As filed with the Securities and
Exchange Commission on June 30, 2008
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
20-F
o
|
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
OR
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the fiscal year ended December 31,
2007
|
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
OR
o
|
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
Commission
file number: 001-16125
(Exact
Name of Registrant as Specified in Its Charter)
Advanced
Semiconductor Engineering, Inc.
(Translation
of Registrant’s Name into English)
REPUBLIC
OF CHINA
(Jurisdiction
of Incorporation or Organization)
26
Chin Third Road
Nantze
Export Processing Zone
Nantze,
Kaohsiung, Taiwan
Republic
of China
(Address
of Principal Executive Offices)
Joseph
Tung
Room
1901, No. 333, Section 1 Keelung Rd.
Taipei,
Taiwan, 110
Republic
of China
Tel: 886-2-8780-5489
Fax: 882-2-2757-6121
Email: ir@aseglobal.com
(Name,
Telephone, Email and/or Facsimile number and Address of Company Contact
Person)
Securities
registered or to be registered pursuant to Section 12(b) of the
Act:
Title of Each Class
|
|
Name of Each Exchange on which
Registered
|
Common
Shares, par value NT$10.00 each
|
|
The
New York Stock Exchange*
|
*Traded in
the form of American Depositary Receipts evidencing American
Depositary
Shares, each representing five Common Shares
(Title of
Class)
Securities
registered or to be registered pursuant to Section 12(g) of the
Act:
None
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:
None
(Title of
Class)
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report:
5,447,558,879
Common Shares, par value NT$10 each**
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes
þ
No
o
If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
Yes
o
No
þ
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o
Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
U.S. GAAP
o
International Financial Reporting Standards as issued by the International
Accounting Standards Board
o
Other
þ
If “Other”
has been checked in response to the previous question, indicate by check mark
which financial statement item the registrant has elected to
follow:
Item
17
o
Item 18
þ
If this is
an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
** As a
result of the exercise of employee stock options and the conversion of our
convertible bonds due September 2008 subsequent to December 31, 2007, as
of May 30, 2008, we had 5,476,949,209 shares outstanding.
|
1
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1
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2
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2
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2
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2
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2
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6
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6
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6
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19
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19
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20
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39
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43
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44
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44
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44
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57
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61
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61
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62
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63
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63
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66
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67
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68
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69
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69
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70
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71
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71
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71
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71
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72
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73
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73
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73
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75
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75
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75
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75
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75
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|
75
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75
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75
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81
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82
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83
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86
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86
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86
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86
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87
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89
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89
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89
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89
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89
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91
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91
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91
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91
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92
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92
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92
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92
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92
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93
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All
references herein to (i) the “Company”, “ASE Group”, “ASE Inc.”, “we”, “us”, or
“our” are to Advanced Semiconductor Engineering, Inc. and, unless the context
requires otherwise, its subsidiaries, (ii) “ASE Test” are to ASE Test Limited
and its subsidiaries, (iii) “ASE Test Taiwan” are to ASE Test, Inc., a company
incorporated under the laws of the ROC, (iv) “ASE Test Malaysia” are to ASE
Electronics (M) Sdn. Bhd., a company incorporated under the laws of Malaysia,
(v) “ISE Labs” are to ISE Labs, Inc., a corporation incorporated under the laws
of the State of California, (vi) “Universal Scientific” are to Universal
Scientific Industrial Co., Ltd., a company incorporated under the laws of the
ROC, (vii) “ASE Material” are to ASE Material Inc., a company previously
incorporated under the laws of the ROC that merged into ASE Inc. on August 1,
2004, (viii) “ASE Korea” are to ASE (Korea) Inc., a company incorporated under
the laws of the Republic of Korea, (ix) “ASE Chung Li” are to ASE (Chung Li)
Inc., a company previously incorporated under the laws of the ROC that merged
into ASE Inc. on August 1, 2004, (x) “ASE Shanghai” are to ASE (Shanghai) Inc.,
a company incorporated under the laws of the PRC, (xi) “Hung Ching” are to Hung
Ching Development & Construction Co. Ltd., a company incorporated under the
laws of the ROC, (xii) “ASE Electronics” are to ASE Electronics Inc., a company
incorporated under the laws of the ROC, (xiii) “Power ASE” are to Power ASE
Technology, Inc., a company incorporated under the laws of the ROC, (xiv) “ASESH
AT” are to ASE Assembly & Test (Shanghai) Limited, formerly known as Global
Advanced Packaging Technology Limited, a company incorporated under the laws of
the PRC, (xv) “GAPT” are to Global Advanced Packaging Technology Limited, now
known as ASE Assembly & Test (Shanghai) Limited, a company incorporated
under the laws of the PRC, (xvi) “ASE Japan” are to ASE Japan Co. Ltd., a
company incorporated under the laws of Japan, (xvii) “ASEN” are to Suzhou ASEN
Semiconductors Co., Ltd., a company incorporated under the laws of the PRC,
(xviii) the “Securities Act” are to the U.S. Securities Act of 1933, as amended,
and (xvix) the “Exchange Act” are to the U.S. Securities Exchange Act of 1934,
as amended.
All
references to the “Republic of China”, the “ROC” and “Taiwan” are to the
Republic of China, including Taiwan and certain other
possessions. All references to “Korea” or “South Korea” are to the
Republic of Korea. All references to the “PRC” are to the People’s
Republic of China and exclude Taiwan, Macau and Hong Kong.
We publish
our financial statements in New Taiwan dollars, the lawful currency of the
ROC. In this annual report, references to “United States dollars”,
“U.S. dollars” and “US$” are to the currency of the United States; references to
“New Taiwan dollars”, “NT dollars” and “NT$” are to the currency of the ROC;
references to “RMB” are to the currency of the PRC; references to “JP¥” are to
the currency of Japan; references to “EUR” are to the currency of the European
Union; and references to “KRW” are to the currency of the Republic of
Korea. Unless otherwise noted, all translations from NT dollars to
U.S. dollars were made at the noon buying rate in The City of New York for cable
transfers in NT dollars per U.S. dollar as certified for customs purposes by the
Federal Reserve Bank of New York as of December 31, 2007, which was
NT$32.43=US$1.00. All amounts translated into U.S. dollars in this
annual report are provided solely for your convenience and no representation is
made that the NT dollar or U.S. dollar amounts referred to herein could have
been or could be converted into U.S. dollars or NT dollars, as the case may be,
at any particular rate or at all. On May 30, 2008, the noon buying
rate was NT$30.37=US$1.00.
This
annual report on Form 20-F contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, including statements regarding our future results of operations and
business prospects. Although these forward-looking statements, which
may include statements regarding our future results of operations, financial
condition or business prospects, are based on our own information and
information from other sources we believe to be reliable, you should not place
undue reliance on these forward-looking statements, which apply only as of the
date of this annual report. We were not involved in the preparation
of these projections. The words “anticipate”, “believe”, “estimate”,
“expect”, “intend”, “plan” and similar expressions, as they relate to us, are
intended to identify these forward-looking statements in this annual
report. Our actual results of operations, financial condition or
business prospects may differ materially from those expressed or implied in
these forward-looking statements for a variety of reasons, including risks
associated with cyclicality and market conditions in the semiconductor industry;
demand for the outsourced semiconductor
packaging
and testing services we offer and for such outsourced services generally; the
highly competitive semiconductor industry; our ability to introduce new
packaging, interconnect materials and testing technologies in order to remain
competitive; international business activities; our business strategy; our
future expansion plans and capital expenditures; the strained relationship
between the ROC and the PRC; general economic and political conditions; possible
disruptions in commercial activities caused by natural or human-induced
disasters; fluctuations in foreign currency exchange rates; and other
factors. For a discussion of these risks and other factors, see “Item
3. Key Information—Risk Factors.”
Not
applicable.
Not
applicable.
The
selected consolidated statement of operations data and cash flow data for the
years ended December 31, 2005, 2006 and 2007, and the selected consolidated
balance sheet data as of December 31, 2006 and 2007, set forth below are derived
from our audited consolidated financial statements included in this annual
report and should be read in conjunction with, and are qualified in their
entirety by reference to, these consolidated financial statements. The selected
consolidated statement of operations data and cash flow data for the years ended
December 31, 2003 and 2004 and the selected consolidated balance sheet data as
of December 31, 2003, 2004 and 2005 set forth below are derived from our audited
consolidated financial statements not included in this annual report. Our
consolidated financial statements have been prepared and presented in accordance
with accounting principles generally accepted in the ROC, or ROC GAAP, which
differ in some material respects from accounting principles generally accepted
in the United States of America, or U.S. GAAP. See note 31 to our consolidated
financial statements for a description of the significant differences between
ROC GAAP and U.S. GAAP for the periods covered by these consolidated financial
statements.
|
|
As
of and for the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
(in
millions, except earnings per share and per ADS data)
|
|
ROC
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
55,728.4
|
|
|
|
75,237.7
|
|
|
|
84,035.8
|
|
|
|
100,423.6
|
|
|
|
101,163.1
|
|
|
|
3,119.4
|
|
Cost
of revenues
|
|
|
(45,118.0
|
)
|
|
|
(59,641.1
|
)
|
|
|
(69,518.0
|
)
|
|
|
(71,643.3
|
)
|
|
|
(72,074.7
|
)
|
|
|
(2,222.5
|
)
|
Gross
profit
|
|
|
10,610.4
|
|
|
|
15,596.6
|
|
|
|
14,517.8
|
|
|
|
28,780.3
|
|
|
|
29,088.4
|
|
|
|
896.9
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
|
|
|
(1,204.9
|
)
|
|
|
(1,341.1
|
)
|
|
|
(1,100.0
|
)
|
|
|
(1,320.6
|
)
|
|
|
(1,068.6
|
)
|
|
|
(32.9
|
)
|
General
and administrative
|
|
|
(3,170.1
|
)
|
|
|
(3,840.0
|
)
|
|
|
(4,284.3
|
)
|
|
|
(4,381.3
|
)
|
|
|
(5,438.5
|
)
|
|
|
(167.7
|
)
|
Goodwill
amortization
|
|
|
(819.3
|
)
|
|
|
(877.6
|
)
|
|
|
(528.9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Research
and development
|
|
|
(2,342.9
|
)
|
|
|
(2,581.1
|
)
|
|
|
(2,785.4
|
)
|
|
|
(2,632.0
|
)
|
|
|
(3,284.1
|
)
|
|
|
(101.3
|
)
|
Total
operating expenses
|
|
|
(7,537.2
|
)
|
|
|
(8,639.8
|
)
|
|
|
(8,698.6
|
)
|
|
|
(8,333.9
|
)
|
|
|
(9,791.2
|
)
|
|
|
(301.9
|
)
|
Income
from operations
|
|
|
3,073.2
|
|
|
|
6,956.8
|
|
|
|
5,819.2
|
|
|
|
20,446.4
|
|
|
|
19,297.2
|
|
|
|
595.0
|
|
Non-operating
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in earnings (losses) of equity method investees, net
|
|
|
(20.1
|
)
|
|
|
(174.4
|
)
|
|
|
180.8
|
|
|
|
315.7
|
|
|
|
345.7
|
|
|
|
10.7
|
|
Goodwill
amortization
|
|
|
(220.6
|
)
|
|
|
(220.6
|
)
|
|
|
(106.5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Foreign
exchange gain (loss), net
(1)
|
|
|
(386.8
|
)
|
|
|
222.4
|
|
|
|
154.3
|
|
|
|
92.8
|
|
|
|
403.5
|
|
|
|
12.4
|
|
Realized
loss on long-term investments
|
|
|
(354.8
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Interest
expense, net
|
|
|
(1,304.4
|
)
|
|
|
(894.4
|
)
|
|
|
(1,397.7
|
)
|
|
|
(1,213.9
|
)
|
|
|
(1,225.8
|
)
|
|
|
(37.8
|
)
|
Impairment
loss
|
|
|
—
|
|
|
|
(1,950.1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(994.7
|
)
|
|
|
(30.7
|
)
|
Gain
on insurance settlement and impairment
recovery
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,574.5
|
|
|
|
—
|
|
|
|
—
|
|
Loss
on fire damage
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,838.1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other
investment loss
|
|
|
—
|
|
|
|
(512.0
|
)
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Others,
net
(1)
|
|
|
503.9
|
|
|
|
(464.8
|
)
|
|
|
(1,485.8
|
)
|
|
|
(1,964.1
|
)
|
|
|
(474.0
|
)
|
|
|
(14.6
|
)
|
Income
(loss) before income tax
|
|
|
1,290.4
|
|
|
|
2,962.9
|
|
|
|
(5,673.8
|
)
|
|
|
22,251.4
|
|
|
|
17,351.9
|
|
|
|
535.0
|
|
Income
tax benefit (expense)
|
|
|
1,278.7
|
|
|
|
1,397.0
|
|
|
|
118.6
|
|
|
|
(2,084.8
|
)
|
|
|
(3,357.4
|
)
|
|
|
(103.5
|
)
|
Income
(loss) from continuing operations
|
|
|
2,569.1
|
|
|
|
4,359.9
|
|
|
|
(5,555.2
|
)
|
|
|
20,166.6
|
|
|
|
13,994.5
|
|
|
|
431.5
|
|
Discontinued
operations
(3)
|
|
|
196.8
|
|
|
|
568.2
|
|
|
|
353.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
As
of and for the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
(in
millions, except earnings per share and per ADS data)
|
|
|
|
|
|
Extraordinary
loss, net of income tax benefit
|
|
|
(75.7
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cumulative
effect of change in accounting principle
|
|
|
—
|
|
|
|
(26.8
|
)
(4)
|
|
|
—
|
|
|
|
(342.5
|
)
(5)
|
|
|
—
|
|
|
|
—
|
|
Minority
interest in net loss (income) of subsidiaries
|
|
|
52.6
|
|
|
|
(691.6
|
)
|
|
|
510.3
|
|
|
|
(2,407.9
|
)
|
|
|
(1,829.2
|
)
|
|
|
(56.4
|
)
|
Net
income (loss) attributable to shareholders of parent
company
|
|
|
2,742.8
|
|
|
|
4,209.7
|
|
|
|
(4,691.2
|
)
|
|
|
17,416.2
|
|
|
|
12,165.3
|
|
|
|
375.1
|
|
Income
(loss) from continuing operations per common share
|
|
|
0.55
|
|
|
|
0.74
|
|
|
|
(1.00
|
)
|
|
|
3.48
|
|
|
|
2.34
|
|
|
|
0.07
|
|
Earnings
(loss) per common share
(6)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.57
|
|
|
|
0.85
|
|
|
|
(0.92
|
)
|
|
|
3.41
|
|
|
|
2.34
|
|
|
|
0.07
|
|
Diluted
|
|
|
0.57
|
|
|
|
0.83
|
|
|
|
(0.92
|
)
|
|
|
3.25
|
|
|
|
2.26
|
|
|
|
0.07
|
|
Dividends
per common share
(7)
|
|
|
1.00
|
|
|
|
0.57
|
|
|
|
1.00
|
|
|
|
—
|
|
|
|
1.48
|
|
|
|
0.05
|
|
Earnings
(loss) per equivalent ADS
(6)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.87
|
|
|
|
4.26
|
|
|
|
(4.62
|
)
|
|
|
17.05
|
|
|
|
11.69
|
|
|
|
0.36
|
|
Diluted
|
|
|
2.85
|
|
|
|
4.15
|
|
|
|
(4.62
|
)
|
|
|
16.26
|
|
|
|
11.29
|
|
|
|
0.35
|
|
Number
of common shares
(8)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,771.5
|
|
|
|
4,944.3
|
|
|
|
5,066.9
|
|
|
|
5,106.7
|
|
|
|
5,202.6
|
|
|
|
5,202.6
|
|
Diluted
|
|
|
4,815.6
|
|
|
|
5,270.2
|
|
|
|
5,066.9
|
|
|
|
5,407.8
|
|
|
|
5,436.4
|
|
|
|
5,436.4
|
|
Number
of equivalent ADSs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
954.3
|
|
|
|
988.9
|
|
|
|
1,013.4
|
|
|
|
1,021.3
|
|
|
|
1,040.5
|
|
|
|
1,040.5
|
|
Diluted
|
|
|
963.1
|
|
|
|
1,054.0
|
|
|
|
1,013.4
|
|
|
|
1,081.6
|
|
|
|
1,087.3
|
|
|
|
1,087.3
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
8,562.4
|
|
|
|
5,975.1
|
|
|
|
13,263.8
|
|
|
|
15,730.1
|
|
|
|
17,157.9
|
|
|
|
529.1
|
|
Financial
assets—current
(1)(9)
|
|
|
3,017.8
|
|
|
|
3,194.2
|
|
|
|
4,358.7
|
|
|
|
10,904.3
|
|
|
|
11,058.3
|
|
|
|
341.0
|
|
Notes
and accounts receivable, net
|
|
|
12,909.7
|
|
|
|
13,676.2
|
|
|
|
15,585.6
|
|
|
|
11,454.9
|
|
|
|
18,747.5
|
|
|
|
578.1
|
|
Inventories
|
|
|
4,691.8
|
|
|
|
9,437.3
|
|
|
|
7,757.1
|
|
|
|
5,674.0
|
|
|
|
5,596.9
|
|
|
|
172.6
|
|
Others
|
|
|
2,276.2
|
|
|
|
3,612.1
|
|
|
|
6,578.8
|
|
|
|
4,999.5
|
|
|
|
4,341.4
|
|
|
|
133.8
|
|
Total
|
|
|
31,457.9
|
|
|
|
35,894.9
|
|
|
|
47,544.0
|
|
|
|
48,762.8
|
|
|
|
56,902.0
|
|
|
|
1,754.6
|
|
Long-term
investments
|
|
|
6,342.8
|
|
|
|
4,907.4
|
|
|
|
4,898.1
|
|
|
|
5,734.5
|
|
|
|
4,850.2
|
|
|
|
149.6
|
|
Property,
plant and equipment, net
|
|
|
67,339.9
|
|
|
|
82,339.9
|
|
|
|
68,040.8
|
|
|
|
73,543.8
|
|
|
|
81,788.3
|
|
|
|
2,522.0
|
|
Intangible
assets
|
|
|
4,596.2
|
|
|
|
3,959.8
|
|
|
|
3,589.1
|
|
|
|
3,449.0
|
|
|
|
4,732.3
|
|
|
|
145.9
|
|
Other
assets
|
|
|
4,587.4
|
|
|
|
6,848.9
|
|
|
|
7,053.5
|
|
|
|
5,550.8
|
|
|
|
4,104.6
|
|
|
|
126.6
|
|
Total
assets
|
|
|
114,324.2
|
|
|
|
133,950.9
|
|
|
|
131,125.5
|
|
|
|
137,040.9
|
|
|
|
152,377.4
|
|
|
|
4,698.7
|
|
Short-term
borrowings
(10)
|
|
|
14,090.2
|
|
|
|
6,852.8
|
|
|
|
10,523.1
|
|
|
|
8,499.1
|
|
|
|
15,773.9
|
|
|
|
486.4
|
|
Long-term
debts
(11)
|
|
|
30,840.1
|
|
|
|
46,529.6
|
|
|
|
42,862.1
|
|
|
|
29,398.3
|
|
|
|
23,936.0
|
|
|
|
738.1
|
|
Other
liabilities
(12)
|
|
|
14,193.7
|
|
|
|
20,851.9
|
|
|
|
22,890.0
|
|
|
|
22,016.7
|
|
|
|
22,927.6
|
|
|
|
707.0
|
|
Total
liabilities
|
|
|
59,124.0
|
|
|
|
74,234.3
|
|
|
|
76,275.2
|
|
|
|
59,914.1
|
|
|
|
62,637.5
|
|
|
|
1,931.5
|
|
Capital
stock
|
|
|
35,802.8
|
|
|
|
41,000.0
|
|
|
|
45,573.7
|
|
|
|
45,925.1
|
|
|
|
54,475.6
|
|
|
|
1,679.8
|
|
Minority
interest in consolidated subsidiaries
|
|
|
10,077.6
|
|
|
|
8,404.8
|
|
|
|
7,902.0
|
|
|
|
11,106.9
|
|
|
|
14,566.5
|
|
|
|
449.2
|
|
Total
shareholders’ equity
|
|
|
55,200.2
|
|
|
|
59,716.6
|
|
|
|
54,850.3
|
|
|
|
77,126.8
|
|
|
|
89,739.9
|
|
|
|
2,767.2
|
|
Cash
Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash outflow from acquisition of property, plant and
equipment
|
|
|
(17,332.0
|
)
|
|
|
(28,521.4
|
)
|
|
|
(15,611.5
|
)
|
|
|
(17,764.2
|
)
|
|
|
(17,190.4
|
)
|
|
|
(530.1
|
)
|
Depreciation
and amortization
|
|
|
12,766.6
|
|
|
|
14,786.3
|
|
|
|
15,032.8
|
|
|
|
14,488.2
|
|
|
|
16,626.2
|
|
|
|
512.7
|
|
Net
cash inflow from operating activities
|
|
|
13,224.3
|
|
|
|
19,206.7
|
|
|
|
18,751.1
|
|
|
|
37,290.0
|
|
|
|
28,306.8
|
|
|
|
872.9
|
|
Net
cash inflow from sale of ASE Inc.
common
shares
|
|
|
2,850.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net
cash outflow from investing activities
|
|
|
(18,370.5
|
)
|
|
|
(31,048.9
|
)
|
|
|
(11,632.0
|
)
|
|
|
(22,104.5
|
)
|
|
|
(18,108.4
|
)
|
|
|
(558.4
|
)
|
Net
cash inflow (outflow) from financing activities
|
|
|
4,090.8
|
|
|
|
9,164.2
|
|
|
|
(91.8
|
)
|
|
|
(12,561.1
|
)
|
|
|
(8,488.9
|
)
|
|
|
(261.8
|
)
|
Segment
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging
|
|
|
43,443.5
|
|
|
|
58,261.8
|
|
|
|
66,022.9
|
|
|
|
76,820.5
|
|
|
|
78,516.3
|
|
|
|
2,421.1
|
|
Testing
|
|
|
12,142.4
|
|
|
|
16,473.9
|
|
|
|
17,122.0
|
|
|
|
21,429.6
|
|
|
|
20,007.8
|
|
|
|
616.9
|
|
Others
|
|
|
142.5
|
|
|
|
502.0
|
|
|
|
890.9
|
|
|
|
2,173.5
|
|
|
|
2,639.0
|
|
|
|
81.4
|
|
Gross
profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging
|
|
|
7,749.4
|
|
|
|
11,146.0
|
|
|
|
10,128.7
|
|
|
|
19,280.8
|
|
|
|
20,589.7
|
|
|
|
634.9
|
|
Testing
|
|
|
2,855.3
|
|
|
|
4,332.7
|
|
|
|
4,433.1
|
|
|
|
8,728.2
|
|
|
|
7,602.9
|
|
|
|
234.4
|
|
Others
|
|
|
5.7
|
|
|
|
117.9
|
|
|
|
(44.0
|
)
|
|
|
771.4
|
|
|
|
895.8
|
|
|
|
27.6
|
|
|
|
As
of and for the Year Ended December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
(in
millions, except earnings per share and per ADS data)
|
|
U.S.
