2,400
|
2,542
|
||||||||||||
Interest
expense (Notes 2, 10 and 16)
|
(3,632 | ) | (1,398 | ) | (10,536 | ) | (4,455 | ) | ||||||||
Equity
in earnings of equity method investees (Notes 2 and 9)
|
5,604
|
4,320
|
13,318
|
11,704
|
||||||||||||
Dividend
income
|
-
|
8,111
|
-
|
8,111
|
||||||||||||
Gain
on insurance settlement and impairment recovery (Note 20)
|
-
|
-
|
32,145
|
-
|
||||||||||||
Gain
(loss) on valuation of financial assets, net (Notes 2, 3, 5 and
16)
|
(496 | ) |
420
|
(769 | ) |
1,051
|
||||||||||
Loss
on valuation of financial liabilities, net (Notes 2, 3, 5 and
16)
|
(314 | ) | (615 | ) | (486 | ) | (2,059 | ) | ||||||||
Foreign
exchange gain (loss), net (Notes 2, 3 and 16)
|
559
|
(236 | ) |
615
|
615
|
|||||||||||
Other,
net
|
(310 | ) |
776
|
(12,494 | ) |
3,148
|
||||||||||
Net
non-operating income
|
2,359
|
12,365
|
24,193
|
20,657
|
||||||||||||
INCOME
BEFORE INCOME TAX
|
42,008
|
46,798
|
136,538
|
78,240
|
||||||||||||
INCOME
TAX EXPENSE (Notes 2 and 15)
|
4,582
|
8,741
|
18,970
|
24,809
|
||||||||||||
NET
INCOME
|
$ |
37,426
|
$ |
38,057
|
$ |
117,568
|
$ |
53,431
|
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2006
|
2007
|
2006
|
2007
|
|||||||||||||
EARNINGS
PER SHARE
|
||||||||||||||||
Basic
|
$ |
0.37
|
$ |
0.38
|
$ |
1.17
|
$ |
0.53
|
||||||||
Diluted
|
$ |
0.37
|
$ |
0.37
|
$ |
1.17
|
$ |
0.52
|
||||||||
WEIGHTED-AVERAGE
COMMON SHARES OUTSTANDING
|
||||||||||||||||
Basic
|
100,089,093
|
100,919,507
|
100,073,675
|
100,481,805
|
||||||||||||
Diluted
|
100,238,585
|
103,351,032
|
100,235,151
|
102,626,001
|
For
the nine months
ended
September 30,
|
||||||||
2006
|
2007
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Consolidated
net income
|
$ |
117,568
|
$ |
53,431
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
90,310
|
87,661
|
||||||
Gain
on insurance settlement and impairment recovery
|
(32,145 | ) |
-
|
|||||
Provision
(reversal) for doubtful accounts and sales allowances
|
336
|
(1,128 | ) | |||||
Allowance
for inventory obsolescence
|
4,830
|
1,740
|
||||||
Equity
in earnings of equity method investees
|
(13,318 | ) | (11,704 | ) | ||||
Gain
on disposal of assets
|
(835 | ) | (1,479 | ) | ||||
Deferred
income taxes
|
11,292
|
19,310
|
||||||
Other
|
7,542
|
1,524
|
||||||
Changes
in operating assets and liabilities
|
||||||||
Financial
instruments at fair value through profit or loss
|
480
|
(828 | ) | |||||
Hedging
derivative financial assets
|
-
|
(531 | ) | |||||
Notes
and accounts receivable
|
7,696
|
(17,864 | ) | |||||
Receivable
from related parties
|
(3,481 | ) | (1,870 | ) | ||||
Inventories
|
2,201
|
3,351
|
||||||
Prepayments
and other
|
5,842
|
(8,324 | ) | |||||
Notes
and accounts payable
|
(785 | ) |
3,291
|
|||||
Payable
to related parties
|
(5,600 | ) | (842 | ) | ||||
Income
tax payable
|
7,192
|
(5,205 | ) | |||||
Accrued
expenses and other
|
(4,909 | ) |
10,804
|
|||||
Net
cash provided by operating activities
|
194,216
|
131,337
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Acquisition
of available-for-sale financial assets – current
|
(120,828 | ) | (65,613 | ) | ||||
Proceeds
from sales of available-for-sale financial assets –
current
|
23,405
|
30,164
|
||||||
Acquisition
of property, plant and equipment
|
(63,886 | ) | (49,327 | ) | ||||
Proceeds
from sales of property, plant and equipment
|
16,265
|
4,776
|
||||||
Proceeds
from insurance claims
|
26,407
|
-
|
||||||
Decrease
(increase) in pledged time deposits
|
(126 | ) |
548
|
|||||
Decrease
(increase) in guarantee deposit
|
(769 | ) |
2,472
|
|||||
Increase
in other assets
|
(6,788 | ) | (931 | ) | ||||
Net
cash used in investing activities
|
(126,320 | ) | (77,911 | ) |
For
the nine months
ended
September 30,
|
||||||||
2006
|
2007
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds
from issuance of shares
|
$ |
252
|
$ |
9,050
|
||||
Increase
in short-term borrowings
|
2,900
|
-
|
||||||
Repayments
of long-term debts
|
(84,002 | ) | (34,192 | ) | ||||
Increase
(decrease) in collection of sold accounts receivable
|
285
|
(3,545 | ) | |||||
Increase
(decrease) in other liabilities
|
2,497
|
(2,500 | ) | |||||
Net
cash used in financing activities
|
(78,068 | ) | (31,187 | ) | ||||
EFFECT
OF EXCHANGE RATE CHANGES ON CASH
|
2,984
|
1,233
|
||||||
NET
INCREASE (DECREASE) IN CASH
|
(7,188 | ) |
23,472
|
|||||
CASH,
BEGINNING OF PERIOD
|
138,211
|
89,715
|
||||||
CASH,
END OF PERIOD
|
$ |
131,023
|
$ |
113,187
|
||||
SUPPLEMENTAL
INFORMATION
|
||||||||
Interest
paid (excluding capitalized interest)
|
$ |
7,829
|
$ |
3,177
|
||||
Income
tax paid
|
$ |
1,332
|
$ |
8,845
|
||||
Cash
paid for acquisition of property, plant and equipment
|
||||||||
Acquisition
of property, plant and equipment
|
$ |
71,965
|
$ |
57,290
|
||||
Increase
in payable
|
(1,424 | ) | (7,792 | ) | ||||
Increase
in capital lease obligation
|
(6,655 | ) | (171 | ) | ||||
$ |
63,886
|
$ |
49,327
|
|||||
Cash
received from sales of property, plant and equipment
|
||||||||
Sales
price
|
$ |
19,059
|
$ |
5,635
|
||||
Increase
in receivable
|
(2,794 | ) | (859 | ) | ||||
$ |
16,265
|
$ |
4,776
|
|||||
Cash
received from issuance of shares
|
||||||||
Issuance
of shares, net of issuance cost
|
$ |
252
|
$ |
9,245
|
||||
Decrease
in receivable for issuance of shares
|
-
|
(195 | ) | |||||
$ |
252
|
$ |
9,050
|
1.
|
ORGANIZATION
AND OPERATION
|
|
Overview
|
|
ASE
Test Limited (“ASE Test” or the “Company”) is a Singapore holding company
which, through an exchange of its shares with its parent
company, Advanced
Semiconductor Engineering, Inc. (“ASE Inc.”), and other individuals,
acquired substantially all of the shares of ASE Test, Inc.
in May
1996. The exchange was accounted for as a reorganization of
companies under common control. Since June 1996, the Company’s
shares have been traded on the NASDAQ National Market
(
“NASDAQ”
)
in
the United States under the symbol
“ASTSF”.
|
|
J
&
R
Holding Limited, a
shareholder of the Company,
offered
6,000,000 and 5,000,000 shares
of
the
Company
’
s
common stock
in December
1997 and February 1999,
respectively, in the form of Taiwan Depositary Receipts (
“
TDR
s
”
). The
TDRs
are
traded
on
the Taiwan Stock
Exchange
under
the
s
ymbol
“
9101”
and each TDR represents 0.0125
share of the Company
’
s
stock.
|
|
Set
forth is a brief
overview
of the
Company
’
s
organization
s
tructure.
|
|
The
Company has four direct
subsidiaries:
|
a.
|
ASE
Test, Inc. (incorporated in the Republic of China (“ROC”) in December
1987), which is engaged in the testing of
semiconductors;
|
b.
|
ASE
Holdings (Singapore) Pte Ltd. (incorporated in Singapore
in December
1994), which holds shares in ASE Test group
companies;
|
c.
|
ASE
Test Holdings, Limited (“ASE Test Holdings”) (incorporated in Cayman
Islands in April 1999), which holds shares in ASE Test group
companies;
and
|
d.
|
ASE
Test Finance Limited (“ASE Test Finance”) (incorporated in Mauritius in
June 1999), which is engaged in financing
activities.
|
|
ASE
Holdings (Singapore) Pte Ltd
.
has a wholly-owned subsidiary,
ASE Electronics (M) Sdn. Bhd. (“
ASE
Test Malaysi
a”
)
(incorporated in Malaysia in
February 1991), which is engaged in the packaging and testing
of
semiconductors
.
|
|
ASE
Test Holdings has a wholly-owned subsidiary, ISE Labs, Inc.
(“
ISE
Labs”
) (incorporated
in
California
,
U.S.A.
in November 1983)
.
ISE
Lab
s and
its wholly-owned
subsidiaries, ASE Singapore Pte Ltd
.
,
ISE Technology, Inc. and Digital
Testing Services Inc., are engaged in the front-end engineering
testing
and final testing of
semiconductors.
|
|
As
of September 30, 2006, December 31, 2006 and September 30,
2007, the
Company and its subsidiaries had approximately 5,400, 5,300
and 5,300
employees, respectively.
|
2.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
|
The
accompanying interim consolidated financial statements have
been prepared
in conformity with Business Accounting Law, Guidelines Governing
Business
Accounting, and accounting principles generally accepted
in the Republic
of China (“ROC GAAP”). Under these law, guidelines and
principles, the Company should reasonably estimate the amounts
of
allowances for doubtful accounts, allowance for sales discounts,
inventory
valuations, depreciation of property, plant, and equipment,
loss on
impairment of assets, pension expenses, gain (loss) on valuation
of
financial instrument and allowance of deferred income tax
assets. Actual results may differ from these
estimates. Significant accounting policies are summarized as
follows:
|
|
Basis
of Presentation
|
|
The
Company prepares its interim consolidated financial statements
using the
aforementioned law, guidelines and principles with a reconciliation
to
accounting principles generally accepted in the United States
of America
(“U.S. GAAP”) (see Note 22) to be consistent with the basis of
presentation of the interim consolidated financial statements
of ASE
Inc. The accompanying consolidated balance sheets are presented
as of September 30, 2006, December 31, 2006 and September
30, 2007 and the
accompanying consolidated statements of income and cash flows
are
presented for the three months and nine months ended September
30, 2006
and 2007.
|
|
The
interim financial data is unaudited. However, in the opinion of
management, the unaudited interim data includes all adjustments,
consisting of only normal recurring adjustments, necessary
for a fair
statement of the results of the interim periods. The results of
operations for the interim periods are not necessarily indicative
of the
results of operations to be expected for a full year or any
period.
|
|
Basis
of Consolidation
|
|
The
interim consolidated financial statements include the accounts
of the
Company and all of the aforementioned
subsidiaries.
|
|
All
significant intercompany accounts and transactions have been
eliminated.
|
|
Current
and Noncurrent Assets and
Liabilities
|
|
Current
assets include cash, financial assets held primarily for
trading purposes
and assets expected to be converted to cash, sold or consumed
within one
year from the balance sheet date. Current liabilities are
obligations incurred for trading purposes and obligations
expected to be
settled within one year from the balance sheet date. Assets and
liabilities that are not classified as current are noncurrent
assets and
liabilities, respectively.
|
|
Financial
Assets and Liabilities at Fair Value through Profit or
Loss
|
|
Financial
instruments classified as financial assets or financial liabilities
at
fair value through profit or loss consist of financial assets
or financial
liabilities held for trading. These financial instruments are
initially recognized at fair value, with associated transaction
costs
expensed as incurred. The financial instruments are
subsequently remeasured at fair value, and changes in fair
value are
recognized in current income (loss). A regular way purchase or
sale of financial assets is recognized and derecognized using
settlement
date accounting.
|
|
Derivatives
which are not qualified for hedge accounting are recorded
as financial
assets or liabilities at fair value through profit or
loss. Fair value of derivatives with no active market fair
value is estimated using valuation
techniques.
|
|
Available-for-Sale
Financial Assets
|
|
Available-for-sale
financial assets are initially recognized at fair value plus
transaction
costs that are directly attributable to the acquisition. At
each balance sheet date subsequent to initial recognition,
available-for-sale financial assets are remeasured at fair
value. Changes in fair value of financial assets are reported
in a separate component of shareholders’ equity. The
corresponding accumulated gains or losses are recognized
in earnings when
the financial asset is derecognized from the balance sheet. A
regular way purchase or sale of financial assets is accounted
for using
settlement date accounting.
|
|
Cash
dividends are recognized on the ex-dividend date, except
for dividends
distributed from the pre-acquisition profit which are treated
as a
reduction of investment cost. Stock dividends are not
recognized as investment income but are recorded as an increase
in the
number of shares. The total number of shares subsequent to the
increase is used for recalculation of cost per
share.
|
|
Fair
value for beneficiary certificates of open-ended mutual funds
and publicly
traded stocks are
determined
using the
net asset value and closing-price at the balance sheet
date
,
respectively.
|
|
If
certain objective evidence indicates that such available-for-sale
financial asset is impaired, a loss should be recognized
currently. If, in a subsequent period, the amount of the
impairment loss decreases, for equity securities, the previously
recognized impairment loss is reversed to the extent of the
decrease and
recorded as an adjustment to shareholders’
equity.
|
|
Revenue
Recognition, Accounts Receivable and Allowance for Doubtful
Accounts
|
|
Revenues
from semiconductor packaging services are recognized upon
shipment. Revenues from semiconductor testing services are
recognized upon completion of the services or shipment. The
Company does not take ownership of: (i) bare semiconductor
wafers received from customers that the Company packages
into finished
semiconductors, and (ii) packaged semiconductors received
from customers
that the Company tests as to whether they meet certain performance
specifications. The title and risk of loss remain with the
customer for those bare semiconductors and/or packaged
semiconductors. Accordingly, costs of customer-supplied
semiconductors materials are not included in the accompanying
interim
consolidated financial statements. Other criteria the Company
uses to determine when to recognize revenue are: (i) existence
of persuasive evidence of an arrangement, (ii) the selling
price is fixed
or determinable and (iii) collectibility is reasonably
assured.
|
|
Revenues
are determined using the fair value taking into account related
sales
discounts agreed to by the Company and customers. Since the
receivables from sales are collectible within one year and
such
transactions are frequent, the fair value of receivables
is equivalent to
the nominal amount of cash
received.
|
|
Allowance
for doubtful accounts is provided based on an evaluation
of the
collectibility of receivables. The Company determines the
amount of allowance for doubtful receivables by examining
the aging
analysis of the outstanding accounts receivable and current
trends in the
credit quality of its customers. An appropriate sales
allowance, based on historical experience, is recognized
in the same
period the sale is recognized.
|
|
Accounts
Receivable Securitization
|
|
Accounts
receivable securitization is the transfer of a designated
pool of accounts
receivable to a bank, which in turn issues beneficial securities
or
asset-backed securities based on the accounts receivable. Under
ROC Statement of Financial Accounting Standards (ROC SFAS)
No. 33 “
Accounting
for Transfers of
Financial Assets and Extinguishments of Liabilities”
, such transfer
of financial assets in which the transferor surrenders control
over those
assets is accounted for as a sale to the extent that consideration
other
than beneficial interests in the transferred assets is received
in
exchange. The difference between the book value of accounts
receivable and total proceeds received is recorded as a gain
or loss on
disposal of financial assets.
|
|
Inventories
|
|
Inventories
including raw materials (materials received from customers
for processing,
mainly semiconductor wafers are excluded from inventories
as title and
risk of loss remain with the customers), supplies and spare
parts,
finished goods and work in process are stated at the lower
of cost or
market value. Market value represents net realizable value for
finished goods and work in process, and replacement costs
for raw
materials, supplies and spare
parts.
|
|
Raw
materials, supplies and spare parts are recorded at moving
average cost or
weighted average cost; others are recorded at standard cost
and adjusted
to the approximate weighted average cost at the balance sheet
date. Estimated losses on scrap and slow-moving items are
recognized and included in the allowance for
losses.
|
|
Equity
Method Investments
|
|
Investments
in companies of which the Company owns at least 20% of the
outstanding
voting shares or where the Company exercises significant
influence over
the investee company’s operating and financial policy decisions are
accounted for using the equity method. Prior to January 1,
2006, the difference, if any, between the cost of investment
and the
Company’s proportionate equity in the fair value of the net assets
of the
investees at the time of investments or at the time the equity
method of
accounting is first applied to a particular investment, is
amortized on
the straight-line method over 10 years. Effective January 1,
2006, pursuant to the revised ROC SFAS No. 5, “Long-term Investments under
Equity Method” ( ROC SFAS No. 5), the cost of an investment shall be
analyzed and the difference between the cost of investment
and the fair
value of identifiable net assets acquired, representing goodwill,
shall
not be amortized and instead shall be tested for impairment
annually. The accounting treatment for the investment premiums
acquired before January 1, 2006 is the same as that for goodwill
which is
no longer being amortized. When an indication of impairment is
identified, the carrying amount of the investment is reduced,
with the
related impairment loss recognized in
earnings.
|
|
Financial
Assets Carried at Cost
|
|
Investments
that do not have a quoted market price in an active market
and whose fair
value cannot be reliably measured are carried at their original
cost, such
as non-publicly traded stocks. The costs of financial assets
sold are determined using the weighted-average method. If there
is objective evidence which indicates that a financial asset
is impaired,
a loss is recognized. A subsequent reversal of such impairment
loss is not allowed.
|
|
Property,
Plant and Equipment
|
|
Property,
plant and equipment, except for machinery and equipment under
operating
lease, are stated at cost less accumulated depreciation and
accumulated
impairment. Machinery and equipment held under capital leases
are recorded as an asset and an obligation at an amount equal
to the lower
of: (i) the present value at the beginning of the lease term
of
the minimum lease payments during the lease term (including
the payment
called for under any bargain purchase option); or (ii) fair
value of the
leased machinery and equipment at the inception of the
lease. Machinery in transit, construction in progress and
prepayments under construction are stated at cost. These
include the cost of machinery, construction, down payments
and other
direct costs plus interest charges attributable to the borrowings
used to
finance the acquisitions of these assets. Major overhauls and
improvements are capitalized, while maintenance and repairs
are expensed
as incurred.
|
|
Depreciation
is computed using the straight-line method over estimated
service lives,
which range as follows: buildings and improvements, 3 to 40
years; machinery and equipment, 2 to 6 years; furniture and
fixtures, 1 to
8 years and leased assets, 1 to 7 years. Leasehold improvements
and improvements on building and business flats are amortized
on a
straight-line basis over the shorter of the useful life of
the
improvements or the lease term of the building. In the event
that an asset depreciated to its residual value is still
in service, its
residual value is depreciated over its re-estimated service
life.
|
|
When
plant and equipment are retired or disposed of, their costs
and
accumulated depreciation are removed from the accounts and
any gain or
loss is credited or charged to
income.
|
|
Asset
I
mpairment
|
|
The
Company evaluates whether or not there are indications that
assets
(primarily property, plant and equipment, deferred charge
and goodwill)
may be impaired on the balance sheet date. If there are
indications, the Company should estimate the recoverable
amount for the
asset. If an asset’s recoverable amount is lower than its
carrying amount, the carrying amount of the asset should
be reduced to its
recoverable amount by recording a charge to the accumulated
impairment
account of the asset and such reduction should be recognized
as impairment
loss in current period income. When the recoverable amount
subsequently increases, then the impairment loss previously
recognized
would be reversed and recorded as a gain. However, the carrying
amount of an asset (other than goodwill) after the reversal
of impairment
loss should not exceed the carrying amount of the asset that
would have
been determined net of depreciation as if no impairment loss
had been
recognized.
|
|
Deferred
Charges
|
|
Deferred
charges consist of certain intangibles and other assets,
including tools,
utility, telecommunications and computer network systems. The
amounts are amortized as follows: tools, 2 years; utility,
telecommunications and computer network systems, 2 - 5 years;
and others,
2 - 5 years.
|
|
Goodwill
|
|
Goodwill
represents the excess of the consideration paid for an acquisition
over
the fair value of identifiable net assets acquired. Prior to
January 1, 2006, goodwill was amortized using the straight-line
method
over the estimated life of 10 years. Effective January 1, 2006,
pursuant to the newly revised ROC SFAS No. 25, “Business Combinations -
Accounting Treatment under Purchase Method” (ROC SFAS No. 25), goodwill is
no longer amortized and instead is tested for impairment
annually.
|
|
Employee
Stock Options
|
|
All
stock-based compensation for awards granted or modified after
January 1,
2004 is accounted for by the related Interpretations of Accounting
Research and Development Foundation (“ARDF”) in ROC. The
compensation cost is measured based on the intrinsic value
method, for
which the compensation cost for stock options is measured
as the excess,
if any, of the quoted market price of the Company’s stock at the date of
the grant over the amount an employee must pay to acquire
the
stock. Total compensation cost is recognized as expense over
the requisite service or vesting
period.
|
|
Pension
Cost
|
|
For
employees under defined benefit pension plan, pension costs
are recorded
based on actuarial calculations. Pension costs include service
costs, interest, amortization of unrecognized net obligation and expected
return on pension assets.
|
|
For
employees under defined contribution pension plan, pension
costs are
recorded based on the actual contribution made to employee’s personal
pension accounts.
|
|
Research
and Development Costs
|
|
Research
and development costs are charged to expense as
incurred.
|
|
Income
Taxes
|
|
The
Company uses an inter-period tax allocation method for income
tax. T
ax effects
of deductible temporary differences, unused tax credits and
opera
ting
loss
carryforward
are
recognized as deferred income
tax assets,
while
taxable
temporary
differences
are
recognized
as
deferred
income tax
liabilities
. A v
aluation
allowance is
provided
to
the
extent
that it is more
likely
than not that
deferred
incom
e tax
assets
will
not be realized
.
|
|
Tax
credits of ASE Test, Inc. from investments in machinery and
equipment,
research and development and employees’ training costs are recognized in
the year acquired and expensed. Capital allowances of ASE Test
Malaysia from investment in industrial buildings, machinery
and equipment
are recognized in the year in which they are
acquired.
|
|
Adjustments
of prior years’ income taxes are added to or deducted from the current
year’s tax provision.
|
|
Income
taxes on undistributed earnings (10%) of ASE Test, Inc.,
the Company’s
Taiwan based subsidiary, are recorded as an expense in the
year of
shareholders’ approval.
|
|
Foreign
Currency Transactions and Translation of Foreign-currency
Financial
Statements
|
|
The
functional and reporting currency of ASE Test is U.S. dollar,
while the
functional currencies of its major subsidiaries, ASE Test,
Inc., ASE Test
Malaysia and ISE Labs, Inc. are their local currencies, namely,
New Taiwan
dollar, Malaysia Ringgit and U.S. dollar, respectively. Foreign
currency transactions, except for derivative transactions,
are recorded in
the local currencies at the rates of exchange in effect when
the
transactions occur. Gains or losses resulting from the
application of different foreign exchange rates when foreign-currency
assets and liabilities denominated in foreign-currencies
are settled are
credited or charged to income in the period of settlement. At
the balance sheet date, monetary assets and liabilities denominated
in
foreign-currencies are revalued at the prevailing exchange
rates and the
resulting gains or losses are recognized in current period
income.
|
|
The
financial statements of the Company’s subsidiaries are translated into
U.S. dollars at the end of period using the following
rates: Assets and liabilities, current rate at the balance
sheet date; shareholders’ equity, historical rates; dividend, current rate
at the dividend declaration date; and income and expenses,
average rate
during the period. The net resulting translation adjustment is
reported as a separate component of shareholders’
equity.
|
|
Hedging
Derivative Financial
Instruments
|
|
Derivatives
that qualify as effective hedging instruments are measured
at fair value,
with subsequent changes in fair value recognized either in
profit or loss,
or in shareholders’ equity, depending on the nature of the hedging
relationship.
|
|
Hedge
Accounting
|
|
Hedge
accounting recognizes the offsetting effects on profit or
loss of changes
in the fair values of the hedging instrument and the hedged
item as
follows:
|
a.
|
Fair
value hedge
|
|
The
gain or loss from remeasuring the hedging instrument at fair
value and the
gain or loss on the hedged item attributable to the hedged
risk are
recognized in profit or loss.
|
b.
|
Cash
flow hedge
|
|
The
portion of the gain or loss on the hedging instrument that
is determined
to be an effective hedge is recognized in shareholders’
equity. The amount recognized in shareholders’ equity is
recognized in profit or loss in the same period or periods
during which
the hedged forecast transaction or an asset or liability
arising from the
hedged forecast transaction affects profit or loss. However, if
all or a portion of a loss recognized in shareholders’ equity is not
expected to be recovered in the future, the amount that is
not expected to
be recovered is reclassified into profit or
loss.
|
3.
|
EFFECTS
OF CHANGES IN ACCOUNTING
PRINCIPLES
|
|
Adoption
of New and Revised
Standards
|
|
On
January 1, 2007, the Company adopted the newly released ROC
SFAS No. 37,
“Intangible Assets” and ROC SFAS No. 38 “Non-current Assets Held for Sale
and Discontinued Operations”. The Company believes that there
is no impact on the results of operations and financial position
of the
Company after adopting ROC SFAS No. 37 and ROC SFAS No.
38.
|
|
On
January 1, 2006, the Company adopted the newly released ROC
SFAS No. 34,
“Financial Instruments: Recognition and Measurement” (ROC SFAS No. 34) and
No. 36, “Financial Instruments: Disclosure and Presentation” (ROC SFAS No.
36) and other revisions of previously released
SFASs.
|
|
Upon
adoption of ROC SFAS No. 34 and No. 36 in January, 2006,
carrying amounts
of the available-for-sale financial assets were adjusted
to fair value,
and the Company recognized $83,751 thousand of unrealized
gain as a
separate component of shareholders’ equity as at January 1,
2006. Besides, there was no effect on net income for the nine
months ended September 30, 2006.
|
|
Effective
January 1, 2006, the Company adopted the newly revised ROC
SFAS No. 5 and
No. 25, which prescribe that investment premiums, representing
goodwill,
be assessed for impairment at least on an annual basis instead
of being
amortized. Such a change in accounting principle resulted in an
increase in net income of $3,725 thousand and basic earnings
per share
(after income tax) of $0.04 for the nine months ended September
30,
2006.
|
|
Recent
Accounting Pronouncements
|
|
In
March 2007, ARDF issued an interpretation that requires ROC
companies to
recognize compensation expenses for bonuses paid to employees,
directors
and supervisors beginning January 1, 2008. Such bonuses are
currently recorded as appropriation of earnings under ROC
GAAP.
|
4.
|
CASH
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
||||||||||
Cash
on hand
|
$ |
20
|
$ |
21
|
$ |
26
|
||||||
Checking
and saving
accounts
|
61,946
|
62,162
|
39,872
|
|||||||||
Time
deposits
|
69,057
|
27,532
|
73,289
|
|||||||||
$ |
131,023
|
$ |
89,715
|
$ |
113,187
|
5.
|
FINANCIAL
INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR
LOSS
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
||||||||||
Financial
assets held for trading
|
||||||||||||
Forward
exchange contracts
|
$ |
-
|
$ |
-
|
$ |
566
|
||||||
Financial
liabilities incurred for trading
|
||||||||||||
Forward
exchange contracts
|
$ |
480
|
$ |
262
|
$ |
-
|
|
The
Company entered into derivative contracts during the nine
months ended
September 30, 2006, twelve months ended December 31, 2006
and nine months
ended September 30, 2007 to manage exposures to foreign exchange
rate
risk. The derivative contracts entered into by the Company did
not qualify for hedge accounting prescribed by ROC SFAS No.
34 and
therefore were classified as financial instruments at fair
value through
profit or loss.
|
|
Outstanding
forward exchange contracts as of September 30, 2006, December
31, 2006 and
September 30, 2007 were as follows:
|
Contract
|
|||
Amount
|
|||
Currency
|
Maturity
Date
|
(in
Thousands)
|
|
September
30, 2006
|
|||
Sell
|
USD/NTD
|
2006/10/11-2006/11/29
|
USD
37,000/NTD 1,210,258
|
Sell
|
USD/MYR
|
2006/10/30-2006/12/29
|
USD
8,000/MYR 29,161
|
December
31, 2006
|
|||
Sell
|
USD/NTD
|
2007/01/22-2007/03/01
|
USD
42,000/NTD 1,352,500
|
September
30, 2007
|
|||
Sell
|
USD/NTD
|
2007/10/4-2007/12/19
|
USD
39,000/NTD 1,282,933
|
Sell
|
USD/MYR
|
2007/10/4-2007/10/26
|
USD
6,000/MYR 20,815
|
6.
|
AVAILABLE-FOR-SALE
FINANCIAL ASSETS
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
||||||||||
Publicly-traded
stocks
|
$ |
167,597
|
$ |
204,851
|
$ |
229,459
|
||||||
Open-end
mutual funds
|
95,768
|
89,341
|
120,561
|
|||||||||
Government
bonds & corporate bonds
|
-
|
-
|
4,485
|
|||||||||
Commercial
paper
|
-
|
-
|
987
|
|||||||||
263,365
|
294,192
|
355,492
|
||||||||||
Less: Current
portion
|
(95,768 | ) | (89,341 | ) | (126,033 | ) | ||||||
$ |
167,597
|
$ |
204,851
|
$ |
229,459
|
|
As
of September 30, 2006, December 31, 2006 and September 30,
2007, the
Company held 180,132,187 shares, 180,132,187 shares and 206,779,543
shares
of common stock of ASE Inc. which were classified as available-for-sale
financial assets-noncurrent in the balance sheet. With respect
to the trust arrangement, in order to comply with applicable
Singapore
laws, which provide that the Company may not acquire, directly
or
indirectly, shares in its parent company, ASE Inc., a trust
was
established jointly by ASE Inc. and the Company to hold and
dispose of the
ASE Inc. shares acquired by the Company. Pursuant to the trust
agreement, the Company’s rights with respect to the ASE Inc. shares held
in trust are limited to the right to receive the proceeds from the sale of
the shares and any cash dividends declared while the shares
remain in
trust. The trustee is authorized to sell the shares, subject to
market conditions, when such shares become available for
resale under ROC
law and in accordance with volume limitations under ROC law,
at its sole
discretion; provided such shares are sold (i) in compliance
with ROC laws
and regulations, (ii) in an orderly manner in order to minimize
the impact
on the trading price of the shares, and (iii) in a manner
consistent with
its fiduciary duties owed to the
Company.
|
7.
|
NOTES
AND ACCOUNTS RECEIVABLE,
NET
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
||||||||||
Notes
receivable
|
$ |
72
|
$ |
180
|
$ |
6
|
||||||
Accounts
receivable
|
73,651
|
60,017
|
77,840
|
|||||||||
Less: Allowance
for doubtful accounts (Note 2)
|
(4,205 | ) | (2,175 | ) | (721 | ) | ||||||
Allowance for sales allowances (Note 2)
|
(216 | ) | (147 | ) | (258 | ) | ||||||
$ |
69,302
|
$ |
57,875
|
$ |
76,867
|
|
Movements
of allowances for doubtful accounts were as
follows:
|
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2006
|
2007
|
|||||||
Balance,
beginning of period
|
$ |
5,023
|
$ |
2,175
|
||||
Additions
|
101
|
98
|
||||||
Reversal
|
-
|
(1,404 | ) | |||||
Write-offs
|
(919 | ) | (148 | ) | ||||
Balance,
end of period
|
$ |
4,205
|
$ |
721
|
|
Movements
of allowances for sales allowances were as
follows:
|
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2006
|
2007
|
|||||||
Balance,
beginning of period
|
$ |
455
|
$ |
147
|
||||
Additions
|
235
|
178
|
||||||
Write-offs
|
(474 | ) | (67 | ) | ||||
Balance,
end of period
|
$ |
216
|
$ |
258
|
|
In
November 2005, ASE Test, Inc. and its parent company, ASE
Inc., entered
into a $100 million, three-year revolving accounts receivable
securitization agreement with a bank and the credit line
was increased to
$200 million in June 2006.
|
|
After
the transfer of the accounts receivable, the Company continues
to service,
administer, and collect these accounts receivable on behalf
of the
bank. The Company collects on the initial receivables and
transfers certain new accounts receivable having similar
value to replace
the collected receivables. Collected receivables not yet
replaced by new accounts receivable due to timing difference
are recorded
as other current liability on the balance sheet, which amounted
to $4,657
thousand, 4,913 thousand and $1,367 thousand as of September
30, 2006,
December 31, 2006 and September 30, 2007. Total accounts
receivable sold was $17,663 thousand, $12,463 thousand and
$2,449 thousand
as of September 30, 2006, December 31, 2006 and September
30, 2007,
respectively.
|
8.
|
INVENTORIES
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
||||||||||
Raw
materials
|
$ |
7,586
|
$ |
10,304
|
$ |
6,563
|
||||||
Work
in process
|
1,931
|
2,333
|
2,210
|
|||||||||
Finished
goods
|
1,393
|
1,831
|
2,324
|
|||||||||
Supplies
and spare parts
|
7,018
|
5,810
|
2,646
|
|||||||||
Supplies
in transit
|
270
|
694
|
185
|
|||||||||
18,198
|
20,972
|
13,928
|
||||||||||
Less: Allowance
for obsolescence
|
(3,990 | ) | (4,037 | ) | (2,084 | ) | ||||||
$ |
14,208
|
$ |
16,935
|
$ |
11,844
|
|
The
changes in allowance for obsolescence were as
follows:
|
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2006
|
2007
|
|||||||
Balance,
beginning of period
|
$ |
1,654
|
$ |
4,037
|
||||
Additions
|
4,830
|
1,740
|
||||||
Write-offs
|
(2,494 | ) | (3,693 | ) | ||||
Balance,
end of period
|
$ |
3,990
|
$ |
2,084
|
9.
|
EQUITY
METHOD INVESTMENTS
|
|
The
investment in ASE Investment (Labuan) Inc. (incorporated
in Malaysia in
June 1999) was made in connection with the acquisition of
the operation of
the Motorola Semiconductor Products Sector Businesses in
Paju,
Korea. As of September 30, 2006, December 31, 2006 and
September 30, 2007, the Company held a 30% ownership interest
in ASE
Investment (Labuan) Inc. at carrying value of $71,291 thousand,
$75,979
thousand and $87,683 thousand,
respectively.
|
|
For
the three months and nine months ended September 30, 2006,
equity in
earnings of $5,604 thousand and $13,318 thousand was recognized,
respectively. For the three months and nine months ended
September 30, 2007, equity in earnings of $4,320 thousand
and $11,704
thousand was recognized, respectively. The carrying amounts of
the investments accounted for using the equity method and
the related
equity in earnings or losses of equity method investees were
determined
based on the reviewed financial statements of the investees
for the same
periods as the Company.
|
10.
|
PROPERTY,
PLANT AND EQUIPMENT, NET
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
||||||||||
Cost
|
||||||||||||
Buildings
and improvements
|
$ |
112,981
|
$ |
114,296
|
$ |
116,191
|
||||||
Machinery
and equipment
|
897,175
|
927,249
|
933,297
|
|||||||||
Furniture
and fixtures
|
18,863
|
18,964
|
19,709
|
|||||||||
Leased
assets - machinery and equipment
|
14,150
|
23,259
|
16,675
|
|||||||||
Machinery
in transit and prepayments
|
14,922
|
8,515
|
25,169
|
|||||||||
Construction
in progress
|
1,256
|
12
|
370
|
|||||||||
1,059,347
|
1,092,295
|
1,111,411
|
||||||||||
Accumulated
depreciation
|
||||||||||||
Buildings
and improvements
|
53,038
|
52,700
|
59,158
|
|||||||||
Machinery
and equipment
|
590,227
|
630,496
|
670,143
|
|||||||||
Furniture
and fixtures
|
14,235
|
14,581
|
16,038
|
|||||||||
Leased
assets - machinery and equipment
|
3,699
|
5,083
|
6,964
|
|||||||||
661,199
|
702,860
|
752,303
|
||||||||||
$ |
398,148
|
$ |
389,435
|
$ |
359,108
|
|
Capitalized
interest consists of the following:
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
2006
|
2007
|
2006
|
2007
|
|||||||||||||
Total
interest expense including capitalization
|
$ |
3,714
|
$ |
1,474
|
$ |
10,853
|
$ |
4,592
|
||||||||
Less: Capitalized
interest
|
(82 | ) | (76 | ) | (317 | ) | (137 | ) | ||||||||
|
||||||||||||||||
Interest
expense
|
$ |
3,632
|
$ |
1,398
|
$ |
10,536
|
$ |
4,455
|
||||||||
|
||||||||||||||||
Capitalization
rate
|
3.11%-5.67 | % | 1.56%-3.96 | % | 1.75%-5.67 | % | 1.56%-6.00 | % |
11.
|
LONG-TERM
DEBTS
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
||||||||||
Bank
loans
|
$ |
208,006
|
$ |
105,039
|
$ |
83,742
|
||||||
Capital
lease obligation (Note 19)
|
10,226
|
15,085
|
2,050
|
|||||||||
218,232
|
120,124
|
85,792
|
||||||||||
Less: Current
portion
|
(76,682 | ) | (34,418 | ) | (20,282 | ) | ||||||
$ |
141,550
|
$ |
85,706
|
$ |
65,510
|
a.
|
Bank
loans
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
||||||||||
ASE
Test, Inc.
|
||||||||||||
Repayable
by December 2009 in quarterly
installments,
interest at 2.63%, 2.69%
and
3.19% as of September 30, 2006,
December
31, 2006 and September
30,
2007, respectively
|
$ |
5,562
|
$ |
5,640
|
$ |
2,251
|
||||||
Repayable
by May 2008 in semi-annual
installments,
interest at 3.10% as of
September
30, 2006, December 31, 2006
and
September 30, 2007, respectively
|
5,446
|
3,682
|
1,837
|
|||||||||
Repayment
at maturity in August 2007,
interest
at 2.19% and 2.25% as of
September
30, 2006 and December 31, 2006, respectively
|
15,128
|
15,339
|
-
|
|||||||||
26,136
|
24,661
|
4,088
|
||||||||||
ISE
Labs
|
||||||||||||
Repayable
by July 2009 in quarterly
installments,
interest at 6.15%, 6.10%
and
6.10% as of September 30, 2006,
December
31, 2006 and September 30,
2007,
respectively
|
1,247
|
1,143
|
831
|
|||||||||
Repayable
by March 2009 in quarterly
installments,
interest at 6.10%, 6.10%
and
5.97% as of September 30, 2006,
December
31, 2006 and September 30,
2007,
respectively
|
1,373
|
1,235
|
823
|
|||||||||
2,620
|
2,378
|
1,654
|
||||||||||
ASE
Test Finance
|
||||||||||||
Repayable
in semi-annual installments
from
August 2008 to August 2010,
interest
at 6.19%, 6.23% and 6.00% as
of
September 30, 2006, December 31,
2006
and September 30, 2007,
respectively
|
78,000
|
78,000
|
78,000
|
|||||||||
Repaid
in December 2006, interest at
6.43%
|
101,250
|
-
|
-
|
|||||||||
179,250
|
78,000
|
78,000
|
||||||||||
$ |
208,006
|
$ |
105,039
|
$ |
83,742
|
|
Bank
loans obtained by ASE Test Finance were restricted for the
use in the
redemption of ASE Test Finance’s and the Company’s loans. The
Company and ASE Inc. provided guarantees for ASE Test Finance’s payment
obligations under the $78,000 thousand loan. Under the
guaranty, the Company is required to maintain certain financial
ratios and
the tangible net worth of the Company shall not be less than
$450 million
at any time.
|
|
The
loan agreements specify the
following
non-financial covenants
:
|
|
Without
the prior written consent
from the maj
ority
of
the banks, the Company should
not:
|
|
a)
|
Pledge
its assets, assume liabilities or dispose of assets in excess
of 20% of
total assets, unless the transaction involves a transfer
of assets between
affiliates. Assets in exchange for other comparable or superior
as to type are excluded from this covenant;
or
|
|
b)
|
Merge
with any other entity or make investments in excess of $100
million or
acquire material assets from another
entity.
|
|
The
abovementioned bank loan contracts have variable interest
rates and are
subject to adjustments by banks or changes in prime rate. In
addition, several of the loan agreements have default provisions,
whereby
a default under one debt agreement may also trigger cross-defaults
under
other debt agreements.
|
|
As
of September 30, 2007, the Company was in compliance with
its financial
and non-financial covenants.
|
|
Long-term
debt by currencies other than U.S. dollars as of September
30, 2006,
December 31, 2006 and September 30, 2007 is as
follows:
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
|
(In
Thousands)
|
(In
Thousands)
|
(In
Thousands)
|
|
New
Taiwan
dollars
|
NT$
863,795
|
NT$
803,845
|
NT$
133,543
|
|
Such
amounts have been translated into U.S. dollars at the spot
rates quoted by
Bank of Taiwan of NT$33.05 to US$1, NT$32.596 to US$1 and
NT$32.667 to
US$1 as of September 30, 2006, December 31, 2006 and September
30, 2007,
respectively.
|
|
As
of September 30, 2007, the maturities of long-term debts
are as
follows:
|
2008
|
$ |
20,282
|
||
2009
|
33,668
|
|||
2010
|
31,790
|
|||
2011
|
52
|
|||
$ |
85,792
|
12.
|
SHAREHOLDERS’
EQUITY
|
|
As
stipulated by the Company Laws of ROC, the Company's subsidiary
in the ROC
is required to make an appropriation for legal capital reserve
at 10% of
net income as determined in accordance with ROC GAAP. Use of
the legal capital reserve is restricted to certain purposes,
including the
offset of a deficit, and when total legal reserve has reached
50% of total
capital stock at par, up to 50% thereof may be transferred
to capital
stock. As of September 30, 2007, total legal capital reserve
approximated US$37,533 thousand and was not available for
distribution.
|
|
Stock
Option Plans
|
|
As
of September 30, 2007, the Company had three stock option
plans, the 1999,
2000 and 2004 Option Plans. Stock options granted under these
plans are exercisable for ordinary shares of the Company
and vest ratably
over a period of three and five years. The options expire five
or ten years from the date of
grant.
|
|
Information
regarding stock options granted or modified after January
1, 2004 is
presented below:
|
|
ASE
Test Limited
|
Nine
Months Ended September 30
|
||||||||||||||||||||||||
2006
|
2007
|
|||||||||||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||||||||||
Average
|
Weighted
|
Average
|
Weighted
|
|||||||||||||||||||||
Exercise
|
Average
|
Exercise
|
Average
|
|||||||||||||||||||||
Number
of
|
Price
|
Grant
Date
|
Number
of
|
Price
|
Grant
Date
|
|||||||||||||||||||
Shares
|
Per
Share
|
Fair
Values
|
Shares
|
Per
Share
|
Fair
Values
|
|||||||||||||||||||
Beginning
outstanding
balance
|
292,500
|
$ |
6.21
|
413,500
|
$ |
7.28
|
||||||||||||||||||
Option
granted
|
130,000
|
9.60
|
$ |
9.60
|
-
|
-
|
$ |
-
|
||||||||||||||||
Option
exercised
|
(9,000 | ) |
6.10
|
(33,750 | ) |
7.38
|
||||||||||||||||||
Option
forfeited
|
-
|
-
|
(12,000 | ) |
6.10
|
|||||||||||||||||||
Option
expired
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
|
||||||||||||||||||||||||
Ending
outstanding
balance
|
413,500
|
7.28
|
367,750
|
7.31
|
|
Options
outstanding on September 30, 2007, the related weighted average
exercise
price and remaining contractual life information are as
follows:
|
Outstanding
Shares
|
Exercisable
Shares
|
Weighted
Average
Remaining
Life
(Years)
|
|||||||||||
Options
with exercise price of:
|
|||||||||||||
$5
.50
|
60,000
|
36,000
|
6.9
|
||||||||||
$6
.10
|
21,000
|
9,000
|
7.1
|
||||||||||
$6
.50
|
172,500
|
111,000
|
6.8
|
||||||||||
$9.79
|
108,000
|
27,500
|
8.5
|
||||||||||
$8
.10
|
6,250
|
1,200
|
8.9
|
||||||||||
367,750
|
184,700
|
|
The
Company has computed, for pro forma disclosure purposes,
the fair value of
options granted using the Black-Scholes option pricing model
with the
following assumptions:
|
Nine
Months Ended
September
30,
|
|||
2006
|
|||
Risk-free
interest rate
|
4.88%
|
||
Expected
life
|
3-5
years
|
||
Expected
volatility
|
59.95%-62.03%
|
||
Expected
dividend
|
0%
|
|
ASE
Inc.
|
|
ASE
Inc., the parent company, has two option plans, which were
adopted in 2002
and 2004. Under the terms of the plans, stock options are
granted to employees including those of the Company. The option
rights expire ten years from the date of grant. On the second
anniversary of the grant date, 40% of the options become
vested and the
remaining options vest ratably over a period of three years
thereafter.
|
|
Information
regarding the ASE Inc.’s stock option plans for the Company and its
subsidiaries is as follows:
|
Nine
Months Ended September 30
|
||||||||||||||||||||||||
2006
|
2007
|
|||||||||||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||||||||||
Average
|
Weighted
|
Average
|
Weighted
|
|||||||||||||||||||||
Exercise
|
Average
|
Exercise
|
Average
|
|||||||||||||||||||||
Number
of
|
Price
|
Grant
Date
|
Number
of
|
Price
|
Grant
Date
|
|||||||||||||||||||
Shares
|
Per
Share
|
Fair
Values
|
Shares
|
Per
Share
|
Fair
Values
|
|||||||||||||||||||
Beginning
outstanding
balance
|
52,926,580
|
$ |
0.60
|
40,528,870
|
$ |
0.61
|
||||||||||||||||||
Options
granted
|
-
|
-
|
$ |
-
|
-
|
-
|
$ |
-
|
||||||||||||||||
Options
forfeited
|
(2,405,300 | ) |
0.61
|
(541,050 | ) |
0.52
|
||||||||||||||||||
Options
expired
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Options
exercised
|
(5,318,440 | ) |
0.56
|
(9,562,080 | ) |
0.45
|
||||||||||||||||||
Ending
outstanding
balance
|
45,202,840
|
0.60
|
30,425,740
|
0.51
|
|
Options
outstanding on September 30, 2007, the related weighted average
exercise
price and remaining contractual life information are as
follows:
|
Outstanding
Shares
|
Exercisable
Shares
|
Weighted
Average
Remaining
Life
(Years)
|
|||||||||||
Options
with exercise price
|
|||||||||||||
$0
.38
|
9,921,400
|
7,436,900
|
5.2
|
||||||||||
$0
.51
|
3,907,240
|
2,910,160
|
5.9
|
||||||||||
$0
.60
|
14,656,100
|
6,093,300
|
6.7
|
||||||||||
$0
.49
|
1,941,000
|
484,000
|
7.6
|
||||||||||
30,425,740
|
16,924,360
|
6.0
|
|
The
fair value of the common stock options issued was determined
using a
Black-Scholes option pricing model with the following
assumptions:
|
Risk-free
interest
rate
|
1.80%-2.50%
|
|
Expected
life
|
5
years
|
|
Expected
volatility
|
47%-59%
|
|
Expected
dividend
|
3.00%
|
|
For
purposes of pro forma disclosure, the estimated fair values
of the options
are amortized to expense ratably over the option vesting
periods. Had the Company recorded compensation costs based on
the estimated grant date fair value, the Company’s net income would have
been reduced to the pro forma amounts below (EPS in U.S.
dollars).