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
55,728.4
|
|
|
|
75,237.7
|
|
|
|
84,035.8
|
|
|
|
100,423.6
|
|
|
|
101,163.1
|
|
|
|
3,119.4
|
|
Cost
of revenues
|
|
|
(46,399.0
|
)
|
|
|
(60,030.0
|
)
|
|
|
(70,544.4
|
)
|
|
|
(73,366.9
|
)
|
|
|
(75,134.7
|
)
|
|
|
(2,316.8
|
)
|
Gross
profit
|
|
|
9,329.4
|
|
|
|
15,207.7
|
|
|
|
13,491.4
|
|
|
|
27,056.7
|
|
|
|
26,028.4
|
|
|
|
802.6
|
|
Total
operating expenses
|
|
|
(7,079.3
|
)
|
|
|
(7,227.6
|
)
|
|
|
(21,882.8
|
)
|
|
|
(10,113.8
|
)
|
|
|
(11,108.7
|
)
|
|
|
(342.6
|
)
|
Income
(loss) from operations
|
|
|
2,250.1
|
|
|
|
7,980.1
|
|
|
|
(8,391.4
|
)
|
|
|
16,942.9
|
|
|
|
14,919.7
|
|
|
|
460.0
|
|
Non-operating
income (expense)
|
|
|
(1,238.4
|
)
|
|
|
(5,127.2
|
)
|
|
|
1,958.5
|
|
|
|
1,448.4
|
|
|
|
71.4
|
|
|
|
2.2
|
|
Income
tax benefit (expense)
|
|
|
1,289.7
|
|
|
|
1,506.1
|
|
|
|
190.3
|
|
|
|
(1,980.7
|
)
|
|
|
(3,262.5
|
)
|
|
|
(100.6
|
)
|
Discontinued
operations
(3)
|
|
|
196.8
|
|
|
|
568.2
|
|
|
|
353.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Extraordinary
loss
|
|
|
(75.7
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cumulative
effect of change in accounting principle
|
|
|
—
|
|
|
|
(26.8
|
)
(4)
|
|
|
—
|
|
|
|
(296.5
|
)
(13)
|
|
|
—
|
|
|
|
—
|
|
Minority
interest in net loss (income) of subsidiaries
|
|
|
(70.5
|
)
|
|
|
(603.3
|
)
|
|
|
358.4
|
|
|
|
(1,991.4
|
)
|
|
|
(1,797.5
|
)
|
|
|
(55.4
|
)
|
Net
income (loss)
|
|
|
2,352.0
|
|
|
|
4,297.1
|
|
|
|
(5,530.5
|
)
|
|
|
14,122.7
|
|
|
|
9,931.1
|
|
|
|
306.2
|
|
Earnings
(loss) per common share
(6)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.50
|
|
|
|
0.88
|
|
|
|
(1.10
|
)
|
|
|
2.77
|
|
|
|
1.91
|
|
|
|
0.06
|
|
Diluted
|
|
|
0.49
|
|
|
|
0.85
|
|
|
|
(1.10
|
)
|
|
|
2.64
|
|
|
|
1.85
|
|
|
|
0.06
|
|
Earnings
(loss) per equivalent ADS
(6)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.49
|
|
|
|
4.38
|
|
|
|
(5.48
|
)
|
|
|
13.83
|
|
|
|
9.54
|
|
|
|
0.29
|
|
Diluted
|
|
|
2.47
|
|
|
|
4.27
|
|
|
|
(5.48
|
)
|
|
|
13.22
|
|
|
|
9.23
|
|
|
|
0.28
|
|
Number
of common shares
(14)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,725.5
|
|
|
|
4,903.6
|
|
|
|
5,046.2
|
|
|
|
5,106.7
|
|
|
|
5,202.6
|
|
|
|
5,202.6
|
|
Diluted
|
|
|
4,769.1
|
|
|
|
5,227.6
|
|
|
|
5,046.2
|
|
|
|
5,403.9
|
|
|
|
5,444.0
|
|
|
|
5,444.0
|
|
Number
of equivalent ADSs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
945.1
|
|
|
|
980.7
|
|
|
|
1,009.2
|
|
|
|
1,021.3
|
|
|
|
1,040.5
|
|
|
|
1,040.5
|
|
Diluted
|
|
|
953.8
|
|
|
|
1,045.5
|
|
|
|
1,009.2
|
|
|
|
1,080.8
|
|
|
|
1,088.8
|
|
|
|
1,088.8
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
8,562.4
|
|
|
|
5,975.1
|
|
|
|
13,263.8
|
|
|
|
15,730.1
|
|
|
|
17,157.9
|
|
|
|
529.1
|
|
Financial
assets—current
(1)(9)
|
|
|
3,022.9
|
|
|
|
3,198.4
|
|
|
|
4,375.0
|
|
|
|
10,904.3
|
|
|
|
11,058.3
|
|
|
|
341.0
|
|
Notes
and accounts receivable, net
|
|
|
12,909.8
|
|
|
|
13,676.2
|
|
|
|
15,585.6
|
|
|
|
11,454.9
|
|
|
|
18,747.5
|
|
|
|
578.1
|
|
Inventories
|
|
|
4,691.8
|
|
|
|
9,437.3
|
|
|
|
7,757.1
|
|
|
|
5,674.0
|
|
|
|
5,596.9
|
|
|
|
172.6
|
|
Others
|
|
|
2,276.2
|
|
|
|
3,612.1
|
|
|
|
6,578.8
|
|
|
|
4,999.5
|
|
|
|
4,341.4
|
|
|
|
133.8
|
|
Total
|
|
|
31,463.1
|
|
|
|
35,899.1
|
|
|
|
47,560.3
|
|
|
|
48,762.8
|
|
|
|
56,902.0
|
|
|
|
1,754.6
|
|
Long-term
investments
|
|
|
5,571.4
|
|
|
|
3,377.6
|
|
|
|
3,469.2
|
|
|
|
4,266.9
|
|
|
|
3,045.4
|
|
|
|
93.9
|
|
Property,
plant and equipment, net
|
|
|
66,947.6
|
|
|
|
81,849.1
|
|
|
|
67,547.9
|
|
|
|
70,894.1
|
|
|
|
80,036.6
|
|
|
|
2,468.0
|
|
Intangible
assets
|
|
|
3,100.8
|
|
|
|
3,954.4
|
|
|
|
4,112.6
|
|
|
|
3,972.4
|
|
|
|
5,255.8
|
|
|
|
162.1
|
|
Other
assets
|
|
|
4,637.8
|
|
|
|
7,008.5
|
|
|
|
7,284.7
|
|
|
|
5,834.8
|
|
|
|
3,766.7
|
|
|
|
116.1
|
|
Total
assets
|
|
|
111,720.7
|
|
|
|
132,088.7
|
|
|
|
129,974.7
|
|
|
|
133,731.1
|
|
|
|
149,006.5
|
|
|
|
4,594.7
|
|
Short-term
borrowings
(10)
|
|
|
14,090.2
|
|
|
|
6,852.8
|
|
|
|
10,523.1
|
|
|
|
8,499.1
|
|
|
|
15,773.9
|
|
|
|
486.4
|
|
Long-term
debts
(11)
|
|
|
30,840.1
|
|
|
|
46,529.6
|
|
|
|
42,862.1
|
|
|
|
29,398.3
|
|
|
|
23,936.0
|
|
|
|
738.1
|
|
Other
liabilities
(12)
|
|
|
14,351.8
|
|
|
|
21,465.2
|
|
|
|
23,397.2
|
|
|
|
24,228.3
|
|
|
|
24,746.0
|
|
|
|
763.0
|
|
Total
liabilities
|
|
|
59,282.1
|
|
|
|
74,847.6
|
|
|
|
76,782.4
|
|
|
|
62,125.7
|
|
|
|
64,455.9
|
|
|
|
1,987.5
|
|
Minority
interest
|
|
|
10,345.1
|
|
|
|
8,584.0
|
|
|
|
8,233.0
|
|
|
|
11,021.3
|
|
|
|
14,449.2
|
|
|
|
445.6
|
|
Capital
stock
|
|
|
35,802.0
|
|
|
|
41,000.0
|
|
|
|
45,573.7
|
|
|
|
45,925.1
|
|
|
|
54,475.6
|
|
|
|
1,679.8
|
|
Total
shareholders’ equity
|
|
|
42,093.5
|
|
|
|
48,657.1
|
|
|
|
44,959.3
|
|
|
|
60,584.1
|
|
|
|
70,101.4
|
|
|
|
2,161.6
|
|
(1)
|
As a
result of our adoption of the ROC Statement of Financial Accounting
Standards, or ROC SFAS, No. 34 “Financial Instruments: Recognition
and Measurement”, and ROC SFAS No. 36, “Financial Instruments:
Disclosure and Presentation” on January 1, 2006, the balances in 2004 and
2005 were reclassified to be consistent with the classification used in
our consolidated financial statements for 2006. The balances in 2003 were
not reclassified. See note 3 to our consolidated financial statements
included in this annual report.
|
(2)
|
Represents
an impairment charge of NT$512.0 million relating to our long-term
investment in our unconsolidated affiliate Universal
Scientific.
|
(3)
|
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. Information in
this annual report from our consolidated statements of operations for the
years ended December 31, 2003, 2004 and 2005 has been adjusted to reflect
the reclassification of ASE Test’s camera module assembly operations as
discontinued operations. Information from our consolidated statements of
cash flows was appropriately not
adjusted.
|
(4)
|
Represents
the cumulative effect of our change from using the weighted-average method
to using the moving-average method to price our raw materials and
supplies.
|
(5)
|
Represents
the cumulative effect of our adoption of ROC SFAS No. 34 “Financial
Instrument: Recognition and Measurement” and ROC SFAS, No. 36 “Financial
Instruments: Disclosure and Presentation.” See note 3 to
our consolidated financial statements included in this annual
report.
|
(6)
|
The
denominators for diluted earnings per common share and diluted earnings
per equivalent ADS are calculated to account for the potential exercise of
options and conversion of our convertible bonds into our common shares and
American depositary shares, or
ADSs.
|
(7)
|
Dividends
per common share issued as a stock
dividend.
|
(8)
|
Represents
the weighted average number of shares after retroactive adjustments to
give effect to stock dividends and employee stock bonuses. Beginning in
2002, common shares held by consolidated subsidiaries are classified for
accounting purposes as “treasury stock”, and are deducted from the number
of common shares outstanding.
|
(9)
|
Includes
financial assets at fair value through profit or loss, available-for-sale
financial assets and held-to-maturity financial
assets.
|
(10)
|
Includes
current portions of bonds payable, long-term bank loans and capital lease
obligations.
|
(11)
|
Excludes
current portions of bonds payable, long-term bank loans and capital lease
obligations.
|
(12)
|
Includes
current liabilities other than short-term
borrowings.
|
(13)
|
Represents
the cumulative effect of our adoption of U.S. SFAS No. 123R, “Share-Based
Payment.” See note 32 to our consolidated financial statements included in
this annual report.
|
(14)
|
Represents
the weighted average number of common shares after retroactive adjustments
to give effect to stock
dividends.
|
Exchange
Rates
Fluctuations
in the exchange rate between NT dollars and U.S. dollars will affect the U.S.
dollar equivalent of the NT dollar price of the common shares on the Taiwan
Stock Exchange and, as a result, will likely affect the market price of the
ADSs. Fluctuations will also affect the U.S. dollar conversion by the depositary
under our ADS deposit agreement referred to below of cash dividends paid in NT
dollars on, and the NT dollar proceeds received by the depositary from any sale
of, common shares represented by ADSs, in each case, according to the terms of
the deposit agreement dated September 29, 2000 and as amended and supplemented
from time to time among us, Citibank N.A., as depositary, and the holders and
beneficial owners from time to time of the ADSs, which we refer to as the
deposit agreement.
The
following table sets forth, for the periods indicated, information concerning
the number of NT dollars for which one U.S. dollar could be exchanged based on
the noon buying rate for cable transfers in NT dollars as certified for customs
purposes by the Federal Reserve Bank of New York.
|
NT
Dollars per U.S. Dollar Noon Buying Rate
|
|
|
|
|
|
|
|
|
2003
|
34.40
|
|
34.98
|
|
33.72
|
|
33.99
|
2004
|
33.37
|
|
34.16
|
|
33.10
|
|
33.24
|
2005
|
32.13
|
|
33.77
|
|
30.65
|
|
32.80
|
2006
|
32.51
|
|
33.31
|
|
31.28
|
|
32.59
|
2007
|
32.85
|
|
33.41
|
|
32.26
|
|
32.43
|
December
|
32.41
|
|
32.53
|
|
32.30
|
|
32.43
|
|
NT
Dollars per U.S. Dollar Noon Buying Rate
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
January
|
32.36
|
|
32.49
|
|
32.15
|
|
32.15
|
February
|
31.61
|
|
32.03
|
|
30.90
|
|
30.92
|
March
|
30.58
|
|
31.09
|
|
29.99
|
|
30.37
|
April
|
30.36
|
|
30.52
|
|
30.24
|
|
30.47
|
May
|
30.59
|
|
30.99
|
|
30.36
|
|
30.37
|
Source:
Federal Reserve Statistical Release, Board of Governors of the Federal Reserve
System.
On May 30,
2008, the noon buying rate was NT$30.37=US$1.00.
Not
applicable.
Not
applicable.
Risks
Relating to Our Business
Since
we are dependent on the highly cyclical semiconductor industry and conditions in
the markets for the end-use applications of our products, our revenues and net
income may fluctuate significantly.
Our
semiconductor packaging and testing business is affected by market conditions in
the highly cyclical semiconductor industry. All of our customers operate in this
industry, and variations in order levels from our customers and service fee
rates may result in volatility in our revenues and net income. From time to
time, the semiconductor industry has experienced significant, and sometimes
prolonged, downturns. As our business is, and will continue to be, dependent on
the requirements of semiconductor companies for independent packaging and
testing services, any future downturn in the semiconductor industry would reduce
demand for our services. For example, in the fourth quarter of 2000, a worldwide
downturn resulted in a significant deterioration in the average selling prices
of, as well as demand for, our services in 2001, and adversely affected our
operating results in 2001. Although the semiconductor industry has experienced a
recovery since 2002, we expect market conditions to continue to exert downward
pressure on the average selling prices for our packaging and testing
services.
If
we cannot reduce our costs or adjust our product mix to sufficiently offset any
decline in average selling prices, our profitability will suffer and we may
incur losses.
Market
conditions in the semiconductor industry depend to a large degree on conditions
in the markets for the end-use applications of semiconductor products, such as
communications, computer and consumer electronics products. Any deterioration of
conditions in the markets for the end-use applications of the semiconductors we
package and test would reduce demand for our services, and would likely have a
material adverse effect on our financial condition and results of operations. In
2005, approximately 37.0%, 29.3% and 30.9% of our net revenues were attributed
to the packaging and testing of semiconductors used in communications, computer,
and consumer electronics applications, respectively. In 2006, approximately
37.2%, 24.7% and 37.3% of our net revenues were attributed to the packaging and
testing of semiconductors used in communications, computer, and consumer
electronics applications, respectively. In 2007, approximately 44.5%, 22.8% and
32.1% of our net revenues were attributed to the packaging and testing of
semiconductors used in communications, computer, and consumer electronics
applications, respectively. Each of the markets for end-use applications is
subject to intense competition and significant shifts in demand, which could put
pricing pressure on the packaging and testing services provided by us and
adversely affect our revenues and net income.
A
reversal or slowdown in the outsourcing trend for semiconductor packaging and
testing services could adversely affect our growth prospects and
profitability.
In recent
years, semiconductor manufacturers that have their own in-house packaging and
testing capabilities, known as integrated device manufacturers, have
increasingly outsourced stages of the semiconductor production process,
including packaging and testing, to independent companies in order to reduce
costs and shorten production cycles. In addition, the availability of advanced
independent semiconductor manufacturing services has also enabled the growth of
so-called “fabless” semiconductor companies that focus exclusively on design and
marketing and outsource their manufacturing, packaging and testing requirements
to independent companies. We cannot assure you that these integrated device
manufacturers and fabless semiconductor companies will continue to outsource
their packaging and testing requirements to third parties like us. A reversal
of, or a slowdown in, this outsourcing trend could result in reduced demand for
our services and adversely affect our growth prospects and
profitability.
If
we are unable to compete favorably in the highly competitive semiconductor
packaging and testing markets, our revenues and net income may
decrease.
The
semiconductor packaging and testing markets are very competitive. We face
competition from a number of sources, including other independent semiconductor
packaging and testing companies, especially those that offer turnkey packaging
and testing services. We believe that the principal competitive factors in the
packaging and testing markets are:
|
·
|
the
ability to provide total solutions to our
customers;
|
|
·
|
technological
expertise;
|
|
·
|
range
of package types and testing platforms
available;
|
|
·
|
the
ability to design and produce advanced and cost-competitive interconnect
materials;
|
|
·
|
the
ability to work closely with our customers at the product development
stage;
|
|
·
|
responsiveness
and flexibility;
|
We face
increasing competition from other packaging and testing companies, as most of
our customers obtain packaging or testing services from more than one source. In
addition, some of our competitors may have access to more advanced technologies
and greater financial and other resources than we do. Although prices have
stabilized, any renewed erosion in the prices for our packaging and testing
services could cause our revenues and net income to decrease and have a material
adverse effect on our financial condition and results of
operations.
Our
profitability depends on our ability to respond to rapid technological changes
in the semiconductor industry.
The
semiconductor industry is characterized by rapid increases in the diversity and
complexity of semiconductors. As a result, we expect that we will need to
constantly offer more sophisticated packaging and testing technologies and
processes in order to respond to competitive industry conditions and customer
requirements. If we fail to develop, or obtain access to, advances in packaging
or testing technologies or processes, we may become less competitive and less
profitable. In addition, advances in technology typically lead to declining
average selling prices for semiconductors packaged or tested with older
technologies or processes. As a result, if we cannot reduce the costs associated
with our services, the profitability of a given service and our overall
profitability may decrease over time.
Our
operating results are subject to significant fluctuations, which could adversely
affect the market value of your investment.
Our
operating results have varied significantly from period to period and may
continue to vary in the future. Downward fluctuations in our operating results
may result in decreases in the market price of the common shares and the ADSs.
Among the more important factors affecting our quarterly and annual operating
results are the following:
|
·
|
changes
in general economic and business conditions, particularly given the
cyclical nature of the semiconductor industry and the markets served by
our customers;
|
|
·
|
our
ability to quickly adjust to unanticipated declines or shortfalls in
demand and market prices for our packaging and testing services, due to
our high percentage of fixed costs;
|
|
·
|
changes
in prices for our packaging and testing
services;
|
|
·
|
volume
of orders relative to our packaging and testing
capacity;
|
|
·
|
changes
in costs and availability of raw materials, equipment and
labor;
|
|
·
|
timing
of capital expenditures in anticipation of future
orders;
|
|
·
|
our
ability to design and produce advanced and cost-competitive interconnect
materials;
|
|
·
|
fluctuations
in the exchange rate between the NT dollar and foreign currencies,
especially the U.S. dollar; and
|
|
·
|
earthquakes,
drought, epidemics and other natural disasters, as well as industrial and
other incidents such as fires and power
outages.
|
Due to the
factors listed above, our future operating results or growth rates may be below
the expectations of research analysts and investors. If so, the market price of
the common shares and the ADSs, and thus the market value of your investment,
may fall.
If
we are not successful in maintaining and enhancing our in-house interconnect
materials capabilities, our margins and profitability may be adversely
affected.
We expect
that interconnect materials will become an increasingly important value-added
component of the semiconductor packaging business as technology migrates from
the traditional wirebonding process towards the flip-chip wafer bumping process
and interconnect materials such as advanced substrates represent a higher
percentage of the cost of the packaging process. As a result, we expect that we
will need to offer more advanced interconnect materials designs and production
processes in order to respond to competitive industry conditions and customer
requirements. In particular, our competitive position will depend to a
significant extent on our ability to design and produce interconnect materials
that are comparable to or better than those produced by independent suppliers
and others. Many of these independent suppliers have dedicated greater resources
than we have for the research and development and design and production of
interconnect materials. In addition, we may not be able to acquire the
technology and personnel that would enable us to further develop our in-house
expertise and enhance our design and production capabilities. We have enhanced
our interconnect materials capabilities through our operations originally
conducted through ASE Material and now conducted through our wholly-owned
subsidiary ASE Electronics and the operations of ASE Shanghai. For
more information on our interconnect materials operations, see “Item 4.
Information on the Company
—
Business
Overview
—
Principal Products
and Services
—
Packaging
Services
—
Interconnect
Materials.” If we are unable to maintain and enhance our in-house interconnect
materials expertise to offer advanced interconnect materials that meet the
requirements of our customers, we may become less competitive and our margins
and profitability may suffer as a result.
Due
to our high percentage of fixed costs, we will be unable to maintain our gross
margin at past levels if we are unable to achieve relatively high capacity
utilization rates.
Our
operations, in particular our testing operations, are characterized by
relatively high fixed costs. We expect to continue to incur substantial
depreciation and other expenses in connection with our previous acquisitions of
packaging and testing equipment and facilities. Our profitability
depends not only on the pricing levels for our services, but also on utilization
rates for our packaging and testing machinery and equipment, commonly referred
to as “capacity utilization rates.” In particular, increases or decreases in our
capacity utilization rates can significantly affect gross margins since the unit
cost of packaging and testing services generally decreases as fixed costs are
allocated over a larger number of units. In periods of low demand, we experience
relatively low capacity utilization rates in our operations, which leads to
reduced margins. For example, in 2001, we experienced lower than anticipated
utilization rates in our operations due to a significant decline in worldwide
demand for our packaging and testing services, which resulted in reduced margins
during that period.
Although our capacity
utilization rates have improved, we cannot assure you that we will be able to
maintain or surpass our past gross margin levels if we cannot consistently
achieve or maintain relatively high capacity utilization rates.
If
we are unable to manage our expansion effectively, our growth prospects may be
limited and our future profitability may be affected.
We have
significantly expanded our packaging and testing operations in recent years, and
expect to continue to expand our operations in the future, including the
expansion of our interconnect materials operations. In particular, we intend to
provide total solutions for the packaging and testing of semiconductors in order
to attract new customers and broaden our product range to include products
packaged and tested for a variety of end-use applications. In the past, we have
expanded through both internal growth and the acquisition of new operations.
Rapid expansion puts strain on our managerial, technical, financial, operational
and other resources. As a result of our expansion, we have implemented and will
continue to need to implement additional operational and financial controls and
hire and train additional personnel. Any failure to manage our growth
effectively could lead to inefficiencies and redundancies and result in reduced
growth prospects and profitability.
Because
of the highly cyclical nature of our industry, our capital requirements are
difficult to plan. If we cannot obtain additional capital when we need it, our
growth prospects and future profitability may be adversely
affected.
Our
capital requirements are difficult to plan in our highly cyclical and rapidly
changing industry. We will need capital to fund the expansion of our facilities
as well as fund our research and development activities in order to remain
competitive. We believe that our existing cash, marketable securities, expected
cash flow from operations and existing credit lines under our loan facilities
will be sufficient to meet our capital expenditures, working capital, cash
obligations under our existing debt and lease arrangements, and other
requirements for at least the next twelve months. However, future capacity
expansions or market or other developments may cause us to require additional
funds. Our ability to obtain external financing in the future is subject to a
variety of uncertainties, including:
|
·
|
our
future financial condition, results of operations and cash
flows;
|
|
·
|
general
market conditions for financing activities by semiconductor companies;
and
|
|
·
|
economic,
political and other conditions in Taiwan and
elsewhere.
|
If we are
unable to obtain funding in a timely manner or on acceptable terms, our growth
prospects and future profitability may decline.
Restrictive
covenants and broad default provisions in our existing debt agreements may
materially restrict our operations as well as adversely affect our liquidity,
financial condition and results of operations.
We are a
party to numerous loan and other agreements relating to the incurrence of debt,
many of which include restrictive covenants and broad default provisions. In
general, covenants in the agreements governing our existing debt, and debt we
may incur in the future, may materially restrict our operations, including our
ability to incur debt, pay dividends, make certain investments and payments,
other than in connection with restructurings of consolidated entities, and
encumber or dispose of assets. In the event of a prolonged downturn in the
demand for our services as a result of a downturn in the worldwide semiconductor
industry or otherwise, we cannot assure you that we will be able to remain in
compliance with our financial covenants which, as a result, may lead to a
default.
In
addition, on May 30, 2008, we acquired, by way of a scheme of arrangement under
Singapore law, all the outstanding ordinary shares of ASE Test that we did not
already directly or indirectly own, making ASE Tes
t
our wholly-owned subsidiary. See “
Item
4. Information on the Company
—
History
and Development of the Company
—
ASE
Test Share Acquisition and Privatization.”
To
finance the transaction, we entered into two syndicated loan agreements in
amounts of NT$24,750
.
0
million and US$200.0 million, which may make it more difficult for us to
maintain certain financial ratios or to incur additional debt to fund our
operations, expansion or other initiatives.
Furthermore, a
default under one agreement by us or one of our subsidiaries may also trigger
cross-defaults under our other agreements. In the event of default, we may not
be able to cure the default or obtain a waiver on a timely basis. An event of
default under any agreement governing our existing or future debt, if not cured
or waived, could have a material adverse effect on our liquidity, financial
condition and results of operations.
We have on
occasion failed to comply with certain financial covenants in some of our loan
agreements. Such non-compliance may also have, through broadly worded
cross-default provisions, resulted in default under some of the agreements
governing our other existing debt. For example, we failed to comply with certain
debt ratios in some of
our loan agreements
as a result of additional borrowings to fund increased capital expenditures in
2004 without an increase in net income and as a result of the fire at our
facilities in Chung Li, Taiwan in May 2005. By July 2005
, we had either
obtained waivers for, or refinanced on a long-term basis, all of the relevant
loans, and are not in default under any of our existing debt. For these and
other reasons, including our financial condition and our relationship with our
lenders, no lender has to date sought and we do not believe that any of our
lenders would seek to declare a default or enforce remedies in respect of our
existing debt as a result of cross-default provisions or otherwise, although we
cannot provide any assurance in this regard.
We
depend on select personnel and could be affected by the loss of their
services.
We depend
on the continued service of our executive officers and skilled technical and
other personnel. Our business could suffer if we lose the services of any of
these personnel and cannot adequately replace them. Although some of these
management personnel have entered into employment agreements with us, they may
nevertheless leave before the expiration of these agreements. We are not insured
against the loss of any of our personnel.
In
addition, we may be required to increase substantially the number of these
employees in connection with our expansion plans, and there is intense
competition for their services in the semiconductor industry. We may not be able
to either retain our present personnel or attract additional qualified personnel
as and when needed. In addition, we may need to increase employee compensation
levels in order to attract and retain our existing officers and employees and
the additional personnel that we expect to require. Furthermore, a portion of
the workforce at our facilities in Taiwan are foreign workers employed by us
under work permits which are subject to government regulations on renewal and
other terms. Consequently, our business could also suffer if the Taiwan
regulations relating to the employment of foreign workers were to become
significantly more restrictive or if we are otherwise unable to attract or
retain these workers at a reasonable cost.
If
we are unable to obtain additional packaging and testing equipment or facilities
in a timely manner and at a reasonable cost, our competitiveness and future
profitability may be adversely affected.
The
semiconductor packaging and testing businesses are capital intensive and require
significant investment in expensive equipment manufactured by a limited number
of suppliers. The market for semiconductor packaging and testing equipment is
characterized, from time to time, by intense demand, limited supply and long
delivery cycles. Our operations and expansion plans depend on our ability to
obtain a significant amount of such equipment from a limited number of
suppliers.
From
time to time we have also leased certain equipment. We have no binding supply
agreements with any of our suppliers and acquire our packaging and testing
equipment on a purchase order basis, which exposes us to changing market
conditions and other substantial risks.