|
Nine
Months Ended
September
30
|
||||||||
2006
|
2007
|
|||||||
Net
income
|
$ |
117,568
|
$ |
53,431
|
||||
Stock-based
compensation expense (net of related tax effect)
|
||||||||
From
the Company
|
(225 | ) | (273 | ) | ||||
From
ASE Inc.
|
(2,495 | ) | (2,053 | ) | ||||
Pro
forma net income
|
$ |
114,848
|
$ |
51,105
|
||||
Basic
EPS: As reported
|
$ |
1.17
|
$ |
0.53
|
||||
Pro
forma
|
$ |
1.15
|
$ |
0.51
|
||||
Diluted
EPS: As reported
|
$ |
1.17
|
$ |
0.52
|
||||
Pro
forma
|
$ |
1.15
|
$ |
0.50
|
|
Unrealized
Gain on Financial
Instruments
|
|
For
the nine months ended September 30, 2006 and 2007, movements
of unrealized
gain on financial instruments were as
follows:
|
Available-for-sale
Financial
Assets
|
Gain
on
Cash
Flow Hedge
|
Total
|
||||||||||
Nine
months ended September 30, 2006
|
||||||||||||
Balance,
beginning of period
|
$ |
-
|
$ |
-
|
$ |
-
|
||||||
Effect
of initial adoption of ROC SFAS No.34
|
83,751
|
-
|
83,751
|
|||||||||
Recognized
in shareholders’ equity
|
2,761
|
-
|
2,761
|
|||||||||
Transferred
to profit
|
143
|
-
|
143
|
|||||||||
Cumulative
translation adjustments
|
7
|
-
|
7
|
|||||||||
Balance,
end of period
|
$ |
86,662
|
$ |
-
|
$ |
86,662
|
||||||
Nine
months ended September 30, 2007
|
||||||||||||
Balance,
beginning of period
|
$ |
123,962
|
$ |
-
|
$ |
123,962
|
||||||
Recognized
in shareholders’ equity
|
25,783
|
105
|
25,888
|
|||||||||
Transferred
to profit
|
(320 | ) |
-
|
(320 | ) | |||||||
Cumulative
translation adjustments
|
(18 | ) |
37
|
19
|
||||||||
Balance,
end of period
|
$ |
149,407
|
$ |
142
|
$ |
149,549
|
13.
|
PENSION
PLAN
|
|
The
Labor Pension Act (the “Act”), which took effect in the ROC on July 1,
2005, provides for a pension mechanism that is deemed a defined
contribution pension plan. The employees who were subject to
the Labor Standards Law of the ROC before the enforcement
of this Act may
choose to be subject to the pension mechanism under this
Act or may
continue to be subject to the pension mechanism under the
Labor Standards
Law. For those employees who were subject to the Labor
Standards Law before July 1, 2005, work for the same company
after July 1,
2005 and choose to be subject to the pension mechanism under
the Act,
their service years as of July 1, 2005 will be retained. Under
the Act, the rate of an employer’s monthly contribution to the employees’
personal pension accounts should not be less than 6% of each
|
|
employee’s
monthly salary or wage. Thus, since July 1, 2005, ASE Test,
Inc. has made monthly contributions based on each employee’s salary or
wage to personal pension accounts, and recognized pension
costs of $1,482
thousand and $1,253 thousand for the nine month periods
ended September
30, 2006 and 2007.
|
|
ASE
Test, Inc. has a defined benefit pension plan for its regular
employees. Retirement benefits are based on the length of
service and average salaries or wages of the last six months
before
retirement. ASE Test, Inc. makes monthly contributions, at 2%
of salaries and wages, to plan assets which are in the name
of, and are
administered by, the employee pension plan committee and
are deposited in
the Central Trust of China (the “CTC”), an ROC government
agency. ASE Test, Inc. also accrued pension cost of executive
managers. Pension cost for executive managers was $50 thousand
and $88 thousand for the nine months ended September 30,
2006 and 2007,
respectively. As of September 30, 2006 and 2007, accrued
pension cost of aforementioned plan was $61 thousand and
$387 thousand,
respectively.
|
|
ISE
Labs, Inc. has a defined contribution plan (“401k plan”) for eligible
employees. This plan permits employees to make contributions up
to the maximum limits allowable under the U.S. Internal Revenue
Code
Section 401k. ASE Test Malaysia and ASE Singapore Pte Ltd. also
have a defined contribution plan. The Company has no other
post-retirement or post-employment benefit
plans.
|
14.
|
EMPLOYEES
BENEFITS, DEPRECIATION AND
AMORTIZATION
|
Nine
Months ended September 30
|
||||||||||||||||||||||||
2006
|
2007
|
|||||||||||||||||||||||
Cost
of
|
Operating
|
Cost
of
|
Operating
|
|||||||||||||||||||||
Revenues
|
Expenses
|
Total
|
Revenues
|
Expenses
|
Total
|
|||||||||||||||||||
Employees
benefits
|
||||||||||||||||||||||||
Salary
|
$ |
44,830
|
$ |
16,550
|
$ |
61,380
|
$ |
43,104
|
$ |
16,713
|
$ |
59,817
|
||||||||||||
Pension
|
2,557
|
913
|
3,470
|
2,345
|
917
|
3,262
|
||||||||||||||||||
Insurance
|
3,235
|
1,346
|
4,581
|
3,138
|
1,021
|
4,159
|
||||||||||||||||||
Others
|
4,764
|
970
|
5,734
|
3,445
|
1,339
|
4,784
|
||||||||||||||||||
$ |
55,386
|
$ |
19,779
|
$ |
75,165
|
$ |
52,032
|
$ |
19,990
|
$ |
72,022
|
|||||||||||||
Depreciation
|
$ |
83,029
|
$ |
1,830
|
$ |
84,859
|
$ |
81,863
|
$ |
1,732
|
$ |
83,595
|
||||||||||||
Amortization
|
$ |
4,101
|
$ |
1,350
|
$ |
5,451
|
$ |
3,117
|
$ |
949
|
$ |
4,066
|
15.
|
INCOME
TAX
|
a.
|
Income
tax expense attributable to continuing operations is summarized
as
follows:
|
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2006
|
2007
|
|||||||
Tax
expense based on pre-tax accounting income from
continuing
operations at statutory rate
|
$ |
32,531
|
$ |
22,066
|
||||
Add
(deduct) tax effects of:
|
||||||||
Permanent
differences
|
||||||||
Tax-exempt
income - tax holiday
|
(8,305 | ) | (3,607 | ) | ||||
Other
|
(30 | ) |
140
|
|||||
Temporary
differences
|
||||||||
Depreciation
and capital allowance
|
(8,461 | ) | (8,000 | ) | ||||
Depreciation
|
4,331
|
1,789
|
||||||
Other
|
1,776
|
(1,545 | ) | |||||
21,842
|
10,843
|
|||||||
Loss
carryforward
|
(4,941 | ) |
-
|
|||||
Income
taxes on undistributed earnings
|
-
|
8,780
|
||||||
Credits
for investments, investment in machinery and equipment, and
research
and development
|
(10,410 | ) | (13,427 | ) | ||||
Net
change in deferred income tax for the period
|
12,607
|
19,310
|
||||||
Adjustment
of prior years’ income tax
|
(128 | ) | (697 | ) | ||||
Income
tax expense
|
$ |
18,970
|
$ |
24,809
|
|
The
above-mentioned taxes on pre-tax accounting income (loss)
based on the
applicable statutory rates for both domestic and foreign
entities are
shown below:
|
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2006
|
2007
|
|||||||
Domestic
entity
|
$ |
2,890
|
$ |
3,950
|
||||
Foreign
entities
|
||||||||
ASE
Test, Inc. (25% statutory rate)
|
28,389
|
12,495
|
||||||
ASE
Test Malaysia (27%-28% statutory rate)
|
1,696
|
5,796
|
||||||
ISE
Labs (federal tax rate 34% and state tax rate 6%)
|
(444 | ) | (175 | ) | ||||
$ |
32,531
|
$ |
22,066
|
|
ASE
Test Inc. has a five-year income tax exemption projects beginning
from
January 2006. A portion of ASE Test, Inc.’s income from the
testing of semiconductors is exempt from income tax. ASE
Singapore Pte Ltd., a subsidiary of ISE Labs, has been granted
pioneer
status under the provisions of the Economic Expansion Incentives
(Relief
from Income Tax) Act for its operations in Singapore for
a qualifying
period of 10 years commencing September 1, 1998. During the
qualifying period, all income arising from pioneer status
activities is
wholly exempt from income tax. The per share effect (basic
earnings per share) of tax holiday is $0.08 and $0.04 for
the nine months
ended September 30, 2006 and 2007,
respectively.
|
b.
|
Deferred
income tax assets and liabilities are summarized as
follows:
|
September
30,
2006
|
December
31,
2006
|
September
30,
2007
|
||||||||||
Current
deferred income tax assets
|
||||||||||||
Unused
tax credits
|
$ |
1,432
|
$ |
22,639
|
$ |
4,490
|
||||||
Other
|
950
|
1,241
|
1,747
|
|||||||||
2,382
|
23,880
|
6,237
|
||||||||||
Less
: valuation allowance
|
(425 | ) | (319 | ) | (530 | ) | ||||||
$ |
1,957
|
$ |
23,561
|
$ |
5,707
|
|||||||
Noncurrent
deferred income tax assets
|
||||||||||||
Unused
tax credits
|
$ |
24,559
|
$ |
9,706
|
$ |
16,404
|
||||||
Tax
effect of unabsorbed capital allowance
|
7,542
|
6,284
|
1,098
|
|||||||||
Loss
carryforward
|
8,731
|
8,196
|
8,890
|
|||||||||
Other
|
574
|
(17 | ) | (2,138 | ) | |||||||
41,406
|
24,169
|
24,254
|
||||||||||
Less
: valuation allowance
|
(13,469 | ) | (11,046 | ) | (12,618 | ) | ||||||
$ |
27,937
|
$ |
13,123
|
$ |
11,636
|
|||||||
Noncurrent
deferred income tax liabilities
|
$ |
1,289
|
$ |
608
|
$ |
577
|
|
In
assessing the realization of deferred income tax assets,
the Company
considers its future taxable earnings and expected timing
for the reversal
of temporary differences. In addition, in the event future
taxable earnings do not materialize, the Company will consider
executing
certain tax planning strategies available to realize the
deferred income
tax assets. The valuation allowance is provided to reduce the
gross deferred income tax assets to an amount which the Company
believes
will more likely than not be realized. Deferred income tax
assets and liabilities are classified in the consolidated
balance sheets
based on the classification of the related assets or liabilities
or the
expected timing of the reversal of temporary
differences.
|
c.
|
As
of September 30, 2007, unused tax credits which can be utilized
to offset
future income tax, are set forth
below:
|
Year
of Expiry
|
||||
|
||||
2008
|
$ |
6,241
|
||
2009
|
2,432
|
|||
2010
|
2,160
|
|||
2011
|
1,954
|
|||
2012
and thereafter
|
8,107
|
|||
$ |
20,894
|
|
In
the ROC, tax credits may be utilized to reduce up to 50%
of income tax
payable each year. In the expiring year, any remaining unused
tax credits may be used entirely.
|
|
The
U.S. Federal and California State net operating loss carry
forwards of ISE
Labs as of September 30, 2007 approximated $21.6 million
and $31.9 million
which expire in 2026 and 2015,
respectively.
|
16.
|
DISCLOSURES
FOR FINANCIAL INSTRUMENTS
|
a.
|
Fair
values of financial instruments were as
follows:
|
September
30, 2006
|
December
31, 2006
|
September
30, 2007
|
||||||||||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||||||||
Amount
|
Value
|
Amount
|
Value
|
Amount
|
Value
|
|||||||||||||||||||
Non-derivative
financial instruments
|
||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Available-for-sale
financial assets
-
current
|
$ |
95,768
|
$ |
95,768
|
$ |
89,341
|
$ |
89,341
|
$ |
126,033
|
$ |
126,033
|
||||||||||||
Available-for-sale
financial assets
-
noncurrent
|
167,597
|
167,597
|
204,851
|
204,851
|
229,459
|
229,459
|
||||||||||||||||||
Pledged
time deposit ( included in
other
assets )
|
4,790
|
4,790
|
5,276
|
5,276
|
5,517
|
5,517
|
||||||||||||||||||
Liabilities
|
||||||||||||||||||||||||
Long-term
debts (including
current
portion)
|
218,232
|
218,232
|
120,124
|
120,124
|
85,792
|
85,792
|
||||||||||||||||||
Derivative
financial instruments
|
||||||||||||||||||||||||
Financial
currency forward contracts
|
(480 | ) | (480 | ) | (262 | ) | (262 | ) |
566
|
566
|
||||||||||||||
Cross
currency swap contracts
|
-
|
-
|
-
|
-
|
636
|
636
|
b.
|
Methods
and assumptions used in the determination of fair values
of financial
instruments were as
below:
|
|
1)
|
The
aforementioned financial instruments do not include cash,
notes and
accounts receivable, receivables from related parties, pledged
time
deposit-current, notes and accounts payable, payable to related
parties,
accrued expenses and payables for property, plant and
equipment. These financial instruments’ carrying amounts
approximate their fair values.
|
|
2)
|
Fair
values of available-for-sale financial assets are determined
based on
their quoted market prices. Fair values of derivatives were
determined using valuation techniques incorporating estimates
and
assumptions that were consistent with prevailing market
conditions.
|
|
3)
|
The
carrying amount of pledged time deposit reflects its fair
value.
|
|
4)
|
Fair
values of long-term debts were based on the present value
of expected cash
flows discounted at current interest rates of similar long-term
debts. The carrying amount of long-term debts approximates
their fair value.
|
c.
|
The
Company recognized $810 thousand and $1,255 thousand of losses
for the
three months and nine months ended September 30, 2006, respectively
for
the changes in fair value of derivatives determined using
valuation
techniques. The Company recognized $195 thousand and $1,008
thousand of losses for the three months and nine months ended
September
30, 2007, respectively for the changes in fair value of derivatives
determined using valuation
techniques.
|
d.
|
As
of September 30, 2006, December 31, 2006 and September 30,
2007, financial
assets exposed to fair value interest rate risk were $4,960
thousand,
$6,081 thousand and $5,726 thousand, respectively, financial
liabilities
exposed to fair value interest rate risk were $2,889 thousand,
$1,781
thousand and $169 thousand, respectively. Financial assets
exposed to cash flow interest rate risk were $61,341 thousand,
$62,088
thousand and $32,830 thousand, respectively, and financial
liabilities
exposed to cash flow interest rate risk were $199,941 thousand,
$101,358
thousand and $80,251 thousand,
respectively.
|
e.
|
For
the three months and nine months ended September 30, 2006,
the Company
recognized interest income of $948 thousand and $2,400 thousand,
and
interest expense (including capitalized interest) of $3,714
thousand
$10,853 thousand, respectively, for those financial assets
or liabilities
that are not categorized as financial assets or liabilities
at fair value
through profit and loss. For the three months and nine months
ended September 30, 2007, the Company recognized interest
income of $987
thousand and $2,542 thousand, and interest expense (including
capitalized
interest) of $1,474 thousand and $4,592 thousand, respectively,
for those
financial assets or liabilities that are not categorized
as financial
assets or liabilities at fair value through profit and
loss.
|
f.
|
The
derivative instruments employed by the Company are to mitigate
risks
arising from the ordinary business operation. All derivative
transactions engaged by the Company should be designated
into two
purposes: hedging and speculating which are governed by separated
internal
guidelines and controls. Derivative transactions enter for
hedging purposes must hedge the risk against fluctuation
in foreign
exchange and interest rates arising from operating
activities. The currency and the amount of derivative
instruments held by the Company must match the Company’s assets and
liabilities.
|
g.
|
Information
about financial risk
|
|
1)
|
Market
risk
|
|
The
Company invested in open-end funds and listed shares which
are traded in
active market. The fair value of financial assets was changed
based on market condition. All derivative financial instruments
are mainly used to hedge the exchange rate fluctuations of
foreign
currency denominated assets and liabilities. Therefore, the
market risk of derivatives will be offset by the foreign
exchange risk of
these assets and liabilities.
|
|
2)
|
Credit
risk
|
|
Credit
risk represents the potential loss that would be incurred
by the Company
if the counter-parties or third-parties breached
contracts. Risk factors are including the concentration degree,
components and contract amounts of financial instruments. The
counter-parties or third-parties to the foregoing financial
instruments
are reputable financial institutions and business
organizations. Management believes that the Company’s exposure
to default by those parties is low.
|
|
3)
|
Liquidity
risk
|
|
The
Company believes its liquidity risk is low because the Company’s working
capital, which includes investments in mutual funds and other
marketable
securities that are readily convertible to cash at or near
fair market
value, is sufficient to fulfill its obligations incurred
in the
operation.
|
|
4)
|
Cash
flow interest rate risk
|
|
The
Company mainly engages in floated-interest-rate
debt. Therefore, cash flows are expected to increase $803
thousand while the market interest rate increases by
1%.
|
h.
|
Cash
flow hedge
|
|
ASE
Test Inc. entered into cross currency swap contract to hedge
exposures
from fluctuations in both exchange rate and interest rates
on its
receivable from affiliate, ASE Test
Finance.
|
|
Outstanding
cross currency swap contracts as of September 30, 2007 were
as
follows:
|
Maturity
Date
|
Contract
Amount
(In
Thousand)
|
Interest
Rates Paid
|
Interest
Rates Received
|
|||
October
17, 2007
|
USD
20,000/ NTD 661,540
|
5.798%
|
2.92%
|
|||
October
22, 2007
|
USD
20,000/ NTD 662,460
|
5.800%
|
2.90%
|
|
Net
evaluation gains for derivative financial instruments for
hedging was $599
thousand as of September 30, 2007 and was recorded as deduction
of
interest income $36 thousand, exchange gain $530 thousand
and the
adjustments of stockholders’ equity $105 thousand,
respectively.
|
|
Net
gains for derivative financial instruments for hedging was
$433 thousand
for the nine months ended September 30, 2007 and was recorded
as deduction
of interest income $121 thousand, exchange gain $449 thousand
and the
adjustments of stockholders’ equity $105 thousand,
respectively.
|
17.
|
RELATED
PARTY TRANSACTIONS
|
a.
|
Related
parties
|
Related
Parties
|
Relationship
|
|
ASE
Inc.
|
Parent
company
|
|
ASE
Korea, Inc.
|
Affiliate
|
|
ASE
(Shanghai) Inc.
|
Affiliate
|
|
ASE
(U.S.) Inc.
|
Affiliate
|
|
ASE
Japan Co., Ltd. (“ASE Japan”)
|
Affiliate
|
|
ASE
Electronics, Inc. (“ASEE”)
|
Affiliate
(starting August 2006)
|
|
ASE
Assembly & Test (Shanghai) Limited
|
Affiliate
(Formerly Global Advanced Packing Technology Limited, starting
January
2007)
|
b.
|
Significant
related party transactions:
|
Nine
Months Ended
|
||||||
September
30
|
||||||
2006
|
2007
|
1)
|
Revenue
|
ASE
Inc.
|
$ |
33,974
|
$ |
22,411
|
2)
|
Purchase
of machinery and
equipment
|
ASE
Inc.
|
$ |
4,475
|
$ |
2,727
|
||||
ASE
Assembly & Test (Shanghai) Limited
|
-
|
2,280
|
||||||
ASE
Korea, Inc.
|
7,100
|
-
|
||||||
$ |
11,575
|
$ |
5,007
|
Nine
Months Ended
|
||||||
September
30
|
||||||
2006
|
2007
|
3)
|
Purchase
of raw materials
|
ASEE
|
$ |
184
|
$ |
2,508
|
||||
ASE
Inc.
|
2,236
|
-
|
||||||
Other
|
1
|
274
|
||||||
$ |
2,421
|
$ |
2,782
|
4)
|
Sale
of property, plant and
equipment
|
ASE
Korea, Inc.
|
$ |
4,927
|
$ |
2,691
|
||||
ASE
Inc.
|
338
|
1,717
|
||||||
ASE
Assembly & Test (Shanghai) Limited
|
-
|
235
|
||||||
ASE
Japan
|
1,226
|
54
|
||||||
$ |
6,491
|
$ |
4,697
|
|
5)
|
Service
fees
|
|
The
Company engages ASE (U.S.) Inc. as a sales agent and the
service fees paid
were based on monthly service-related costs and expenses
incurred (limited
amounts prescribed for costs and expenses). Total service fees
were $3,746 thousand and $3,565 thousand for the nine months
ended
September 30, 2006 and 2007,
respectively.
|
c.
|
Balances
at period end:
|
September
|
December
|
September
|
||||||||||
30,
2006
|
31,
2006
|
30,
2007
|
||||||||||
Receivable
|
||||||||||||
ASE
Inc.
|
$ |
20,069
|
$ |
13,811
|
$ |
16,502
|
||||||
ASE
Korea, Inc.
|
4,598
|
73
|
1,630
|
|||||||||
Other
|
508
|
734
|
910
|
|||||||||
$ |
25,175
|
$ |
14,618
|
$ |
19,042
|
Payable
|
||||||||||||
ASE
Inc.
|
$ |
2,645
|
$ |
4,207
|
$ |
4,354
|
||||||
ASE
Assembly & Test (Shanghai) Limited
|
-
|
-
|
2,213
|
|||||||||
ASEE
|
184
|
565
|
757
|
|||||||||
Other
|
725
|
365
|
615
|
|||||||||
$ |
3,554
|
$ |
5,137
|
$ |
7,939
|
|
These
transactions were conducted at prices and terms comparable
to those
applied in transactions with unrelated companies, except
for the purchases
and sales of machinery and equipment which were recorded
at net book
values.
|
18.
|
ASSETS
PLEDGED
|
|
The
following assets have been pledged or mortgaged as collaterals
for bank
loans and as guarantees for the employment of foreign labor
and the lease
of office buildings:
|
September
|
December
|
September
|
||||||||||
30,
2006
|
31,
2006
|
30,
2007
|
||||||||||
Machinery
and equipment, net
|
$ |
7,657
|
$ |
7,326
|
$ |
6,001
|
||||||
Pledged
time deposit (included in other assets-other)
|
4,790
|
5,276
|
5,517
|
|||||||||
$ |
12,447
|
$ |
12,602
|
$ |
11,518
|
19.
|
COMMITMENTS
AND CONTINGENCIES
|
a.
|
Lease
commitments
|
|
1)
|
Operating
leases
|
|
ASE
Test, Inc. leases the land on which its buildings are situated
under
various operating lease agreements with the government expiring
on various
dates through February 2015. The lease agreements grant ASE
Test, Inc. the option to renew the leases and reserve the
right for the
lessor to adjust the lease charges upon an increase in the
assessed value
of the land and to terminate the leases under certain
conditions. Moreover, the Company leases machinery, equipment
and office building under non-cancellable operating lease
agreements. The rental expenses for the nine months ended
September 30, 2006 and 2007 were $ 34,085 thousand and $19,574
thousand,
respectively. The future minimum lease payments under the
above-mentioned operating leases are as
follows:
|
2007.10.1-2008.9.30 | $ |
4,861
|
|||
2008.10.1-2009.9.30 |
6,853
|
||||
2009.10.1-2010.9.30 |
5,021
|
||||
2010.10.1-2011.9.30 |
3,325
|
||||
2011.10.1
and thereafter
|
407
|
||||
Total
minimum lease payments
|
$ |
20,467
|
|
2)
|
Capital
leases
|
|
In
addition, the Company also leases machinery and equipment
under
non-cancellable capital lease agreements. As of September 30,
2007, the net book value of the machinery and equipment acquired
under the
capital obligations amounted to $9,711 thousand. The future
minimum lease payments under capital leases as of September
30, 2007 are
as follows:
|
2007.10.1-2008.9.30 | $ |
1,213
|
|||
2008.10.1-2009.9.30 |
812
|
||||
2009.10.1-2010.9.30 |
36
|
||||
2010.10.1-2011.9.30 |
22
|
||||
2011.10.1
thereafter
|
49
|
||||
Total
minimum lease payments
|
2,132
|
||||
Less: Imputed
interest
|
(82 | ) | |||
Present
value of future lease obligations
|
2,050
|
||||
Capital
lease obligation, current
|
(1,880 | ) | |||
Capital
lease obligation, long-term
|
$ |
170
|
b.
|
The
Company had no unused letters of credit as of September 30,
2007.
|
c.
|
The
Company had commitments to certain vendors to purchase property,
plant and
equipment of approximately $34,021 thousand, and had prepaid
$3,635
thousand as of September 30, 2007.
|
d.
|
At
September 30, 2007, the Company did not have any significant unasserted
claims or pending litigations.
|
20.
|
LOSS
ON FIRE DAMAGE
|
|
ASE
Test, Inc., incurred fire damage to its production lines
in Chung Li,
Taiwan on May 1, 2005, and recognized an estimated loss of
$52,014
thousand for damages to its machinery and equipment. With the
assistance of external counsel, the Company submitted insurance
claims of
$790 thousand to its insurers for compensation for damages
which the
Company believed to be clearly identifiable and reasonably
estimated, and
recorded such amount as an offset to fire loss in
2005.
|
|
The
Company reached final settlement with the insurers in June
2006 with
regards to the fire damage incurred to the production lines
in Chung
Li. The final settlement amount of $27,289 thousand, offset by
the $790 thousand recorded in 2005, was recorded in the current
period. The Company also reversed $5,641 thousand of impairment
loss recognized in 2005 after a careful analysis of the increase
in the
estimated service potential of the production line facilities
by an
external specialist. Net amount of $32,145 thousand, including
the reversal of $5 thousand of other accruals, was recognized
as a gain on
insurance settlement and loss recovery for the nine months
ended September
30, 2006. All of the insurance recoveries were received in
August 2006.
|
21.
|
SUBSEQUENT
EVENTS
|
|
On
September 4, 2007, the Company had signed the Scheme Implementation
Agreement with its parent company, ASE Inc., to acquire the
Company’s
remaining ordinary shares which ASE Inc. does not directly
or indirectly
own. The Company’s ordinary shares are listed on the NASDAQ and
in the form of TDRs, where each TDR represents 0.0125 the
Company’s
ordinary shares. Under the terms of the proposed acquisition,
the all cash acquisition consideration consists of USD$14.78
for each the
Company’s ordinary share listed on NASDAQ and the NT$ equivalent
of USD
$0.185 (based on the prevailing exchange rate) for each the
Company’s
TDRs. The proposed acquisition will be effected by way of a
scheme of arrangement under Section 210 of the Companies
Act of Singapore
(
“
Singapore
Companies Act”). If the requisite approval is obtained and the
other conditions precedent are met, upon the consummation
of the proposed
transaction, the Company will become an indirect wholly-owned
subsidiary
of ASE Inc. and the Company’s ordinary shares will be delisted from NASDAQ
and the TDRs will be delisted from the Taiwan Stock
Exchange. As of December 11, 2007, the acquisition process is
still in progress.
|
22.
|
SUMMARY
OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES
FOLLOWED BY THE
COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED STATES
OF AMERICA
|
|
The
Company’s interim consolidated financial statements have been prepared
in
accordance with ROC GAAP, which differ in the following respects
from U.S.