For example, shortages
of capital equipment could result in an increase in the price of equipment and
longer delivery times. Semiconductor packaging and testing also require us to
operate sizeable facilities. If we are unable to obtain equipment or facilities
in a timely manner, we may be unable to fulfill our customers’ orders, which
could adversely affect our growth prospects as well as financial condition and
results of operations. See “Item 4. Information on the Company—Business
Overview—Equipment.”
Fluctuations
in exchange rates could result in foreign exchange losses.
Currently,
the majority of our revenues from packaging and testing services are denominated
in U.S. dollars, with a portion denominated in NT dollars and Japanese yen.
Our
cost of revenues and operating expenses associated with packaging and testing
services, on the other hand, are incurred in several currencies, primarily NT
dollars and U.S. dollars, as well as, to a lesser extent, Korean won, Japanese
yen, Malaysian ringgit and PRC renminbi. In addition, a substantial
portion of our capital expenditures, primarily for the purchase of packaging and
testing equipment, has been, and is expected to continue to be, denominated in
U.S. dollars, with much of the remainder in Japanese yen. Fluctuations in
exchange rates, primarily among the U.S. dollar, the NT dollar, the Japanese yen
and the PRC renminbi, will affect our costs and operating margins. In addition,
these fluctuations could result in exchange losses and increased costs in NT
dollar and other local currency terms. Despite hedging and mitigating techniques
implemented by us, fluctuations in exchange rates have affected, and may
continue to affect, our financial condition and results of
operations. We incurred foreign exchange gains of NT$154.3 million,
NT$92.8 million and NT$403.5 million (US$12.4 million) in 2005, 2006 and 2007,
respectively. See “Item 11. Quantitative and Qualitative Disclosures
about Market Risk—Market Risk—Foreign Currency Exchange Rate Risk.”
The
loss of a large customer or disruption of our strategic alliance or other
commercial arrangements with semiconductor foundries and providers of other
complementary semiconductor manufacturing services may result in a decline in
our revenues and profitability.
Although
we have over 200 customers, we have derived and expect to continue to derive a
large portion of our revenues from a small group of customers during any
particular period due in part to the concentration of market share in the
semiconductor industry. Our five largest customers together accounted for
approximately 30.6%, 26.0% and 24.8% of our net revenues in 2005, 2006 and 2007,
respectively. No customer accounted for more than 10% of our net revenues in
2005, 2006 and 2007. The demand for our services from a customer is directly
dependent upon that customer’s level of business activity, which could vary
significantly from year to year. Our key customers typically operate in the
cyclical semiconductor business and, in the past, have varied, and may vary in
the future, order levels significantly from period to period. Some of these
companies are relatively small, have limited operating histories and financial
resources, and are highly exposed to the cyclicality of the industry. We cannot
assure you that these customers or any other customers will continue to place
orders with us in the future at the same levels as in past periods. The loss of
one or more of our significant customers, or reduced orders by any one of them,
and our inability to replace these customers or make up for such orders could
adversely affect our revenues and profitability. In addition, we have in the
past reduced, and may in the future be requested to reduce, our prices to limit
the level of order cancellations. Any price reduction would likely reduce our
margins and profitability.
Our
strategic alliance with Taiwan Semiconductor Manufacturing Company Limited, or
TSMC, one of the world’s largest dedicated semiconductor foundries, as well as
our other commercial arrangements with providers of other complementary
semiconductor manufacturing services, enable us to offer total semiconductor
manufacturing solutions to our customers. This strategic alliance and any of our
other commercial arrangements may be terminated at any time. A termination of
this strategic alliance and other commercial arrangements, and our failure to
enter into
substantially
similar alliances and commercial arrangements, may adversely affect our
competitiveness and our revenues and profitability.
Our
revenues and profitability may decline if we are unable to obtain adequate
supplies of raw materials in a timely manner and at a reasonable
price.
Our
packaging operations require that we obtain adequate supplies of raw materials
on a timely basis. Shortages in the supply of raw materials experienced by the
semiconductor industry have in the past resulted in occasional price increases
and delivery delays. For example, in 1999 and the first half of 2000, the
industry experienced a shortage in the supply of advanced substrates used in
ball grid array, or BGA, packaging.
Raw materials such as
advanced substrates are prone to supply shortages since such materials are
produced by a limited number of suppliers such as Phoenix Precision Technology
Corporation, Kinsus Interconnect Technology Corporation, SMI Electronic Devices
Inc. and Nanya Printed Circuit Board Corporation. Our operations originally
conducted through ASE Material and now conducted through our wholly-owned
subsidiary ASE Electronics and the operations of ASE Shanghai have improved our
ability to obtain advanced substrates on a timely basis and at a reasonable
cost. However, we do not expect that our internal interconnect materials
operations will be able to meet all of our interconnect materials requirements.
Consequently, we will remain dependent on market supply and demand for our raw
materials. Recent increases in gold prices have also affected the
price at which we have been able to purchase gold wire, one of the
principal raw materials we use in our packaging processes. We cannot guarantee
that we will not experience shortages in the near future or that we will be able
to obtain adequate supplies of raw materials in a timely manner or at a
reasonable price. Our revenues and net income could decline if we are unable to
obtain adequate supplies of high quality raw materials in a timely manner or if
there are significant increases in the costs of raw materials that we cannot
pass on to our customers.
Any
environmental claims or failure to comply with any present or future
environmental regulations, as well as any fire or other industrial accident, may
require us to spend additional funds and may materially and adversely affect our
financial condition and results of operations.
We are
subject to various laws and regulations relating to the use, storage, discharge
and disposal of chemical by-products of, and water used in, our packaging and
interconnect materials production processes. Although we have not suffered
material environmental claims in the past, the failure to comply with any
present or future regulations could result in the assessment of damages or
imposition of fines against us, suspension of production or a cessation of our
operations. New regulations could require us to acquire costly equipment or to
incur other significant expenses that we may not be able to pass on to our
customers. See “Item 4. Information on the Company—Business Overview—Raw
Materials and Suppliers—Packaging.” Additionally, any failure on our part to
control the use, or adequately restrict the discharge, of hazardous substances
could subject us to future liabilities that may have a material adverse effect
on our financial condition and results of operations.
Our
controlling shareholders may take actions that are not in, or may conflict with,
our public shareholders’ best interest.
Members of
the Chang family own, directly or indirectly, a controlling interest in our
outstanding common shares. See “Item 7. Major Shareholders and
Related Party Transactions—Major Shareholders.” Accordingly, these shareholders
will continue to have the ability to exercise a controlling influence over our
business, including matters relating to:
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·
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our
management and policies;
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·
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the
timing and distribution of dividends;
and
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·
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the
election of our directors and
supervisors.
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Members of
the Chang family may take actions that you may not agree with or that are not in
our or our public shareholders’ best interests.
We
may be subject to intellectual property rights disputes, which could materially
adversely affect our business.
Our
ability to compete successfully and achieve future growth depends, in part, on
our ability to develop and protect our proprietary technologies and to secure on
commercially acceptable terms certain technologies that we do not own. We cannot
assure you that we will be able to independently develop, obtain patents for,
protect or secure from any third party, the technologies required for our
packaging and testing services.
Our
ability to compete successfully also depends, in part, on our ability to operate
without infringing the proprietary rights of others. The semiconductor industry
is characterized by frequent litigation regarding patent and other intellectual
property rights. In January 2006, Tessera Inc. filed a suit against us and
others alleging patent infringement. See “Item 8. Financial Information—Legal
Proceedings.” Any litigation, whether as plaintiff or defendant and regardless
of the outcome, is costly and diverts company resources.
Any of the
foregoing could harm our competitive position and render us unable to provide
some of our services operations.
We
are an ROC company and, because the rights of shareholders under ROC law differ
from those under U.S. law and the laws of certain other countries, you may have
difficulty protecting your shareholder rights.
Our
corporate affairs are governed by our Articles of Incorporation and by the laws
governing corporations incorporated in the ROC. The rights of shareholders and
the responsibilities of management and the members of the board of directors
under ROC law are different from those applicable to a corporation incorporated
in the United States and certain other countries. As a result, public
shareholders of ROC companies may have more difficulty in protecting their
interests in connection with actions taken by management or members of the board
of directors than they would as public shareholders of a corporation in the
United States or certain other countries.
We
face risks associated with uncertainties in PRC laws and
regulations.
We operate
packaging and testing facilities in the PRC through our subsidiaries and joint
ventures incorporated in the PRC. Under PRC laws and regulations, foreign
investment projects, such as our subsidiaries and joint ventures, must obtain
certain approvals from the relevant governmental authorities in the provinces or
special economic zones in which they are located and, in some circumstances,
from the relevant authorities in the PRC’s central government. Foreign
investment projects must also comply with certain regulatory requirements.
However, PRC laws and regulations are often subject to varying interpretations
and means of enforcement, and additional approvals from the relevant
governmental authorities may be required for the operations of our PRC
subsidiaries and joint ventures. If required, we cannot assure you
that we will be able to obtain these approvals in a timely manner, if at
all. Because the PRC government holds significant discretion in
determining matters relating to foreign investment, we cannot assure you that
the relevant governmental authorities will not take action that is material and
adverse to our PRC operations.
Any
impairment charges may have a material adverse effect on our net
income.
Under ROC
GAAP and U.S. GAAP, we are required to evaluate our long-lived assets, including
equipment and goodwill, for possible impairment at least annually or whenever
there is an indication of impairment. If certain criteria are met, we are
required to record an impairment charge.
With
respect to long-lived assets, in 2005, we recognized a loss of NT$13,479.1
million on damage to our property, plant and equipment caused by a fire at our
facilities in Chung Li, Taiwan. In 2006, we reversed NT$2,190.6 million of the
impairment loss recognized in 2005 under ROC GAAP due to an increase in the
estimated service potential of the relevant assets. In 2007, we recognized an
impairment charge of NT$816.2 million (US$25.2 million) in connection with our
flip-chip substrate production line as a result of idle capacity caused by lack
of demand for certain applications. We also recognized impairment charges on
goodwill in 2004 in connection with our holdings in ASE Test and ISE Labs. As of
December 31, 2007, goodwill under ROC GAAP and U.S. GAAP amounted to NT$3,188.1
million (US$98.3 million) and NT$3,711.6 million (US$114.4 million),
respectively. See
“Item 5. Operating and Financial Review and Prospects—Operating Results and
Trend Information—Critical Accounting Policies and Estimates—Realizability of
Long-Lived Assets” and “—Goodwill.”
We are
unable to estimate the extent and timing of any impairment charges for
long-lived assets or goodwill for future years under ROC GAAP or U.S. GAAP, and
we cannot give any assurance that impairment charges will not be required in
periods subsequent to December 31, 2007. Any impairment charge could have a
material adverse effect on our net income. The determination of an
impairment charge at any given time is based significantly on our expected
results of operations over a number of years in the future. As a result, an
impairment charge is more likely to occur during a period in which our operating
results and outlook are otherwise already depressed.
Risks
Relating to Taiwan, ROC
Strained
relations between the ROC and the PRC could negatively affect our business and
the market value of your investment.
Our
principal executive offices and our principal packaging and testing facilities
are located in Taiwan and approximately 73.5%, 74.4% and 68.6% of our net
revenues in 2005, 2006 and 2007, respectively, were derived from our operations
in Taiwan. The ROC has a unique international political status. The government
of the PRC asserts sovereignty over all of China, including Taiwan, and does not
recognize the legitimacy of the ROC government. Although significant economic
and cultural relations have been established in recent years between the ROC and
the PRC, relations have often been strained and the PRC government has indicated
that it may use military force to gain control over Taiwan in some
circumstances, such as the declaration of independence by the
ROC. Political uncertainty could adversely affect the prices of our
common shares and ADSs. Relations between the ROC and the PRC and
other factors affecting the political or economic conditions in Taiwan could
have a material adverse effect on our financial condition and results of
operations, as well as the market price and the liquidity of our common shares
and ADSs.
Currently,
we manufacture interconnect materials in the PRC through our wholly-owned
subsidiary ASE Shanghai. We also provide wire bond packaging and
testing services in the PRC through our subsidiaries, ASESH AT, ASEN and ASE
Weihai Inc. See “Item 4. Information on the Company—Organizational Structure—Our
Consolidated Subsidiaries.” The ROC government currently restricts certain types
of investments by ROC companies, including ourselves, in the PRC, including
certain types of investments in facilities for the packaging and testing of
semiconductors. In April 2006, these restrictions were amended to permit
investments in facilities for certain less advanced wire bond packaging and
testing services. We do not know when or if such laws and policies
governing investment in the PRC will be amended, and we cannot assure you that
such ROC investment laws and policies will permit us to make further investments
in the PRC in the future that we consider beneficial to us. Our growth prospects
and profitability may be adversely affected if we are restricted from making
certain additional investments in the PRC and are not able to fully capitalize
on the growth of the semiconductor industry in the PRC.
As
a substantial portion of our business and operations is located in Taiwan, we
are vulnerable to earthquakes, typhoons, drought and other natural disasters, as
well as power outages and other industrial incidents, which could severely
disrupt the normal operation of our business and adversely affect our results of
operations.
Taiwan is
susceptible to earthquakes and has experienced severe earthquakes which caused
significant property damage and loss of life, particularly in the central and
eastern parts of Taiwan. Earthquakes have damaged production facilities and
adversely affected the operations of many companies involved in the
semiconductor and other industries. We have never experienced structural damage
to our facilities or damage to our machinery and equipment as a result of these
earthquakes. In the past, however, we have experienced interruptions to our
production schedule primarily as a result of power outages caused by
earthquakes.
Taiwan is
also susceptible to typhoons, which may cause damage and business interruptions
to companies with facilities located in Taiwan. In the third quarter of 2004, a
typhoon caused a partial interruption for approximately two weeks in our water
supply at ASE Chung Li’s substrate operations.
Taiwan has
experienced severe droughts in the past. Although we have not been directly
affected by droughts, we are dependent upon water for our packaging and
substrates operations and a drought could interrupt such
operations. In
addition, a drought could interrupt the manufacturing process of the foundries
located in Taiwan, in turn disrupting some of our customers’ production, which
could result in a decline in the demand for our services. In addition, the
supply of electrical power in Taiwan, which is primarily provided by Taiwan
Power Company, the state-owned electric utility, is susceptible to disruption
that could be prolonged and frequent, caused by overload as a result of high
demand or other reasons.
Our
production facilities as well as many of our suppliers and customers and
providers of complementary semiconductor manufacturing services, including
foundries, are located in Taiwan. If our customers are affected by an
earthquake, a typhoon, a drought or any other natural disasters, or power outage
or other industrial incidents, it could result in a decline in the demand for
our packaging and testing services. If our suppliers or providers of
complementary semiconductor manufacturing services are affected, our production
schedule could be interrupted or delayed. As a result, a major earthquake,
typhoon, drought, or other natural disaster in Taiwan, or a power outage or
other industrial incident could severely disrupt the normal operation of our
business and have a material adverse effect on our financial condition and
results of operations.
Any
outbreak of avian flu or recurrence of SARS or other contagious disease may have
an adverse effect on the economies and financial markets of certain Asian
countries and may adversely affect our results of operations.
The World
Health Organization, or WHO, reported in January 2005 that “during 2004, large
parts of Asia experienced unprecedented outbreaks of highly pathogenic avian
influenza, caused by the H5N1 virus”, which moved the world closer than at any
time since 1968 to an influenza pandemic “with high morbidity, excess mortality,
and social and economic disruption.” There have continued to be cases of
outbreaks of avian flu in certain regions of Asia, Europe and Africa with human
casualties reported in countries such as Azerbaijan, Cambodia, Egypt, Indonesia,
Iraq, the PRC, Thailand, Turkey and Vietnam. Additionally, in the first half of
2003, the PRC, Hong Kong, Taiwan, Singapore, Vietnam and certain other countries
encountered an outbreak of severe acute respiratory syndrome, or SARS, which is
a highly contagious form of atypical pneumonia. The SARS outbreak had an adverse
effect on our results of operations for the first half of 2003, primarily due to
the lower than expected demand for our packaging and testing services that
resulted from the adverse effect of such SARS outbreak on the level of economic
activity in the affected regions. There is no guarantee that an outbreak of
avian flu, SARS or other contagious disease will not occur again in the future
and that any future outbreak of avian flu, SARS or other contagious disease or
the measures taken by the governments of the ROC, Hong Kong, the PRC or other
countries against such potential outbreaks, will not seriously interrupt our
production operations or those of our suppliers and customers, which may have a
material adverse effect on our results of operations. The perception that an
outbreak of avian flu, SARS or other contagious disease may occur again may have
an adverse effect on the economic conditions of certain countries in
Asia.
Risks
Relating to Ownership of the ADSs
The
market for the common shares and the ADSs may not be liquid.
Active,
liquid trading markets generally result in lower price volatility and more
efficient execution of buy and sell orders for investors, compared to less
active and less liquid markets. Liquidity of a securities market is often a
function of the volume of the underlying shares that are publicly held by
unrelated parties.
There has
been no trading market for the common shares outside the ROC and the only
trading market for the common shares will be the Taiwan Stock Exchange. The
outstanding ADSs are listed on the New York Stock Exchange. There is no
assurance that the market for the common shares or the ADSs will be active or
liquid.
Although
ADS holders are entitled to withdraw the common shares underlying the ADSs from
the depositary at any time, ROC law requires that the common shares be held in
an account in the ROC or sold for the benefit of the holder on the Taiwan Stock
Exchange. In connection with any withdrawal of common shares from our
ADS facility, the ADSs evidencing these common shares will be cancelled. Unless
additional ADSs are issued, the effect of withdrawals will be to reduce the
number of outstanding ADSs. If a significant number of withdrawals are effected,
the liquidity of our ADSs will be substantially reduced. We cannot assure you
that the ADS depositary will
be able to
arrange for a sale of deposited shares in a timely manner or at a specified
price, particularly during periods of illiquidity or
volatility.
If
a non-ROC holder of ADSs withdraws common shares, such holder of ADSs will be
required to appoint a tax guarantor, local agent and custodian bank in the ROC
and register with the Taiwan Stock Exchange in order to buy and sell securities
on the Taiwan Stock Exchange.
When a
non-ROC holder of ADSs elects to withdraw common shares represented by ADSs,
such holder of the ADSs will be required to appoint an agent for filing tax
returns and making tax payments in the ROC. Such agent will be required to meet
the qualifications set by the ROC Ministry of Finance and, upon appointment,
becomes the guarantor of the withdrawing holder’s tax payment obligations.
Evidence of the appointment of a tax guarantor, the approval of such appointment
by the ROC tax authorities and tax clearance certificates or evidentiary
documents issued by such tax guarantor may be required as conditions to such
holder repatriating the profits derived from the sale of common
shares. We cannot assure you that a withdrawing holder will be able
to appoint and obtain approval for a tax guarantor in a timely
manner.
In
addition, under current ROC law, such withdrawing holder is required to register
with the Taiwan Stock Exchange and appoint a local agent in the ROC to, among
other things, open a bank account and open a securities trading account with a
local securities brokerage firm, pay taxes, remit funds and exercise such
holder’s rights as a shareholder. Furthermore, such withdrawing holder must
appoint a local bank to act as custodian for confirmation and settlement of
trades, safekeeping of securities and cash proceeds and reporting and
declaration of information. Without satisfying these requirements, non-ROC
withdrawing holders of ADSs would not be able to hold or otherwise subsequently
sell the common shares on the Taiwan Stock Exchange or otherwise.
The
market value of your investment may fluctuate due to the volatility of the ROC
securities market.
The
trading price of our ADSs may be affected by the trading price of our common
shares on the Taiwan Stock Exchange. The ROC securities market is smaller and
more volatile than the securities markets in the United States and in many
European countries. The Taiwan Stock Exchange has experienced substantial
fluctuations in the prices and volumes of sales of listed securities and there
are currently limits on the range of daily price movements on the Taiwan Stock
Exchange. The Taiwan Stock Exchange Index peaked at 12,495.3 in
February 1990, and subsequently fell to a low of 2,560.5 in October 1990. On
March 13, 2000, the Taiwan Stock Exchange Index experienced a 617-point drop,
which represented the single largest decrease in the Taiwan Stock Exchange Index
in its history. During the period from January 1, 2007 to December 31, 2007, the
Taiwan Stock Exchange Index peaked at 9,809.9 on October 29, 2007, and reached a
low of 7,344.6 on March 5, 2007. Over the same period, daily closing values of
our common shares ranged from NT$29.60 per share to NT$48.80 per share. On May
30, 2008, the Taiwan Stock Exchange Index closed at 8,619.08, and the closing
value of our common shares was NT$31.90 per share.
The Taiwan
Stock Exchange is particularly volatile during times of political instability,
including when relations between Taiwan and the PRC are strained. Several
investment funds affiliated with the ROC government have also from time to time
purchased securities from the Taiwan Stock Exchange to support the trading level
of the Taiwan Stock Exchange. Moreover, the Taiwan Stock Exchange has
experienced problems such as market manipulation, insider trading and settlement
defaults. The recurrence of these or similar problems could have an adverse
effect on the market price and liquidity of the securities of ROC companies,
including our common shares and ADSs, in both the domestic and international
markets.
Holders
of common shares and ADSs may incur dilution as a result of the practice among
ROC technology companies of issuing stock bonuses and stock options to
employees.
Similar to
other ROC technology companies, we issue bonuses from time to time in the form
of common shares valued at par under our employee stock bonus plan. In addition,
under the revised ROC Company Law we may, upon approval from our board of
directors and the ROC Securities and Futures Bureau of the Financial Supervisory
Commission, Executive Yuan (formerly known as the Securities and Futures
Commission), establish employee stock option plans. We currently
maintain three employee stock option plans pursuant to which our full-time
employees and the full-time employees of our domestic and foreign subsidiaries
are eligible to receive stock option
grants. As
of December 31, 2007, 295,747,950 options were outstanding. See “Item 6.
Directors, Senior Management and Employees—Compensation—ASE Inc. Employee Bonus
and Stock Option Plans.” The issuance of our common shares pursuant to stock
bonuses or stock options may have a dilutive effect on the holders of
outstanding common shares and ADSs.
Restrictions
on the ability to deposit our common shares into our ADS facility may adversely
affect the liquidity and price of our ADSs.
The
ability to deposit common shares into our ADS facility is restricted by ROC
law. A significant number of withdrawals of common shares underlying
our ADSs would reduce the liquidity of the ADSs by reducing the number of ADSs
outstanding. As a result, the prevailing market price of our ADSs may differ
from the prevailing market price of our common shares on the Taiwan Stock
Exchange. Under current ROC law, no person or entity, including you and us, may
deposit our common shares in our ADS facility without specific approval of the
ROC Financial Supervisory Commission, Executive Yuan, unless:
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(1)
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we
pay stock dividends on our common
shares;
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(2)
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we
make a free distribution of common
shares;
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(3)
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holders
of ADSs exercise preemptive rights in the event of capital increases;
or
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(4)
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to
the extent permitted under the deposit agreement and the relevant custody
agreement, investors purchase our common shares, directly or through the
depositary, on the Taiwan Stock Exchange, and deliver our common shares to
the custodian for deposit into our ADS facility, or our existing
shareholders deliver our common shares to the custodian for deposit into
our ADS facility.
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With
respect to item (4) above, the depositary may issue ADSs against the deposit of
those common shares only if the total number of ADSs outstanding following the
deposit will not exceed the number of ADSs previously approved by the ROC
Financial Supervisory Commission, Executive Yuan plus any ADSs issued pursuant
to the events described in subparagraphs (1), (2) and (3) above.
In
addition, in the case of a deposit of our common shares requested under item (4)
above, the depositary will refuse to accept deposit of our common shares if such
deposit is not permitted under any legal, regulatory or other restrictions
notified by us to the depositary from time to time, which restrictions may
include blackout periods during which deposits may not be made, minimum and
maximum amounts and frequency of deposits.
The
depositary will not offer holders of ADSs preemptive rights unless the
distribution of both the rights and the underlying common shares to our ADS
holders are either registered under the Securities Act or exempt from
registration under the Securities Act.
Holders
of ADSs will not have the same voting rights as our shareholders, which may
affect the value of their ADSs.
The voting
rights of a holder of ADSs as to the common shares represented by its ADSs are
governed by the deposit agreement. Holders of ADSs will not be able to exercise
voting rights on an individual basis. If holders representing at least 51% of
the ADSs outstanding at the relevant record date instruct the depositary to vote
in the same manner regarding a resolution, including the election of directors
and supervisors, the depositary will cause all common shares represented by the
ADSs to be voted in that manner. If the depositary does not receive timely
instructions representing at least 51% of the ADSs outstanding at the relevant
record date to vote in the same manner for any resolution, including the
election of directors and supervisors, holders of ADSs will be deemed to have
instructed the depositary or its nominee to authorize all the common shares
represented by the ADSs to be voted at the discretion of our chairman or his
designee, which may not be in the interest of holders of ADSs. Moreover, while
shareholders who own 1% or more of our outstanding shares are entitled to submit
one proposal to be considered at our annual general meetings of shareholders,
only holders representing at least 51% of our ADSs outstanding at the relevant
record date are entitled to submit one proposal to be considered at our annual
general meetings of shareholders. Hence, only one proposal may be
submitted on behalf of all ADS holders.
The
right of holders of ADSs to participate in our rights offerings is limited,
which could cause dilution to your holdings.
We may
from time to time distribute rights to our shareholders, including rights to
acquire our securities. Under the deposit agreement, the depositary will not
offer holders of ADSs those rights unless both the distribution of the rights
and the underlying securities to all our ADS holders are either registered under
the Securities Act or exempt from registration under the Securities Act.
Although we may be eligible to take advantage of certain exemptions under the
Securities Act available to certain foreign issuers for rights offerings, we can
give no assurances that we will be able to establish an exemption from
registration under the Securities Act, and we are under no obligation to file a
registration statement for any of these rights. Accordingly, holders of ADSs may
be unable to participate in our rights offerings and may experience dilution of
their holdings.
If the
depositary is unable to sell rights that are not exercised or not distributed or
if the sale is not lawful or reasonably practicable, it will allow the rights to
lapse, in which case holders of ADSs will receive no value for these
rights.
Changes
in exchange controls which restrict your ability to convert proceeds received
from your ownership of ADSs may have an adverse effect on the value of your
investment.
Under
current ROC law, the depositary, without obtaining approvals from the Central
Bank of the Republic of China (Taiwan) or any other governmental authority or
agency of the ROC, may convert NT dollars into other currencies, including U.S.
dollars, for:
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the
proceeds of the sale of common shares represented by ADSs or received as
stock dividends from the common shares and deposited into the depositary
receipt facility; and
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any
cash dividends or distributions received from the common
shares.
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In
addition, the depositary may also convert into NT dollars incoming payments for
purchases of common shares for deposit in the ADS facility against the creation
of additional ADSs. The depositary may be required to obtain foreign exchange
approval from the Central Bank of the Republic of China (Taiwan) on a
payment-by-payment basis for conversion from NT dollars into foreign currencies
of the proceeds from the sale of subscription rights for new common shares.
Although it is expected that the Central Bank of the Republic of China (Taiwan)
will grant this approval as a routine matter, we cannot assure you that in the
future any approval will be obtained in a timely manner, or at all.
Under
current ROC law, a holder of the ADSs, without obtaining further approval from
the Central Bank of the Republic of China (Taiwan), may convert from NT dollars
into other currencies, including U.S. dollars, the following:
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the
proceeds of the sale of any underlying common shares withdrawn from the
depositary receipt facility or received as a stock dividend that has been
deposited into the depositary receipt facility;
and
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any
cash dividends or distribution received from the common
shares.
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However,
such holder may be required to obtain foreign exchange approval from the Central
Bank of the Republic of China (Taiwan) on a payment-by-payment basis for
conversion from NT dollars into foreign currencies of the proceeds from the sale
of subscription rights for new common shares. Although the Central Bank of the
Republic of China (Taiwan) is generally expected to grant this approval as a
routine matter, we cannot assure you that you will actually obtain this approval
in a timely manner, or at all.
Under the
ROC Foreign Exchange Control Law, the Executive Yuan of the ROC government may,
without prior notice but subject to subsequent legislative approval, impose
foreign exchange controls in the event of, among other things, a material change
in international economic conditions. We cannot assure you that foreign exchange
controls or other restrictions will not be introduced in the
future.
The
value of your investment may be reduced by possible future sales of common
shares or ADSs by us or our shareholders.
While we
are not aware of any plans by any major shareholders to dispose of significant
numbers of common shares, we cannot assure you that one or more existing
shareholders or owners of securities convertible or exchangeable into or
exercisable for our common shares or ADSs will not dispose of significant
numbers of common shares or ADSs. In addition, several of our subsidiaries and
affiliates hold common shares, depositary shares representing common shares and
options to purchase common shares or ADSs. We or they may decide to sell those
securities in the future. See “Item 7. Major Shareholders and Related Party
Transactions—Major Shareholders” for a description of our significant
shareholders and affiliates that hold our common shares.
We cannot
predict the effect, if any, that future sales of common shares or ADSs, or the
availability of common shares or ADSs for future sale, will have on the market
price of the common shares or the ADSs prevailing from time to time. Sales of
substantial numbers of common shares or ADSs in the public market, or the
perception that such sales may occur, could depress the prevailing market prices
of the common shares or the ADSs.
Advanced
Semiconductor Engineering, Inc. was incorporated on March 23, 1984 as a company
limited by shares under the ROC Company Law, with facilities in the Nantze
Export Processing Zone located in Kaohsiung, Taiwan. We were listed on the
Taiwan Stock Exchange in 1989. Our principal executive offices are
located at 26 Chin Third Road, Nantze Export Processing Zone, Nantze, Kaohsiung,
Taiwan, ROC and our telephone number at the above address is (886)
7361-7131. Our common shares have been listed on the Taiwan
Stock Exchange under the symbol “2311” since July 1989 and ADSs
representing our common shares have been listed on the New York
Stock Exchange under the symbol “ASX” since September 2000.
Acquisition
of ASESH AT
On January
11, 2007, we completed the acquisition of 100.0% of GAPT, now known as ASESH AT,
for a purchase price of US$60.0 million. Based in Shanghai, China, ASESH AT
provides wire bond packaging and testing services for a wide range of
semiconductors.
Joint
Venture with NXP Semiconductors
On
September 25, 2007, we entered into a joint venture with NXP B.V., or NXP
Semiconductors, formerly known as Philips Semiconductors, by completing the
acquisition of 60.0% of ASEN, formerly known as NXP Semiconductors Suzhou Ltd.,
from NXP Semiconductors for a purchase price of US$21.6 million. NXP
Semiconductors holds the remaining 40.0% of ASEN. ASEN is based in Suzhou, China
and is engaged in semiconductor packaging and testing.
Acquisition
of ASE Weihai Inc.
On May 14,
2008, we completed the acquisition of 100.0% of Weihai Aimhigh Electronic Co.
Ltd., now known as ASE Weihai Inc., from Aimhigh Global Corp. and TCC Steel for
a purchase price of US$7.0 million. ASE Weihai Inc. is based in Shandong, China
and is engaged in semiconductor packaging and testing.
ASE
Test Share Acquisition and Privatization
On
September 4, 2007, we and ASE Test entered into a scheme implementation
agreement under which we agreed to acquire, by way of a scheme of arrangement
under Section 210 of the Companies Act, Chapter 50 of Singapore, or the Scheme,
all the outstanding ordinary shares of ASE Test that we did not already directly
or indirectly own. We sought to effect the Scheme in order to
simplify our organizational structure, reduce costs and administrative burdens
associated with filing and compliance requirements relating to ASE Test’s Nasdaq
Global Market and Taiwan Stock Exchange listings and public company reporting
obligations, enhance our brand recognition through the promotion of a single
common brand, and increase our flexibility in making investments and allocating
resources among our subsidiaries.
We reached
an agreement with ASE Test on the terms of the Scheme following an evaluation by
a special committee of ASE Test’s board of directors, comprised of two of ASE
Test’s independent directors, that was established to, among other things,
review, evaluate, negotiate and consider all matters arising in connection with
the Scheme. The Scheme was unanimously approved on our behalf by our board of
directors and unanimously approved by ASE Test’s independent directors at the
recommendation of ASE Test’s special committee. On May 6, 2008, the Scheme was
approved by a majority of ASE Test’s shareholders (other than us or our
affiliates) present and voting, either in person or by proxy, at the
shareholders meeting, who represented not less than 75% in value of the shares
held by shareholders (other than us or our affiliates) present and voting,
either in person or by proxy, at the shareholders meeting. The
Scheme became effective on May 30, 2008 and ASE Test became our
wholly-owned subsidiary. On June 12, 2008, ASE Test’s ordinary shares
were delisted from the Nasdaq Global Market. ASE Test’s shares will be
deregistered under the Exchange Act effective September 10, 2008 and its
reporting obligations thereunder are currently suspended. The delisting of ASE
Test’s depositary shares from the Taiwan Stock Exchange is currently expected to
occur in mid-July, pending ROC regulatory approval.
Pursuant
to the terms of the scheme implementation agreement, each ASE Test shareholder
(other than us and our subsidiaries) received US$14.78 in cash for each ASE Test
ordinary share held by the shareholder and listed on the Nasdaq Global Market,
and NT$5.6314, the New Taiwan dollar equivalent of US$0.185 in cash based on the
exchange rate as of May 29, 2008, for each ASE Test depositary share
(representing 0.0125 ASE Test ordinary shares) held by the shareholder and
listed on the Taiwan Stock Exchange. This acquisition price was a
25.6% premium above ASE Test’s closing price on the Nasdaq Global Market as of
August 31, 2007, and was determined after arm’s length negotiations between us
and the special committee of ASE Test’s board of directors.
Also
pursuant to the terms of the scheme implementation agreement, each ASE Test
option exercisable for ASE Test ordinary shares (whether or not vested) that had
a per share exercise price lower than US$14.78 was deemed to have been exercised
by ASE Test on behalf of the option holder on a cashless basis. We
then acquired these newly issued ASE Test ordinary shares for US$14.78 per share
in cash. As a result, each of these option holders received a cash
payment per share equal to the excess of US$14.78 over the per share exercise
price of their options, less any interest, fees and charges. Each ASE
Test option that had a per share exercise price equal to or higher than US$14.78
was cancelled without any payment to the option holder.
Through
this transaction, we acquired a total of 58,438,944 shares of ASE Test,
7,843,663 of which were acquired from the mandatory option
exercise. The total transaction value of the Scheme was US$863.9
million. In order to finance our acquisition of ASE Test’s shares, we
entered into two syndicated loan agreements for term loan facilities of
NT$24,750.0 million and US$200.0 million, respectively. For a further
description of these agreements, see “Item 5. Operating and Financial Review and
Prospects—Liquidity and Capital Resources.”
For more
information on the Scheme, see the Schedule 13E-3, as amended, filed by ASE Test
with the United States Securities and Exchange Commission, or the SEC, on
May 30, 2008.
For more
information on our history and development, see “
¾
Organizational
Structure.”
Together
with our subsidiary ASE Test, we are the world’s largest independent provider of
semiconductor packaging and testing services based on 2007 revenues. Our
services include semiconductor packaging, design and production of interconnect
materials, front-end engineering testing, wafer probing and final testing
services. We believe that, as a result of the following, we are better
positioned than our competitors to meet the requirements of semiconductor
companies worldwide for outsourced packaging and testing services across a wide
range of end-use applications:
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our
ability to provide a broad range of cost-effective semiconductor packaging
and testing services on a large-scale turnkey basis in key centers of
semiconductor manufacturing;
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our
expertise in developing and providing cost-effective packaging,
interconnect materials and testing technologies and
solutions;
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our
scale of operations and financial position, which enable us to make
significant investments in capacity expansion and research and development
as well as to make selective
acquisitions;
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our
geographic presence in key centers of outsourced semiconductor and
electronics manufacturing; and
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our
long-term relationships with providers of complementary semiconductor
manufacturing services, including our strategic alliance with TSMC, one of
the world’s largest dedicated semiconductor
foundries.
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We believe
that the trend for semiconductor companies to outsource their packaging and
testing requirements is accelerating as semiconductor companies increasingly
rely on independent providers of foundry and advanced packaging and testing
services. In response to the increased pace of new product development and
shortened product life and production cycles, semiconductor companies are
increasingly seeking independent packaging and testing companies that can
provide turnkey services in order to reduce time-to-market. We believe that our
expertise and scale in advanced technology and our ability to integrate our
broad range of solutions into turnkey services allow us to benefit from the
accelerated outsourcing trend and better serve our existing and potential
customers.
We believe
that we have benefited, and will continue to benefit, from our geographic
location in Taiwan. Taiwan is currently the largest center for outsourced
semiconductor manufacturing in the world and has a high concentration of
electronics manufacturing service providers, which are the end users of our
customers’ products. Our close proximity to foundries and other providers of
complementary semiconductor manufacturing services is attractive to our
customers who wish to take advantage of the efficiencies of a total
semiconductor manufacturing solution by outsourcing several stages of their
manufacturing requirements. Our close proximity to end users of our customers’
products is attractive to our customers who wish to take advantage of the
logistical efficiencies of direct shipment services that we offer. We believe
that, as a result, we are well positioned to meet the advanced semiconductor
engineering and manufacturing requirements of our customers.
Our global
base of over 200 customers includes leading semiconductor companies across a
wide range of end-use applications, such as:
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Altera
Corporation
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NEC
Electronics Corporation
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ATI
Technologies, Inc.
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NVIDIA
Corporation
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Broadcom
Corporation
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NXP
Semiconductors
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Cambridge
Silicon Radio Limited
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Powerchip
Semiconductor Corp.
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Conexant
Systems, Inc.
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Qualcomm
Incorporated
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Freescale
Semiconductor, Inc.
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RF
Micro Devices, Inc.
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Kawasaki
Microelectronics, Inc
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STMicroelectronics
N.V.
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Marvell
Technology Group Ltd.
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VIA
Technologies, Inc.
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Media
Tek Inc.
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Zoran
Corporation
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Microsoft
Corporation
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Industry
Background
General
Semiconductors
are the basic building blocks used to create an increasing variety of electronic
products and systems. Continuous improvements in semiconductor process and
design technologies have led to smaller, more complex and more reliable
semiconductors at a lower cost per function. These improvements have resulted in
significant performance and price benefits to manufacturers of electronic
products. As a result, semiconductor demand has grown substantially in our
primary end-user markets for communications, computers and consumer electronics,
and has experienced increased growth in other markets such as automotive
products and industrial automation and control systems.
The semiconductor industry
is characterized by strong long-term growth, with periodic and sometimes severe
cyclical downturns, most recently the industry downturn that began in the fourth
quarter of 2000 and continued into 2002 in connection with a slowdown in the
global economy, overcapacity in the semiconductor industry and
worldwide
inventory adjustment. The Semiconductor Industry Association estimates that
worldwide sales of semiconductors increased from approximately US$51 billion in
1990 to approximately US$257.1 billion in 2007. We believe that the pattern of
long-term growth and cyclical fluctuations will continue in the semiconductor
industry.
Outsourcing
Trends in Semiconductor Manufacturing
Historically,
semiconductor companies designed, manufactured, packaged and tested
semiconductors primarily in their own facilities. Over the past several years,
there has been a trend in the industry to outsource stages in the manufacturing
process. Virtually every significant stage of the manufacturing process can be
outsourced. Wafer foundry services and semiconductor packaging and testing
services are currently the largest segments of the independent semiconductor
manufacturing services market. Most of the world’s major integrated device
manufacturers use some independent manufacturing services to maintain a
strategic mix of internal and external manufacturing capacity.
The
availability of technologically advanced independent manufacturing services has
also enabled the growth of “fabless” semiconductor companies that focus on
semiconductor design and marketing and outsource their wafer fabrication,
packaging and testing requirements to independent companies. We believe that the
growth in the number and scale of fabless semiconductor companies that rely
solely on independent companies to meet their manufacturing requirements will
continue to be a driver of growth in the market for independent foundry,
packaging and testing services. Similarly, the availability of technologically
advanced independent manufacturing services has encouraged integrated device
manufacturers, which had traditionally relied on in-house semiconductor
manufacturing capacity, to increasingly outsource their manufacturing
requirements to independent semiconductor manufacturing companies.
We believe
the outsourcing of semiconductor manufacturing services will increase in the
future from current levels for many reasons, including the
following:
Technological
Expertise and Significant Capital Expenditure
. Semiconductor
manufacturing processes have become highly complex, requiring substantial
investment in specialized equipment and facilities and sophisticated engineering
and manufacturing expertise. Technical expertise becomes increasingly important
as the industry transitions from one generation of technology to another, as
evidenced by the current migration of the fabrication process from 8-inches to
12-inches in sub-micron technology and the size of technology nodes fabricated
from 65 nm to 45 nm, as well as the integration of different functions into a
single-chip service. In addition, product life cycles have been shortening,
magnifying the need to continuously upgrade or replace manufacturing equipment
to accommodate new products. As a result, new investments in in-house packaging,
testing and fabrication facilities are becoming less desirable to integrated
device manufacturers because of the high investment costs as well as the
inability to achieve sufficient economies of scale and utilization rates
necessary to be competitive with the independent service providers. Independent
packaging, testing and foundry companies, on the other hand, are able to realize
the benefits of specialization and achieve economies of scale by providing
services to a large base of customers across a wide range of products. This
enables them to reduce costs and shorten production cycles through high capacity
utilization and process expertise. In the process, they are also able to focus
on discrete stages of semiconductor manufacturing and deliver services of
superior quality.
In recent
years, semiconductor companies have significantly reduced their investment in
in-house packaging and testing technologies and capacity. As a result, some
semiconductor companies may have limited in-house expertise and capacity to
accommodate large orders following a recovery in demand, particularly in the
area of advanced technology. On the other hand, some semiconductor companies
with in-house packaging and testing operations focusing on low-end
leadframe-based packages are under increasing pressure to rationalize these
operations by relocating to locations with lower costs or better infrastructure,
such as the PRC, in order to lower manufacturing costs and shorten production
cycle time. We expect semiconductor companies to increasingly outsource their
packaging and testing requirements to take advantage of the advanced technology
and scale of operations of independent packaging and testing
companies.
Focus on Core
Competencies
. As the semiconductor industry becomes more competitive,
semiconductor companies are expected to further outsource their semiconductor
manufacturing requirements in order to focus their resources on core
competencies, such as semiconductor design and marketing.
Time-to-Market
Pressure
. The increasingly short product life cycle has accelerated
time-to-market pressure for semiconductor companies, leading them to rely
increasingly on outsourced suppliers as a key source for effective manufacturing
solutions.
Capitalize on the
high growth rate in emerging markets.
Emerging markets, and
China in particular, have become both major manufacturing centers for the
technology industry and growing markets for technology-based products. Thus, in
order to gain direct access to the Chinese market, many semiconductor companies
are seeking to establish manufacturing facilities in China by partnering with
local subcontractors. As a result, certain stages of the
semiconductor manufacturing process that were previously handled in-house will
be increasingly outsourced in order to improve efficiency.
The
Semiconductor Industry in Taiwan
The
semiconductor industry in Taiwan has been a leader in, and a major beneficiary
of, the trend in outsourcing. The growth of the semiconductor industry in Taiwan
has been the result of several factors. First, semiconductor manufacturing
companies in Taiwan typically focus on one or two stages of the semiconductor
manufacturing process. As a result, these companies tend to be more efficient
and are better able to achieve economies of scale and maintain higher capacity
utilization rates. Second, semiconductor manufacturing companies in Taiwan that
provide the major stages of the manufacturing process are located close to each
other and typically enjoy close working relationships. This close network is
attractive to customers who wish to outsource multiple stages of the
semiconductor manufacturing process. For instance, a customer could reduce
production cycle time and unit cost and streamline logistics by outsourcing its
foundry, packaging, testing and drop shipment services to electronics
manufacturing companies in Taiwan. Third, Taiwan also has an educated labor pool
and a large number of engineers suitable for sophisticated manufacturing
industries such as semiconductors.
As a
result of the growth of the global semiconductor market, the semiconductor
industry in Taiwan has in recent years made significant capital expenditures to
expand capacity and technological capabilities. The ROC government has also
provided tax incentives, long-term loans at favorable rates and research and
development support, both directly and indirectly through support of research
institutes and universities. As a result of investments made in recent years,
Taiwan has achieved substantial market share in the outsourced semiconductor
manufacturing industry. Furthermore, the growth of Taiwan’s electronics
manufacturing industry, particularly in personal computer, mobile handset and
digital camera design and manufacturing, has created substantial local demand
for semiconductors.
The
Semiconductor Industry in Other Asian Regions
Many of
the factors that contributed to the growth of the semiconductor industry in
Taiwan have also contributed to the recent development of the semiconductor
industry in Southeast Asia. Access to expanding semiconductor foundry services
in Singapore, convenient proximity to major downstream electronics manufacturing
operations in Malaysia, Singapore and Thailand, government-sponsored
infrastructure support, tax incentives and pools of skilled engineers and labor
at relatively low cost have all encouraged the development of back-end
semiconductor service operations in Southeast Asia. The downstream electronics
manufacturers in Southeast Asia have typically focused on products used in the
communications, industrial and consumer electronics and personal computer
peripheral sectors. The proximity to both semiconductor foundries and end users
has influenced local and international semiconductor companies increasingly to
obtain packaging, testing and drop shipment services from companies in Southeast
Asia.
In
addition, the world’s leading electronics manufacturing service providers, many
of them from Taiwan, are increasingly establishing manufacturing facilities in
the PRC and Vietnam in order to take advantage of lower labor costs, government
incentives for investment and the potential size of the domestic market for end
users of electronics products. Many of the factors that contributed to the
growth of the semiconductor industry in Taiwan are
beginning
to emerge in the PRC and may play an increasingly important role in the growth
of its semiconductor industry over the long term.
Overview
of Semiconductor Manufacturing Process
The
manufacturing of semiconductors is a complex process that requires increasingly
sophisticated engineering and manufacturing expertise. The manufacturing process
may be divided into the following stages from circuit design to
shipment:
We are
involved in all stages of the semiconductor manufacturing process except circuit
design and wafer fabrication.
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Circuit
Design
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The
design of a semiconductor is developed by laying out circuit components
and interconnections.
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Front-End
Engineering Test
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Throughout
and following the design process, prototype semiconductors undergo
front-end engineering testing, which involves software development,
electrical design validation and reliability and failure
analysis.
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Wafer
Fabrication
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Process
begins with the generation of a photomask through the definition of the
circuit design pattern on a photographic negative, known as a mask, by an
electron beam or laser beam writer. These circuit patterns are transferred
to the wafers using various advanced processes.
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Wafer
Probe
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Each
individual die is electrically tested, or probed, for defects. Dies that
fail this test are marked to be
discarded.
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Packaging
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Packaging,
also called assembly, is the processing of bare semiconductors into
finished semiconductors and serves to protect the die and facilitate
electrical connections and heat dissipation. The patterned silicon wafers
received from our customers are diced by means of diamond saws into
separate dies, also called chips. Each die is attached to a leadframe or a
laminate (plastic or tape) substrate by epoxy resin. A leadframe is a
miniature sheet of metal, generally made of copper and silver alloys, on
which the pattern of input/output leads has been cut. On a laminate
substrate, typically used in BGA packages, the leads take the shape of
small bumps or balls. Leads on the leadframe or the substrate are
connected by extremely fine gold wires or bumps to the input/output
terminals on the chips, through the use of automated machines known as
“bonders.” Each chip is then encapsulated, generally in a plastic casing
molded from a molding compound, with only the leads protruding from the
finished casing, either from the edges of the package as in the case of
the leadframe-based packages, or in the form of small bumps on a surface
of the package as in the case of BGA or other substrate-based
packages.
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Final
Test
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Final
testing is conducted to ensure that the packaged semiconductor meets
performance specifications. Final testing involves using sophisticated
testing equipment known as testers and customized software to electrically
test a number of attributes of packaged semiconductors, including
functionality, speed, predicted endurance and power consumption. The final
testing of semiconductors is categorized by the functions of the
semiconductors tested into logic/mixed-signal final testing and memory
final testing. Memory final testing typically requires simpler test
software but longer testing time per device
tested.
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Strategy
Our
objective is to provide semiconductor packaging and testing services and
interconnect materials design and production capabilities which set industry
standards and to lead and facilitate the industry trend towards outsourcing
semiconductor manufacturing requirements. The principal elements of our strategy
are to:
Grow
Our Advanced Packaging Services and Expand into the Legacy Packaging
Market
We believe
that an important factor in our ability to attract leading semiconductor
companies as our customers has been our ability to fulfill demand for a broad
range of packaging solutions on a large scale. We intend to continue to
develop process and product technologies to meet the requirements of clients
using our advanced packaging services. Our expertise in packaging technology has
enabled us to develop advanced solutions such as fine-pitch wire bonding,
stacked die packaging and bump chip carrier packaging. We are continuously
investing in
research
and development in response to and in anticipation of migrations in technology
and intend to continue to acquire access to new technologies through strategic
alliances and licensing arrangements.
We also
intend to expand our legacy leadframe-based packaging product offerings and
services. We believe that our clients will continue to outsource their
legacy packaging requirements. To capitalize on this trend, we plan to
accelerate our single outline
legacy
packaging production in Shanghai and expand into the discrete packaging
business by leveraging the existing assets of ASE Weihai Inc. in
Shandong, China as well as our portfolio of clients.
The
increasing miniaturization of semiconductors and the growing complexity of
interconnect technology have also resulted in the blurring of the traditional
distinctions among assembly at different levels of integration: chip, module,
board and system. We currently provide module assembly services primarily at our
facilities in Korea. Our interest in Universal Scientific has provided us with
access to process and product technologies at the levels of module, board and
system assembly and test, which helps us to better anticipate industry trends
and take advantage of potential growth opportunities.
Strategically
Expand Production Capacity
To
capitalize on the growing demand for advanced and legacy packaging and testing
services, we intend to strategically expand our production capacity, both
through internal growth and through selective acquisitions and joint ventures,
with a focus on providing cost competitive and innovative packaging and testing
services.
For our
advanced packaging and testing business, we intend to invest in trends that are
essential to the development of the industry. We plan to expand our capacity for
FC-CSP and system-in-a-package products
to
meet demand for smaller form factors, higher performance and higher packaging
density. We believe rising commodity prices will expedite the migration from
leadframe and BGA-based packaging to flip-chip packaging and wafer level
packaging, as the cost differential narrows. We intend to increase our
capacity for flip-chip packaging and wafer level packaging in order to cope
with rising demand for these packaging technologies.
For our
legacy packaging and testing business, we expect to focus on providing cost
competitive services through our China operations by leveraging China’s
lower cost of labor and land and a rapidly growing end market. Our clients may
also benefit from easier inventory management and savings in transportation
costs and taxes by outsourcing their packaging and testing requirements to
China. Through better management of capacity utilization and efficiency
improvements, we plan to offer cost competitive legacy packaging and testing
services on a large scale with the intention of driving more integrated device
manufacturer outsourcing
in
the long-run.