GAAP:
|
a.
|
Pension
benefits
|
|
ASE
Test, Inc. adopted U.S. Statement of Financial Accounting
Standards (U.S.
SFAS) No. 87, “Employers’ Accounting for Pensions” (U.S. SFAS No.87) on
January 1, 1987, which requires the Company to determine
the accumulated
pension obligation and the pension expense on an actuarial
basis.
|
|
U.S.
SFAS No. 87 was amended by U.S. SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans” (U.S. SFAS No.158)
on September 29, 2006, which requires employers to recognize
the
overfunded or underfunded status of a defined benefit pension
plan as an
asset or liability in its statement of financial position
and to recognize
changes in that funded status in the period in which the
changes occur
through comprehensive income. U.S. SFAS No. 158 defines the
funded status of a benefit plan as the difference between
the fair value
of the plan assets and the projected benefit
obligation. Previously unrecognized items such as gains or
losses, prior service credits and transition assets or liabilities
will be
recognized in accumulated other comprehensive income and
will be
subsequently recognized through net periodic benefit cost
pursuant to the
provisions of U.S. SFAS No. 87. The Company adopted U.S.
SFAS No.158 on
December 31, 2006.
|
|
ROC
SFAS No. 18 “Accounting for Pensions” is similar in many respects to U.S.
SFAS No. 87 and was adopted by ASE Test, Inc. in 1996. However,
ROC SFAS No. 18 does not require a company to recognize the
overfunded or
underfunded status of a defined benefit pension plan as an
asset or
liability in the statement of financial position. The
difference in the dates of adoption gives rise to a U.S.
GAAP difference
in the actuarial computation for transition obligation pension
expense and
the related amortization.
|
b.
|
Bonuses
to employees, directors and
supervisors
|
|
According
to ROC regulations and the Articles of Incorporation of ASE
Inc. and ASE
Test, Inc. a portion of the Company’s earnings is required to be set aside
as bonuses to employees, directors and supervisors. Bonuses to
directors and supervisors are always paid in cash. However,
bonuses to employees may be granted in cash or stock or
both. All of these appropriations, including stock bonuses
which are valued at par value of NT$10, are charged against
retained
earnings under ROC GAAP after such appropriations are formally
approved by
the shareholders in the following
year.
|
|
Under
U.S. GAAP, such bonuses are charged against income in the
accounting
period earned. Shares issued as part of these bonuses are
recorded at fair market value. The total amount of the
aforementioned bonuses to be paid in the following year is
initially
accrued based on management’s estimate pursuant to the Company‘s Articles
of Incorporation in the period in which shareholders’ approval is
obtained, which normally occurs during the subsequent year. Any
difference between the initially accrued amount and the fair
market value
of any shares issued as bonuses is recognized in the year
of approval by
shareholders.
|
|
ASE
Inc. pays the bonuses on behalf of the Company and does not
require
reimbursement. For U.S. GAAP reporting purposes, bonus payments
made by ASE Inc. directly to ASE Test, Inc.’s employees are recorded as
compensation expense for the Company and credited to additional
paid-in
capital.
|
|
The
impact of bonuses under U.S. GAAP to specific cost and expense
categories
is as follows:
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||
2006
|
2007
|
2006
|
2007
|
|||||||||||||
Cost
of revenues
|
$ |
1,880
|
$ |
6,244
|
$ |
6,997
|
$ |
2,452
|
||||||||
Selling,
general and administrative expenses
|
878
|
1,913
|
3,382
|
(749 | ) | |||||||||||
Research
and development
|
288
|
954
|
1,069
|
375
|
||||||||||||
$ |
3,046
|
$ |
9,111
|
$ |
11,448
|
$ |
2,078
|
c.
|
Depreciation
of buildings
|
|
Under
ROC GAAP, buildings may be depreciated over their estimated
life or up to
40 years based on ROC practices and tax regulations. For U.S.
GAAP purposes, buildings are depreciated over their estimated
economic
useful life of 25 years.
|
d.
|
Depreciation
on the excess of book value on transfer of buildings between
related
parties
|
|
ASE
Test, Inc. purchased buildings and facilities from its affiliate,
ASE
Technology, in 1997. The purchase price was based on market
value, which represented the portion of the purchase price
in excess of
book value NT$17,667 thousand (US$642 thousand) was capitalized
by ASE
Test, Inc. as allowed under ROC GAAP. Under U.S. GAAP,
transfers of assets between related parties are recorded
at historical
costs. Therefore, depreciation on the capitalized amount
recorded under ROC GAAP is reversed under U.S. GAAP until
the buildings
and facilities are fully depreciated or
disposed.
|
e.
|
Impairment
of long-lived assets
|
|
Under
ROC GAAP, effective January 1, 2005, the Company is required
to recognize
an impairment loss when an indication is identified that
the carrying
amount of an asset or a group of assets is not recoverable
from the
expected future cash flows. However, if the recoverable amount
increases in a future period, the amount previously recognized
as
impairment would be reversed and recognized as a gain. The
adjusted amount may not exceed the carrying amount that would
have been
determined, net of depreciation, if no impairment loss had
been
recognized.
|
|
Prior
to January 1, 2005, the Company followed U.S. GAAP in accounting
for
impairment of long-lived assets for ROC GAAP
purpose.
|
|
As
discussed in Note 20, the Company reversed $5,641 thousand
of impairment
loss recognized in 2005 under ROC GAAP after a careful analysis
of the
increase in the estimated service potential of the production
line
facilities by an external specialist. Reversal the amount is
prohibited under U.S. GAAP. As such, differences in the cost
basis of these damaged machinery and equipment and associated
depreciation
expense between ROC and U.S. GAAP are reflected in the
reconciliation.
|
|
f.
|
Stock-based
compensation
|
|
Under
U.S. GAAP, stock-based compensation expense for the three
months and nine
months ended September 30, 2006 and 2007 includes compensation
expense for
all unvested stock-based compensation awards granted prior
to January 1,
2006 that are expected to vest, based on the grant date fair
value
estimated in accordance with the transition method and the
original
provision of U.S. SFAS No. 123, “Accounting for Stock-Based Compensation”
(“U.S. SFAS No. 123”).
Upon an employee
’
s
termination
, unvested
awards are forfeited, which
affects the
quantity of options to
be included in the calculation of stock-based compensation
expense. Forfeitures do not include vested options that expire
unexercised.
Stock-based compensation expense for all
stock-based compensation awards granted after January 1,
2006 is based on
the grant-date fair value estimate in accordance with the
provisions of
U.S. SFAS No. 123R, “Share-Based Payment” (“U.S. SFAS No.
123R”). The Company recognizes these compensation costs using
the graded vesting method over the requisite service period
of the award,
which is generally the option vesting term of five years. Prior
to the adoption of U.S. SFAS No. 123R, the Company recognized
stock-based
compensation expense in accordance with U.S. Accounting Principles
Board
(“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB
25”). See Note 23d a further discussion on stock-based
compensation.
|
|
ASE
Inc. pays certain employee compensation amounts, by means
of stock
options, on behalf of the Company and does not require
reimbursement. For U.S. GAAP reporting purposes, such payments
made by ASE Inc. directly to the employees of ASE Test and
subsidiaries
are recorded as compensation expense for the Company and
credited to
additional paid-in capital.
|
|
Certain
characteristics of the stock options granted under the ASE
2002 Option
Plan made the fair values of these options not reasonably
estimable using
appropriate valuation methodologies as prescribed under U.S.
SFAS No. 123
and have been accounted for using the intrinsic value
method. Upon the adoption of U.S. SFAS No. 123R, the Company
continued to account for these stock options based on its
intrinsic value,
remeasured at each reporting date through the date of exercise
or other
settlement.
|
|
Under
ROC GAAP, employee stock option plans that are amended or
have options
granted on or after January 1, 2004 must be accounted for
by the
interpretations issued by the ARDF in Taiwan. The Company
adopted the intrinsic value method and any compensation expense
determined
using this method is recognized over the vesting period. No
stock-based compensation expense was recognized under ROC
GAAP for the
three months and nine months ended September 30, 2006 and
2007,
respectively.
|
g.
|
Goodwill
|
|
Prior
to January 1, 2006, under ROC GAAP, the Company amortized
goodwill arising
from acquisitions over 10 years. The Company adopted ROC SFAS
No. 35 on December 31, 2004, and in accordance with this
new standard,
performed an impairment analysis and recorded an impairment
charge of
$26,500 thousand for the year ended December 31, 2004 based
on a
“recoverable amount” as determined by an estimate of discounted cash flows
for the next six years. The Company found no impairment as of
December 31, 2006.
|
|
Effective
January 1, 2006, the Company adopted ROC SFAS No. 25 (revised
2005),
“Business Combinations-Accounting Treatment under Purchase
Method” which
is similar to U.S. SFAS No. 142. The Company ceased
amortization and reviewed goodwill for impairment in accordance
with the
provisions of the standard and ROC SFAS No.
35.
|
|
Under
U.S. GAAP, the Company adopted the provisions of U.S. SFAS
No. 142
“Goodwill and Other Intangible Assets
”
,
on January
1, 2002. U.S. SFAS No. 142 requires the Company to review for
possible impairment of goodwill existing at the date of adoption
and
perform subsequent impairment tests on at least an annual
basis. In addition, existing goodwill and intangible assets
must be reassessed and classified consistently in accordance
with the
criteria set forth in U.S. SFAS No. 141 and U.S. SFAS No.
142. As a result, the Company ceased to amortize goodwill
effective January 1, 2002. Definite lived intangible assets
will continue to be amortized over their estimated useful
lives.
|
|
The
determination of whether or not the goodwill is impaired
under U.S. SFAS
No. 142 is made by first estimating the fair value of the
reporting unit
and comparing such fair value with its carrying amount, including
goodwill. If the carrying amount exceeds the fair value, the
Company calculates an implied fair value of the goodwill
based on an
allocation of the fair value of the reporting unit to its
underlying
assets and liabilities. If the carrying amount of reporting
unit goodwill exceeds the implied fair value of that goodwill,
an
impairment loss shall be recognized in an amount equal to
that
excess. For the year ended December 31, 2004, the Company
recognized an impairment loss of $41,500 thousand for U.S.
GAAP
purposes.
|
h.
|
Undistributed
earnings tax
|
|
In
the ROC, a 10% tax is imposed on unappropriated earnings
(excluding
earnings from foreign consolidated subsidiaries). For ROC GAAP
purposes, the Company records the 10% tax on unappropriated
earnings in
the year of shareholders’ approval. Starting from 2002, the
American Institute of Certified Public Accountants International
Practices
Task Force (the
“
Task
Force
”
)
concluded that in accordance with Emerging Issues Task Force
(EITF) 95-10,
“Accounting for tax credits related to dividends in accordance
with SFAS
109,” the 10% tax on unappropriated earnings should be accrued
under U.S.
GAAP during the period the earnings arise and adjusted to
the extent that
distributions are approved by the shareholders in the following
year.
|
|
i.
|
Investments
in parent company accounted for as treasury
stock
|
|
Under
ROC GAAP, shareholdings in the parent company are recorded
as an
available-for-sale financial asset and changes in fair value
from a
subsequent remeasurement are reported as a separate component
of
shareholders’ equity. Under U.S. GAAP, according to ARB No. 51
“Consolidated Financial Statements”, there is a presumption that the
parent company must approve the subsidiary's
transactions. Accordingly, unless this presumption can be
overcome, the investment in the parent company's stock should
be presented
within the equity section of a wholly owned subsidiary's
separate
financial statements and be accounted for in the same manner
as treasury
stock. Upon the company’s receipt of cash dividend distributed
by the parent company, the cash dividend should be recorded
as additional
paid-in capital.
|
|
j.
|
Earnings
per share
|
|
Under
both ROC GAAP and U.S. GAAP, basic earnings per share is
calculated by
dividing net income by the average number of shares outstanding
in each
period. Other shares issued from unappropriated earnings, such
as stock bonuses to employees, are included in the calculation
of
weighted-average number of shares outstanding from the date
of
occurrence. For diluted earnings per share, unvested stock
options are included in the calculation using the treasury
stock method if
the inclusion of such would be
dilutive.
|
|
U.S.
SFAS No. 128, “Earnings per share” provides guidance on applying the
treasury stock method for equity instruments granted in share-based
payment transactions in determining diluted earnings per
share, which
states that the assumed proceeds shall be the sum of (a) the
exercise price, (b) the amount of compensation cost attributed
to future services and not yet recognized, and (c) the amount
of excess tax benefits that would be credited to additional
paid-in
capital assuming exercise of the options. Prior to January 1,
2006, the Company used the intrinsic value method to account
for its
stock-based compensation under both U.S. GAAP and ROC GAAP,
resulting in
no unrecognized compensation expense being included in the
assumed
proceeds calculation. However, upon adoption of U.S. SFAS No.
123R, the Company now has unrecognized compensation costs,
and therefore,
the number of diluted shares included in the diluted earnings
per share
calculation under U.S. GAAP will be different from that under
ROC
GAAP.
|
|
The
following reconciles net income and shareholders’ equity under ROC GAAP as
reported in the interim consolidated financial statements
to the
approximate net income and shareholders’ equity amounts as determined
under U.S. GAAP, giving effect to adjustments for the differences
listed
above.
|
September
30,
|
December
31,
|
September
30,
|
||||||||||
2006
|
2006
|
2007
|
||||||||||
Changes
in shareholders’ equity based on U.S. GAAP
|
||||||||||||
Balance,
beginning of period
|
$ |
495,456
|
$ |
495,456
|
$ |
633,111
|
||||||
Net
income for the year
|
88,589
|
117,318
|
45,408
|
|||||||||
Issuance
of new shares under stock option plans
|
-
|
678
|
9,246
|
|||||||||
Adjustment
of pension cost upon adoption of U.S. SFAS No. 158
|
-
|
(1,712 | ) |
-
|
||||||||
ASE
Inc. shares to be distributed as bonus to employees
|
3,663
|
4,343
|
8,053
|
|||||||||
Stock
option compensation
|
5,513
|
7,051
|
4,563
|
|||||||||
Cumulative
translation adjustment for subsidiaries
|
1,523
|
9,444
|
2,719
|
|||||||||
Unrealized
gain on financial instruments
|
241
|
533
|
893
|
|||||||||
Cash
dividend income from the parent company
|
-
|
-
|
8,111
|
|||||||||
Balance,
end of period
|
$ |
594,985
|
$ |
633,111
|
$ |
712,104
|
|
The
following U.S. GAAP condensed consolidated balance sheets
as of September
30, 2006, December 31, 2006 and September 30, 2007, and consolidated
statements of income for the three months and nine months
ended September
30, 2006 and 2007 are presented as
follows:
|
September
|
December
|
September
|
||||||||||
30,
2006
|
31,
2006
|
30,
2007
|
||||||||||
Current
assets
|
$ |
350,413
|
$ |
305,554
|
$ |
371,730
|
||||||
Long-term
investments
|
73,683
|
78,371
|
90,075
|
|||||||||
Property,
plant, and equipment, net
|
389,345
|
380,863
|
351,596
|
|||||||||
Goodwill
|
40,927
|
40,927
|
40,927
|
|||||||||
Other
assets
|
57,949
|
39,275
|
38,766
|
|||||||||
Total
assets
|
||||||||||||
$ |
912,317
|
$ |
844,990
|
$ |
893,094
|
|||||||
Current
liabilities
|
$ |
163,656
|
$ |
111,506
|
$ |
103,215
|
||||||
Long-term
debts
|
141,550
|
85,706
|
65,510
|
|||||||||
Other
liabilities
|
12,126
|
14,667
|
12,265
|
|||||||||
Total
liabilities
|
||||||||||||
317,332
|
211,879
|
180,990
|
||||||||||
Shareholders'
equity
|
594,985
|
633,111
|
712,104
|
|||||||||
Total
liabilities and shareholders' equity
|
$ |
912,317
|
$ |
844,990
|
$ |
893,094
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||
2006
|
2007
|
2006
|
2007
|
|||||||||||||
Net
revenues
|
$ |
136,842
|
$ |
128,189
|
$ |
408,045
|
$ |
340,430
|
||||||||
Cost
of revenues
|
84,355
|
84,582
|
264,408
|
237,238
|
||||||||||||
Gross
profit
|
52,487
|
43,607
|
143,637
|
103,192
|
||||||||||||
Operating
expenses
|
17,474
|
18,783
|
25,742
|
53,409
|
||||||||||||
Income
from operations
|
35,013
|
24,824
|
117,895
|
49,783
|
||||||||||||
Net
non-operating income (expense)
|
3,374
|
5,197
|
(3,793 | ) |
14,772
|
|||||||||||
Income
before income tax
|
38,387
|
30,021
|
114,102
|
64,555
|
||||||||||||
Income
tax expense
|
6,650
|
10,929
|
25,513
|
19,147
|
||||||||||||
Net
income
|
$ |
31,737
|
$ |
19,092
|
$ |
88,589
|
$ |
45,408
|
|
The
Company applies ROC SFAS No. 17, “Statement of Cash Flows”. Its objectives
and principles are similar to those set out in U.S. SFAS
No. 95,
“Statement of Cash Flows”. The principal differences between
the two standards relate to classification. Cash flows from
investing activities for changes in deferred charges, refundable
deposits
and other assets-miscellaneous, and cash flows from financing
activities
for changes in guarantee deposits, other liabilities and
cash bonuses paid
to employees, directors and supervisors are reclassified
to operating
activities under U.S. SFAS No. 95. Summarized cash flow data by
operating, investing and financing activities in accordance
with U.S. SFAS
No. 95 are as follows:
|
Nine
Months Ended
September
30
|
||||||||
2006
|
2007
|
|||||||
Net
cash inflow (outflow) from:
|
||||||||
Operating
activities
|
$ |
189,030
|
$ |
130,926
|
||||
Investing
activities
|
(118,637 | ) | (80,000 | ) | ||||
Financing
activities
|
(80,565 | ) | (28,687 | ) | ||||
Effect
of exchange rate changes on cash
|
2,984
|
1,233
|
||||||
Net
increase (decrease) in cash
|
(7,188 | ) |
23,472
|
|||||
Cash,
beginning of period
|
138,211
|
89,715
|
||||||
Cash,
end of period
|
$ |
131,023
|
$ |
113,187
|
23.
|
ADDITIONAL
DISCLOSURES REQUIRED BY U.S.
GAAP
|
a.
|
Recently
issued accounting standards
|
|
In
September 2006, the FASB issued U.S. SFAS No. 157, “Fair Value
Measurements”, which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles,
and
expands disclosures about fair value measurements. U.S. SFAS
No. 157 does not require any new fair value measurements,
but brings up
guidance on how to measure fair value by providing a fair
value hierarchy
used to classify the source of the information. This statement
is effective for the Company beginning January 1, 2008. The
Company is currently assessing the potential impact that
the adoption of
U.S. SFAS No. 157 will have on the operations results and
financial
position of the Company, and is not yet in a position to
determine such
effects.
|
|
In
September 2006, the FASB issued U.S. SFAS No. 158, “Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans—An Amendment of
FASB Statements No. 87, 88, 106, and 132R” (U.S. SFAS No.
158). Provisions with respect to the recognition of an asset
and liability related to the funded status and the changes
in the funded
status be reflected in comprehensive income are effective
for fiscal years
ending after December 15, 2006 and the change in measurement
date
provisions is effective for fiscal years ending after December
15,
2008. U.S. SFAS No. 158 also requires the measurement date of
the plan’s funded status be the same as the Company’s fiscal
year-end. The Company adopts all requirements of U.S. SFAS No.
158 on December 31, 2006. Upon the adoption of U.S. SFAS No.
158, the Company recognized a decrease to accumulative other
comprehensive
income of $1,712 thousand as of December 31,
2006.
|
|
In
July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109”
(“FIN 48”). FIN 48 clarifies the accounting for uncertainty in
income taxes by prescribing the recognition threshold a tax
position is
required to meet before being recognized in the financial
statements. It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods,
disclosure, and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006 and is required to
be adopted by
the Company in fiscal 2007. The cumulative effects, if any, of
applying FIN 48 will be recorded as an adjustment to retained
earnings as
of the beginning of the period of adoption. The Company is
in the process of assessing FIN48 and the impact on the results
of operations and financial position after the
|
|
adoption
of FIN48 is inconclusive as of September 30,
2007.
|
b.
|
Income
tax
|
|
Reconciliation
of income tax attributable to continuing operations for the
nine months
ended September 30, 2006 and 2007 calculated on pre-tax financial
statement income from continuing operations based on the
statutory tax
rate and the income tax expense, which conforms to U.S. GAAP,
is as
follows:
|
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2006
|
2007
|
|||||||
Tax
expense based on pre-tax accounting income
from
continuing operations at statutory rate
|
$ |
28,353
|
$ |
20,406
|
||||
Add
(deduct) tax effects of:
|
||||||||
Permanent
differences
|
||||||||
Bonuses
to directors, supervisors and
employees
|
2,862
|
520
|
||||||
Stock
option compensation
|
1,316
|
1,140
|
||||||
Tax-exempt
income - tax holiday
|
(8,305 | ) | (3,607 | ) | ||||
Other
|
(30 | ) |
140
|
|||||
Tax
credits
|
||||||||
Deferred
|
9,301
|
3,977
|
||||||
Income
taxes on undistributed earnings
|
(7,855 | ) | (2,732 | ) | ||||
Adjustment
of prior years’ income tax
|
(128 | ) | (697 | ) | ||||
Income
tax expense
|
$ |
25,514
|
$ |
19,147
|
|
The
above-mentioned taxes on pre-tax accounting income (loss)
from continuing
operations based on the applicable statutory rates for both
domestic and
foreign entities are shown below:
|
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2006
|
2007
|
|||||||
Domestic
Entity
|
$ |
2,890
|
$ |
3,950
|
||||
Foreign
entities
|
||||||||
ASE
Test, Inc. (25% statutory rate)
|
24,211
|
10,835
|
||||||
ASE
Test Malaysia (27%-28% statutory rate)
|
1,696
|
5,796
|
||||||
ISE
Labs (federal tax rate 34% and state tax rate 6%)
|
(444 | ) | (175 | ) | ||||
$ |
28,353
|
$ |
20,406
|
|
Deferred
income tax assets and liabilities are summarized as
follows:
|
September
30,
|
December
31,
|
September
30,
|
||||||||||
2006
|
2006
|
2007
|
||||||||||
Current
deferred income tax assets
|
||||||||||||
Unused
tax credits
|
$ |
1,432
|
$ |
22,639
|
$ |
4,490
|
||||||
Other
|
950
|
1,241
|
1,747
|
|||||||||
2,382
|
23,880
|
6,237
|
||||||||||
Less:
valuation allowance
|
(425 | ) | (319 | ) | (530 | ) | ||||||
$ |
1,957
|
$ |
23,561
|
$ |
5,707
|
September
30,
|
December
31,
|
September
30,
|
||||||||||
2006
|
2006
|
2007
|
||||||||||
Noncurrent
deferred income tax assets
|
||||||||||||
Unused
tax credits
|
$ |
18,049
|
$ |
2,018
|
$ |
14,450
|
||||||
Tax
effect of unabsorbed capital allowance
|
7,542
|
6,284
|
1,098
|
|||||||||
Loss
carryforward
|
8,731
|
8,196
|
8,890
|
|||||||||
Other
|
574
|
(17 | ) | (2,138 | ) | |||||||
34,896
|
16,481
|
22,300
|
||||||||||
Less:
valuation allowance
|
(13,469 | ) | (11,046 | ) | (12,618 | ) | ||||||
$ |
21,427
|
$ |
5,435
|
$ |
9,682
|
|||||||
Noncurrent
deferred income tax liabilities
|
$ |
1,289
|
$ |
608
|
$ |
577
|
c.
|
Earnings
per share
|
|
U.S.
SFAS No. 128 requires the presentation of basic and diluted
earnings per
share. Basic net income per share is computed based on the
weighted average number of common shares outstanding during
the
period. Diluted net income per share includes the effect of
diluted equivalent common shares (stock options issued during
the period
using the treasury stock method).
|
|
Following
is a reconciliation of denominators used in the basic and
diluted
computation:
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||
2006
|
2007
|
2006
|
2007
|
|||||||||||||
Weighted
average shares, as adjusted
|
||||||||||||||||
Basic
|
100,089,093
|
100,919,507
|
100,073,675
|
100,481,805
|
||||||||||||
Effect
of dilutive securities
|
52,996
|
2,306,543
|
53,950
|
2,076,812
|
||||||||||||
Diluted
|
100,142,089
|
103,226,050
|
100,127,625
|
102,558,617
|
|
Diluted
earnings per share exclude 10,339,713 and 10,338,759 anti-dilutive
options
for the three months and nine months ended September 30,
2006,
respectively. Diluted earnings per share exclude 6,816,029 and
7,045,760 anti-dilutive options for the three months and
nine months ended
September 30, 2007, respectively. While these options were
anti-dilutive for the respective periods, they could be dilutive
in the
future.
|
d.
|
Stock
option plans
|
|
Effective
January 1, 2006, the Company adopted the fair value recognition
provisions
of U.S. SFAS No. 123R, using the modified prospective transition
method
and therefore has not restated results for prior periods. Under
this transition method, stock-based compensation expense
for the nine
months ended September 30, 2006 and 2007 included stock-based
compensation
expense for all share-based payment awards granted prior
to, but not yet
vested as of January 1, 2006, based on the grant-date fair
value estimated
in accordance with the original provision of U.S. SFAS No.
123. In addition, the stock-based compensation expense also
includes intrinsic value of certain outstanding share-based
awards for
which it was not possible to reasonable estimate their grant-date
fair
value under the requirement of U.S. SFAS No. 123. Stock-based
compensation expense for all share-based payment awards granted
after
January 1, 2006 is based on the grant-date fair value estimated
in
accordance with the provision of U.S. SFAS No. 123R. The
Company recognizes these compensation costs using the graded
vesting
method over the requisite service period of the award, which
is generally
a five-year vesting period. The adoption of U.S. SFAS No. 123R
resulted in a cumulative gain from changes in accounting
principle of $381
thousand, which reflects the net cumulative impact of estimating
future
forfeitures in the determination of period expense, rather
than recording
forfeitures when they occur as previously permitted. Prior to
the adoption of U.S. SFAS No. 123R, the Company accounted
for awards
granted from ASE Inc. under the intrinsic value method prescribed
by
Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock
Issued to Employees” (“APB 25”), and
related
|
|
interpretations,
and provided the required pro forma disclosures prescribed
by U.S. SFAS
No. 123, as amended. In March 2005, SEC issued Staff Accounting
Bulletin
No. 107 (“SAB 107”) regarding SEC’s interpretation of U.S. SFAS No. 123R
and the value of share-based payments for public companies. The
Company has applied the provisions of SAB 107 in its adoption
of U.S. SFAS
No. 123R.
|
|
As
a
result of adopting U.S. SFAS No. 123R, income before income
taxes and net
income for the nine months ended September 30, 2006 were
lower by $3,881
thousand and $2,911 thousand, respectively, than if the Company
had
continued to account for stock-based compensation under APB
25. The impact on both basic and diluted earnings per share for
the nine months ended September 30, 2006 was a decrease of
$0.03. In addition, prior to the adoption of U.S. SFAS No.
123R, the Company presented the tax benefit of stock option
exercised as
operating cash flows.
|
|
Information
regarding ASE Test’s and ASE Inc’s stock option plans is as
follows.
|
|
ASE
Test Limited
|
|
ASE
Test has three stock option plans, the 1999 Option Plan,
the 2000 Option
Plan and the 2004 Option Plan. Up to 2,000,000 shares,
12,000,000, and 2,500,000 shares have been reserved for issuance
under the
1999, 2000 and 2004 option plans,
respectively.
|
|
The
1999, 2000 and 2004 Option Plans granted the following stock
options to
purchase ASE Test’s shares which vest ratably over a period of five years
from the date of grant until the expiration of options, to
directors,
officers and key employees. If any granted shares are
forfeited, the shares may be granted again, to the extent
of any such
forfeiture.
|
|
The
exercise price under each of the aforementioned stock option
plans was
equal to the stock’s market price on the date of grant. Options
granted under the 1999, 2000 and 2004 Option Plans expire
5 or 10 years
after grant.
|
|
Information
regarding the option plans of ASE Test is presented
below:
|
Weighted
|
||||||||||||||||
Average
|
Weighted
|
Aggregate
|
||||||||||||||
Exercise
|
Average
|
Intrinsic
|
||||||||||||||
Number
of
|
Price
|
Grant
Date
|
Value
(In
|
|||||||||||||
Shares
|
Per
Share
|
Fair
Values
|
thousand)
|
|||||||||||||
Beginning
outstanding balance – January 1, 2006
|
10,491,064
|
10.37
|
||||||||||||||
Option
granted
|
130,000
|
9.60
|
$ |
9.60
|
||||||||||||
Option
exercised
|
(31,150 | ) |
8.07
|
|||||||||||||
Option
forfeited
|
(197,205 | ) |
11.71
|
|||||||||||||
Option
expired
|
-
|
-
|
||||||||||||||
Ending
outstanding balance - September 30, 2006
|
10,392,709
|
10.34
|
$ |
1,245
|
||||||||||||
Ending
exercisable balance – September 30, 2006
|
9,093,709
|
10.17
|
$ |
728
|
||||||||||||
Beginning
outstanding balance - January 1, 2007
|
10,325,038
|
10.34
|
||||||||||||||
Option
granted
|
-
|
-
|
$ |
-
|
||||||||||||
Option
exercised
|
(1,038,713 | ) |
7.64
|
|||||||||||||
Option
forfeited
|
(163,753 | ) |
8.30
|
|||||||||||||
Option
expired
|
-
|
|||||||||||||||
Ending
outstanding balance - September 30, 2007
|
9,122,572
|
10.52
|
$ |
39,827
|
||||||||||||
Ending
exercisable balance - September 30, 2007
|
8,372,222
|
10.42
|
$ |
37,825
|
|
As
of September 30, 2007, the number of options that are expected
to vest was
738,889.
|
|
Total
intrinsic value of options exercised for the nine months
ended September
30, 2006 and 2007 was $52 thousand and $4,170 thousand,
respectively.
|
|
Options
outstanding on September 30, 2007, the related weighted average
exercise
price and remaining contractual life information are as follows
(in U.S.
dollars):
|
Outstanding
|
Exercisable
|
||||||||||||||||||||||||
Weighted
|
Weighted
|
||||||||||||||||||||||||
Weighted
|
Average
|
Weighted
|
Average
|
||||||||||||||||||||||
Average
|
Remaining
|
Average
|
Remaining
|
||||||||||||||||||||||
Shares
|
Price
|
Life
(Years)
|
Shares
|
Price
|
Life
(Years)
|
||||||||||||||||||||
Options
with exercise price of:
|
|||||||||||||||||||||||||
$
20-$25
|
589,900
|
$ |
22.37
|
2.18
|
589,900
|
$ |
22.37
|
2.18
|
|||||||||||||||||
$
11.5-$12.95
|
2,073,950
|
12.81
|
5.94
|
1,506,650
|
12.76
|
5.84
|
|||||||||||||||||||
$
5.5-$9.79
|
6,458,722
|
8.70
|
3.59
|
6,275,672
|
8.73
|
3.48
|
|||||||||||||||||||
9,122,572
|
4.04
|
8,372,222
|
3.81
|
|
ASE
Test has used the fair value based method (based on the Black-Sholes
model) to evaluate the options granted with the following
assumptions:
|
Nine
Months
|
|||
Ended
|
|||
September
30, 2006
|
|||
Risk-free
interest rate
|
4.88%
|
||
Expected
life
|
3-5
years
|
||
Expected
volatility
|
59.95%-62.03%
|
||
Expected
dividend
|
0%
|
|
ASE
Inc.
|
|
ASE
Inc., the parent company, has two option plans, the 2002
Option Plan and
the 2004 Option Plan. The maximum number of units authorized to
be granted under the 2002 and 2004 option plan is 160 million
and 140
million, respectively, with each unit representing one share
of ASE
Inc. Under the terms of the plans, stock option rights are
granted to employees, including those of the Company, which
have an
exercise price equal to the closing price of the ASE Inc.
common stock as
per the Taiwan Stock Exchange on the date of grant, and such
exercise
price is subject to retroactive adjustment in the event of
certain capital
transactions in subsequent periods. The option rights expire
ten years from the date of grant. On the second anniversary of
the grant date, 40% of the options become vested and the
remaining options
vest ratably over a period of three years thereafter. Under the
2002 and 2004 Option Plans, 41,603,100 and 28,499,550 units
were granted,
respectively, by ASE Inc. to employees of the
Company.
|
|
Information
regarding the options issued to employees of the Company
under ASE Inc.’s
stock option plan for the Company is as follows (in U.S.
dollars):
|
Weighted
|
||||||||||||||||
Average
|
Weighted
|
Aggregate
|
||||||||||||||
Exercise
|
Average
|
Intrinsic
|
||||||||||||||
Number
of
|
Price
|
Grant
Date
|
Value
(In
|
|||||||||||||
Shares
|
Per
Share
|
Fair
Values
|
thousand)
|
|||||||||||||
Beginning
outstanding balance - January 1, 2006
|
52,926,580
|
0.60
|
||||||||||||||
Options
granted
|
-
|
-
|
$ |
-
|
||||||||||||
Options
forfeited
|
(2,405,300 | ) |
0.61
|
|||||||||||||
Options
expired
|
-
|
-
|
||||||||||||||
Options
exercised
|
(5,318,440 | ) |
0.56
|
|||||||||||||
Ending
outstanding balance - September 30, 2006
|
45,202,840
|
0.60
|
$ |
15,206
|
||||||||||||
Ending
exercisable balance - September 30, 2006
|
19,656,260
|
0.58
|
$ |
6,853
|
||||||||||||
Beginning
outstanding balance - January 1,2007
|
40,528,870
|
0.61
|
||||||||||||||
Options
granted
|
-
|
-
|
$ |
-
|
||||||||||||
Options
forfeited
|
(541,050 | ) |
0.52
|
|||||||||||||
Options
expired
|
-
|
-
|
||||||||||||||
Options
exercised
|
(9,562,080 | ) |
0.45
|
|||||||||||||
Ending
outstanding balance - September 30, 2007
|
30,425,740
|
0.51
|
$ |
18,267
|
||||||||||||
Ending
exercisable balance - September 30, 2007
|
16,924,360
|
0.48
|
$ |
10,586
|
|
As
of September 30, 2007, the number of options that are expected
to vest was
12,386,536.
|
|
Total
intrinsic value of options exercised for the nine months
ended September
30, 2006 and 2007 was $1,979 thousand and $6,254 thousand,
respectively.
|
|
The
weighted average exercise price and remaining contractual
life of the
options outstanding as of September 30, 2007 are as
follows:
|
Outstanding
|
Exercisable
|
||||||||||||||||
Shares
|
Weighted
Average
Remaining
Life
(Years)
|
Shares
|
Weighted
Average
Remaining
Life
(Years)
|
||||||||||||||
Options
with exercise price
|
|||||||||||||||||
$0
.38
|
9,921,400
|
5.2
|
7,436,900
|
5.2
|
|||||||||||||
$
0.51
|
3,907,240
|
5.9
|
2,910,160
|
5.9
|
|||||||||||||
$
0.60
|
14,656,100
|
6.7
|
6,093,300
|
6.7
|
|||||||||||||
$
0.49
|
1,941,000
|
7.6
|
484,000
|
7.6
|
|||||||||||||
30,425,740
|
6.0
|
16,924,360
|
6.0
|
|
The
2002 option plan is accounted for as a variable plan, as
a result of a
provision in the plan which would require an adjustment of
the exercise
price in accordance with a prescribed formula based on occurrence
of
certain future events. Accordingly, no adjustment is required
for purposes of the pro forma compensation expense calculated
in
accordance with U.S. SFAS No. 123 before January 1, 2006
for these
options. Upon the adoption of U.S. SFAS No. 123R, the Company
continued to account for these stock options based on its
intrinsic value,
and remeasured at each reporting date through the date of
exercise or
other settlement.
|
|
The
fair value of the option plan issued was determined using
a Black-Scholes
option pricing model with the following
assumptions:
|
Risk-free
interest rate
|
1.80%-2.50%
|
|
Expected
life
|
5
years
|
|
Expected
dividend
|
3.00%
|
|
Expected
volatility
|
47%-59%
|
e.
|
According
to U.S. SFAS No. 130 “Reporting Comprehensive Income”, the statements of
comprehensive income for the nine months ended September
30, 2006 and 2007
are presented below:
|
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2006
|
2007
|
|||||||
Net
income based on U.S. GAAP
|
$ |
88,589
|
$ |
45,408
|
||||
Translation
adjustment on subsidiaries
|
1,523
|
2,719
|
||||||
Unrealized
gain on financial instruments
|
241
|
893
|
||||||
Comprehensive
income
|
$ |
90,353
|
$ |
49,020
|
1.
|
INTRODUCTION |
We,
ANZ
Singapore Limited, act as independent financial adviser to the
independent
directors of ASE Test Limited (“
ASE Test
”) in connection
with the proposed privatisation by Advanced Semiconductor Engineering,
Inc. (“
ASE Inc.
”) of ASE Test by way of a
scheme of arrangement (the “
Scheme
”) under section 210 of
the Companies Act, Chapter 50 of Singapore and in accordance with
certain
provisions of the Singapore Code on Take-overs and Mergers (the
“
Code
”).
|
|
We
have
prepared this letter for inclusion in the scheme document to be
despatched
to shareholders of ASE Test in connection with the Scheme (the
“
Scheme Document
”).
|
|
2.
|
UNAUDITED
CONSOLIDATED INTERIM RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER
2007
|
Pursuant
to
the Code, we have examined the unaudited consolidated interim results
of
ASE Test and its subsidiaries for the nine months ended 30 September
2007
(the “
Unaudited Interim Results
”), a copy of which is set
out in Appendix G to the Scheme Document, and have discussed the
Unaudited
Interim Results with certain senior management of ASE Test who
are
responsible for their preparation. We have also considered the
review
report dated December 11, 2007 from Deloitte & Touche, the auditors of
ASE Test, addressed to the Board of Directors of ASE Test relating
to the
unaudited interim results of ASE Test and its subsidiaries for
the three
months and nine months ended 30 September 2006 and 2007. We
have relied upon the accuracy and completeness in all material
respects of
all financial and other information discussed with us and have
assumed
their accuracy and completeness in all material respects for the
purposes
of rendering this letter. Save as provided in this letter, we
do not express any other opinion on the Unaudited Interim
Results.
|
|
3.
|
REPORT
|
On
the basis
of the foregoing, we are of the view that the Unaudited Interim
Results
(for which the Directors of ASE Test are solely responsible) was
prepared
after due and careful enquiry.
|
|
4.
|
SCOPE
OF REPORT
|
We
have
provided this letter solely to you, as the Board of Directors of
ASE Test,
for the purpose of complying with Rule 25 to the Singapore Code
on
Take-overs and Mergers and for no other purpose; provided, that
a copy of
this Report may be included in its entirety in the Scheme Document
and in
any filings that ASE Test is required to make with the U.S. Securities
and
Exchange Commission (or any other filings to be specifically agreed
by us)
in connection with the Scheme. We accept no responsibility to
any other person(s) other than the Board of Directors of ASE Test
in
respect of this letter.
|
|
1.
|
INTRODUCTION
|
We,
ANZ
Singapore Limited, act as independent financial adviser to the
independent
directors of ASE Test Limited (“
ASE Test
”) in connection
with the proposed privatisation by Advanced Semiconductor Engineering,
Inc. (“
ASE Inc.
”) of ASE Test Limited by way of a scheme
of arrangement (the “
Scheme
”) under section 210 of the
Companies Act, Chapter 50 of Singapore and in accordance with certain
provisions of the Singapore Code on Take-overs and Mergers (the
“
Code
”).
|
|
We
have
prepared this Report for inclusion in the scheme document to be
despatched
to the shareholders of ASE Test in connection with the Scheme (the
“
Scheme Document
”).
|
|
2.
|
31
DECEMBER 2007 PROJECTED FINANCIAL INFORMATION
|
ASE
Test has
determined to provide ASE Test shareholders access to certain non-public
information, including a summary of certain projected financial
information for the financial year ending 31 December 2007 that
was considered by the special committee of the Board of Directors
and the
Board of Directors of ASE Test for the purposes of considering
and
evaluating the Scheme prior to entering into the scheme implementation
agreement between ASE Test and ASE Inc., dated 4 September 2007
(the
“
Projected Financial Information
”). Further information
on the reasons behind the disclosure of the Projected Financial
Information together with the bases and assumptions adopted in
developing
the Projected Financial Information is set out on pages [ ] to
[ ] of the Scheme Document. In this regard, we note that
the Projected Financial Information reflects assumptions with respect
to
industry performance, general business, competitive environment,
economic,
market and financial conditions and other matters, all of which
are
difficult to predict and are beyond ASE Test’s control. The Projected
Financial Information also reflects numerous estimates and assumptions
relating to the business of ASE Test that are inherently subject
to
economic, market, and other uncertainties, all of which are difficult
to
predict and many of which are beyond ASE Test’s
control. Furthermore, the internal financial forecasts, upon
which the Projected Financial Information is based, are subjective
in many
respects. As a result, there can be no assurance that the
projected results will be realized or that actual results will
not be
significantly higher or lower than projected.
|
|
We
have
examined the Projected Financial Information and have discussed
the bases
and assumptions underlying the preparation of the Projected Financial
Information with certain senior management of ASE Test who are
responsible
for its preparation. We have also considered the review report
and letter each dated December 11, 2007, and November 8,
2007, respectively, from Deloitte & Touche, the auditors of ASE Test,
addressed to the Board of Directors of ASE Test relating to certain
unaudited interim results of ASE Test and its subsidiaries for
the three
months and nine months ended 30 September 2006 and 2007 and the
Projected
Financial Information, respectively. We have relied upon the
accuracy and completeness of the bases and commercial assumptions
underlying the Projected Financial
|
|
Information
and other information discussed with us and have assumed such accuracy
and
completeness for the purposes of rendering this Report.
|
|
3.
|
REPORT
|
On
the basis
of the foregoing, we are of the view that the Projected Financial
Information (for which the Directors of ASE Test are solely responsible)
was prepared and made after due and careful enquiry.
|
|
4.
|
SCOPE
OF REPORT
|
We
have
provided this Report solely to you, as the Board of Directors of
ASE Test,
in compliance with Rule 25.6 to the Singapore Code on Take-overs
and
Mergers and for no other purpose; provided, that a copy of this
Report may
be included in its entirety in the Scheme Document and in any filings
that
ASE Test is required to make with the U.S. Securities and Exchange
Commission (or any other filings to be specifically agreed by us)
in
connection with the Scheme.
|
|
We
accept no
responsibility to any other person(s) other than the Board of Directors
of
ASE Test in respect of this Report.
|
(A)
|
Valuation
multiples of broadly comparable companies of ASE
Test;
|
(B)
|
Transaction
multiples implied by the privatization of United Test and Assembly
Center
Ltd. (“
UTAC
”) by Affinity Equity Partners and TPG
Capital;
|
(C)
|
Selected
precedent completed and pending privatizations of companies listed
on the
NASDAQ;
|
(D)
|
Price
performance of the ASE Test shares;
and
|
(E)
|
Other
considerations.
|
(i)
|
Enterprise
Value (“
EV
”) to
Earnings
Before Interest, Taxes,
Depreciation and Amortisation
(“
EBITDA
”) for the
last twelve months and normalized by eliminating non-recurring
items
(“
EV /
LTM EBITDA
”). EV is calculated by
adding short- and long-term debt to the sum of the market value
of common
equity, intrinsic value of all in-the-money stock options and the
book
value of any minority interest, and subtracting cash and cash equivalents,
including marketable securities;
|
(ii)
|
EV
to Earnings
Before Interest and Taxes (“
EBIT
”)
for
the last twelve
months and normalized by eliminating non-recurring items (“
EV
/
LTM
EBIT
”);
|
(iii)
|
Price
to
Earnings Per Share Ratio for the last twelve months and normalized
by
eliminating non-recurring items (“
LTM
PER
”);
|
(iv)
|
EV
to
consensus EBITDA estimates for fiscal year 2007 (“
E
V
/ FY07E
EBITDA
”)
;
|
(v)
|
EV
to
consensus EBIT estimates for fiscal year 2007 (“
E
V
/ FY07E
EBIT
”)
;
|
(vi)
|
Consensus
PER
estimates for fiscal year 2007 (“
FY07E
PER
”)
;
and
|
(vii)
|
Price
to Net
Tangible Assets per Share (“
Price /
NTA
”).
|
(1)
|
Market
capitalization calculated based on the closing price as at the
Latest
Practicable Date and diluted shares outstanding (treasury method).