We
evaluate acquisition and joint venture opportunities on the basis of access to
new markets and technology, the enhancement of our production capacity,
economies of scale and management resources, and closer proximity to existing
and potential customers. In July 2006, we entered into a joint venture with
Powerchip, a DRAM manufacturer in Taiwan that focuses on the packaging and
testing of memory semiconductors, in order to help develop our capabilities with
respect to memory semiconductors and to benefit from future growth in the market
for memory products. The joint venture began operations in December 2006. In
January 2007, we completed the acquisition of GAPT, a company that provides wire
bond packaging and testing services for a wide range of semiconductors. In
February 2007, we and NXP Semiconductors formed a joint venture in Suzhou, China
focused on semiconductor testing and packaging. We currently own a 60.0%
interest in the joint venture. In May 2008, we completed the acquisition of ASE
Weihai Inc., a company that also engages in semiconductor packaging and testing
services.
Continue
to Leverage Our Presence in Key Centers of Semiconductor and Electronics
Manufacturing
We intend
to continue leveraging our presence in key centers of semiconductor and
electronics manufacturing to further grow our business. We have significant
packaging and testing operations in Taiwan, currently the largest center for
outsourced semiconductor manufacturing in the world. This presence enables our
engineers to work closely with our customers as well as foundries and other
providers of complementary semiconductor manufacturing services early in the
semiconductor design process, enhances our responsiveness to the requirements of
our customers and shortens production cycles. In addition, as a turnkey service
provider, we are able to offer in Taiwan
packaging
and testing services, including interconnect materials solutions, all within
relatively close geographic proximity to our customers, complementary service
providers and the end users of our customers
’
products. In addition to our current operations, we intend to expand our
packaging, testing and interconnect materials operations in Chung Li, Taiwan to
better serve our customers located in northern Taiwan and customers who request
that we maintain the capability of packaging and testing their products at more
than one location in Taiwan.
In
addition to our locations in Taiwan, we have operations in the following
locations:
l
|
PRC
—
a
fast-growing market for semiconductor manufacturing for domestic
consumption and our primary site for serving legacy packaging
clients;
|
l
|
Korea
—
an
increasingly important center for the manufacturing of memory and
communications devices with a concentration of integrated device
manufacturers specializing in these
products;
|
l
|
Malaysia
and Singapore
—
an emerging
center for outsourced semiconductor manufacturing in Southeast Asia with a
concentration of integrated device
manufacturers;
|
l
|
Silicon
Valley in California
—
the
preeminent center for semiconductor design, with a concentration of
fabless customers; and
|
l
|
Japan
—
an emerging
market for semiconductor packaging and testing services as Japanese
integrated device manufacturers increasingly outsource their semiconductor
manufacturing requirements.
|
Strengthen
and Develop Strategic Relationships with Providers of Complementary
Semiconductor Manufacturing Services
We intend
to strengthen existing, and develop new, strategic relationships with providers
of other complementary semiconductor manufacturing services, such as foundries,
as well as equipment vendors, raw material suppliers and technology research
institutes, in order to offer our customers total semiconductor manufacturing
solutions covering all stages of the manufacturing of their products from design
to shipment.
Since
1997, we have maintained a strategic alliance with TSMC, currently one of the
world’s largest dedicated semiconductor foundries, which designates us as the
non-exclusive preferred provider of packaging and testing services for
semiconductors manufactured by TSMC. Through our strategic alliance with and
close geographic proximity to TSMC, we are able to offer our customers a total
semiconductor manufacturing solution that includes access to foundry services in
addition to our packaging, testing and direct shipment services.
Principal
Products and Services
We offer a
broad range of advanced and legacy semiconductor packaging and testing services.
Our package types employ either leadframes or substrates as interconnect
materials. The semiconductors we package are used in a wide range of end-use
applications, including communications, computers, consumer electronics,
industrial, automotive and other applications. Our testing services include
front-end engineering testing, which is performed during and following the
initial circuit design stage of the semiconductor manufacturing process, wafer
probe, final testing and other related semiconductor testing services. We focus
on packaging and testing logic semiconductors. We offer our customers turnkey
services which consist of packaging, testing and direct shipment of
semiconductors to end users designated by our customers. In 2005, 2006 and 2007,
our packaging revenues, including revenues from module assembly, accounted for
78.6%, 76.5% and 77.6% of our net revenues, respectively, and our testing
revenues accounted for 20.4%, 21.3% and 19.8% of our net revenues,
respectively.
Packaging
Services
We offer a
broad range of package types to meet the requirements of our customers, with a
focus on advanced packaging solutions. Within our portfolio of package types, we
focus on the packaging of semiconductors for which there is expected to be
strong demand. These include advanced leadframe-based package types such as quad
flat package, thin quad flat package, bump chip carrier and quad flat no-lead
package, and package types based on substrates, such as flip-chip BGA and other
BGA types as well as other advanced packages such as wafer-bumping products. We
are among the leaders in such advanced packaging processes and technologies and
are well positioned to lead the technology migration in the semiconductor
packaging industry.
The
semiconductor packaging industry has evolved to meet the advanced packaging
requirements of high-performance semiconductors. The development of
high-performance electronics products has spurred the innovation of
semiconductor packages that have higher interconnect density and better
electrical performance. As a part of this technology migration, semiconductor
packages have evolved from leadframe-based packages to substrate-based packages.
The key differences of these package types are:
|
·
|
the
size of the package;
|
|
·
|
the
density of electrical connections the package can support;
and
|
|
·
|
the
thermal and electrical characteristics of the
package.
|
Leadframe-Based
Packages.
Leadframe-based packages are packaged by connecting
the die, using wire bonders, to the leadframe with gold wire. As packaging
technology improves, the number of leads per package increases. Packages have
evolved from the lower pin-count plastic dual in-line packages to higher
pin-count quad flat packages. In addition, improvements in leadframe-based
packages have reduced the footprint of the package on the circuit board and
improved the electrical performance of the package. The following table sets
forth our principal leadframe-based packages.
|
|
|
|
|
|
|
Quad
Flat Package (QFP)/ Thin
Quad
Flat Package (TQFP)
|
|
44-256
|
|
Designed
for advanced processors and controllers, application-specific integrated
circuits and digital signal processors.
|
|
Multimedia
applications, cellular phones, personal computers, automotive and
industrial products, hard disk drives, communication boards such as
ethernet, integrated services digital network, and notebook
computers.
|
|
|
|
|
|
|
|
Quad
Flat No-Lead Package (QFN)/Microchip Carrier (MCC)
|
|
12-84
|
|
QFN,
also known as MCC, uses half-encapsulation technology to expose the rear
side of the die pad and the tiny fingers, which are used to connect the
chip and bonding wire with printed circuit boards.
|
|
Cellular
phones, wireless local access network, or wireless LAN, personal digital
assistant devices and digital cameras.
|
|
|
|
|
|
|
|
Bump
Chip Carrier (BCC)
|
|
16-156
|
|
BCC
packages use plating metal pads to connect with printed circuit boards,
creating enhanced thermal and electrical performance.
|
|
Cellular
phones, wireless LAN, personal digital assistant devices and digital
cameras.
|
Small
Outline Plastic Package
(SOP)/Thin
Small Outline
Plastic
Package (TSOP)
|
|
8-56
|
|
Designed
for memory devices including static random access memory, or SRAM, dynamic
random access memory, or DRAM, fast static RAM, also called FSRAM, and
flash memory devices.
|
|
Consumer
audio/video and entertainment products, cordless telephones, pagers, fax
machines, printers, copiers, personal computer peripherals, automotive
parts, telecommunications products, recordable optical disks and hard disk
drives.
|
|
|
|
|
|
|
|
Small
Outline Plastic J-Bend Package (SOJ)
|
|
20-44
|
|
Designed
for memory and low pin-count applications.
|
|
DRAM
memory devices, microcontrollers, digital analog conversions and
audio/video applications.
|
|
|
|
|
|
|
|
Plastic
Leaded Chip Carrier (PLCC)
|
|
28-84
|
|
Designed
for applications that do not require low-profile packages with high
density of interconnects.
|
|
Personal
computers, scanners, electronic games and monitors.
|
|
|
|
|
|
|
|
Plastic
Dual In-line Package (PDIP)
|
|
8-64
|
|
Designed
for consumer electronic products.
|
|
Telephones,
televisions, audio/video applications and computer
peripherals.
|
Substrate-Based
Packages
. Substrate-based packages generally employ the BGA design, which
utilizes a substrate rather than a leadframe. Whereas traditional leadframe
technology places the electrical connection around the perimeter of the package,
the BGA package type places the electrical connection at the bottom of the
package surface in the form of small bumps or balls. These small bumps or balls
are typically distributed evenly across the bottom surface of the package,
allowing greater distance between individual leads and higher
pin-counts.
The BGA
package type was developed in response to the requirements of advanced
semiconductors. The benefits of the BGA package type include:
|
·
|
superior
electrical signal transmission; and
|
|
·
|
better
heat dissipation.
|
The
industry demand for BGA packages has grown significantly in recent years. BGA
packages are generally used in applications where size, density and performance
are important considerations, such as cellular handsets and high pin-count
graphic chipsets. Our expertise in BGA packages also includes capabilities in
stacked-die BGA, which assembles multiple dies into a single package. As an
extension to stacked-die BGA, we also assemble system-in-a-package products,
which involve the integration of more than one chip into the same package. We
believe that we are among the leaders in these packaging
technologies.
We believe
that there will continue to be growing demand for packaging solutions with
increased input/output density, smaller size and better heat dissipation
characteristics. In anticipation of this demand, we have focused on developing
our capabilities in some advanced packaging solutions, such as flip-chip BGA.
Flip-chip BGA technology replaces wire bonding with wafer bumping for
interconnections within the package. Wafer bumping involves the placing of tiny
solder balls, instead of wires, on top of dies for connection to substrates. As
compared with more traditional packages, which allow input/output connection
only on the boundaries of the dies, flip-chip packages significantly enhance the
input/output flow by allowing input/output connection over the entire surface of
the dies.
The
following table sets forth our principal substrate-based packages.
|
|
|
|
|
|
|
Plastic
BGA
|
|
5-1520
|
|
Designed
for semiconductors which require the enhanced performance provided by
plastic BGA, including personal computer chipsets, graphic controllers and
microprocessors, application-specific integrated circuits, digital signal
processors and memory devices.
|
|
Wireless
products, cellular phones, global positioning systems, notebook computers,
disk drives and video cameras.
|
|
|
|
|
|
|
|
Cavity
Down BGA
|
|
256-1140
|
|
Designed
for memory devices such as flash memory devices, SRAM, DRAM and FSRAM,
microprocessors/controllers and high-value, application-specific
integrated circuits requiring a low profile, light and small
package.
|
|
Cellular
and other telecommunications products, wireless and consumer systems,
personal digital assistants, or PDAs, disk drives, notebook computers and
memory boards.
|
|
|
|
|
|
|
|
Stacked-Die
BGA
|
|
44-591
|
|
Combination
of multiple dies in a single package enables package to have multiple
functions within a small surface area.
|
|
Cellular
phones, local area networks, graphic and processors, digital cameras and
pagers.
|
|
|
|
|
|
|
|
Flip-Chip
BGA
|
|
16-2401
|
|
Using
advanced interconnect technology, the flip-chip BGA package allows higher
density of input/output connection over the entire surface of the
dies. Designed for high-performance semiconductors that require
high density of interconnects in a small package.
|
|
High-performance
networking, graphics and processor applications.
|
|
|
|
|
|
|
|
Land
Grid Array (LGA)
|
|
10-72
|
|
Leadless
package which is essentially a BGA package without the solder
balls. Based on laminate substrate, land grid array packages
allow flexible routing and are capable of multichip module
functions.
|
|
High
frequency integrated circuits such as wireless communications products,
computers servers and personal computer peripherals.
|
|
|
|
|
|
|
|
Flip-Chip
Chip Scale Package (FC-CSP)
|
|
16-200
|
|
A lightweight package
with a small, thin profile that provides better protection for chips and
better
solder joint reliability than other comparable package
types.
|
|
RFICs and memory ICs
such as digital cameras, DVDs, devices that utilize WiMAX technology,
cellular
phones, GPS devices and personal computer
peripherals.
|
|
|
|
|
|
|
|
Wafer
Level Chip Scale Package (aCSP)
|
|
6-88
|
|
A
wafer level CSP package that can be directly attached to the circuit
board. Provides shortest electrical path from the die pad to
the circuit board, thereby enhancing electrical
performance.
|
|
Applications
for portable devices, cellular phones, PDAs, watches, MP3 players, cameras
and camcorders.
|
Module
Assembly.
We also offer module assembly services, which
combine one or more packaged semiconductors with other components in an
integrated module to enable increased functionality, typically using automated
surface mount technology, or SMT, machines and other machinery and equipment for
system-level assembly. End-use applications for modules include cellular phones,
PDAs, wireless LAN applications, Bluetooth applications, camera modules,
automotive applications and toys. Beginning in 2003, a substantial
portion of our module assembly services was provided at ASE Test’s facilities in
Malaysia to a customer for the assembly of camera modules used in
handsets. In 2005, this customer moved its camera module assembly
in-house and ASE Test disposed of its camera module assembly operations in
Malaysia in October 2005. We currently provide module assembly services
primarily at our facilities in Korea for radio frequency and power amplifier
modules used in wireless communications and automotive
applications.
Interconnect
Materials.
Interconnect materials connect the input/output on
the semiconductor dies to the printed circuit board. Interconnect materials
include leadframe, which is a miniature sheet of metal, generally made of copper
and silver alloys, on which the pattern of input/output leads has been cut, and
substrate, which is a multi-layer miniature printed circuit board. Interconnect
materials are an important element of the electrical characteristics and overall
performance of semiconductors. We produce substrates for use in our packaging
operations. We also produced leadframes in the past, but we
discontinued production in the fourth quarter of 2005.
We expect
substrates will become an increasingly important value-added component of the
semiconductor packaging business. The demand for higher performance
semiconductors in smaller packages will continue to spur the development of
advanced substrates that can support the advancement in circuit design and
fabrication. As a result, we believe that the market for substrates will grow
and the cost of substrates as a percentage of the total packaging process will
increase, especially for advanced packages such as flip-chip BGA packages. In
the past, substrates we designed for our customers were produced by independent
substrate manufacturers. Since 1997, we have been designing and producing a
portion of our interconnect materials in-house. In 2007, our interconnect
materials operations supplied approximately 52.2% of our consolidated substrate
requirements by value.
The
following table sets forth, for the periods indicated, the percentage of our
packaging revenues accounted for by each principal type of packaging products or
services.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(percentage
of packaging revenues)
|
|
|
|
|
|
|
|
|
|
|
|
Advanced
substrate and leadframe-based packages
(1)(2)
|
|
|
79.3
|
%
|
|
|
82.8
|
%
|
|
|
83.8
|
%
|
Traditional
leadframe-based packages
(3)
|
|
|
6.6
|
|
|
|
5.2
|
|
|
|
4.3
|
|
Module
assembly
|
|
|
10.0
|
|
|
|
7.1
|
|
|
|
6.2
|
|
Other
|
|
|
4.1
|
|
|
|
4.9
|
|
|
|
5.7
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
(1)
|
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.
Information in this annual report from our consolidated statements of
operations for the years ended
December
31, 2003, 2004 and 2005 has been adjusted to reflect the reclassification
of ASE Test’s camera module assembly operations as discontinued
operations.
|
(2)
|
Includes
leadframe-based packages such as QFP/TQFP, QFN/MCC and BCC and
substrate-based packages such as various BGA package types (including
flip-chip and others) and LGA.
|
(3)
|
Includes
leadframe-based packages such as SOP/TSOP, SOJ, PLCC and
PDIP.
|
Testing
Services
We provide
a complete range of semiconductor testing services, including front-end
engineering testing, wafer probing, final testing of logic/mixed-signal and
memory semiconductors and other test-related services.
The
testing of semiconductors requires technical expertise and knowledge of the
specific applications and functions of the semiconductors tested as well as the
testing equipment utilized. We believe that our testing services employ
technology and expertise which are among the most advanced in the semiconductor
industry. In addition to maintaining different types of testing equipment, which
enables us to test a variety of semiconductor functions, we work closely with
our customers to design effective testing and conversion programs on multiple
equipment platforms for particular semiconductors.
In recent
years, complex, high-performance logic/mixed-signal semiconductors have
accounted for an increasing portion of our testing revenues. As the testing of
complex, high-performance semiconductors requires a large number of functions to
be tested using more advanced testing equipment, these products generate higher
revenues per unit of testing time, as measured in central processing unit
seconds.
Front-End
Engineering Testing
. We provide front-end engineering testing
services, including customized software development, electrical design
validation, and reliability and failure analysis.
|
·
|
Customized
Software Development.
Test engineers develop customized
software to test the semiconductor using advanced testing equipment.
Customized software, developed on specific testing platforms, is required
to test the conformity of each particular semiconductor type to its unique
functionality and specification.
|
|
·
|
Electrical
Design Validation.
A prototype of the designed
semiconductor is subjected to electrical tests using advanced test
equipment and customized software. These tests assess whether the
prototype semiconductor complies with a variety of different operating
specifications, including functionality, frequency, voltage, current,
timing and temperature range.
|
|
·
|
Reliability
Analysis.
Reliability analysis is designed to assess the
long-term reliability of the semiconductor and its suitability of use for
intended applications. Reliability testing can include “burn-in” services,
which electrically stress a device, usually at high temperature and
voltage, for a period of time long enough to cause the failure of marginal
devices.
|
|
·
|
Failure
Analysis.
In the event that the prototype semiconductor
does not function to specifications during either the electrical design
validation or reliability testing processes, it is typically subjected to
failure analysis to determine the cause of the failure to perform as
anticipated. As part of this analysis, the prototype semiconductor may be
subjected to a variety of analyses, including electron beam probing and
electrical testing.
|
Wafer
Probing.
Wafer probing is the step immediately before the
packaging of semiconductors and involves visual inspection and electrical
testing of the processed wafer for defects to ensure that it meets our
customers’ specifications. Wafer probing services require expertise and testing
equipment similar to that used in final testing, and most of our testers can
also be used for wafer probing.
Logic/Mixed-Signal/RF
Final Testing.
We conduct final tests of a wide variety of
logic/mixed-signal/RF semiconductors, with the number of leads ranging from the
single digits to over one thousand and operating frequencies of over 2.5 Gbps
for digital semiconductors and 6 GHz for radio frequency semiconductors, which
are at the high end of the range for the industry. The products we test include
semiconductors used for networking and
wireless
communications, graphics and disk controllers for home entertainment and
personal computer applications, as well as a variety of application-specific
integrated circuits for various specialized applications.
Memory Final
Testing.
We provide final testing services for a variety of
memory products, such as SRAM, DRAM, single-bit erasable programmable read-only
memory semiconductors and flash memory semiconductors.
Other
Test-Related Services.
We provide a broad range of additional
test-related services, including:
|
·
|
Burn-in
Testing.
Burn-in testing is the process of electrically
stressing a device, usually at high temperature and voltage, for a period
of time to simulate the continuous use of the device to determine whether
this use would cause the failure of marginal
devices;
|
|
·
|
Dry
Pack.
Process which involves heating semiconductors in
order to remove moisture before packaging and shipping to
customers;
|
|
·
|
Tape and
Reel.
Process which involves transferring semiconductors
from a tray or tube into a tape-like carrier for shipment to customers;
and
|
|
·
|
Electric
Interface Board and Mechanical Test Tool Design.
Process of
designing individualized testing apparatuses for unique semiconductor
devices and packages.
|
Drop Shipment
Services.
We offer drop shipment services for shipment of
semiconductors directly to end users designated by our customers. Drop shipment
services are provided mostly in conjunction with logic/mixed-signal testing. We
provide drop shipment services to a significant percentage of our testing
customers. A substantial portion of our customers at each of our facilities have
qualified these facilities for drop shipment services. Since drop shipment
eliminates the additional step of inspection by the customer before shipment to
the end user, quality of service is a key consideration. We believe that our
ability to successfully execute our full range of services, including drop
shipment services, is an important factor in maintaining existing customers as
well as attracting new customers.
The
following table sets forth, for the periods indicated, the percentage of our
testing revenues accounted for by each type of testing service.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(percentage
of testing revenues)
|
|
Testing
Services:
|
|
|
|
|
|
|
|
|
|
Front-end
engineering testing
|
|
|
3.7
|
%
|
|
|
4.7
|
%
|
|
|
3.6
|
%
|
Wafer
probing
|
|
|
16.6
|
|
|
|
18.7
|
|
|
|
20.1
|
|
Final
testing
|
|
|
79.7
|
|
|
|
76.6
|
|
|
|
76.3
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Seasonality
See “Item
5. Operating and Financial Review and Prospects—Operating Results and Trend
Information—Quarterly Net Revenues, Gross Profit and Gross Margin.”
Sales
and Marketing
Sales
and Marketing Offices
We maintain sales and
marketing offices in Taiwan, the United States, Austria, Belgium, France,
Germany, Singapore, Korea, Malaysia and Japan. Our sales and marketing offices
in Taiwan, which are located in Taoyuan and Kaohsiung, are staffed with both our
and ASE Test Taiwan’s employees. We conduct marketing research through our
customer service personnel and through our relationships with our customers and
suppliers to keep abreast of market trends and developments. We also provide
advice in the area of production process technology to
our major
customers planning the introduction of new products. In placing orders with us,
our customers specify which of our facilities these orders will go to. Our
customers conduct separate qualification and correlation processes for each of
our facilities that they use. See “
—
Qualification and
Correlation by Customers.”
Customers
Our global
base of over 200 customers includes leading semiconductor companies across a
wide range of end-use applications, such as:
|
·
Altera Corporation
|
·
NEC Electronics Corporation
|
|
·
ATI Technologies, Inc.
|
·
NVIDIA Corporation
|
|
·
Broadcom Corporation
|
·
NXP Semiconductors
|
|
·
Cambridge Silicon Radio Limited
|
·
Powerchip Semiconductor Corp.
|
|
·
Conexant Systems, Inc.
|
·
Qualcomm Incorporated
|
|
·
Freescale Semiconductor, Inc.
|
·
RF Micro Devices, Inc.
|
|
·
Kawasaki Microelectronics, Inc
|
·
STMicroelectronics N.V.
|
|
·
Marvell Technology Group Ltd.
|
·
VIA Technologies, Inc.
|
|
·
Media Tek Inc.
|
·
Zoran Corporation
|
|
·
Microsoft Corporation
|
|
Our five
largest customers together accounted for approximately 30.6%, 26.0% and 24.8% of
our net revenues in 2005, 2006 and 2007, respectively. No customer accounted for
more than 10% of our net revenues in 2005, 2006 and 2007.
We package
and test for our customers a wide range of products with end-use applications in
the communications, computers, consumer electronics, industrial and automotive
sectors. The following table sets forth a breakdown of the percentage of our net
revenues, for the periods indicated, by the principal end-use applications of
the products which we packaged and tested.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications
|
|
|
37.0
|
%
|
|
|
37.2
|
%
|
|
|
44.5
|
%
|
Computers
|
|
|
29.3
|
|
|
|
24.7
|
|
|
|
22.8
|
|
Consumer
electronics/industrial/automotive
|
|
|
30.9
|
|
|
|
37.3
|
|
|
|
32.1
|
|
Other
|
|
|
2.8
|
|
|
|
0.8
|
|
|
|
0.6
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Many of
our customers are leaders in their respective end-use markets. For example, we
provide Freescale Semiconductor, Inc., an industry leader in automotive and
wireless communications semiconductor products, with a substantial portion of
its outsourced packaging and testing requirements. The following table sets
forth some of our largest customers, in alphabetical order, categorized by the
principal end-use applications of the products which we package and test for
them.
|
|
|
|
Consumer
Electronics/Industrial/Automotive
|
Broadcom
Corporation
Cambridge
Silicon Radio Limited
Freescale
Semiconductor, Inc.
Media
Tek Inc.
NXP
Semiconductors
Qualcomm
Incorporated
RF
Micro Devices, Inc.
|
|
ATI
Technologies, Inc.
NVIDIA
Corporation
Powerchip
Semiconductor Corp.
VIA
Technologies, Inc.
|
|
Freescale
Semiconductor, Inc.
Kawasaki
Microelectronics Inc.
Microsoft
Corporation
NEC
Electronics Corporation
Zoran
Corporation
|
We
categorize our packaging and testing revenues geographically based on the
country in which the customer is headquartered. The following table sets forth,
for the periods indicated, the percentage breakdown by geographic regions of our
packaging and testing revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
America
|
|
|
51.5
|
%
|
|
|
53.1
|
%
|
|
|
49.8
|
%
|
Taiwan
|
|
|
20.0
|
|
|
|
18.7
|
|
|
|
21.2
|
|
Asia
|
|
|
16.2
|
|
|
|
15.7
|
|
|
|
16.6
|
|
Europe
|
|
|
12.3
|
|
|
|
12.5
|
|
|
|
12.4
|
|
Other
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
*
Indicates percentage is less than 0.1% of net revenues.
The
majority of our testing revenues is accounted for by the testing of
semiconductors that were also packaged at our packaging facilities.
The balance
represented testing revenues from customers who delivered packaged
semiconductors directly to our facilities for testing services alone. The
majority of our packaging revenues is accounted for by the packaging of
semiconductors which were subsequently tested at our facilities. We expect that
more customers of our packaging facilities will begin to contract for our
packaging and testing services on a turnkey basis.