ASE
Test’s market capitalization is calculated based on the Scheme
Consideration and diluted shares outstanding (treasury
method).
|
(2)
|
Market
capitalization and enterprise values have been converted to US$
based on
the relevant spot exchange rates as at the Latest Practicable
Date.
|
(3)
|
LTM
EBITDA,
LTM EBIT, LTM PER and Price / NTA based on latest 12-month results
sourced
from the latest available quarterly and annual reports and have
been
normalized to eliminate non-recurring
items.
|
(4)
|
FY07E
EBITDA,
FY07E EBIT and FY07E PER are based on Bloomberg Consensus Earnings
Estimates.
|
(5)
|
Siliconware
Precision Industries Co. Ltd. and King Yuan Electronics Co. Ltd.
are based
on financial statements for 12 months ended 30 June
2007.
|
(6)
|
LTM
and FY07E
EBITDA, EBIT and Net Income for ASE Inc., Siliconware Precision
Industries
Co. Ltd and ChipMOS Technologies (Bermuda) Ltd have been adjusted
for
employee option expense, estimated based on respective companies’ FY06
annual reports, in order to align with US
GAAP.
|
(7)
|
ASE
Test’s EV
is calculated based on the Scheme Consideration and includes 30
per cent.
of ASE Korea’s debt and cash, and the value of ASE Test’s shareholding in
ASE Inc. which was treated as marketable securities and was calculated
at
a 3 per cent. discount to the market price of ASE Inc. common shares
as of
the Latest Practicable Date. ASE Test’s LTM and FY07E EBITDA, EBIT and Net
Income include ASE Test’s 30 per cent. share of ASE Korea and has been
adjusted for employee option expense, based on estimates of ASE
Test’s management.
|
1.
|
the
EV / LTM
EBITDA and EV / FY07E EBITDA of ASE Test exceed both the mean and
median
EV / LTM EBITDA and EV / FY07E EBITDA multiples of the selected
broadly
comparable medium capitalization
companies;
|
2.
|
the
EV / LTM
EBIT and EV / FY07E EBIT of ASE Test exceed both the mean and median
EV /
LTM EBIT and EV / FY07E EBIT multiples of the selected broadly
comparable
medium capitalization companies;
|
3.
|
the
LTM PER
and FY07E PER of ASE Test exceed both the mean and median LTM PER
and
FY07E PER multiples of the selected broadly comparable medium
capitalization companies; and
|
4.
|
the
Price /
NTA of ASE Test exceeds both the mean and median Price / NTA of
the
selected broadly comparable medium capitalization
companies.
|
(1)
|
UTAC’s
market
capitalization is sourced from UTAC’s Scheme Document. ASE Test’s market
capitalization is calculated based on the Scheme Consideration
and diluted
shares outstanding (treasury
method).
|
(2)
|
LTM
EBITDA,
LTM EBIT, LTM PER and Price / NTA based on latest 12-month results
sourced
from the latest available quarterly and annual reports and have
been
normalized to eliminate non-recurring
items.
|
(3)
|
FY07E
EBITDA,
FY07E EBIT and FY07E PER are based on Bloomberg Consensus Earnings
Estimates.
|
(4)
|
ASE
Test’s EV
is calculated based on the Scheme Consideration and includes 30
per cent.
of ASE Korea’s debt and cash, and the value of ASE Test’s shareholding in
ASE Inc. which was treated as marketable securities and was calculated
at
a 3 per cent. discount to the market price of ASE Inc. common shares
as of
the Latest Practicable Date. ASE Test’s LTM and FY07E EBITDA,
EBIT and Net Income include ASE Test’s 30 per cent. share of ASE Korea and
adjusted for employee option expense, based on estimates of ASE
Test’s
management.
|
1.
|
the
EV / LTM
EBITDA and EV / FY07E EBITDA of ASE Test are marginally below the
EV / LTM
EBITDA and EV / FY07E EBITDA multiples of the privatization of
UTAC;
|
2.
|
the
EV / LTM
EBIT and EV / FY07E EBIT of ASE Test are marginally below the EV
/ LTM
EBIT and EV / FY07E EBIT multiples of the privatization of
UTAC;
|
3.
|
the
LTM PER of
ASE Test is marginally below the LTM PER multiple of the privatization
of
UTAC but the FY07E PER of ASE Test exceeds the FY07E PER multiple
of the
privatization of UTAC; and
|
4.
|
the
Price /
NTA of ASE Test is below the Price / NTA multiple of the UTAC
privatization.
|
(1)
|
Offer
price
based on the final bid price per
share.
|
(2)
|
Last
traded
price before the announcement date of the
transaction.
|
(3)
|
Average
price
of shares traded during the specified number of trading days prior
to
announcement date of the transaction calculated using
Bloomberg;
|
(4)
|
Outcome
of
transaction pending as at the Latest Practicable
Date.
|
(i)
|
exceed
the
mean and median premia over the last traded price prior to the
respective
announcement date for the selected privatization
transactions;
|
(ii)
|
exceed
the
mean and median premia over the 7-day average price for the selected
privatization transactions;
|
(iii)
|
exceed
the
mean and median premia over the 30-day average price for the selected
privatization transactions; and
|
(iv)
|
is
below the
mean and median premia over the 90-day average price for the selected
privatization transactions.
|
(1)
|
31
Oct 06: ASE
Test released 3Q06 results.
|
(2)
|
24
Nov 06:
Announcement of The Carlyle Group intending to acquire related
company ASE
Inc..
|
(3)
|
14
Feb 06: ASE
Test releases FY06 results (US GAAP), net income of US$117.3m,
compared to
net loss of US$35.4m in FY05.
|
(4)
|
17
Apr 07:
Announcement of The Carlyle Group terminating its acquisition bid
for ASE
Inc..
|
(5)
|
19
Apr 07:
News article claiming 4 private equity firms expressed interest
in
acquiring ASE Inc.. Source: Commercial
Times.
|
(6)
|
26
Apr 07: ASE
Test released 1Q07 results; net income (US GAAP) declined 52 per
cent.
from the previous corresponding
period.
|
(7)
|
24
Jul 07:
Revelations of significant defaulting sub-prime loans in the United
States.
|
(8)
|
4
Aug 07: ASE
Test released 2Q07 results; net income (US GAAP) declined 54 per
cent.
from the previous corresponding
period.
|
(9)
|
4
Sep 07:
Joint Announcement Date.
|
(1)
|
Based
on
101,028,341 ASE Test Shares outstanding as at the Joint Announcement
Date.
Free float excludes ASE Inc.’s shareholding of 50,985,143 ASE Test Shares
and the shareholdings of directors of ASE Test and ASE Inc. of
1,450,032
ASE Test Shares as at the Joint Announcement
Date.
|
(1)
|
Based
on
101,028,341 ASE Test Shares outstanding as at the Joint Announcement
Date.
Free float excludes ASE Inc.’s shareholding of 50,985,143 ASE Test Shares
and the shareholdings of Affiliated Directors of 1,450,032 ASE
Test Shares
as at the Joint Announcement Date.
|
(1)
|
Based
on the
1:80 ordinary share / TDS ratio and exchange rate of US$1:NT$[32.41]
as at
the Latest Practicable Date.
|
(2)
|
VWAP
is based
on the daily volume and closing price of the relevant instrument
for the
specified number of trading days.
|
(1)
|
Based
on
closing share prices.
|
(2)
|
Companies
within the Comparables Index include ASE Inc., Siliconware Precision
Industries Co. Ltd, Amkor Technology Inc, STATS ChipPAC Ltd, Powertech
Technologies Inc, King Yuan Electronics Co. Ltd, Greatek Electronics
Inc,
ChipMOS Technologies (Bermuda) Ltd. Each company is weighted based
on its
daily market capitalization in the Comparables
Index.
|
(i)
|
ASE
Test’s EV
/ LTM EBITDA and EV / FY07E EBITDA as implied by the Scheme Consideration
exceed both the mean and median EV / LTM EBITDA and EV / FY07E
EBITDA
multiples of the selected broadly comparable medium capitalization
companies;
|
(ii)
|
ASE
Test’s EV
/ LTM EBIT and EV / FY07E EBIT as implied by the Scheme Consideration
exceed both the mean and median EV / LTM EBIT and EV / FY07E EBIT
multiples of the selected broadly comparable medium capitalization
companies;
|
(iii)
|
ASE
Test’s LTM
PER and FY07E PER as implied by the Scheme Consideration exceed
both the
mean and median LTM PER and FY07E PER multiples of the selected
broadly comparable medium capitalization
companies;
|
(iv)
|
ASE
Test’s
Price / NTA as implied by the Scheme Consideration exceeds both
the mean
and median Price / NTA multiples of the selected broadly comparable
medium
capitalization companies;
|
(v)
|
the
price of
ASE Test NASDAQ Shares for the 12 month period prior to the Joint
Announcement Date up to 31 August 2007, the last full trading day
of ASE
Test NASDAQ Shares on the NASDAQ prior to the Joint Announcement
Date, had
outperformed against the NASDAQ Composite and the Semiconductor
Index, and
underperformed against the Comparables Index. Following the announcement
of the Scheme we also note that the price of ASE Test NASDAQ Shares
for
the 12 month period prior to the Joint Announcement Date up to
the Latest
Practicable Date, had outperformed against the NASDAQ Composite,
the
Semiconductor Index and the Comparables
Index;
|
(vi)
|
the
Scheme
Consideration represents a 25.6 per cent. premium to the last transacted
price of ASE Test NASDAQ Shares on the NASDAQ of US$11.77 as of
August 31,
2007, the last full trading day of ASE Test NASDAQ Shares on the
NASDAQ
prior to the Joint Announcement Date. It is also a premium to the
VWAP on
ASE Test NASDAQ Shares over the 30-day, 60-day, 90-day and 180-day
periods
preceding the Joint Announcement Date, except in the case of ASE
Test TDSs
where the Scheme Consideration represents a small discount to the
VWAP
over the 60-day and 90-day periods per ASE Test
TDSs;
|
(vii)
|
the
premium
implied by the Scheme Consideration, exceeds the mean and median
of the
premia to the last traded price before the respective announcement
dates
and the 7-day, 30-day average prices of the selected privatizations
but is
below the mean and median of the premia to the 90-day average prices
of
such selected privatizations;
|
(viii)
|
the
valuation
multiples implied by the Scheme Consideration may be considered
to be
generally comparable to the transaction multiples implied by the
privatization of UTAC;
|
(ix)
|
the
trading
volumes of ASE Test Shares appear to be relatively low;
and
|
(x)
|
as
of the
Latest Practicable Date, there is no publicly available evidence
of an
alternative offer for ASE Test Shares from any third party for
a
consideration that is above the terms of the Scheme as proposed
by ASE
Inc.,;
|
Bill
Foo
|
Glenn
Porritt
|
Managing
Director
|
Director
|
(a)
|
Rights
in respect of voting
|
|
“53.
|
No
business shall be transacted at any General Meeting unless a quorum
is
present at the time when the meeting proceeds to business. Save
as herein otherwise provided, the quorum at any General Meeting
shall be
members holding in aggregate not less than 33 1/3 per cent. of
the total
issued and fully paid shares in the capital of the Company for
the time
being, present in person or by proxy. For the purpose of this
Article, “Member” includes a person attending by proxy or by attorney or
as representing a corporation which is a
Member.
|
|
63.
|
Subject
and without prejudice to any special privileges or restrictions
as to
voting for the time being attached to any special class of shares
for the
time being forming part of the capital of the Company each member
entitled
to vote may vote in person or by proxy. On a show of hands
every member who is present in person and each proxy shall have
one vote
and on a poll, every member who is present in person or by proxy
shall
have one vote for every share which he holds or
represents.
|
|
64.
|
In
the case of joint holders of a share the vote of the senior who
tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion
of
the votes of the other joint holders and for this purpose seniority
shall
be determined by the order in which the names stand in the Register
of
Members in respect of the share.
|
|
65.
|
Where
in Singapore or elsewhere a receiver or other person (by whatever
name
called) has been appointed by any court claiming jurisdiction in
that
behalf to exercise powers with respect to the property or affairs
of any
member on the ground (however formulated) of mental disorder, the
Directors may in their absolute discretion, upon or subject to
production
of such evidence of the appointment as the Directors may require,
permit
such receiver or other person on behalf of such member to vote
in person
or by proxy at any General Meeting or to exercise any other right
conferred by membership in relation to meetings of the
Company.
|
|
66.
|
No
member shall, unless the Directors otherwise determine, be entitled
in
respect of shares held by him to vote at a General Meeting either
personally or by proxy or to exercise any other right conferred
by
membership in relation to meetings of the Company if any call or
other sum
presently payable by him to the Company in respect of such shares
remains
unpaid.
|
|
67.
|
No
objection shall be raised as to the admissibility of any vote except
at
the meeting or adjourned meeting at which the vote objected to
is or may
be given or tendered and every vote not disallowed at such meeting
shall
be valid for all purposes. Any such objection shall be referred
to the chairman of the meeting whose decision shall be final and
conclusive.
|
|
68.
|
On
a
poll, votes may be given either personally or by proxy and a person
entitled to more than one vote need not use all his votes or cast
all the
votes he uses in the same way.
|
|
69.
|
(A)
|
A
member may appoint any number of proxies to attend and vote at
the same
General Meeting.
|
|
|
(B)
|
The
Company shall be entitled and bound, in determining rights to vote
and
other matters in respect of a completed instrument or proxy submitted
to
it, to have regard to the instructions (if any) given by and the
notes (if
any) set out in the instrument of
proxy.
|
|
|
(C)
|
In
any case where a form of proxy appoints more than one proxy, the
proportion of the shareholding concerned to be represented by each
proxy
shall be specified in the form of
proxy.
|
|
|
(D)
|
A
proxy need not be a member of the
Company.
|
|
70.
|
(A)
|
An
instrument appointing a proxy shall be in writing in any usual
or common
form or in any other form which the Directors may approve
and:-
|
|
|
(a)
|
in
the case of an individual shall be signed by the appointor or his
attorney; and
|
|
|
(b)
|
in
the case of a corporation shall be either given under its common
seal or
signed on its behalf by an attorney or a duly authorised officer
of the
corporation.
|
|
|
(B)
|
The signature on such instrument need not be witnessed. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy pursuant to the next following Article, failing which the instrument may be treated as invalid. |
|
71.
|
An
instrument appointing a proxy must be left at such place or one
of such
places (if any) as may be specified for that purpose in or by way
of note
to or in any document accompanying the notice convening the meeting
(or,
if no place is so specified, at the Office) not less than forty-eight
hours before the time appointed for the holding of the meeting
or
adjourned meeting or (in the case of a poll taken otherwise than
at or on
the same day as the meeting or adjourned meeting) for the taking
of the
poll at which it is to be used, and in default shall not be treated
as
valid. The instrument shall, unless the contrary is stated
thereon, be valid as well for any adjournment of the meeting as
for the
meeting to which it relates; Provided that an instrument of proxy
relating
to more than one meeting (including any adjournment thereof) having
once
been so delivered for the purposes of any meeting shall not require
again
to be delivered for the purposes of any subsequent meeting to which
it
relates.
|
|
72.
|
An
instrument appointing a proxy shall be deemed to include the right
to
demand or join in demanding a poll, to move any resolution or amendment
thereto and to speak at the
meeting.
|
|
73.
|
A
vote cast by proxy shall not be invalidated by the previous death
or
insanity of the principal or by the revocation of the appointment
of the
proxy or of the authority under which the appointment was made
provided
that no intimation in writing of such death, insanity or revocation
shall
have been received by the Company at the Office at least one hour
before
the commencement of the meeting or adjourned meeting or (in the
case of a
poll taken otherwise that at or on the same day as the meeting
or
adjourned meeting) the time appointed for the taking of the poll
at which
the vote is cast.
|
|
74.
|
Any
corporation which is a member of the Company may by resolution
of its
directors or other governing body authorise such person as it thinks
fit
to act as its representative at any meeting of the Company or of
any class
of members of the Company. The person so authorised shall be
entitled to exercise the same powers on behalf of such corporation
as the
corporation could exercise if it were an individual member of the
Company
and such corporation shall for the purposes of these presents be
deemed to
be present in person at any such meeting if a person so authorised
is
present thereat”.
|
(b)
|
Rights
in respect of Dividends
|
|
“119.
|
The
Company may by Ordinary Resolution declare dividends but no such
dividend
shall exceed the amount recommended by the
Directors.
|
|
120.
|
If
and so far as in the opinion of the Directors the profits of the
Company
justify such payments, the Directors may declare and pay the fixed
dividends on any class of shares carrying a fixed dividend expressed
to be
payable on fixed dates on the half-yearly or other dates prescribed
for
the payment thereof and may also from time to time declare and
pay interim
dividends on shares of any class of such amounts and on such dates
and in
respect of such periods as they think
fit.
|
|
121.
|
Unless
and to the extend that the rights attached to any shares or the
terms of
issue thereof otherwise provide, all dividends shall (as regards
any
shares not fully paid throughout the period in respect of which
the
dividend is paid) be apportioned and paid pro rata according to
the
amounts paid on the shares during any portion or portions of the
period in
respect of which the dividend is paid. For the purposes of this
Article no amount paid on a share in advance of calls shall be
treated as
paid on the share.
|
|
122.
|
No
dividend shall be paid otherwise than out of profits available
for
distribution under the provisions of the
Statutes.
|
|
123.
|
No
dividend or other moneys payable on or in respect of a share shall
bear
interest as against the Company.
|
|
124.
|
(A)
|
The
Directors may retain any dividend or other moneys payable on or
in respect
of a share on which the Company has a lien and may apply the same
in or
towards satisfaction of the debts, liabilities or engagements in
respect
of which the lien exists.
|
|
|
(B)
|
The
Directors may retain the dividends payable upon shares in respect
of which
any person is under the provisions as to the transmission of shares
hereinbefore contained entitled to become a member, or which any
person is
under those provisions entitled to transfer, until such person
shall
become a member in respect of such shares or shall transfer the
same.
|
|
125.
|
The
waiver in whole or in part of any dividend on any share by any
document
(whether or not under seal) shall be effective only if such document
is
signed by the shareholder (of the person entitled to the share
in
consequence of the death or bankruptcy of the holder) and delivered
to the
Company and if or to the extent that the same is accepted as such
or acted
upon by the Company.
|
|
126.
|
The
Company may upon the recommendation of the Directors by Ordinary
Resolution direct payment of a dividend in whole or in part by
the
distribution of specific assets (and in particular of paid-up shares
or
debentures of any other company) and the Directors shall give effect
to
such resolution. Where any difficulty arises in regard to such
distribution, the Directors may settle the same as they think expedient
and in particular may issue fractional certificates, may fix the
value for
distribution of such specific assets or any part thereof, may determine
that cash payments shall be made to any members upon the footing
of the
value so fixed in order to adjust the rights of all parties and
may vest
any such specific assets in trustees as may seem expedient to the
Directors.
|
|
127.
|
Any
dividend or other moneys payable in cash on or in respect of a
share may
be paid by cheque or warrant sent through the post to the registered
address of a member or person entitled thereto (or, if two or more
persons
are registered as joint holders of the share or are entitled thereto
in
consequence of the death or bankruptcy of the holder, to any one
of such
persons) or to such person at such address as such member or person
or
persons may by writing direct. Every such cheque or warrant
shall be made payable to the order of the person to whom it is
sent or to
such person as the holder or joint holders or person or persons
entitled
to the share in consequence of the death or bankruptcy of the holder
may
direct and payment of the cheque or warrant by the banker upon
whom it is
drawn shall be a good discharge to the Company. Every such
cheque or warrant shall be sent at the risk of the person entitled
to the
money represented thereby.
|
|
128.
|
If
two or more persons are registered as joint holders of any share,
or are
entitled jointly to a share in consequence of the death or bankruptcy
of
the holder, any one of them may give effectual receipts for any
dividend
or other moneys payable or property distributable on or in respect
of the
share.
|
|
129.
|
Any
resolution declaring a dividend on shares of any class, whether
a
resolution of the Company in General Meeting or a resolution of
the
Directors, may specify that the same shall be payable to the persons
registered as the holders of such shares at the close of business
on a
particular date and thereupon the dividend shall be payable to
them in
accordance with their respective holdings so registered, but without
prejudice to the rights inter se in respect of such dividend of
transferors and transferees of any such
shares.
|
|
130.
|
The
payment by the Directors of any unclaimed dividends or other moneys
payable on or in respect of a share into a separate account shall
not
constitute the Company a trustee in respect thereof. All
dividends unclaimed after being declared may be invested or otherwise
made
use of by the Directors for the benefit of the Company and any
dividend
unclaimed after a period of six years from the date of declaration
of such
dividend may be forfeited and if so shall revert to the Company
but the
Directors may at any time thereafter at their absolute discretion
annul
any such forfeiture and pay the dividend so forfeited to the person
entitled thereto prior to the
forfeiture.
|
|
131.
|
A
transfer of shares shall not pass the right to any dividend declared
on
such shares before the registration of the
transfer”.
|
(c)
|
Rights
in respect of Capital
|
|
“4.
|
Save
as provided in Section 161 of the Act, no shares may be issued
by the
Directors without the prior approval of the Company in General
Meeting but
subject thereto and to the
|
|
5.
|
(A)
|
Whenever
the share capital of the Company is divided into different classes
of
shares, the special rights attached to any class may, subject to
the
provisions of the Statutes, be varied or abrogated either with
the consent
in writing of the holders of three-quarters in nominal value of
the issued
shares of the class or with the sanction of a Special Resolution
passed at
a separate General Meeting of the holders of the shares of the
class (but
not otherwise) and may be so varied or abrogated either whilst
the Company
is a going concern or during or in contemplation of a
winding-up. To every such separate General Meeting all the
provisions of these presents relating to the General Meetings of
the
Company and to the proceedings thereat shall mutatis mutandis apply,
except that the necessary quorum shall be two persons at least
holding or
representing by proxy at least one-third in nominal value of the
issued
shares of the class and that any holder of shares of the class
present in
person or by proxy may demand a poll and that every such holder
shall on a
poll have one vote for every share of the class held by him, Provided
always that where necessary majority for such a Special Resolution
is not
obtained at such General Meeting, consent in writing if obtained
from the
holders of three-quarters in nominal value of the issued shares
of the
class concerned within two months of such General Meeting shall
be as
valid and effectual as a Special Resolution carried at such General
Meeting. The foregoing provisions of this Article shall apply
to the variation or abrogation of the special rights attached to
some only
of the shares of any class as if each group of shares of the class
differently treated formed a separate class the special rights
whereof are
to be varied.
|
|
|
(B)
|
The
special rights attached to any class of shares having preferential
rights
shall not unless otherwise expressly provided by the terms of issue
thereof be deemed to be varied by the creation or issue of further
shares
ranking as regards participation in the profits or assets of the
Company
in some or all respects pari passu therewith but in no respect
in priority
thereto.
|
|
6.
|
The
Company may from time to time by Ordinary Resolution, whether all
the
shares from the time being authorised shall have been issued or
all the
shares for the time being issued shall have been fully paid-up
or not,
increase its capital by such sum to be divided into shares of such
amounts
as the resolution shall prescribe.
|
|
7.
|
Except
so far as otherwise provided by the conditions of issue or by these
presents, all new shares shall be subject to the provisions of
the
Statutes and of these presents with reference to allotment, payment
of
calls, lien, transfer, transmission, forfeiture and
otherwise.
|
8.
|
The
Company may by Ordinary
Resolution:-
|
|
9.
|
The
Company may reduce its share capital or any capital redemption
reserve
fund, share premium account or other undistributable reserve in
any manner
and with and subject to any incident authorised and consent required
by
law.
|
|
20.
|
The
Directors may from time to time make calls upon the members in
respect of
any moneys unpaid on their shares (whether on account of the nominal
value
of the shares or, when permitted, by way of a premium) but subject
always
to the terms of issue of such shares. A call shall be deemed to
have been made at the time when the resolution of the Directors
authorising the call was passed and may be made payable by
installments.
|
|
21.
|
Each
member shall (subject to receiving at least 14 days’ notice specifying the
time or times and place of payment) pay to the Company at the time
or
times and place so specified the amount called on his
shares. The joint holders of a share shall be jointly and
severally liable to pay all calls in respect thereof. A call
may be revoked or postponed as the Directors may
determine.
|
|
22.
|
If
a
sum called in respect of a share is not paid before or on the day
appointed for payment thereof, the person from whom the sum is
due shall
pay interest on the sum from the day appointed for payment thereof
to the
time of actual payment at such rate (not exceeding ten per cent.
per
annum) as the Directors determine but the Directors shall be at
liberty in
any case or cases to waive payment of such interest wholly or in
part.
|
|
23.