Qualification
and Correlation by Customers
Customers
generally require that our facilities undergo a stringent qualification process
during which the customer evaluates our operations and production processes,
including engineering, delivery control and testing capabilities. The
qualification process typically takes up to eight weeks, but can take longer
depending on the requirements of the customer. In the case of our testing
operations, after we have been qualified by a customer and before the customer
delivers semiconductors to us for testing in volume, a process known as
correlation is undertaken. During the correlation process, the customer provides
us with sample semiconductors to be tested and either provides us with the test
program or requests that we develop a conversion program. In some cases, the
customer also provides us with a data log of results of any testing of the
semiconductors which the customer may have conducted previously. The correlation
process typically takes up to two weeks, but can take longer depending on the
requirements of the customer. We believe our ability to provide turnkey services
reduces the amount of time spent by our customers in the qualification and
correlation process. As a result, customers utilizing our turnkey services are
able to achieve shorter production cycles.
Pricing
We price
our packaging services primarily on a cost-plus basis with reference to
prevailing market prices. We price our testing services primarily on the basis
of the amount of time, measured in central processing unit seconds, taken by the
automated testing equipment to execute the test programs specific to the
products being tested, as well as the cost of the equipment, with reference to
prevailing market prices. Prices for our packaging and testing services are
confirmed at the time firm orders are received from customers, which is
typically four to eight weeks before delivery.
Raw
Materials and Suppliers
Packaging
The
principal raw materials used in our packaging processes are interconnect
materials such as leadframes and substrates, gold wire and molding compound.
Interconnect materials, such as leadframes, substrates, gold wire and molding
compound represented approximately 13.2%, 35.9%, 32.8% and 6.3%, respectively,
of our total cost of packaging materials in 2007.
The
silicon die, which is the functional unit of the semiconductor to be packaged,
is supplied in the form of silicon wafers. Each silicon wafer contains a number
of identical dies. We receive the wafers from the customers or the foundries on
a consignment basis. Consequently, we generally do not incur inventory costs
relating to the silicon wafers used in our packaging process.
We do not
maintain large inventories of leadframes, substrates, gold wire or molding
compound, but generally maintain sufficient stock of each principal raw material
for approximately one month’s production based on blanket orders and rolling
forecasts of near-term requirements received from customers. In addition,
several of our principal suppliers dedicate portions of their inventories,
typically in amounts equal to the average monthly amounts supplied to us, as
reserves to meet our production requirements. However, shortages in the supply
of materials experienced by the semiconductor industry have in the past resulted
in occasional price adjustments and delivery delays. For example, in the first
half of 2000, the industry experienced a shortage in the supply of advanced
substrates used in BGA packages, which, at the time, were only available from a
limited number of suppliers located primarily in Japan. Recent increases in gold
prices have also affected the price at which we have been able to purchase gold
wire. We cannot guarantee that we will not experience shortages in the near
future or that we will be able to obtain adequate supplies of raw materials in a
timely manner and at a reasonable price. In the event of a shortage, we
generally inform our customers and work together to accommodate changes in
delivery schedules.
We produce
substrates for use in our packaging operations. We produced leadframes in the
past, but we discontinued production in the fourth quarter of 2005. In 2007, our
interconnect materials operations supplied approximately 52.2% of our
consolidated substrate requirements by value. See “—Principal Products and
Services
—
Packaging
Services—Interconnect Materials.”
As a
result of the “Directive 2002/95/EC on the restriction of the use of certain
hazardous substances in electrical and electronic equipment”, or RoHS, which
became effective on July 1, 2006, we have adjusted our purchases of raw
materials and our production processes in order to use raw materials that comply
with this legislation for part of our production. This new
legislation restricts the use in the European Union, or EU, of certain
substances the EU deems harmful to consumers, which includes certain grades of
molding compounds, solder and other raw materials that are used in our
products. Manufacturers of electrical and electronic equipment must
comply with this legislation in order to sell their products in an EU member
state. As a result of this legislation, our customers have
increasingly requested that RoHS-compliant materials be used in our packaging
processes.
Testing
Apart from
packaged semiconductors, no other raw materials are needed for the functional
and burn-in testing of semiconductors. For the majority of our testing
equipment, we often base our purchases on prior discussions with our customers
about their forecast requirements. The balance consists of testing equipment on
consignment from customers and which are dedicated exclusively to the testing of
these customers’ specific products.
Equipment
Packaging
The most important
equipment used in the semiconductor packaging process is the wire bonder. Wire
bonders connect the input/output terminals on the silicon die using extremely
fine gold wire to leads on leadframes or substrates. Typically, a wire bonder
may be used, with minor modifications, for the packaging of different products.
We purchase our wire bonders principally from Kulicke & Soffa Industries
Inc. and Oerlikon Assembly Equipment Ltd. As of April 30, 2008, we operated an
aggregate of 8,268 wire bonders, of which 7,518 were fine-pitch wire bonders. As
of the same date, 43 of the wire bonders operated by us were consigned by
customers. For the packaging of certain types of substrate-based packages, such
as flip-chip BGA, die bonders are used in place of wire bonders. We
purchase our die bonders principally from Hitachi High Technologies Corporation
and Oerlikon Assembly Equipment Ltd. The number of bonders at a given facility
is commonly used as a measure of the packaging capacity of the
facility. In addition to bonders, we maintain a variety of other
types of packaging equipment, such as wafer grind, wafer mount, wafer saw,
automated molding machines, laser markers, solder plate,
pad
printers, dejunkers, trimmers, formers, substrate saws and scanners. We purchase
our molding machines principally from Towa Corporation and Fico
B.V.
Testing
Testing
equipment is the most capital intensive component of the testing process. We
generally seek to purchase testers from different suppliers with similar
functionality and the ability to test a variety of different semiconductors. We
purchase testers from major international manufacturers, including Verigy Ltd.,
Teradyne, Inc., Credence Systems Corporation, LTX Corporation, Seiko Epson and
Tokyo Electron Limited. Upon acquisition of new testers, we install, configure,
calibrate, perform burn-in diagnostic tests on and establish parameters for the
testers based on the anticipated requirements of existing and potential
customers and considerations relating to market trends. As of April 30, 2008, we
operated an aggregate of 1,556 testers, of which 422 were consigned by customers
and 58 were leased under operating leases. In addition to testers, we maintain a
variety of other types of testing equipment, such as automated handlers and
probers (special handlers for wafer probing), scanners, reformers and computer
workstations for use in software development. Each tester may be attached to a
handler or prober. Handlers attach to testers and transport individual packaged
semiconductor to the tester interface. Probers similarly attach to the tester
and align each individual die on a wafer with the interface to the
tester.
Test
programs, which are the software that drive the testing of specific
semiconductors, are written for a specific testing platform. We often perform
test program conversions that enable us to test semiconductors on multiple test
platforms. This portability between testers enables us to allocate
semiconductors tested across our available test capabilities and thereby improve
capacity utilization rates. In cases where a customer requires the testing of a
semiconductor product that is not yet fully developed, the customer may provide
personal computer workstations to us to test specific functions. In cases where
a customer has specified testing equipment that was not widely applicable to
other products which we test, we have required the customer to furnish the
equipment on a consignment basis.
Intellectual
Property
As of
April 30, 2008, we held 1,321 Taiwan patents, 38 U.S. patents and 27 PRC patents
related to various semiconductor packaging technologies. In addition, we
registered “ASE” as a trademark and as a servicemark in Taiwan.
We have
also entered into various non-exclusive technology license agreements with other
companies involved in the semiconductor manufacturing process, including
Freescale Semiconductor Inc., Tessera Inc., Fujitsu Limited, Flip Chip
International, L.L.C., Mitsui High-Tec, Inc. and Infineon Technologies AG. We
paid royalties under our license agreements in the amount of NT$179.1 million,
NT$282.3 million and NT$246.8 million (US$7.6 million) in 2005, 2006 and 2007,
respectively. The technology we license from these companies includes solder
bumping, redistribution, ultra CSP assembly, advanced QFN assembly, wafer level
packaging and other technologies used in the production of package types, such
as BCC, flip-chip BGA, film BGA and QFN. The license agreement with Tessera Inc.
will not expire until the expiration of the Tessera Inc. patents licensed by the
agreement. For information regarding our intellectual property dispute with
Tessera, see “Item 8. Financial Information—Legal Proceedings.” Our license
agreements with Freescale Semiconductor Inc. will expire on December 31, 2010.
Our license agreements with Flip Chip International, L.L.C. will not expire
until the expiration of the Flip Chip International, L.L.C. patents licensed by
the agreement. Our license agreement with Infineon Technologies AG will expire
on November 5, 2017, and our license agreement with Mitsui High-Tec, Inc. will
expire on June 24, 2012. We negotiate the renewal of our license agreement with
Fujitsu Limited annually.
Our
success depends in part on our ability to obtain, maintain and protect our
patents, licenses and other intellectual property rights, including rights under
our license agreement with Freescale Semiconductor, Inc.
Quality
Control
We believe
that our advanced process technology and reputation for high quality and
reliable services have been important factors in attracting and retaining
leading international semiconductor companies as customers for our packaging and
testing services. We have maintained an average packaging yield rate of 99.8% or
greater in each of
the last three years. We maintain a quality
control staff at each of our facilities. Our quality control staff typically
includes engineers, technicians and other employees who monitor packaging and
testing processes in order to ensure high quality. Our quality assurance systems
impose strict process controls, statistical in-line monitors, supplier control,
data review and management, quality controls and corrective action systems. Our
quality control employees operate quality control stations along production
lines, monitor clean room environments and follow up on quality through outgoing
product inspection and interaction with customer service staff. We have
established quality control systems which are designed to ensure high quality
service to customers, high product and testing reliability and high production
yields at our facilities. We also have established an environmental management
system in order to ensure that we can comply with the environmental standards of
our customers and the countries within which they operate. See “—Raw Materials
and Suppliers—Packaging.” In addition, our packaging and testing facilities have
been qualified by all of our major customers after satisfying stringent quality
standards prescribed by these customers.
Our
packaging and testing operations are undertaken in clean rooms where air purity,
temperature and humidity are controlled. To ensure stability and integrity of
our operations, we maintain clean rooms at our facilities that meet U.S. Federal
Standard 209E class 1,000, 10,000 and 100,000 standards.
Our
packaging, testing and interconnect materials facilities in Taiwan, Malaysia,
Japan, the PRC, Singapore and Korea have been certified as meeting
ISO/TS16949:2002 standards. Such standards were originally created by the
International Automotive Task Force in conjunction with the International
Standards Organization, or ISO. These standards provide for continuous
improvement with an emphasis on the prevention of defects and reduction of
variation and waste in the supply chain. The ISO/TS16949:2002 certification is
required by some semiconductor manufacturers as a threshold indicator of
company’s quality control standards.
Our
packaging, testing and interconnect materials facilities in Taiwan, Japan,
Korea, Malaysia, the PRC, California and Singapore have been certified as
meeting the ISO 9001 quality standards set by the ISO. Our packing,
testing and interconnect materials facilities in Taiwan, Japan, Korea, Malaysia,
the PRC, California and Singapore have also been certified as meeting the ISO
14001 quality standards. In addition, our packaging facilities in
Kaohsiung, Taiwan have been certified as meeting the ISO 17025:2005 quality
standards set by the ISO. ISO certifications are required by many
countries in connection with sales of industrial products.
Our
packaging, testing and interconnect materials facilities in Taiwan, Korea and
the PRC have also been certified to be in compliance with OHSAS 18001:1999, a
set of standards designed upon collaboration with occupational health and safety
experts and now offered by many certification organizations as an indication of
compliance with certain standards for occupational health and
safety.
ISE Labs’
testing facilities in Fremont, California have been approved by the U.S.
military’s Defense Supply Center, Columbus, Sourcing and Qualifications Unit as
a laboratory possessing the requisite level of performance, quality and
reliability required of suppliers for the U.S. Department of
Defense.
Our
packaging, testing and interconnect materials facilities in Taiwan, Malaysia and
Korea have been certified as a “Sony Green Partner”, which indicates our
compliance with the “Sony Green Package” standard requirements.
Our
packaging, testing and interconnect material facilities in Taiwan, the PRC and
Malaysia have been certified to be in compliance with IECQ HSPM QC080000, a
certification designed to manage, reduce and eliminate hazardous
substances.
In
addition, we have received various vendor awards from our customers for the
quality of our products and services.
Competition
We compete
in the highly competitive independent semiconductor packaging and testing
markets. We face competition from a number of sources, including other
independent semiconductor packaging and testing companies. More importantly, we
compete for the business of integrated device manufacturers with in-house
packaging and testing capabilities and fabless semiconductor design companies
with their own in-house testing
capabilities. Some of these integrated
device manufacturers have commenced, or may commence, in-house packaging and
testing operations in Asia. Substantially all of the independent
packaging and testing companies that compete with us have established operations
in Taiwan.
Integrated
device manufacturers that use our services continuously evaluate our performance
against their own in-house packaging and testing capabilities. These integrated
device manufacturers may have access to more advanced technologies and greater
financial and other resources than we do. We believe, however, that we can offer
greater efficiency at lower cost while maintaining equivalent or higher quality
for several reasons. First, as we benefit from specialization and economies of
scale by providing services to a large base of customers across a wide range of
products, we are better able to reduce costs and shorten production cycles
through high capacity utilization and process expertise. Second, as a result of
our customer base and product offerings, our equipment generally has a longer
useful life. Third, as a result of the continuing reduction of investments in
in-house packaging and testing capacity and technology at integrated device
manufacturers, we are better positioned to meet their advanced packaging and
testing requirements on a large scale.
Environmental
Matters
Our
packaging and interconnect materials operations generate environmental wastes,
including gaseous chemical, liquid and solid industrial wastes. We have
installed various types of anti-pollution equipment for the treatment of liquid
and gaseous chemical waste generated at all of our semiconductor packaging
facilities. We believe that we have adopted adequate anti-pollution measures for
the effective maintenance of environmental protection standards that are
consistent with the industry practice in the countries in which our facilities
are located. In addition, we believe we are in compliance in all material
respects with present environmental laws and regulations applicable to our
operations and facilities. For information regarding our compliance
with a recent EU Directive affecting us, see “—Raw Materials and
Suppliers—Packaging.”
Insurance
We have
insurance policies covering property damage and damage to our production
facilities, buildings and machinery. In addition, we have insurance policies
covering our public and product liabilities. Significant damage to any of our
production facilities would have a material adverse effect on our results of
operations.
We are not
insured against the loss of key personnel.
The
following chart illustrates our corporate structure and our effective equity
interest in each of our principal operating subsidiaries and affiliates as of
May 30, 2008. The following chart does not include wholly-owned
intermediate holding companies other than ASE Test.
Our
Consolidated Subsidiaries
ASE
Test
We believe
ASE Test is one of the largest independent testing companies in the world,
providing a complete range of semiconductor testing services to leading
international semiconductor companies. ASE Test also provides semiconductor
packaging services. ASE Test has testing operations in Taiwan, the United States
and Singapore, and also maintains testing and packaging operations in
Malaysia.
ASE Test
was incorporated in 1995 and its ordinary shares were quoted for trading on the
Nasdaq Global Market under the symbol “ASTSF” in June 1996. ASE Test’s Taiwan
depositary shares representing its ordinary shares were listed for trading on
the Taiwan Stock Exchange under the symbol “9101” in January 1998. On May 30,
2008, we acquired, by way of a scheme of arrangement under Singapore
law, all the outstanding ordinary shares of ASE Test that we did not
already directly or indirectly own, making ASE Test our wholly-owned
subsidiary. On June 12, 2008, ASE Test’s ordinary shares were
delisted from the Nasdaq Global Market. ASE Test’s shares will be
deregistered under the Exchange Act effective September 10, 2008 and its
reporting obligations thereunder are currently suspended. The delisting of ASE
Test’s depositary shares from the Taiwan Stock Exchange is currently expected to
occur in mid-July, pending ROC regulatory approval. For more
information on this transaction, see “—History and Development of the
Company—ASE Test Share Acquisition and Privatization.”
ASE Test
is a holding company incorporated in Singapore whose significant assets are its
ownership interests in the following operating companies as of May 30,
2008:
|
·
|
ASE Test
Taiwan
.
ASE
Test Taiwan, which was acquired in 1990, is ASE Test’s 99.99%-owned
subsidiary. It is incorporated in Taiwan and is engaged in the testing of
integrated circuits;
|
|
·
|
ASE Test
Malaysia
.
ASE Test Malaysia, which was established in 1991, is ASE Test’s
wholly-owned subsidiary. It is incorporated in Malaysia and is engaged in
the packaging and testing of integrated circuits. ASE Test
Malaysia disposed of its camera module assembly operations in October
2005;
|
|
·
|
ISE
Labs
.
ISE
Labs is ASE Test’s wholly-owned subsidiary. It is a semiconductor company
specializing in front-end engineering testing that is incorporated in the
United States and has its principal facilities located in Fremont and
Santa Clara, California. We acquired 70.0% of the outstanding shares of
ISE Labs in 1999, and increased our holding to 100.0% through purchases
made in 2000 and 2002; and
|
|
·
|
ASE
Korea
.
ASE
Test owns 30.0% of ASE Korea. We own the remaining 70.0%. It is
incorporated in Korea and is engaged in the packaging and testing of
semiconductors. See “
¾
ASE Chung Li and ASE
Korea.”
|
In 2005,
ASE Test recorded net revenues of US$420.9 million, operating income of US$14.0
million and net loss of US$35.5 million. In 2006, ASE Test recorded net revenues
of US$517.7 million, operating income of US$132.3 million and net income of
US$150.8 million. In 2007, ASE Test recorded net revenues of US$475.1 million,
operating income of US$99.9 million and net income of US$88.5
million.
ASE
Electronics
ASE
Material was established in 1997 as an ROC company for the design and production
of interconnect materials, such as leadframes and substrates, used in the
packaging of semiconductors. We initially held a majority stake in ASE Material,
but acquired the remaining equity by means of a merger of ASE Material with and
into us in August 2004. In August 2006, we spun off the operations
originally conducted through ASE Material into our wholly-owned subsidiary ASE
Electronics. ASE Electronics currently supplies our packaging
operations with a substantial portion of our substrate
requirements. The facilities of ASE Electronics are primarily located
in the Nantze Export Processing Zone near our packaging and testing facilities
in Kaohsiung, Taiwan.
ASE
Chung Li and ASE Korea
In July
1999, we purchased Motorola’s Semiconductor Products Sector operations in Chung
Li, Taiwan and Paju, South Korea for the packaging and testing of semiconductors
with principally communications, consumer and automotive applications, thereby
forming ASE Chung Li and ASE Korea. We acquired a 70.0% interest in
each of the two businesses, and ASE Test acquired the remaining 30.0%
interest. In August 2004, we acquired all of the outstanding
shares of ASE Chung Li that we did not already own by means of a merger of
ASE Chung Li into us.
ASE
Japan
ASE Japan,
which we acquired from NEC Electronics Corporation in May 2004, is our
wholly-owned subsidiary. It is incorporated in Japan and is engaged in the
packaging and testing of semiconductors.
ASE
Shanghai
ASE
Shanghai was established in 2001 as a wholly-owned subsidiary of ASE Inc. and
began operations in June 2004. ASE Shanghai primarily manufactures and supplies
interconnect materials for our packaging operations.
Power
ASE Technology, Inc.
In July
2006, we established Power ASE, a joint venture with Powerchip Semiconductor
Corp., or Powerchip, focusing on the packaging and testing of memory
semiconductors. Power ASE began operations in December 2006. Pursuant to the
joint venture agreement, we invested US$30.0 million for 60.0% of the equity
interest in Power ASE and Powerchip invested US$20.0 million for the remaining
40.0%. We currently own 56.3% of Power ASE and Powerchip owns the remaining
43.7%.
ASE
Assembly and Test (Shanghai) Limited
We
acquired 100.0% of GAPT, now known as ASESH AT, in January 2007. ASESH AT is a
PRC company based in Shanghai, China that provides wire bond packaging and
testing services for a wide range of semiconductors.
ASEN
In
September 2007, we acquired 60.0% of ASEN from NXP
Semiconductors. ASEN is based in Suzhou, China and is engaged in
semiconductor packaging and testing.
ASE
Weihai Inc.
In May
2008, we acquired 100.0% of the shares of ASE Weihai Inc. from Aimhigh Global
Corp. and TCC Steel. ASE Weihai Inc. is based in Shandong, China and
is engaged in semiconductor packaging and testing.
Our
Unconsolidated Affiliates
As
of May 30, 2008, we held approximately 18.7% of the outstanding shares of
Universal Scientific and 26.2% of the outstanding shares of Hung
Ching.
Universal
Scientific
Universal
Scientific, which is an ROC company, manufactures electronics products in
varying degrees of system integration principally on a contract basis for
original equipment manufacturers, including:
|
·
|
electronic
components such as thick film mixed-signal devices, thick film resistors,
high frequency devices and automotive and power electronic
devices;
|
|
·
|
board
and sub-system assemblies such as customized surface mount technology
board assemblies, mother boards for personal computers, wireless local
area network cards and fax control boards;
and
|
|
·
|
system
assemblies such as portable computers, desktop personal computers, network
computers and servers.
|
Universal
Scientific’s principal manufacturing facilities are located in Nantou, Taiwan.
The shares of Universal Scientific are listed on the Taiwan Stock Exchange under
the symbol “2350.”
We
purchased 22.6% of the outstanding shares of Universal Scientific in 1999,
principally through open market purchases on the Taiwan Stock Exchange. We
subsequently increased our holding to 23.3% following open market purchases of
additional shares in 2000. As of May 30, 2008, we held 18.7% of Universal
Scientific’s outstanding equity shares. We are the largest shareholder in
Universal Scientific and four out of the nine directors on its board of
directors, including the chairman, are our representatives. As a result, we
exercise significant influence over Universal Scientific and therefore account
for this investment by the equity method.
In 2005,
Universal Scientific recorded net revenues of NT$52,253.6 million, operating
income of NT$994.6 million and net income of NT$682.1 million. In 2006,
Universal Scientific recorded net revenues of NT$53,211.5 million, operating
income of NT$1,830.4 million and net income of NT$1,377.0 million. In 2007,
Universal Scientific recorded net revenues of NT$65,124.1 million (US$2,008.1
million), operating income of NT$2,288.8 million (US$70.6 million) and net
income of NT$1,868.4 million (US$57.6 million). As of April 30, 2008, Universal
Scientific had a market capitalization of NT$18,563.8 million (US$572.4
million).
Hung
Ching
Hung Ching
is an ROC company engaged in the development and management of commercial,
residential and industrial real estate properties in Taiwan. The shares of Hung
Ching are listed on the Taiwan Stock Exchange under the symbol “2527.” Hung
Ching was founded in 1986 by Chang Yao Hung-ying. Chang Yao Hung-ying is the
mother of both Jason C.S. Chang, our Chairman and Chief Executive Officer, and
Richard H.P. Chang, our Vice Chairman and President, and was a director of ASE
Inc. from 1984 to June 2003. Jason C.S. Chang, Richard H.P. Chang, Chang Yao
Hung-ying and other members of the Chang family are controlling shareholders of
Hung Ching. As of May 30, 2008, we held 26.2% of Hung Ching’s outstanding equity
shares. We are the largest shareholder of Hung Ching and two out of the seven
directors on its board of directors, including the chairman, are our
representatives.
In 2005,
Hung Ching recorded net revenues of NT$1,737.6 million, operating income of
NT$119.6 million and net income of NT$91.6 million. In 2006, Hung Ching recorded
net revenues of NT$1,663.5 million, operating income of NT$245.6 million and net
income of NT$204.6 million.
In
2007, Hung Ching recorded net revenues of NT$799.1 million (US$24.6 million),
operating income of NT$46.9 million (US$1.4 million) and net income of NT$62.5
million (US$1.9 million). As of April 30, 2008, Hung Ching had a market
capitalization of NT$5,376.5 million (US$165.8 million).
We operate
a number of packaging and testing facilities in Asia and the United
States. Our facilities provide varying types or levels of services
with respect to different end-product focus, customers, technologies and
geographic locations. With our diverse facilities we are able to tailor our
packaging and testing solutions closely to our customers’ needs. The following
table sets forth the location, commencement of operation, primary use,
approximate floor space and ownership of our facilities as of April 30, 2008,
except with respect to ASE Weihai Inc., which we acquired in
May 2008.
|
|
|
|
Commencement
of Operation
|
|
|
|
Approximate
Floor Space (in sq. ft.)
|
|
|
ASE
Inc.
|
|
Kaohsiung,
Taiwan
|
|
March
1984
|
|
Our
primary packaging facility, which offers complete semiconductor
manufacturing solutions in conjunction with ASE Test Taiwan and foundries
located in Taiwan. Focuses primarily on advanced packaging services,
including flip-chip, wafer bumping and fine-pitch wire
bonding.
|
|
2,910,000
|
|
|
Land:
leased
Buildings:
owned and leased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chung
Li, Taiwan
|
|
Acquired
in August 1999
|
|
An
integrated packaging and testing facility that specializes in
semiconductors for communications and consumer
applications.
|
|
1,526,000
|
|
|
Land
and Buildings: owned
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Test Taiwan
|
|
Kaohsiung,
Taiwan
|
|
December
1987
|
|
Our
primary testing facilities, which offer complete semiconductor
manufacturing solutions in conjunction with ASE Inc.’s facility in
Kaohsiung and foundries located in Taiwan. Focuses primarily on advanced
logic/mixed-signal testing for integrated device manufacturers, fabless
design companies and system companies.
|
|
981,000
|
|
|
Land:
leased
Buildings:
owned and leased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chung
Li, Taiwan
|
|
October
2001
|
|
Our
primary wafer probing testing facilities.
|
|
16,000
|
|
|
Land
and building: leased
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Test Malaysia
|
|
Penang,
Malaysia
|
|
February
1991
|
|
An
integrated packaging and testing facility that focuses primarily on the
requirements of integrated device manufacturers.
|
|
828,000
|
|
|
Land:
leased
Buildings:
owned
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Korea
|
|
Paju,
Korea
|
|
March
1967
|
|
An
integrated packaging and testing facility that specializes in
semiconductors for radio frequency, sensor and automotive
applications.
|
|
520,000
|
|
|
Land
and buildings: owned, subject to mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
ISE
Labs
|
|
Silicon
Valley,
California,
Austin,
Texas
Singapore
|
|
November
1983
|
|
Front-end
engineering and final testing facilities located in northern California in
close proximity to some of the world’s largest fabless design companies.
Testing facilities located in close proximity to integrated device
manufacturers and fabless companies in Texas and Southeast
Asia.
|
|
264,000
|
|
|
Land
and buildings: leased
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Shanghai
|
|
Shanghai,
China
|
|
June
2004
|
|
Design
and production of semiconductor packaging materials and provision of
module assembly services on a contract basis.
|
|
1,071,000
|
|
|
Land:
leased
Buildings:
owned
|
|
|
|
|
Commencement
of Operation
|
|
|
|
Approximate
Floor Space (in sq. ft.)
|
|
|
ASE
Japan
|
|
Takahata,
Japan
|
|
Acquired
in June 2004
|
|
An
integrated packaging and testing facility that specializes in
semiconductors for cellular phone, household appliance and automotive
applications.
|
|
298,000
|
|
|
Land
and buildings: leased
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Electronics
|
|
Kaohsiung,
Taiwan
|
|
August
2006
|
|
Facilities
for the design and production of interconnect materials such as leadframes
and substrates used in packaging of semiconductors.
|
|
314,000
|
|
|
Buildings:
leased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chung
Li, Taiwan
|
|
August
2006
|
|
Facilities
for the design and production of interconnect materials such as substrates
used in packaging of semiconductors.
|
|
430,000
|
|
|
Land
and Buildings: leased
|
|
|
|
|
|
|
|
|
|
|
|
|
ASESH
AT
|
|
Shanghai,
China
|
|
Acquired
in January 2007
|
|
An
integrated packaging and testing facility that specializes in
semiconductors for communications and consumer
applications.
|
|
714,000
|
|
|
Land:
leased
Buildings:
owned
|
|
|
|
|
|
|
|
|
|
|
|
|
ASEN
|
|
Suzhou,
China
|
|
Acquired
in September 2007
|
|
An
integrated packaging and testing facility that specializes in
communication applications.
|
|
142,000
|
|
|
Land:
leased
Buildings:
owned
|
|
|
|
|
|
|
|
|
|
|
|
|
Power
ASE
|
|
Chung
Li, Taiwan
|
|
December
2006
|
|
An
integrated packaging and testing facility that specializes in memory
semiconductors for personal computers applications
|
|
221,000
|
|
|
Buildings:
leased
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Weihai Inc.
|
|
Shandong,
China
|
|
Acquired
in May 2008
|
|
An
integrated packaging and testing facility that specializes in
semiconductors for communications, computers and consumer
applications.
|
|
70,730
|
|
|
Land:
leased
Buildings:
owned
|
Our leased
property in Kaohsiung consists primarily of approximately twenty leases of land
in the Kaohsiung Nantze Export Processing Zone between ASE Inc. and ASE Test
Taiwan, as the lessees, and the Export Processing Zones Administration, or the
EPZA, under the Ministry of Economic Affairs. The leases have ten year terms
that expire between the middle of April 2010 and the end of September 2017. No
sublease or lending of the land is allowed. The EPZA has the right to adjust the
rental price in the event the government revalues the land. The
leases are typically renewable with three months notice prior to the termination
date.
For
information on the aggregate capacity of our facilities in terms of the number
of bonders and testers we operate, see “—Business
Overview—Equipment.”
None.
The following discussion of our
business, financial condition and results of operations should be read in
conjunction with our consolidated financial statements, which are included
elsewhere in this annual report. This discussion contains forward-looking
statements that reflect our current views with respect to future events and
financial performance. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of any number of
factors, such as those set forth under “Item 3. Key Information—Risk Factors”
and elsewhere in this annual report. See “Special Note Regarding Forward-Looking
Statements
.”
Information in this annual report
from our consolidated statements of operations for the years ended December 31,
2003, 2004 and 2005 has been adjusted to reflect the reclassification of ASE
Test’s camera module assembly operations as discontinued operations following
the disposal of these operations in October 2005. Information from
our consolidated statements of cash flows was appropriately not
adjusted.
Overview
We offer a
broad range of semiconductor packaging and testing services. In addition to
offering each service separately, we also offer turnkey services, which consist
of the integrated packaging, testing and direct shipment of semiconductors to
end users designated by our customers. Our net revenues increased from
NT$84,035.8 million in 2005 and NT$100,423.6 million in 2006 to NT$101,163.1
million (US$3,119.4 million) in 2007.
Discussed
below are several factors that have had a significant influence on our financial
results in recent years.
Pricing
and Revenue Mix
We price
our services on a cost-plus basis, taking into account the actual costs involved
in providing these services, with reference to prevailing market prices. The
majority of our prices and revenues are denominated in U.S. dollars. However, as
more than half of our costs, including most of our labor and overhead costs, are
denominated in NT dollars, we consider the NT dollar to be our functional
currency. Furthermore, the majority of our financing costs are denominated in NT
dollars and US dollars.
In the
case of semiconductor packaging, the cost of the silicon die, by most accounts
the most costly component of the packaged semiconductor, is typically not
reflected in our costs (or revenues) since it is typically supplied by our
customers on a consignment basis. In the case of module assembly, we typically
procure the substantial majority of the components and raw materials to be
assembled, including packaged semiconductors, which are reflected both in our
costs and our revenues. Compared to semiconductor packaging, module assembly
typically generates higher revenues and incurs higher costs for a given amount
of gross profit, and affects our margins accordingly.
The
semiconductor industry is characterized by a general trend towards declining
prices for products and services of a given technology over time. In addition,
during periods of intense competition and adverse conditions in the
semiconductor industry, the pace of this decline may be more rapid than that
experienced in other years. The average selling prices of our packaging and
testing services have experienced sharp declines during such periods as a result
of intense price competition from other independent packaging and testing
companies that attempt to maintain high capacity utilization levels in the face
of reduced demand. For example, during the industry downturn commencing in the
fourth quarter of 2000, we experienced a significant deterioration in average
selling prices, which adversely affected our results of operations in 2001 and
2002. As a result of the modest recovery in the semiconductor industry and a
gradual upturn in the outsourcing trend since 2002, our average selling prices
for packaging and testing services have stabilized since 2002 as compared to
2001.
The
average selling prices of our testing services are more severely affected by a
downturn in the semiconductor industry than the average selling prices of our
packaging services. In periods of an industry downturn, the decline in the
average selling prices of our testing services is often exacerbated by the
decrease in demand from our integrated device manufacturer customers, who
typically maintain larger in-house testing capacity than in-house packaging
capacity. These price declines are also exacerbated by the intense price
competition from other independent testing service providers, who typically
offer large price discounts during periods of depressed demand, such as in 2001,
in order to maintain higher capacity utilization rates to defray the high fixed
costs associated with testing operations. In 2005, 2006 and 2007,
packaging revenues, including revenues from module assembly, accounted for
78.6%, 76.5% and 77.6% while testing revenues accounted for 20.4%, 21.3% and
19.8%, respectively, of our net revenues.
We believe
that, over the long term, the market for outsourced semiconductor testing
services has more potential for growth than the market for outsourced
semiconductor packaging services for two reasons. First, the portion of the
semiconductor testing market that is currently accounted for by independent
testing service providers is smaller than that for packaging. Second, the large
capital expenditure needed for increasingly sophisticated testing equipment, as
compared to less expensive packaging equipment, is also a driver for further
outsourcing of testing services by integrated device manufacturers.
Declines
in average selling prices have been partially offset over the last several years
by a change in our revenue mix. In particular, revenues derived from
packaging more advanced package types, such as flip-chip BGA, higher density
packages with finer lead-to-lead spacing, or pitch, and testing of more complex,
high-performance
semiconductors
have increased as a percentage of total revenues. We intend to continue to focus
on packaging more advanced package types, such as BGA and flip-chip BGA,
developing and offering new technologies in packaging and testing services and
expanding our capacity to achieve economies of scale, as well as improving
production efficiencies for older technology, in order to mitigate the effects
of declining average selling prices on our profitability.
High
Fixed Costs
Our
operations, in particular our testing operations, are characterized by
relatively high fixed costs. We expect to continue to incur substantial
depreciation and other expenses as a result of our previous acquisitions of
packaging and testing equipment and facilities. Our profitability depends in
part not only on absolute pricing levels for our services, but also on
utilization rates for our packaging and testing equipment, commonly referred to
as “capacity utilization rates.” In particular, increases or decreases in our
capacity utilization rates could have a significant effect on gross margins
since the unit cost of packaging and testing services generally decreases as
fixed costs are allocated over a larger number of units. The capacity
utilization rates of the machinery and equipment installed at our production
facilities typically depend on factors such as the volume and variety of
products packaged or tested using such machinery and equipment, the efficiency
of our operations in terms of the loading and adjustment of machinery and
equipment for the packaging or testing of different products, the complexity of
the different products to be packaged or tested, the amount of time set aside
for the maintenance and repair of the machinery and equipment, and the
experience and schedule of work shifts of operators.
The
current generation of advanced testers typically cost between US$1.0 million and
US$3.0 million each, while wire bonders used in packaging typically cost between
US$50,000 and US$70,000 each. In 2005, 2006 and 2007, our depreciation and
amortization as a percentage of net revenues was 16.5%, 13.3% and 15.1%,
respectively. The increase in depreciation and amortization as a
percentage of net revenues in 2007 compared to 2006 was primarily a result of
our acquisition of new subsidiaries, ASESH AT and ASEN, in 2007 without a
corresponding increase in revenue in 2007. See “Item 4. Information on the
Company—Business Overview—Equipment.”
We begin depreciating
our equipment when it is placed into service. There may sometimes be a time lag
between when our equipment is placed into service and when it achieves high
levels of utilization. In periods of depressed industry conditions, we may
experience lower than expected demand from customers and a sharp decline in the
average selling price of our testing services, resulting in an increase in
depreciation relative to net revenues. In particular, the capacity utilization
rates for our testing equipment are more severely affected during an industry
downturn as a result of the decrease in outsourcing demand from integrated
device manufacturers, which typically maintain larger in-house testing capacity
than in-house packaging capacity.
In
addition to purchasing testers, we also lease a portion of our testers, which we
believe allows us to better manage our capacity utilization rates and cash
flow. Since testers operated under operating leases can be replaced
with more advanced testers upon the expiration of the lease, we believe that
these operating leases have enabled us to improve our capacity utilization rates
by allowing us to better align our capacity with changes in equipment
technology. For more information about our testers, including the
number of testers under lease, see “Item 4. Information on the Company—Business
Overview—Equipment—Testing.”
Raw
Material Costs
Substantially all of our
raw material costs are accounted for by packaging and the production of
interconnect materials, as testing requires minimal raw materials. In 2005, 2006
and 2007, raw material cost as a percentage of our net revenues was 32.6%, 29.2%
and 27.6%, respectively. We expect interconnect materials to become an
increasingly important component of the cost of our packaging revenues and we
plan to continue to develop and enhance our in-house interconnect materials
capabilities in order to maintain and enhance our profitability, ensure an
adequate supply of interconnect materials at competitive prices and reduce
production time. Our operations originally conducted through ASE Material and
now conducted through our wholly-owned subsidiary ASE Electronics and the
operations of ASE Shanghai have enhanced our interconnect materials
capabilities. For more information on our interconnect materials
operations, see “Item 4. Information on the Company—Business Overview—Principal
Products and Services—Packaging Services—Interconnect Materials.” As
a result of new restrictions in the European Union governing the use of
hazardous substances, we expect that our customers will increasingly request
that the materials used in our packaging processes be compliant with new
European Union
regulations.
See “Item 4. Information on the Company—Business Overview—Raw Materials and
Suppliers—Packaging.”
ASE
Test Share Acquisition a
nd
Privatization
On
May
30, 2008
,
we acquired, by way of a scheme of arrangement under Singapore law, all the
outstanding ordinary shares of ASE Test that we did not already directly or
indirectly own, making ASE Test our wholly-owned subsidiary. See “
Item
4.
Information
on the Company
—
History
and Development of the Company
—
ASE
Test Share Acquisition and Privatization.”
Prior
to this transaction, we held 50.3% of ASE Test and 50.3% of ASE
Test
’
s
net income or loss was reflected in our consolidated net income and
t
he
remaining 49.7% was reflected as minority interest. As a result of the
transaction, we will reflect 100.0% of ASE Test
’
s
net income or loss in our consolidated net income going forward. Any
losses at ASE Test would therefore have a greater adverse effect on
our net income than prior to the effectiveness of the scheme of
arrangement.
Recent
ROC GAAP Accounting Pronouncements
In March
2007, the ROC Accounting Research and Development Foundation, or ARDF, required
ROC companies to recognize compensation expenses for bonuses paid to employees,
directors and supervisors beginning January 1, 2008. Such bonuses are
recorded as appropriation of earnings under ROC GAAP before 2008. On March 30,
2007, the ROC Financial Supervisory Commission, Executive Yuan 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. We believe that the adoption of this standard will result
in a charge to earnings of approximately 10% to 12% of our net income. However,
the actual percentage to be paid in profit sharing bonuses is subject to the
approval of our shareholders.
The ARDF
also issued ROC SFAS No. 39, “Share-based Payment,” or ROC SFAS No. 39 in August
2007, which requires ROC companies to record share-based payment transactions in
the financial statements at fair value. ROC SFAS No. 39 should be
applied to financial statements for fiscal years beginning on or after January
1, 2008. We will recognize compensation expense if we grant new
options or revise existing option plans on or after January 1,
2008.
The ARDF
revised ROC SFAS No. 10, “Inventories,” or ROC SFAS No. 10 in November 2007,
which requires inventories to be stated at the lower of cost or net realizable
value. Prior to the revised standard, inventories were stated at the
lower of cost or market value (replacement cost or net realizable
value). Inventory write-downs are made item by item, except where it
may be appropriate to group similar or related items. Net realizable
value is the estimated selling price of inventories less all estimated costs of
completion and costs necessary to make the sale. Inventories are
recorded by the specific identification method, first-in, first-out method or
weighted average method. The last-in, first-out method is no longer
permitted. The revised ROC SFAS No. 10 should be applied to financial
statements for fiscal years beginning on or after January 1,
2009. Early adoption is permitted. We are currently
evaluating the effect that the adoption of the revised ROC SFAS No. 10 will have
on our results of operations and financial position, and we are not yet in a
position to determine such effect.
Critical
Accounting Policies and Estimates
Preparation
of our consolidated financial statements requires us to make estimates and
judgments in applying our critical accounting policies which have a significant
impact on the results we report in our consolidated financial statements. We
continually evaluate these estimates, including those related to revenue
recognition, allowances for doubtful accounts, inventories, allowances for
deferred income tax assets, realizability of long-lived assets, goodwill and
long-term investments. We base our estimates on historical experience and other
assumptions which we believe to be reasonable under the circumstances. Actual
results may differ from these estimates under different assumptions and
conditions. We have identified below the accounting policies that are the most
critical to our consolidated financial statements.
Revenue
Recognition
. Revenues from semiconductor packaging and testing services
are recognized upon completion of the services or shipment. We do not take
ownership of:
|
·
|
bare
semiconductor wafers received from customers that we package into finished
semiconductors; and
|
|
·
|
packaged
semiconductors received from customers that we test for performance
specifications.
|
The title
and risk of loss remains with the customer for those bare semiconductors and/or
packaged semiconductors. Accordingly, the cost of customer-supplied
semiconductor materials is not included in our consolidated financial
statements. Other criteria that we use to determine when to recognize revenue
are:
|
·
|
existence
of persuasive evidence of an
arrangement;
|
|
·
|
the
selling price is fixed or determinable;
and
|
|
·
|
collectibility
is reasonably assured.
|
These
policies are consistent with provisions in the Staff Accounting Bulletin No. 104
issued by the SEC. We do not provide warranties to our customers except in cases
of defects in the packaging services provided and deficiencies in testing
services provided. An appropriate sales discount is recognized in the period
during which the sale is recognized, and is estimated based on historical
experience.
Allowance for
Doubtful Accounts
. We periodically record a provision for doubtful
accounts based on our evaluation of the collectibility of our accounts
receivable. The total amount of this provision is determined by us as follows.
We first identify the receivables of customers that are considered to be a
higher credit risk based on their current overdue accounts with us, difficulties
collecting from these customers in the past or their overall financial
condition. For each of these customers, we estimate the extent to which the
customer will be able to meet its financial obligations to us, and we record an
allowance that reduces our accounts receivable for that customer to the amount
that we reasonably believe will be collected. For all other customers, we
maintain an allowance for doubtful accounts equal to a percentage of their
aggregate accounts receivable. As of December 31, 2005, 2006 and 2007, the
allowance we set aside for doubtful accounts was NT$382.6 million, NT$244.4
million and NT$109.7 million, respectively. Additional allowances may be
required in the future if the financial condition of our customers or general
economic conditions deteriorate, and this additional allowance would reduce our
net income.
Inventories
. Inventories
are recorded at cost when acquired and stated at the lower of moving or weighted
average cost or market value. Unbilled processing charges incurred are included
in finished goods and work in progress and are stated at actual cost. Market
value for finished goods and work in process is estimated to be the net
realizable value. Market value for raw materials, supplies and spare parts is
the cost of replacement. Materials received from customers for processing,
mainly of semiconductor wafers, are excluded from inventories, as title and risk
of loss remains with the customers. An allowance for loss on decline in market
value and obsolescence is provided based on the difference between the cost of
inventory and the estimated market value based upon assumptions about future
demand and market conditions. An additional inventory provision may be required
if actual market conditions are less favorable than those
projected.
Valuation
Allowances for Deferred Income Tax Assets
. Tax benefits arising from
deductible temporary differences, unused tax credits and net operating loss
carryforwards are recognized as deferred income tax assets. We record a
valuation allowance to the extent that we believe it is more likely than not
that deferred income tax assets will not be realized. We have considered future
taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need and amount for the valuation allowance. In the event we were
to determine that we would be able to realize our deferred income tax assets in
the future in excess of our net recorded amount, an adjustment to our deferred
income tax assets would increase income in the period such determination was
made. Alternatively, should we determine that we would not be able to realize
all or part of our deferred income tax assets in the future, an adjustment to
our deferred income tax assets would decrease income in the period such
determination was made.
Realizability of
Long-Lived Assets
. We are required to evaluate our equipment and other
long-lived assets for impairment whenever there is an indication of impairment.
If certain criteria are met, we are required to record an impairment
charge.
On
December 31, 2004, we adopted ROC SFAS No. 35, “Accounting for Impairment of
Assets” to account for the impairment of our long-lived assets under ROC
GAAP. In accordance with ROC SFAS No. 35, long-lived assets held and
used by us are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the recoverable amount increases in a future period, the amount
previously recognized as impairment will be reversed and recognized as a
gain. However, the adjusted amount may not exceed the carrying amount
that would have been determined, net of depreciation, had no impairment loss had
been recognized. Prior to 2004, there was no requirement related to the
evaluation of recoverability of long-lived assets’ impairment under ROC GAAP,
and we applied U.S. Statement of Financial Accounting Standards, or U.S. SFAS,
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” when
accounting for impairment of long-lived assets for both ROC GAAP and U.S.
GAAP.
In
accordance with U.S. SFAS No. 144, long-lived assets held and used by us are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. For purposes of
evaluating the recoverability of long-lived assets, the recoverability test is
performed by comparing undiscounted net cash flows of the assets against the net
book value of the assets. If the recoverability test indicates that an
impairment has occurred, the impairment loss is the amount of the asset’s net
book value in excess of the related fair value.
In 2005,
we recognized a loss of NT$13,479.1 million on damage to our property, plant and
equipment caused by a fire at our facilities in Chung Li, Taiwan. In 2006, we
reversed NT$2,190.6 million of the impairment loss recognized in 2005 under ROC
GAAP due to an increase in the estimated service potential of the relevant
assets. See note 29 to our consolidated financial statements included in this
annual report. Reversal of the amount is prohibited under U.S.
GAAP. See note 31 to our consolidated financial statements included
in this annual report for a reconciliation of the differences in the cost basis
of the damaged machinery and associated depreciation expense. In 2007, we
recognized impairment of NT$816.2 million (US$25.2 million), based on an
independent appraiser’s assessment of fair value, on idle assets due to an
impairment in our flip-chip substrate production line that was primarily the
result of idle capacity caused by lack of demand for certain applications. See
note 13 to our consolidated financial statements in this annual
report.
Goodwill
.
Pursuant to a change in ROC GAAP, in 2004, we adopted ROC SFAS No. 35,
“Accounting for Asset Impairment.” Under ROC SFAS No. 35, goodwill is evaluated
at least annually for impairment by comparing the recorded amount of the
cash-generating unit to which the goodwill has been allocated to its recoverable
amount. Recoverable amount is defined as the higher of a
cash-generating unit’s fair value less costs to sell or its “value in use”,
which is defined as the present value of the expected future cash flows
generated by the assets. An impairment charge is incurred to the
extent the recorded amount exceeds the recoverable amount. Prior to the adoption
of ROC SFAS No. 35, we were not required to evaluate goodwill for impairment
under ROC GAAP. In 2004, we recognized an impairment charge on goodwill under
ROC GAAP in connection with our shares of ASE Test and ISE Labs. As of December
31, 2007, we had goodwill of NT$3,188.1 million (US$98.3 million) under ROC
GAAP.
If events
and circumstances warrant in the future, the value of our goodwill could be
further impaired under ROC GAAP or U.S. GAAP.
Valuation of
Long-term Investments
. We hold significant long-term investments in
public and non-public entities. We periodically evaluate these long-term
investments based on market prices, if available, the financial condition of the
investee company, economic conditions in the industry, and our intent and
ability to hold the investment for a long period of time. These assessments
usually require a significant amount of judgment, as a significant decline in
the market price may not be the best indicator of impairment. Under U.S. GAAP,
we evaluate long-term investments using the above mentioned criteria and, to the
extent any decline in the value of a long-term investment is determined to be
other than temporary, an impairment charge is recorded in the current period.
The methods to measure the amount of impairment under ROC GAAP and U.S. GAAP may
be based on different estimates of fair value depending on the circumstances.
Under U.S. GAAP, market price is to be used, if available, to determine the fair
value. Under ROC GAAP, however, if the market price is deemed to be a result of
an inactive market, other measures of fair value may be used. Several of the
long-term investments held by us are accounted for under the equity method. Any
significant decline in the operations of an equity method investee could affect
the value of the long-term investment and an impairment charge may occur. In
2004, we recorded impairment charges under both ROC GAAP and U.S. GAAP in
connection with our investment in Universal Scientific. In 2007, we recognized
an impairment of NT$178.5 million (US$5.5 million) on our investment in Taiwan
Fixed Network Co., Ltd. We disposed of this investment in April
2007.
Results
of Operations
The
following table sets forth, for the periods indicated, financial data from our
consolidated statements of operations, expressed as a percentage of net
revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(percentage
of net revenues)
|
ROC
GAAP:
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Packaging
|
|
|
78.6
|
|
|
|
76.5
|
|
|
|
77.6
|
|
Testing
|
|
|
20.4
|
|
|
|
21.3
|
|
|
|
19.8
|
|
Others
|
|
|
1.0
|
|
|
|
2.2
|
|
|
|
2.6
|
|
Cost
of revenues
|
|
|
(82.7
|
)
|
|
|
(71.3
|
)
|
|
|
(71.2
|
)
|
Gross
profit
|
|
|
17.3
|
|
|
|
28.7
|
|
|
|
28.8
|
|
Operating
expenses
|
|
|
(10.4
|
)
|
|
|
(8.3
|
)
|
|
|
(9.7
|
)
|
Income
from operations
|
|
|
6.9
|
|
|
|
20.4
|
|
|
|
19.1
|
|
Non-operating
income (expense)
|
|
|
(13.7
|
)
|
|
|
1.8
|
|
|
|
(1.9
|
)
|
Income
(loss) before income tax
|
|
|
(6.8
|
)
|
|
|
22.2
|
|
|
|
17.2
|
|
Income
tax benefit (expense)
|
|
|
0.2
|
|
|
|
(2.1
|
)
|
|
|
(3.3
|
)
|
Income
(loss) from continuing operations
|
|
|
(6.6
|
)
|
|
|
20.1
|
|
|
|
13.9
|
|
Discontinued
operations
|
|
|
0.4
|
|
|
|
—
|
|
|
|
—
|
|
Cumulative
effect of change in accounting principle
|
|
|
—
|
|
|
|
(0.4
|
)
(1)
|
|
|
—
|
|
Minority
interest in net (income) loss of subsidiaries
|
|
|
0.6
|
|
|
|
(2.4
|
)
|
|
|
(1.8
|
)
|
Net
income (loss) of parent company’s shareholders
|
|
|
(5.6
|
)%
|
|
|
17.3
|
%
|
|
|
12.1
|
%
|
(1)
|
Represents
the cumulative effect of our adoption of ROC SFAS No. 34 and ROC SFAS No.