|
Any
sum (whether on account of the nominal value of the share or by
way of
premium) which by the terms of issue of a share becomes payable
upon
allotment or at any fixed date shall for all the purposes of these
presents be deemed to be a call duly made and payable on the date
on which
by the terms of issue the same becomes payable. In case of
non-payment all the relevant provisions of these presents as to
payment of
interest and expenses, forfeiture or otherwise shall apply as if
such sum
had become payable by virtue of a call duly made and
notified.
|
|
24.
|
The
Directors may on the issue of shares differentiate between the
holders as
to the amount of calls to be paid and the time of
payment.
|
|
25.
|
The
Directors may, if they think fit, receive from any member willing
to
advance the same all or any part of the moneys (whether on account
of the
nominal value of the shares or by way
of
|
|
26.
|
If
a
member fails to pay in full any call or instalment of a call on
the due
date for payment thereof, the Directors may at any time thereafter
serve a
notice on him requiring payment of so much of the call or instalment
as is
unpaid together with any interest which may be accrued thereon
and any
expenses incurred by the Company by reason of such
non-payment.
|
|
27.
|
The
notice shall name a further day (not being less than fourteen days
from
the date of service of notice) on or before which and the place
where the
payment required by the notice is to be made, and shall state that
in the
event of non-payment in accordance therewith the shares on which
the call
has been made will be liable to be
forfeited.
|
|
28.
|
If
the requirements of any such notice as aforesaid are not complied
with,
any share in respect of which such notice has been given may at
any time
thereafter, before payment of all calls and interest and expenses
due in
respect thereof has been made, be forfeited by a resolution of
the
Directors to that effect. Such forfeiture shall include all
dividends declared in respect of the forfeited share and not actually
paid
before forfeiture. The Directors may accept a surrender of any
share liable to be forfeited
hereunder.
|
|
29.
|
A
share so forfeited or surrendered shall become the property of
the Company
and may be sold, re-allotted or otherwise disposed of either to
the person
who was before such forfeiture or surrender the holder thereof
or entitled
thereto or to any other person upon such terms and in such manner
as the
Directors shall think fit and at any time before a sale, re-allotment
or
disposition the forfeiture or surrender may be cancelled on such
terms as
the Directors think fit. The Directors may, if necessary,
authorize some person to transfer or effect the transfer of a forfeited
or
surrendered share to any such other person as
aforesaid.
|
|
30.
|
A
member whose shares have been forfeited or surrendered shall cease
to be a
member in respect of the shares but shall notwithstanding the forfeiture
or surrender remain liable to pay to the Company all moneys which
at the
date of forfeiture or surrender were presently payable by him to
the
Company in respect of the shares with interest thereon at ten per
cent.
per annum (or such lower rate as the Directors may determine) from
the
date of forfeiture or surrender until payment and the Directors
may at
their absolute discretion enforce payment without any allowance
for the
value of the shares at that time of forfeiture or surrender or
waive
payment in whole or in part.
|
|
31.
|
The
Company shall have a first and paramount lien and charge on every
share
(not being a fully paid share) and on all dividends declared or
payable in
respect thereof for all moneys (whether presently payable or
not) called or payable at a fixed time in respect of such share
and for all moneys as the Company may be called upon by law to
pay in
respect of the shares of the member or deceased member. The
Directors may waive any lien which has arisen and may resolve any
share
shall for some limited period be exempt wholly or partially from
the
provisions of this Article.
|
|
32.
|
The
Company may sell in such manner as the Directors think fit any
share on
which the Company has a lien, but no sale shall be made unless
some sum in
respect of which the lien
|
|
33.
|
The
net proceeds of such sale after payment of the costs of such sale
shall be
applied in or towards payment or satisfaction of the debts or liabilities
and any residue shall (subject to a like lien for sums not presently
payable as existed upon the shares before the sale) be paid to
the person
entitled to the shares at the time of the sale or to his executors,
administrators or assigns, as he may
direct.
|
|
34.
|
A
statutory declaration in writing that the declarant is a Director
or the
Secretary of the Company and that a share has been duly forfeited
or
surrendered or sold to satisfy a lien of the Company on a date
stated in
the declaration shall be conclusive evidence of the facts therein
stated
as against all persons claiming to be entitled to the
share. Such declaration and the receipt of the Company for the
consideration (if any) given for the share of the sale, re-allotment
or
disposal thereof together (where the same be required) with the
share
certificate delivered to a purchaser or allottee thereof shall
(subject to
the execution of a transfer if the same be required) constitute
a good
title to the share and the share shall be registered in the name
of the
person to whom the share is sold, re-allotted or disposed
of. Such person shall not be bound to see to the application of
the purchase money (if any) nor shall his title to the share be
affected
by any irregularity or invalidity in the proceedings relating to
the
forfeiture, surrender, sale, re-allotment or disposal of the
share.
|
|
118.
|
The
Directors may from time to time set aside out of the profits of
the
Company and carry to reserve such sums as they think proper which,
at the
discretion of the Directors, shall be applicable for any propose
to which
the profits may properly be applied and pending such application
may
either be employed in the business of the Company or be invested.
The
Directors may divide the reserve into such special funds as they
think fit
and may consolidate into one fund any special funds or any parts
of the
special funds into which the reserve may be divided. The Directors
may
also, without placing the same to reserve, carry forward any profits.
In
carrying sums to reserve and in applying the same the Directors
shall
comply with the provisions of the
Statutes.
|
|
132.
|
The
Directors may, with the sanction of an Ordinary Resolution of the
Company,
capitalise any sum standing to the credit of an of the Company’s reserve
accounts (including Share Premium Account, Capital Redemption Reserve
Fund
or other undistributable reserve) or any sum standing to the credit
of
profit and loss account by appropriating such sum to the holders
of shares
in the Register of Members at the close of business on the date
of the
Resolution (or such other date as may be specified therein or determined
as therein provided) in proportion to their then holdings of
shares and applying such sum on their behalf in paying up in full
unissued
shares (or, subject to any special rights previously conferred
on any
shares or class of shares for the time being issued, unissued shares
of
any other class not being redeemable shares) for allotment and
distribution credited as fully paid up to and amongst them as bonus
shares
in the proportion aforesaid. The Directors may do all acts and
things
considered necessary or expedient to give effect to any such
capitalisation, with full power to the Directors to make such provisions
as they think fit for any fractional entitlements which would arise
on the
basis aforesaid (including provisions whereby fractional entitlements
are
|
|
146.
|
The
Directors shall have power in the name and on behalf of the Company
to
present a petition to the court for the Company to be wound
up.
|
|
147.
|
If
the Company shall be wound up (whether the liquidation is voluntary,
under
supervision, or by the court) the Liquidator may, with the authority
of a
Special Resolution, divide among the members in specie or kind
the whole
or any part of the assets of the Company and whether or not the
assets
shall consist of property of one kind or shall consist of properties
of
different kinds, and may for such purpose set such value as he
deems fair
upon any one or more class or classes of property and may determine
how
such division shall be carried out as between the members of different
classes of members. The Liquidator may, with the like authority,
vest any
part of the assets in trustees upon such trusts for the benefit
of members
as the Liquidator with the like authority shall think fit, and
the
liquidation of the Company may be closed and the Company dissolved,
but so
that no contributory shall be compelled to accept any shares or
other
property in respect of which there is a
liability”.
|
1.
|
Commitment
Terms
Citibank,
N.A., Taipei Branch ("
Citibank
") is pleased to inform you
of Citibank's commitment to provide the entire amount of the Facility,
and
Citigroup Global Markets Asia Limited (“
CGMAL
”) is
pleased to inform you of its agreement to act as arranger of the
Facility,
in each case subject to the terms and conditions described in this
letter
and the attached Annex I. This letter, the fee letter (if any,
entered
into between ASE Inc and Citibank in respect of the fees for the
Facility,
the "
Fee Letter
") and Annex I are referred to
collectively as the "
Documents
". Citibank and CGMAL are
together referred to as “
Citi
”.
|
|
2.
|
Conditions
Precedent
Citi’s
commitment and agreement hereunder are subject to:
|
|
(i)
|
the
preparation and execution of mutually acceptable facility documentation
(the “
Facility Documentation
”) including a credit
agreement incorporating, inter alia, substantially the terms and
conditions outlined in Annex I and the absence of any event which
would
entitle ASE Inc to be relieved of its purchase obligation under
the scheme
or arrangement or any document (including the Offer Document) effecting
the purchase obligation of ASE Inc in connection with the Acquisition
and
the absence of any event which would entitle ASE Inc to revoke
its offer
under the Offer Document;
|
|
(ii)
|
the
accuracy
and completeness of all representations that you (or your advisors)
make
to us and all information that you (or your advisors) furnish to
us in
respect of the Acquisition and your compliance with the terms of
the
Documents;
|
|
(iii)
|
the
payment in
full of all fees, expenses and other amounts payable under the
Documents;
|
|
(iv)
|
your
granting
Citi (for its benefit or the benefit of its nominated affiliate)
the
option (the "
Option
") to act (in its discretion) in each
or any of the following roles: sole book runner, sole lead
manager, placing agent, sole arranger and/or in a similar capacity
on a
sole basis (as the case may be) in connection with any and each
refinancing or partial refinancing/a refinancing (each a
"
Refinancing
") of the Facility by way of each or any of a
capital markets issue, equity issue (other than that which is already
the
subject of a separate mandate between the Borrower and an affiliate
of
Citi acting as financial advisor of the Borrower), syndicated loan
or
otherwise which takes or is to take place at any time in the 60
months
(the "
Relevant Period
") from the date herein, such option
to be capable of exercise by Citibank
|
|
or
any
affiliate thereof. The Option shall apply to and is capable of
exercise separately in relation to any and each Refinancing and
shall be
deemed to have been granted upon your written acceptance of this
commitment letter ;and
|
||
(v)
|
your
granting
Citi (for the benefit of it/its nominated affiliate) the first
right of
refusal for the relevant derivatives transaction in connection
with the
Facility.
|
|
3.
|
Syndication
|
|
3.1
|
Citi
reserves
the right, prior to or after the execution of definitive Facility
Documentation, to syndicate all or a portion of its commitment
to one or
more other financial institutions (the financial institutions becoming
parties to the Facility Documentation being collectively referred
to
herein as the "
Lenders
"). Such syndication will be
managed by Citi. Citi and its affiliates will act as arranger with
respect
to the Facility and will manage all aspects of the syndication
in
consultation with you, including the timing of all offers to potential
Lenders, the acceptance of commitments, and the determination of
the
amounts offered and the compensation provided. You understand that
Citi
may choose to commence syndication efforts promptly and that it
may elect
to appoint one or more additional arrangers to direct the syndication
efforts on its behalf.
|
|
3.2
|
You
agree to
take all action as Citi may reasonably request to assist it in
forming a
syndicate acceptable to it.
|
|
3.3
|
To
ensure an
orderly and effective syndication of the Facility, you agree that
until
the termination of the syndication (as determined by Citi), you
will not,
and will not permit any of your affiliates to, syndicate or issue,
attempt
to syndicate or issue, announce or authorise the announcement of
the
syndication or issuance of, or engage in discussions concerning
the
syndication or issuance of, any debt facility (save for the establishment
of a series of bilateral arrangements or any other financing previously
disclosed in writing to us prior to the date of this commitment
letter) or
debt securities (save for any renewals thereof with no increase
in the overall debt size) in the commercial bank or capital markets,
without the prior written consent of Citi, not to be unreasonably
withheld;
provided
that the foregoing shall not limit your ability
to issue commercial papers, utilise other short-term debt programmes
currently in place or issue equity securities.
|
|
3.4
|
You
agree that
Citi (or its affiliates) will act as the sole agent for the Facility
and
that no additional agents, co-agents or arrangers will be appointed,
or
other titles conferred, without Citi's consent. You agree that
no Lender
will receive any compensation of any kind for its participation
in the
Facility, except as expressly provided for in Annex I.
|
|
3.5
|
The
commitment
and agreement of Citi hereunder and the commitment of any Lender
that
issues a commitment to provide financing under the Facility are
made
solely for your benefit and may not be assigned or transferred
by you or
otherwise relied upon by any other person.
|
|
3.6
|
You
agree
that, without prejudice to the terms of paragraphs 1 and 4 (Commitment
Termination), Citi has the right at any time to change only the
pricing of
the Facility if such change is advisable in the judgement of Citi
to
ensure a successful syndication of such Facility. If Citi
determines such changes are necessary, Citi will consult with you
for a
period of up to 10 business days about such change. If you do
not accept such change after such period, Citi shall be entitled
to
terminate its commitment and agreement hereunder in accordance
with
paragraph 4 hereof and you shall be entitled to terminate this
agreement
in accordance with paragraph 4 hereof (subject to payment of the
"Break
Fee" referred to in paragraph 4.3 below) and to seek financing
from any
other party.
|
|
4.
|
Commitment
Termination
|
|
4.1
|
Citi's
commitment and agreement set forth in the Documents will automatically
terminate on the earlier of the date of signing of Facility Documentation
and December 3, 2007, unless extended by the mutual agreement of
the
parties hereto. Prior to such date, Citi’s commitment and agreement under
the Documents may be terminated by (i) Citi if any event occurs
or information has become available such that, in its judgment,
it
believes that any condition set forth in paragraph 2 (Conditions
Precedent) is or may not be satisfied or (ii) you pursuant to paragraph
3.6 above; or
|
|
4.2
|
The
provisions
of the Fee Letter and of Annex 1 relating to fees and paragraphs
2(iv),
2(v), 3 (Syndication), 5 (Indemnification), 6 (Limited Disclosure
and
Conflicts) and, 8 (Governing Law and Jurisdiction) and 10 (Limited
Citi
Role) hereof shall survive the expiration or termination of Citi’s
commitment and agreement hereunder and all fees, expenses and other
amounts payable under the Documents shall remain due and payable
following
such expiration or termination.
|
|
4.3
|
Termination
of
the agreement by you pursuant to clause 3.6 shall also be subject
to
payment of a fee ("
Break Fee
") in the amount of 25bps
flat on the Facility Amount, payable within 10 business days of
your
failure to accept/agree or to take the steps required to implement
the
change in pricing advised by Citi pursuant to paragraph
3.6. Such fee shall also be payable if this agreement is
terminated and you enter into a facility with any third party upon
substantially similar terms as the Facility for purposes in connection
with financing the Acquisition (or any transaction of analogous
effect) at
any time within 12 months after the termination of this
agreement.
|
|
5.
|
Indemnification
|
|
5.1
|
Whether
or not
the Facility Documentation is signed you hereby indemnify and agree
to
hold harmless Citi, each Lender and in each case each of its and
their
affiliates and each of their respective officers, directors, employees,
agents, advisors and representatives (each, an "
Indemnified
Party
") from and against any and all claims, damages, losses,
liabilities, costs, legal expenses and other expenses (all together
“
Losses
”) that may be incurred by or awarded against
any
Indemnified Party, in each case arising out of or in connection
with any
claims, investigation, litigation or proceeding (or the preparation
of any
defence with respect thereto) commenced or threatened in relation
to the
Documents or the Facility Documentation (or the transactions contemplated
hereby or thereby) or use of the proceeds of the Facility, whether
or not
such claim, investigation, litigation or proceeding is brought
by you, any
of your shareholders or creditors, an Indemnified Party or any
other
person, or an Indemnified Party is otherwise a party thereto, except
to
the extent such Losses are found in a final, non-appealable judgment
by a
court of competent jurisdiction to have resulted from such Indemnified
Party's gross negligence or wilful misconduct.
|
|
5.2
|
You
further
agree that no Indemnified Party shall have any liability (whether
direct
or indirect, in contract, tort or otherwise) to you or any of your
shareholders or creditors for or in connection with the transactions
referred to above, except for direct (as opposed to indirect or
consequential) damages or losses to the extent such liability is
found in
a final non-appealable judgment by a court of competent jurisdiction
to
have resulted from such Indemnified Party's gross negligence or
wilful
misconduct.
|
|
5.3
|
A
Document may
be enforced only by a party to it and the operation of the Contracts
(Rights of Third Parties) Act 1999 (the “
Act
”) is
excluded save that the Act shall apply to this paragraph 5
(Indemnification) for the benefit of the other Indemnified Parties
only,
subject always to the terms of paragraph 8 (Governing Law and
Jurisdiction) and provided that Citi and you shall be entitled
to agree
any changes to or rescind the Documents without consent of such
other
Indemnified Parties.
|
|
6.
|
Limited
Disclosure and Conflicts
|
6.1
|
You
agree that
the Documents are for your confidential use only and that neither
their
existence nor the terms thereof will be disclosed by you to any
person
other than your officers, directors, employees, accountants, attorneys
and
other advisors, and then only on a "need to know" basis in connection
with
the transactions contemplated thereby and on a confidential basis.
Notwithstanding the foregoing, following your return of your executed
copies of the Documents to us as provided below:
|
||
(i)
|
you
may make
public disclosure of the existence and amount of Citi's commitment
and of
its agreement to act as arranger hereunder and the identity of
the agent
bank (subject to prior written approval of Citi in respect of the
terms of
such disclosure);
|
||
(ii)
|
you
may file a
copy of this letter (but not the Fee Letter) in any public record
in which
it is required by law to be filed; and
|
||
(iii)
|
you
may make
such other public disclosures of the terms and conditions hereof
as you
are required by law, in the opinion of your counsel, to
make.
|
||
6.2
|
You
should be
aware that Citi or one or more of its affiliates may be providing
financing or other services to third parties whose interests may
conflict
with yours and by signing this letter you are (subject to the terms
of
this paragraph 6.2 consenting to financing or other services being
provided to such third parties. Be assured, however, that consistent
with
Citi's longstanding policy to hold in confidence the affairs of
its
customers, neither Citi nor any of its affiliates will furnish
confidential information obtained from you to any of its other
customers.
By the same token, neither Citi nor any of its affiliates will
make
available to you confidential information that it obtained or may
obtain
from any other customer.
|
||
6.3
|
By
acceptance
of this letter and the other Documents, you acknowledge that you
have been
advised that (a) Citi and the Lenders are not in the business of
providing
legal, tax or accounting advice, (b) you understand that there
may be
legal, tax or accounting risks associated with the Facility described
herein, (c) you should receive legal, tax and accounting advice
from
advisors with appropriate expertise to assess relevant risks, and
(d) you
should apprise appropriate senior management in your organisation
as to
the legal, tax and accounting advice and (and, if applicable, risks)
associated with the Facility and Citi and the Lenders’ disclaimers as to
these matters.
|
||
7.
|
Information
|
||
7.1
|
You
represent
and warrant that:
|
||
(i)
|
all
information (as supplemented from time to time) that has been or
will
hereafter be made available to Citi or any Lender by you or any
of your
representatives in connection with the transactions contemplated
hereby is
and will at all times be complete and correct in all material respects
and
does not and will not contain any untrue statement of a material
fact or
omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances
under which
such statements were or are made; and
|
||
(ii)
|
all
financial
projections, if any, that have been or will be prepared by you
and made
available to Citi or any Lender have been or will be prepared in
good
faith based upon reasonable assumptions (it being understood that
such
projections are subject to significant uncertainties and contingencies,
many of which are beyond your control, and that no assurance can
be given
that the projections will be realised).
|
||
7.2
|
You
agree to
supplement the information and projections from time to time so
that the
representations and warranties contained in this paragraph remain
correct
and acknowledge that Citi is acting in reliance on the accuracy
of
information supplied to it without independent
verification.
|
||
8.
|
Governing
Law and Jurisdiction
The
Documents
shall be governed by, and construed in accordance with, the laws
of
England and Wales. The parties hereto submit to the non-exclusive
jurisdiction of the English court or at our option arbitration
in London
under the rules of the London Court of International Arbitration.
The
parties hereto waive any defence of inconvenient forum, which may
be
available. You agree to appoint a process agent for service of
process and
copies of appointment if the Facility Documentation is not signed
by the
commitment termination date specified in paragraph 4 above and
to notify
us in writing of its address.
|
||
9.
|
Entire
Agreement
The
Documents
set forth the entire agreement between the parties with respect
to the
matters addressed therein and supersede all prior communications,
written
or oral, with respect thereto and may only be modified in writing.
Delivery of an executed signature page to any Document by facsimile
shall
be as effective as delivery of a manually executed
document.
|
By:
|
/s/
Christie
Chang
|
|
Christie
Chang
|
||
Managing
Director
|
||
By:
|
/s/
Vivian
Tan
|
|
Vivian
Tan
|
||
Director
|
||
By:
|
/s/ Joseph Tung | |
Name:
|
Joseph Tung | |
Title:
|
Chief Financial Officer | |
under
the Scheme Documents (save
for payment of the Acquisition purchase price and the events that
necessarily follow thereafter).
2.
Delivery
of certified copies of
all relevant board resolutions, authorized signatories list
s with specimen
signatures and all
relevant constitutional documents.
3.
The
Borrower and the Target shall
have obtained all necessary approvals (government
al, judicial
,
corporate or otherwise) for the
Acquisition and for the financing contemplated herein
(including
board
resolutions or other
evidence of corporate authori
z
ation
)
4.
Absence
of any law or regulation
that restrains
,
prevents or imposes materially
adverse conditions upon
the Borrower
in
connection with the
Acquisition
and
absence of any violation
of any law
or regulation with
respect to the Acquisition
.
5.
Legal
opinions from the counsels
of the Lenders and the Borrower, satisfactory to the
Lenders.
6.
Evidence
that the Borrower has
sufficient funds
(including
this Facility)
to complete
the
Acquisitio
n
.
7.
Evidence
that all conditions
precedent to the Borrower
’
s
obligation to pay t
he purchase
price to the
shareholders of the Target
as set out
in relevant Offer
Document have been met.
8.
Consents
(if required) from
creditors of the Borrower and the Target f
or entering
into the
Acquisition.
9.
S
uch
others to be confirmed
by
legal
counsel
.
|
||
Representations
and Warranties
|
:
|
Usual
and
customary for financings of this nature on a repeating basis, including
but not limited to the following:
1.
Corporate
organization, existence, power and authorization.
2.
Execution,
delivery and performance of loan documentation do not violate law,
the
Borrower’s charters or bylaws or existing agreements and does not result
in the imposition of liens.
3.
No
government
or regulatory approvals, or other third-party consents, required
other
than those already obtained.
4.
Legality,
validity, binding effect, admissibility and enforceability of the
loan
documentation.
5.
No
litigation
that may have a material adverse effect on the business, condition
(financial or otherwise), operations, or prospects of the Borrower
or the
Borrower and its subsidiaries taken as a whole.
6.
No
material
adverse change in the business, conditions (financial or otherwise),
operations or prospects of the Borrower or the Borrower and its
subsidiaries taken as a whole.
7.
Completeness
and accuracy of financial statements
and
information provided in all material aspects.
8.
No
other
violation of law or material agreements.
9.
Solvency
and
absence of any winding-up or analogous
proceedings
|
Documentation
|
:
|
The
Facility
will be subject to preparation, execution and delivery of mutually
acceptable loan documentation which will contain conditions precedent,
representations and warranties, covenants, financial covenants, negative
pledge, pari-passu, events of default, cross default and other provisions,
including but not limited to provision relating to waiver of immunity,
material adverse change, set-off, inspection right, illegality, cost
and
expenses related to preservation and enforcement, market disruption,
waiver of consequential damages, indemnities including tax indemnities,
break funding costs and default interest, agency
provisions usual and customary for financings of this nature
and other appropriate for this Facility.
|
Governing
Law
|
:
|
ROC
laws.
|
Attention:
|
Mr.
Joseph Tung, Chief Financial Officer
|
Subject:
|
Commitment
Letter relating to a US$750 million NTD equivalent term facility
for
Advanced Semiconductor Engineering, Inc. dated as of September 4,
2007
(the
“Commitment
Letter”)
|
1.
|
Amendments
|
In
consideration of the representations to be given you as set out below,
we
are pleased to make the following amendments to the Mandate
Letter:
|
· |
Section
4.1
(Commitment Termination) of the Commitment Letter shall be amended
so that
the reference to the date “December 3, 2007” shall be replaced by “March
3, 2008”.
|
2.
|
Effective
Date
|
2.1
|
Upon
your
acceptance of the terms of this letter (as evidenced by your
signature
hereunder),
|
(a)
|
you
will be
deemed to have repeated the representations set out in Section
7 of the
Commitment Letter on such date;
|
|
(b)
|
you
will be
deemed to have warranted that each the relevant persons signing
this
letter has the full power and authority to do so for and on behalf
of the
respective Companies; and
|
|
(c)
|
the
Commitment
Letter will be deemed to have been amended as contemplated in this
letter
and shall be read and construed accordingly with effect from the
date of
your acceptance of this letter so that our engagement under the
Commitment
Letter shall be deemed to have continued
accordingly.
|
2.2
|
Except
as
expressly modified hereby, all the provisions under the Commitment
Letter,
including but not limited to section 3.6 (Market Flex), shall
remain
unchanged and continue in full force and effect.
|
3.
|
Governing
Law
|
Section
8 of
the Commitment Letter shall apply in this letter as if incorporated
in
full with references to “the Document” to be read as a reference to “this
Letter”.
|
/s/
Christie
Chang
|
|
Christie
Chang
|
|
Managing
Director
|
|
/s/
Vivian
Tan
|
|
Vivian
Tan
|
|
Director
|
|
By:
|
/s/ Joseph Tung | |
Exhibit (c)(2)
Confidential Presentation to: Special Committee of Tangerine Project Horoscope September 4, 2007 Lehman Brothers |
Table of Contents -------------------------------------------------------------------------------------------------------------- Agenda I. Transaction Overview II. Valuation Analyses Appendix A. Approach and Methodology B. Tangerine Summary -------------------------------------------------------------------------------------------------------------- Lehman Brothers |
Important Notice -------------------------------------------------------------------------------------------------------------- This presentation material (this "Material") has been prepared by Lehman Brothers Asia Limited ("Lehman Brothers") for the special committee of the board of directors (the "Special Committee") of ASE Test Limited (the "Company") in connection with the proposed acquisition of its 49.5% stake by its parent company, ASE Inc. (the "Proposed Transaction") . This Material is not intended to be and does not represent an opinion of Lehman Brothers to the Special Committee on the fairness and reasonableness of the terms of the Proposed Transaction. This Material must not be disclosed, copied, reproduced, distributed or communicated to any person who is neither an officer nor employee of the Company, in whole or in part, at any time without the prior written consent of Lehman Brothers. This Material was prepared solely on information from the Company and from public sources on or prior to the date hereof. In preparing this Material, Lehman Brothers has assumed and relied upon the accuracy and completeness of the financial and other information used by it or the accuracy and completeness of any of the information contained herein without assuming any responsibility for independent verification of such information. With respect to the financial projections of the Company and its subsidiaries, upon advice of the Company, Lehman Brothers has assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance of the Company and its subsidiaries, and Lehman Brothers expresses no views as to the achievement or reasonableness of any future projections, estimates or statements about the future prospects of the Company and its subsidiaries or of any of the options presented in this Material. In preparing this Material, Lehman Brothers has not conducted a physical inspection of the properties and facilities of the Company and its subsidiaries and has not made or obtained any evaluations or appraisals of the assets or liabilities of the Company and its subsidiaries. Any views contained herein are based on financial, economic, market and other conditions prevailing as of the date of this Material. -------------------------------------------------------------------------------------------------------------- Lehman Brothers 1 |
-------------------------------------------------------------------------------------------------------------- Transaction Overview |
Overview of Apple's Proposal -------------------------------------------------------------------------------------------------------------- Transaction Overview Review of Apple's non-binding proposal Offer Price Offer Price Common Shares TDS(1) US$ 14.78 NT$ 6.10 Transaction Structure Transaction to be effected by way of Scheme of Arrangement under Section 210, Chapter 50 of the Singapore Companies Act Conditions to the Offer Signing of a Scheme Implementation Agreement Obtaining of all authorizations, consents, clearances, permissions and approvals by both Tangerine and Apple including Apple's board approval Receipt of confirmation from SIC that Apple may proceed with the Privatization and the Code on Take-overs and Mergers does not apply, or where the Code does apply, selected rules as stated explicitly will not apply Approval of the Privatization by independent shareholders at the Court Meeting The sanction of the Privatization by the Court The lodgement of the Court Order with the ACRA No injunctions Receipt of all approvals for the implementation of the Options Proposal Offer for the Options In-the-money options: shall be deemed to have been exercised on a "cashless" basis and converted into the right to receive the Scheme Consideration Out-of-money options: shall be cancelled on the effective date without any consideration to be paid ___________________________ 1. Based on the 1:80 common share / TDS ratio and exchange rate of 1 US$ : NT$ 33.00. Lehman Brothers 3 |
-------------------------------------------------------------------------------------------------------------- Valuation Analyses |
Tangerine Historical Share Price Performance -------------------------------------------------------------------------------------------------------------- Valuation Analyses Tangerine has under-performed its peer group and outperformed NASDAQ over the past 12 months Historical Share Price Performance (9/1/2006 - 8/31/2007) (1) (2) Source: Factset and Bloomberg. 1. Comps include Amkor, Apple, ChipMOS, King Yuan, STATS ChipPAC, SPIL and UTAC. 2. Based on closing share prices. 3. VWAP represents volume weighted average price. Lehman Brothers 7 |
Comparable Companies Analysis -------------------------------------------------------------------------------------------------------------- Valuation Analyses Comparable Company Trading Multiples (US$ mm, exc. per share data) [graphic] Note: Net Income estimates for Apple, SPIL and King Yuan adjusted to US GAAP. 1. Market Capitalization based on the treasury -method diluted share count calculated from latest public filing. 2. Enterprise value calculation based on market value plus net debt. Tangerine EV adjusted for shareholding in Apple, assuming a 3% discount to current market price. 3. Calendarized revenue, EBITDA, and net income estimates are based on IBES estimates; includes proportionate share of ASE Korea under the label called "Tangerine - (incl. Korea)" . Tangerine's EBITDA and EBIT estimates adjusted for employee stock option. 4. Tangerine EV includes 30% of Korea subsidiary's debt and cash. 5. Tangerine EV includes 30% of Korea subsidiary's book value. 6. UTAC is subject to take-private transaction. Lehman Brothers 11 |
Third Party Research on Tangerine -------------------------------------------------------------------------------------------------------------- Valuation Analyses Range of target prices: $13 - $15 Ratings: 2 outperform, 2 in-line with market Third Party Projections for Tangerine [graphic] Source: Select broker reports. 1. Revenue, EBITDA and net income (ROC GAAP) estimates as per IBES. Gross profit, EBIT, net income (US GAAP) estimates as per mean of depicted broker reports. Lehman Brothers 15 |
-------------------------------------------------------------------------------------------------------------- Appendix |
-------------------------------------------------------------------------------------------------------------- Approach and Methodology |
Approach and Methodology -------------------------------------------------------------------------------------------------------------- Approach and Methodology Key Information Sources We have reviewed to date the following documents of Tangerine: - Correspondences between Apple and Tangerine o Letter dated June 1, 2007 and received by Tangerine on June 4, 2007, expressing Apple's intention to re-initiate discussions with Tangerine regarding a proposed privatization from May 2006 o Letter dated June 6, 2007 from Special Committee of Tangerine to Apple, responding to the June 1 letter o Confidential proposal from Apple detailing the conditions under which the privatization would be implemented dated June 8, 2007 o Offer letter from Apple to Tangerine dated June 14, 2007 o Letter from Apple to Tangerine dated August 21, 2007 - Form 20-F filing for FY 2006 ending December 31, 2006 - Un-audited results for the first half ended June 30, 2007, as well as monthly management accounts for July 2007 - Management forecast for 2007 (June and August versions) - Independent third party research reports - Draft Scheme Implementation Agreement During the course of our due diligence we have also had discussions with Tangerine management regarding their outlook for Tangerine and general industry conditions Key Analyses We have undertaken the following analyses: - Historical share price performance - Comparable company trading multiple analysis - Comparable transaction multiple analysis - Premium analysis for all-cash minority buy-out transactions and recent transactions in the SATS sector - Third party research estimates and views - Liquidity analysis Lehman Brothers 17 |
Purchase Price Ratio Analysis -------------------------------------------------------------------------------------------------------------- Approach and Methodology [graphic] 1. Assumes all outstanding options are exercisable. 2. Includes 30% share of ASE Korea's debt and cash. 3. Calculated for 206,778,782 shares held by Tangerine in Apple; assuming a 3% discount to the current market price of NT$32.65 per share and exchange rate of US$1 : NT$ 33.00; no tax leakage. 4. Adjusted for employee option expense. 5. 2007E net income based on US GAAP. Management estimates derived from 2007E management accounts; consensus estimates represent mean of research estimates. 6. Tangerine's investment in ASE Korea treated as an equity investment and subtracted from Tangerine's market value to arrive at the enterprise value. Lehman Brothers 20 |
-------------------------------------------------------------------------------------------------------------- Tangerine Summary |
DRAFT Project Horoscope—Update August 30, 2007 Strictly Private and Confidential |
|
Rationale DRAFT o Simplifies corporate structure by making Tangerine a wholly owned subsidiary of Apple and reduces the number of listings by 2, - reduces the costs and administrative burdens associated with operating two public companies, including the costs associated with filing and compliance requirements - eliminates investor confusion between the two companies. o Results in the promotion of one common brand and identity. o Increases flexibility for Apple to make investment and other business decisions within the group and can focus on a consistent minority shareholder base. o Increases the flexibility of the Apple to allocate resources efficiently between the two businesses o Provides Tangerine shareholders liquidity at a premium price while avoiding broker fees. 1 |
|
Valuation Points DRAFT o The sector has re-rated down: - Over past 3 months, NASDAQ is down about 3%, companies in sector are down 5%-20% - Driven by lower than expected results and reduced projections - Current market price reflects current expectations of the sector o Due to higher capital intensity, test businesses trade at much lower FV/EBITDA multiples than assembly - So Tangerine EBITDA multiples should be lower, given its exposure to test of 76% vs. UTAC of of 52% - On a 2007 FV/EBITDA basis, Tangerine, at $14.30 price, represents 5.0x US GAAP(1) and 4.9x ROC GAAP, compared with UTAC at 4.9x - On a 2007 P/E basis, Tangerine, at $14.30 price, represents 18.4x US GAAP(1) and 17.2x ROC GAAP, much higher than the median of the test comps at 12.7x, and higher than UTAC offer price at 16x. o Premiums are high relative to UTAC and STATS - 1-day: 27% vs UTAC of 11% and STATS of 18% - 1-week: 25% vs UTAC of 13% and STATS of 22% - 1-month: 20% vs UTAC of 21% and STATS of 32% 2 |
|
Acer Gateway Case Study DRAFT Transaction Highlights o Announcement Day: August 27, 2007 o Acquirer: Acer Inc., world's leading brand PC vendor o Target: Gateway, Inc., fourth largest PC company in the US and leading retail PC provider o Deal Size: Approx. US$710MM o Method: 100% Cash, funding from Acer's balance sheet o Offer Price: US$1.90 per share o Premium: -- One day Prior: 57% -- One Week Average: 50% -- One Month Average: 45% Why Pay Such High Premium? o Highly complementary geographical presences and product positioning -- Strengthening Acer's US presence -- Increase in supply chain scale for Gateway o Solidify Acer's position as number three PC vendor globally with 9.4% market share and number two largest notebook maker with 16.6% market share o Significant revenue and cost synergies (estimated US$150MM cost synergy in 2008) o Deploy multi-brand strategy to cover all the major market segments o Strategically prevent Lenovo's proposed acquisition of Packer Bell to narrow the gap vs. Acer in Europe 10 |
|
DRAFT IRS Circular 230 Disclosure: Citigroup Inc. and its affiliates do not provide tax or legal advice. Any discussion of tax matters in these materials (i) is not intended or written to be used, and cannot be used or relied upon, by you for the purpose of avoiding any tax penalties and (ii) may have been written in connection with the "promotion or marketing" of any transaction contemplated hereby ("Transaction") . Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor. Any terms set forth herein are intended for discussion purposes only and are subject to the final terms as set forth in separate definitive written agreements. This presentation is not a commitment to lend, syndicate a financing, underwrite or purchase securities, or commit capital nor does it obligate us to enter into such a commitment, nor are we acting as a fiduciary to you. By accepting this presentation, subject to applicable law or regulation, you agree to keep confidential the existence of and proposed terms for any Transaction. Prior to entering into any Transaction, you should determine, without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these risks) as well as the legal, tax and accounting characterizations and consequences of any such Transaction. In this regard, by accepting this presentation, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal, tax or accountingadvice, (b) there may be legal, tax or accounting risks associated with any Transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise senior management in your organization as to such legal, tax and accounting advice (and any risks associated with any Transaction) and our disclaimer as to these matters. By acceptance of these materials, you and we hereby agree that from the commencement of discussions with respect to any Transaction, and notwithstanding any other provision in this presentation, we hereby confirm that no participant in any Transaction shall be limited from disclosing the U.S. tax treatment or U.S. tax structure of such Transaction. We are required to obtain, verify and record certain information that identifies each entity that enters into a formal business relationship with us. We will ask for your complete name, street address, and taxpayer ID number. We may also request corporate formation documents, or other forms of identification, to verify information provided. Any prices or levels contained herein are preliminary and indicative only and do not represent bids or offers. These indications are provided solely for your information and consideration, are subject to change at any time without notice and are not intended as a solicitation with respect to the purchase or sale of any instrument. The information contained in this presentation may include results of analyses from a quantitative model which represent potential future events that may or may not be realized, and is not a complete analysis of every material fact representing any product. Any estimates included herein constitute our judgment as of the date hereof and are subject to change without any notice. We and/or our affiliates may make a market in these instruments for our customers and for our own account. Accordingly, we may have a position in any such instrument at any time. Although this material may contain publicly available information about Citi corporate bond research, fixed income strategy or economic and market analysis, Citi policy (i) prohibits employees from offering, directly or indirectly, a favorable or negative research opinion or offering to change an opinion as consideration or inducement for the receipt of business or for compensation; and (ii) prohibits analysts from being compensated for specific recommendations or views contained in research reports. So as to reduce the potential for conflicts of interest, as well as to reduce any appearance of conflicts of interest, Citi has enacted policies and procedures designed to limit communications between its investment banking and research personnel to specifically prescribed circumstances. [C] 2007 Citigroup Global Markets Inc. Member SIPC. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world. 14 |
|
To:
|
Advanced
Semiconductor Engineering, Inc.
|
26
Chin 3
rd
Road
|
|
Nantze
Export
Processing Zone
|
|
Nantze,
Kaohsiung
|
|
Taiwan
|
|
Attention:
The Board of Directors
|
|
ASE
Test Limited
|
|
One
Marina
Boulevard
|
|
#28-00
|
|
Singapore
018989
|
|
Attention:
The Board of Directors
|
1.
|
Introduction
|
|
I
refer to the
proposed acquisition by Advanced Semiconductor Engineering, Inc.
(the
“
ASE Inc.
”) of all the issued ordinary shares
(“
Shares
”) in the capital of ASE Test Limited (the
“
ASE Test
”), a majority-owned subsidiary of ASE Inc., by
way of a scheme of arrangement (the “
Scheme
”) pursuant to
Section 210 of the Companies Act (Chapter 50 of Singapore) as jointly
announced by ASE Test and ASE Inc. on 4 September 2007 in respect
of the
Scheme.
|
||
2.
|
Undertakings
|
|
In
consideration of the payment by ASE Inc. and ASE Test to me of the
sum of
US$1.00 (the receipt and sufficiency of which I hereby acknowledge),
I
irrevocably undertake with ASE Inc. and ASE Test in my capacity as
a
shareholder of ASE Test as follows:
|
||
(a)
|
I
shall
abstain from voting, or procuring the voting of, all of the Relevant
Shares (as defined in Section 5.1 below) on the Scheme and any other
matter necessary or proposed to implement the Scheme at any meeting
of the
shareholders of ASE Test and at any adjournment thereof;
and
|
|
(b)
|
I
shall not
take any action or omit to take any action which would conflict with
or
diminish my obligations under this Letter of
Undertaking.
|
3.
|
Announcements
|
|
I
hereby
consent to any and all references to, and descriptions of this Letter
of
Undertaking in any announcement or document issued by or on behalf
of ASE
Inc. and/or ASE Test including any documents filed with the U.S.
Securities and Exchange Commission (the "
U.S. SEC
"), and
to the filing of this Letter of Undertaking as an exhibit to a Schedule
13E-3 transaction statement and any amendments thereto filed with
the U.S.
SEC.
|
||
4.
|
Termination
|
|
4.1
|
Except
as
provided in this Letter of Undertaking, this Letter of Undertaking
shall
come into force and be binding upon me from the date of this Letter
of
Undertaking until the earliest of any of the following
dates:
|
|
(a)
|
the
date the
Scheme lapses or does not become effective for any reason other than
a
breach by me of any of my obligations set forth in this Letter of
Undertaking; and
|
|
(b)
|
the
date the
Scheme becomes effective in accordance with its terms.
|
|
4.2
|
For
the
avoidance of doubt, the termination of this Letter of Undertaking
shall
not in any way prejudice any rights, benefits or remedies that ASE
Inc.
and/or ASE Test may have under this Letter of Undertaking for claim
for
costs, damages, specific performance or otherwise whatsoever which
accrue
or arise prior to the date of such termination.
|
|
5.
|
Miscellaneous
|
|
5.1
|
Relevant
Shares
. For the purposes of this Letter of
Undertaking, “
Relevant Shares
”:
|
|
(a)
|
means
the
Shares which I legally and/or beneficially own as at the date of
this
Letter of Undertaking; and
|
|
(b)
|
includes
any
other Shares or securities in the capital of ASE Test (including
without
limitation options to subscribe for new Shares) which I may acquire
or
over which I may have otherwise voting control after the date of
this
Letter of Undertaking or which may be issued or unconditionally allotted
to me whether pursuant to any bonus issue, rights issue or distribution
of
shares in the capital of ASE Test or otherwise, on or after the date
of
this Letter of Undertaking.
|
|
5.2
|
Third
Party Contract Rights
. A person who is not a party to
this Letter of Undertaking has no rights under the Contracts (Rights
of
Third Parties) Act (Chapter 53B of Singapore) to enforce any term
of this
Letter of Undertaking.
|
|
5.3
|
Governing
Law
. This Letter of Undertaking is governed by, and
shall be construed in accordance with, Singapore
law.
|
Date:
|
October
30,
2007
|
Re:
|
Update
Q&A
|
1.
|
Why
has timing changed to 1Q2008 from end of
year
|
·
|
As
the
Securities Industry Council (the "SIC") has confirmed that the provisions
of the Singapore Code on Take-overs and Mergers (the “Code”) are
applicable to the proposed scheme of arrangement (the "Scheme"),
we will
need to meet additional requirements under the Code, including, among
other things, (i) the appointment of an independent financial advisor
("IFA"), to advise the independent directors of ASE Test on the Scheme,
and (ii) the review by our accountants and the IFA of the interim
financial statements and financial projections included in the scheme
document. Given these additional requirements under the Code, together
with the expected time required for U.S. SEC process with respect
to the
filing of the Schedule 13E-3 transaction statement, we currently
expect
the closing of this transaction to occur during the first quarter
of
2008.
|
2.
|
What
exemptions did you receive from the
Code?
|
·
|
We
have
received exemptions from Rules 14, 15, 16, 17, 20.1, 21, 22, 28,
29 and
33.2, and Note 1(b) on Rule 19 of the Code, subject to the conditions
described in the press release.
|
·
|
These
exemptions are standard for a Singapore scheme of arrangement because
these exempted rules relate to tender offers and are not relevant
in the
context of a scheme of arrangement.
|
3.
|
What
conditions is the grant of the standard exemptions subject to and
do you
expect that such conditions will be
met?
|
·
|
The
grant by the SIC of the above standard exemptions is subject to the
following conditions: (1) that ASE Test shareholders who are parties
acting in concert with ASE Inc. abstain from voting on the Scheme;
(2)
that directors of ASE Test who are also directors of ASE Inc. abstain
from
making a recommendation on the Proposed Scheme to shareholders of
ASE
Test; (3) that ASE Test appoint an independent financial adviser
to advise
ASE Test shareholders on the Scheme; and (4) that ASE Inc. consult
with
the SIC prior to invoking any of the conditions to its consummation
of the
Scheme.
|
·
|
We
anticipate
that these conditions will be met.
|
4.
|
What
are the events with respect to the timeline going
forward?
|
·
|
We
would like
to complete this transaction as quickly as possible, and currently
expect
the transaction to close during the first quarter of 2008. However,
the
transaction is subject to the approval by shareholders of ASE Test
and
other closing conditions, and there can be no assurance that the
transaction will close in the expected timeframe or at
all.
|
·
|
We
are
preparing a Schedule 13E-3 transaction statement, which will contain
the
disclosure document for the Scheme (the "Scheme Document"). The Schedule
13E-3 transaction statement will be filed with the U.S.
SEC.
|
·
|
The
final
Scheme Document, providing details on the transaction, will be mailed
to
shareholders of ASE Test.
|
5.
|
What
part of the first quarter do you anticipate
closing?
|
·
|
The
timing is
contingent upon the U.S. SEC process with respect to the Schedule
13E-3
transaction statement, the receipt of all regulatory approvals and
other
events that may be beyond our control. We are therefore unable to
provide
greater clarity on timing at this
time.
|
6.
|
Why
is
there another IFA involved? How is the IFA's role different from
that of
Lehman Brothers Inc.?
|
·
|
Lehman
Brothers was engaged as the financial advisor to the special committee
of
ASE Test. Lehman Brothers assisted the special committee in
reviewing, evaluating, negotiating and considering the Scheme and
rendered
an opinion to the special committee that, as of September 4, 2007,
from a
financial point of view, the scheme consideration to be received
by the
unaffiliated ASE Test shareholders in the scheme was fair to such
ASE Test
shareholders.
|
·
|
Because
the
SIC has confirmed subsequent to the announcement of this transaction
that
the Code generally applies to the Scheme, ASE Test is required under
the
Code to engage an IFA to advise the independent directors of ASE
Test on
the Scheme. The role of an IFA under the Code is more limited
than the role of Lehman Brothers, the financial advisor to the special
committee of ASE Test. In accordance with the terms of its
engagement, Lehman Brothers not only advised as to the fairness of
the
scheme consideration to unaffiliated ASE Test shareholders, but also
assisted the special committee in its negotiations with ASE
Inc. In contrast, an IFA's primary role is to render an opinion
on the scheme consideration after it has been agreed between the
parties.
|
7.
|
Why
is
ASE Inc. issuing the "no price increase" statement at this
time?
|
·
|
ASE
Inc. is
aware of investor inquiries regarding the terms of the scheme, including
the scheme consideration. ASE Inc. is issuing the “no price
increase” statement to make clear that it has no intention to, and will
not, raise the scheme consideration. ASE Inc. believes that the
scheme consideration represents an attractive and fair price and,
in
accordance with its "no price increase" statement, will not be raising
the
scheme consideration.
|
8.
|
Has
ASE Inc. received any requests from ASE Test shareholders to raise
the
scheme consideration?
|
·
|
ASE
Inc. is
aware of investor inquiries regarding the terms of the scheme, including
the scheme consideration. ASE Inc. is issuing the “no price
increase” statement to make clear that it has no intention to, and will
not, raise the scheme consideration. ASE Inc. believes that the
scheme consideration represents an attractive and fair price and,
in
accordance with its "no price increase" statement, will not be raising
the
scheme consideration.
|
9.
|
What
if there is a competing offer with a higher scheme consideration
than that
offered by ASE Inc.?
|
·
|
ASE
Inc. is
prohibited from raising the scheme consideration in response to a
competing offer or otherwise after the issuance of the "no price
increase"
statement. Under the Singapore Code on Take-overs and Mergers, because
ASE
Inc. has not specifically reserved, in its "no price increase" statement,
the right to amend the scheme consideration in the event of a competing
offer being made, ASE Inc. is prohibited from amending the terms
of the
scheme
|
|
(including
the
scheme consideration) in any way after the date of the "no price
increase"
statement.
|
10.
|
Will
ASE Inc. consider selling its stake in ASE Test in the event of a
competing offer?
|
·
|
ASE
Inc. has
no intention of selling its stake in ASE Test in the event of a competing
offer.
|