36. See note 3 to our consolidated financial statements included in this
annual report.
|
The
following table sets forth, for the periods indicated, the gross margins for our
packaging and testing services and our total gross margin. Gross margin is
calculated by dividing gross profits by net revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(percentage
of net revenues)
|
|
ROC
GAAP:
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
|
|
|
|
|
|
|
Packaging
|
|
|
15.3%
|
|
|
|
25.1%
|
|
|
|
26.2%
|
|
Testing
|
|
|
25.9%
|
|
|
|
40.7%
|
|
|
|
38.0%
|
|
Overall
|
|
|
17.3%
|
|
|
|
28.7%
|
|
|
|
28.8%
|
|
The
following table sets forth, for the periods indicated, a breakdown of our total
cost of revenues and operating expenses, expressed as a percentage of net
revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(percentage
of net revenues)
|
|
ROC
GAAP:
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
|
32.6
|
%
|
|
|
29.2
|
%
|
|
|
27.6
|
%
|
Labor
|
|
|
15.7
|
|
|
|
14.2
|
|
|
|
14.5
|
|
Depreciation
and amortization
|
|
|
16.5
|
|
|
|
13.3
|
|
|
|
15.1
|
|
Others
|
|
|
17.9
|
|
|
|
14.6
|
|
|
|
14.0
|
|
Total
cost of revenues
|
|
|
82.7
|
%
|
|
|
71.3
|
%
|
|
|
71.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(percentage
of net revenues)
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
|
|
|
1.3
|
%
|
|
|
1.3
|
%
|
|
|
1.1
|
%
|
General
and
administrative
|
|
|
5.8
|
|
|
|
4.4
|
|
|
|
5.4
|
|
Research
and
development
|
|
|
3.3
|
|
|
|
2.6
|
|
|
|
3.2
|
|
Total
operating
expenses
|
|
|
10.4
|
%
|
|
|
8.3
|
%
|
|
|
9.7
|
%
|
Year
Ended December 31, 2007 Compared to Year Ended December 31, 2006
Net Revenues.
Net revenues increased 0.7% to NT$101,163.1 million (US$3,119.4 million)
in 2007 from NT$100,423.6 million in 2006. Packaging revenues
increased 2.2% to NT$78,516.3 million (US$2,421.1 million) in 2007 from
NT$76,820.5 million in 2006. Testing revenues decreased 6.6% to
NT$20,007.8 million (US$617.0 million) in 2007 from NT$21,429.6 million in
2006. The increase in packaging revenues was primarily due to an
increase in packaging volume. The decrease in testing revenues was
primarily due to a decrease in testing volume. The increase in
packaging volume resulted primarily from increased capacity as a result of new
operations in the PRC acquired in 2007 and the commencement of our operations
for the packaging of memory semiconductors in December 2006. The
increase in packaging volume in 2007 is also attributable to the trend of
increasing outsourcing of the packaging of semiconductor devices. The
decrease in testing volume resulted primarily from the reduction of our customer
base in order to allow us to focus on higher-margin customers.
Gross
Profit.
Gross profit increased
1.1% to NT$29,088.4 million (US$897.0 million) in 2007 from NT$28,780.3 million
in 2006.
Our gross
profit as a percentage of net revenues, or gross margin, remained largely
unchanged in 2007 at 28.8%, versus 28.7% in 2006.
Our gross margin for
packaging increased to 26.2% in 2007 from 25.1% in 2006. This
increase was primarily due to a decrease in raw material costs as a percentage
of net packaging revenues. Our gross margin for testing decreased to
38.0% in 2007 from 40.7% in 2006. This decrease was primarily due to an increase
in depreciation, partially offset by a decrease in rental expense, each as a
percentage of net testing revenues.
Raw material costs in
2007 were NT$27,913.1 million (US$860.7 million), compared to NT$29,296.2
million in 2006. As a percentage of net revenues, raw material costs
decreased to 27.6% in 2007 from 29.2% in 2006, primarily because of a change in
our product mix toward packages requiring less expensive raw materials.
Depreciation,
amortization and rental expenses in 2007 was NT$16,358.7 million (US$504.4
million), compared to NT$15,096.1 million in 2006. As a percentage of
net revenues, depreciation, amortization and rental expenses increased to 16.1%
in 2007 from 15.0% in 2006.
Operating
Income.
Operating
income decreased 5.6% to NT$19,297.2 million (US$595.0 million) in 2007,
compared to NT$20,446.4 million in 2006. Operating expenses increased 17.5% to
NT$9,791.2 million (US$301.9 million) in 2007, compared to NT$8,333.9 million in
2006. The increase in operating expenses was primarily due to
increases in general and administrative expense and research and development
expense, partially offset by a decrease in selling expense. General
and administrative expense increased 24.1% to NT$5,438.5 million (US$167.7
million) in 2007 from NT$4,381.3 million in 2006. This increase was
primarily the result of an increase in salaries and bonuses expense, primarily
as a result of bonuses paid by ASE Test Taiwan under ROC earnings distribution
requirements,
and,
to a lesser extent, an increase in professional fees and other expenses in
connection with the privatization of ASE Test.
General
and administrative expense represented 5.4% of our net revenues in 2007,
compared to 4.4% in 2006. Research and development expense increased
24.8% to NT$3,284.1 million (US$101.3 million) in 2007 from NT$2,632.0 million
in 2006. This increase was primarily due to increases in salaries and
bonuses expense, depreciation and amortization and the cost of factory supplies,
each in connection with our new operations in the PRC acquired in 2007. The
research and development expenses of our PRC operations were made with a view
towards qualifying for certain PRC tax incentives. Research and development
expense accounted for 3.2% of our net revenues in 2007, compared to 2.6% in
2006. Selling expense decreased 19.1% to NT$1,068.6 million (US$33.0
million) in 2007 from NT$1,320.6 million in 2006. This decrease was primarily
due to a decrease in commission and sales fees as a result of our moving certain
sales functions that were previously handled by a third-party sales agent
in-house in 2007. Selling expense as a percentage of net revenues
decreased to 1.1% in 2007
from 1.3%
in 2006. Our operating income as a percentage of net revenues, or
operating margin, decreased to 19.1% in 2007 from 20.4% in 2006, primarily as a
result of an increase in operating expenses.
Non-Operating
Income (Expense).
We incurred a net
non-operating expense of NT$1,945.3 million (US$60.0 million) in 2007, compared
to a net non-operating income of NT$1,805.0 million in 2006. This
overall decrease was primarily a result of gain on insurance settlement and
impairment recovery in 2006 and, to a lesser extent, impairment losses in 2007,
partially offset by a decrease in 2007 in loss on inventory valuation and
obsolescence and increases in 2007 in net gains on the valuation of financial
assets and liabilities and net foreign exchange gains. In 2006, we
recognized NT$4,574.5 million for gain on insurance settlement and impairment
recovery in connection with the fire at our facilities in Chung Li, Taiwan in
May 2005. For more information on the Chung Li fire, see note 29 to
our consolidated financial statements included in this annual
report. In 2007, we recognized impairment losses of NT$994.7 million
(US$30.7 million), primarily in connection with our flip-chip substrate
production line, whereas in 2006 we did not recognize any impairment
loss. The impairment of our flip-chip substrate production line in
2007 was primarily the result of idle capacity caused by lack of demand for
certain applications. We recorded a loss on inventory valuation and obsolescence
of NT$634.4 million (US$19.6 million) in 2007 compared to a loss on inventory
valuation and obsolescence of NT$1,143.9 million in 2006, which resulted
primarily from changes in our customer base in connection with our strategy
of focusing on higher-margin customers. We recorded net gains on the
valuation of financial assets and liabilities and foreign exchange of NT$692.5
million (US$21.3 million) in 2007 compared to net loss of NT$111.0 in 2006. The
net gains in 2007 were primarily due to the appreciation of the RMB against
the U.S. dollar and the fact that U.S. dollar liabilities exceed U.S. dollar
assets for our operations in the PRC.
Net
Income.
Net
income decreased 30.1% to NT$12,165.3 million (US$375.1 million) in 2007 from
NT$17,416.2 million in 2006. Our net income per ADS decreased to NT$11.29
(US$0.35) in 2007, compared to a net income per ADS of NT$16.26 in 2006
(retroactively adjusted to account for stock dividends issued in 2007). Our
income tax expense increased 61.0% to NT$3,357.4 million (US$103.5 million) in
2007 from NT$2,084.8 million in 2006, primarily due to the use of tax credits, a
tax on undistributed earnings of our domestic subsidiaries and a withholding tax
on dividends imposed on some of our foreign subsidiaries.
Year
Ended December 31, 2006 Compared to Year Ended December 31, 2005
Net Revenues.
Net revenues increased 19.5% to NT$100,423.6 million in 2006 from
NT$84,035.8 million in 2005. Packaging revenues increased 16.4% to
NT$76,820.5 million in 2006 from NT$66,022.9 million in 2005. Testing
revenues increased 25.2% from NT$21,429.6 million in 2006 to NT$17,122.0 million
in 2005. The increase in packaging revenues was primarily due to an
increase in packaging volume. The increase in testing revenues
was
due
to an increase in average selling prices for testing services. The
increase in packaging volume resulted primarily from an improvement in market
conditions in the semiconductor industry and the increase in outsourcing of the
packaging of semiconductor devices. The increase in average selling
prices for testing services reflects the fact that we are increasingly employing
advanced testing equipment, which is charged out at a higher rate, and the fact
that testing of complex, high-performance logic/mixed-signal semiconductors,
which typically take longer to test, accounted for a greater portion of our
testing volumes.
We also made
certain changes to our pricing in the second half of 2005 and in 2006 that
improved our average selling prices for testing services. In response
to tight capacity in the testing markets generally, we increased the prices for
certain of our testing services in the second half of 2005 and further in 2006,
including charging our customers for certain ancillary services that we
previously provided without charge. The increase in average selling prices for
testing services was partially offset by the general trend in the semiconductor
industry of declining prices for each input/output lead on a semiconductor
device.
Gross
Profit.
Gross profit increased 98.2% to NT$28,780.3 million in 2006 from
NT$14,517.8 million in 2005. Our gross profit as a percentage of net
revenues, or gross margin, increased to 28.7% in 2006 from 17.3% in
2005. This increase was due to an increase in revenues and, to a
lesser extent, a decrease in cost of goods sold as a percentage of revenues, in
particular raw material costs and depreciation. Our gross margin for
packaging increased to 25.1% in 2006 from 15.3% in 2005. This
increase was due to an increase in revenues and, to a lesser extent, a decrease
in cost of goods sold as a percentage of revenues, in particular raw material
costs. Our gross margin for testing increased to 40.7% in 2006 from
25.9% in 2005. This increase was primarily due to an increase in revenues and,
to a lesser extent, a decrease in cost of goods sold as a percentage of
revenues, in particular depreciation. Raw material costs in 2006 were
NT$29,296.2 million, compared to NT$27,430.2 million in 2005. As a
percentage of net revenues, raw material costs decreased to 29.2% in 2006 from
32.6% in 2005, primarily because of a change in
our
product mix toward packages requiring less expensive raw materials and a
decrease in the price of the raw materials we use in our packaging
operations. Depreciation and amortization in 2006 was NT$13,313.0
million, compared to NT$13,830.2 million in 2005. As a percentage of
net revenues, depreciation and amortization decreased to 13.3% in 2006 from
16.5% in 2005, primarily as a result of a net decrease in testing and packaging
equipment in 2006, largely as a result of the fire at our facilities in Chung
Li, Taiwan in May 2005, and due to improved equipment
utilization.
Operating
Income.
We had an operating income of NT$20,446.4 million in 2006,
compared to NT$5,819.2 million in 2005. Operating expenses decreased 4.2% to
NT$8,333.9 million in 2006, compared to NT$8,698.6 million in
2005. The decrease in operating expenses was primarily due to
decreases in general and administrative expense and research and development
expense, partially offset by an increase in selling expense. General
and administrative expense decreased 9.0% to NT$4,381.3 million in 2006 from
NT$4,813.2 million in 2005. This decrease was primarily the result of a decrease
in goodwill amortization, partially offset by increases in depreciation and
amortization and professional fees. We recognized no goodwill
amortization in 2006, compared to NT$528.9 million, or 0.6% of our net revenues,
in 2005. In accordance with ROC SFAS No. 25, “Business
Combinations—Accounting Treatment under Purchase Method,” beginning in 2006,
goodwill is no longer amortized and is instead tested for impairment
annually. General and administrative expense represented 4.4% of our
net revenues in 2006, compared to 5.7% in 2005. Research and
development expense decreased 5.5% to NT$2,632.0 million in 2006 from NT$2,785.4
million in 2005. This decrease was primarily due to a decrease in the
costs for reconfiguring and upgrading our testing equipment as a result of our
obtaining a lower price for these services from our service
providers. Research and development expense accounted for 2.6% of our
net revenues in 2006, compared to 3.3% in 2005. Selling expense
increased 20.1% to NT$1,320.6 million in 2006 from NT$1,100.0 million in 2005.
This increase was primarily due to an increase in commission and sales
fees. Selling expense as a percentage of net revenues remained the
same between 2006 and 2005 at 1.3%. Our operating income as a
percentage of net revenues, or operating margin, increased to 20.4% in 2006 from
6.9% in 2005, primarily as a result of the increase in our gross
margin.
Non-Operating
Income (Expense).
We incurred a net non-operating income of NT$1,805.0
million in 2006, compared to a net non-operating expense of NT$11,493.0 million
in 2005. This overall increase was primarily a result of an our
recognition in 2005 of NT$8,838.1 million for loss on fire damage in connection
with a fire at our facilities in Chung Li, Taiwan in May 2005 and our
recognition of NT$4,574.5 million for gain on insurance settlement and
impairment recovery in 2006. For more information, see note 29 to our
consolidated financial statements included in this annual report.
Net
Income.
We had a net income of NT$17,416.2 million in 2006, compared to a
net loss of NT$4,691.2 million in 2005. Our net income per ADS was NT$16.26 in
2006, compared to a loss per ADS of NT$4.62 in 2005 (retroactively adjusted to
account for stock dividends issued in 2005 and 2007). We had an income tax
expense of NT$2,084.8 million in 2006, compared to an income tax benefit of
NT$118.6 million in 2005, primarily due to an increase in taxable income
and the ROC
Alternative Minimum Tax Act, which became effective on January 1,
2006.
Quarterly
Net Revenues, Gross Profit and Gross Margin
The
following table sets forth our unaudited consolidated net revenues, gross profit
and gross margin for the quarterly periods indicated. The unaudited quarterly
results reflect all adjustments, consisting of normal recurring adjustments,
that, in the opinion of management, are necessary for a fair presentation of the
amounts, on a basis consistent with the audited consolidated financial
statements included elsewhere in this annual report. You should read the
following table in conjunction with the audited consolidated financial
statements and related notes included elsewhere in this annual report. Our net
revenues, gross profit and gross margin for any quarter are not necessarily
indicative of the results for any future period. Our quarterly net revenues,
gross profit and gross margin may fluctuate significantly.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
|
(in
millions)
|
|
Consolidated
Net Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging
|
|
|
19,955.0
|
|
|
|
20,373.7
|
|
|
|
17,185.6
|
|
|
|
16,282.6
|
|
|
|
18,029.5
|
|
|
|
21,643.6
|
|
|
|
22,560.7
|
|
|
|
19,227.1
|
|
Testing
|
|
|
5,699.9
|
|
|
|
5,810.1
|
|
|
|
4,796.9
|
|
|
|
4,324.1
|
|
|
|
4,724.5
|
|
|
|
5,282.4
|
|
|
|
5,676.9
|
|
|
|
4,894.5
|
|
Others
|
|
|
631.9
|
|
|
|
542.2
|
|
|
|
591.1
|
|
|
|
486.0
|
|
|
|
607.9
|
|
|
|
806.9
|
|
|
|
738.0
|
|
|
|
573.1
|
|
Total
|
|
|
26,286.8
|
|
|
|
26,726.0
|
|
|
|
22,573.6
|
|
|
|
21,092.7
|
|
|
|
23,361.9
|
|
|
|
27,732.9
|
|
|
|
28,975.6
|
|
|
|
24,694.7
|
|
Consolidated
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging
|
|
|
4,853.3
|
|
|
|
5,510.3
|
|
|
|
4,420.7
|
|
|
|
3,590.3
|
|
|
|
4,518.6
|
|
|
|
5,918.7
|
|
|
|
6,562.0
|
|
|
|
4,051.0
|
|
Testing
|
|
|
2,451.0
|
|
|
|
2,557.3
|
|
|
|
1,736.9
|
|
|
|
1,246.4
|
|
|
|
1,632.5
|
|
|
|
2,177.0
|
|
|
|
2,547.1
|
|
|
|
1,810.7
|
|
Others
|
|
|
195.4
|
|
|
|
179.9
|
|
|
|
240.2
|
|
|
|
159.6
|
|
|
|
252.3
|
|
|
|
334.2
|
|
|
|
149.7
|
|
|
|
325.9
|
|
Total
|
|
|
7,499.7
|
|
|
|
8,247.5
|
|
|
|
6,397.8
|
|
|
|
4,996.3
|
|
|
|
6,403.4
|
|
|
|
8,429.9
|
|
|
|
9,258.8
|
|
|
|
6,187.6
|
|
Consolidated
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging
|
|
|
24.3
|
%
|
|
|
27.0
|
%
|
|
|
25.7
|
%
|
|
|
22.1
|
%
|
|
|
25.1
|
%
|
|
|
27.3
|
%
|
|
|
29.1
|
%
|
|
|
21.1
|
%
|
Testing
|
|
|
43.0
|
%
|
|
|
44.0
|
%
|
|
|
36.2
|
%
|
|
|
28.8
|
%
|
|
|
34.6
|
%
|
|
|
41.2
|
%
|
|
|
44.9
|
%
|
|
|
37.0
|
%
|
Overall
|
|
|
28.5
|
%
|
|
|
30.9
|
%
|
|
|
28.3
|
%
|
|
|
23.7
|
%
|
|
|
27.4
|
%
|
|
|
30.4
|
%
|
|
|
32.0
|
%
|
|
|
25.1
|
%
|
Our
results of operations are affected by seasonality. Our first quarter
net revenues have historically decreased over the preceding fourth quarter,
primarily due to the combined effects of holidays in the United States, Taiwan
and elsewhere in Asia. Moreover, the increase or decrease in net revenues of a
particular quarter as compared with the immediately preceding quarter varies
significantly. See “Item 3. Key Information—Risk Factors—Risks Relating to Our
Business—Our operating results are subject to significant fluctuations, which
could adversely affect the market value of your investment.”
Exchange
Rate Fluctuations
For
quantitative and qualitative disclosure of our exposure to foreign currency
exchange rate risk, see “Item 11. Quantitative and Qualitative
Disclosures about Market Risk—Market Risk—Foreign Currency Exchange Rate
Risk.”
Taxation
The
regular corporate income tax rate in the ROC applicable to us is 25%. Under the
ROC Statute of Upgrading Industries, which gives certain preferential tax
treatment to companies that qualify as operating in a “newly-emerging important
and strategic industry” or “manufacturing industry”, we may apply for tax
holidays covering the portion of our income allocable to eligible machinery and
equipment upon receipt of a cash infusion from our shareholders, including
through rights offerings, if the proceeds of which are used to purchase eligible
machinery and equipment. We may also apply for this tax holiday after the
capitalization of retained earnings through the issuance of stock
dividends. See note 21 to our consolidated financial statements
included in this annual report. As of May 30, 2008, we have five five-year tax
exemptions on income derived from a portion of our operations in Kaohsiung,
Taiwan. One such exemption will expire on September 30, 2009. We are in the
process of applying for the use of the remaining four exemptions in connection
with our operations in Kaohsiung, Taiwan, following the completion of related
capacity expansions. As of May 30, 2008, we had also received two five-year tax
exemptions for a cash injection from our shareholders in connection with our
operations in Chung Li, Taiwan. Both exemptions will expire at the end of
2011.
ASE Test
Taiwan has one five-year tax exemption that will expire at the end of 2010 on
income derived from a portion of its testing operations. ASE Test Taiwan also
plans to apply for an additional five-year exemption following the completion of
related capacity expansions.
Power ASE
has one five-year tax exemption that will expire in the third quarter of 2012 on
income derived from a portion of its testing and packaging operations. It also
plans to apply for an additional five-year tax exemption following the
completion of related capacity expansions.
Under the
ROC Statute for Upgrading Industries, we are also entitled to tax credit to be
applied to the purchase of qualifying manufacturing equipment. The
tax credits were set at 11%, 7% and 7% for 2005, 2006 and 2007, respectively,
and are expected to remain at 7% in 2008. We are also entitled to tax credits
set at 30% of the amount spent on qualifying research and development expenses
and employee training expenses. These tax credits generally expire five years
following their respective grants and are available to reduce 50% of our income
taxes payable in the first four years and 100% of such taxes payable in the
fifth year, subject to the application of the Alternative Minimum Tax Act, or
AMT Act, discussed below.
ASE Test
Malaysia obtained “pioneer” tax status and was granted a five-year tax exemption
which expired on June 30, 2004. This tax exemption resulted in tax savings for
us of approximately NT$642.3 million and NT$481.2 million in 2004 and 2003,
respectively. In order to qualify for a more beneficial reinvestment allowance,
ASE Test Malaysia applied for and was granted cancellation of its pioneer
status, which was deemed to have been cancelled on September 21, 2002. ASE Test
Malaysia’s current reinvestment allowance applies to certain qualifying
facilities and machinery and allows it to reduce its tax payments on income from
operations that use such facilities and machinery. The term of this reinvestment
allowance is 2003 through 2017.
In
addition, since we have facilities located in special export zones such as the
Nantze Export Processing Zone in Taiwan and the Bayan Lepas Free Industrial Zone
in Malaysia, we enjoy exemptions from various import duties, commodity taxes and
sales taxes on imported machinery, equipment, raw materials and components which
are directly used for manufacturing finished goods.
Finished
goods produced by companies located in these zones and exported or sold to
others within the zones are exempt from otherwise applicable commodity or
business taxes in Taiwan and customs duties and sales taxes in
Malaysia.
Our
effective income tax rate was 0% in 2005 primarily as a result of tax credits
generated from qualifying equipment purchases made at our facilities in
Kaohsiung, Taiwan.
In 2006, our effective
income tax rate increased to 9% primarily due to the increase of taxable income
and the AMT Act, as described below, effective on January 1, 2006.
In
2007, our effective
income tax rate increased to 19% primarily due to (1) the use of tax credits;
(2) undistributed earnings tax on our domestic subsidiaries; and (3) withholding
tax on dividends imposed on some of our foreign subsidiaries. We believe that
our future estimated taxable income will be sufficient to realize the current
and long-term portion of our net deferred tax assets recorded as of December 31,
2007.
Under the
ROC Income Tax Act, all earnings generated in a year which are not distributed
to shareholders as dividends in the following year will be assessed a 10%
undistributed earnings tax. As a result, if we do not distribute all of our
annual earnings as either cash or stock dividends in the following year, these
undistributed earnings will be subject to the 10% undistributed earnings
tax.
The ROC
government enacted the AMT Act, which became effective on January 1, 2006. The
alternative minimum tax, or AMT, imposed under the AMT Act is a supplemental tax
which is payable if the income tax payable pursuant to the ROC Income Tax Act is
below the minimum amount prescribed under the AMT Act. The taxable income for
calculating the AMT includes most income that is exempted from income tax under
various legislations, such as tax holidays. The AMT rate for business entities
is 10%. However, the AMT Act grandfathered certain tax exemptions granted prior
to the enactment of the AMT Act.
Inflation
We do not
believe that inflation in Taiwan or elsewhere has had a material impact on our
results of operations.
U.S.
GAAP Reconciliation
Our
consolidated financial statements are prepared in accordance with ROC GAAP,
which differ in certain material respects from U.S. GAAP. The following table
sets forth a comparison of our net income and shareholders’ equity in accordance
with ROC GAAP and U.S. GAAP as of and for the periods indicated.
|
|
As
of and For the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
(in
millions)
|
|
Net
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
ROC
GAAP
|
|
|
(4,691.2
|
)
|
|
|
17,416.2
|
|
|
|
12,165.2
|
|
|
|
375.1
|
|
U.S.
GAAP
|
|
|
(5,530.5
|
)
|
|
|
14,122.7
|
|
|
|
9,931.1
|
|
|
|
306.2
|
|
Total
shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROC
GAAP
|
|
|
54,850.3
|
|
|
|
77,126.8
|
|
|
|
89,739.9
|
|
|
|
2,767.2
|
|
U.S.
GAAP
|
|
|
44,959.3
|
|
|
|
60,584.1
|
|
|
|
70,101.4
|
|
|
|
2,161.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 31 to
our consolidated financial statements included in this annual report provides a
description of the significant differences between ROC GAAP and U.S. GAAP as
they relate to us and a reconciliation of net income and shareholders’ equity.
Significant differences between ROC GAAP and U.S. GAAP, which primarily affect
our net income as reported under ROC GAAP, include impairment loss reversal,
impairment of goodwill and long-term investments and compensation expense
pertaining to bonuses to employees, directors and supervisors.
Recent
U.S. GAAP Accounting Pronouncements
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 us beginning on
January 1, 2007. The cumulative effects of applying FIN 48 were recorded as
an adjustment to retained earnings as of the beginning of the period of
adoption. In connection with the adoption of FIN 48, we recognized a decrease in
our retained earnings as of the beginning of 2007 of NT$24.2 million (net of tax
effect) under U.S. GAAP.
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 us beginning January 1,
2008. We do not expect the adoption of U.S. SFAS No.157 to impact our
consolidated financial position or results of operations.
In
February 2007, the FASB issued U.S. SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities—Including an Amendment of FASB
Statement No.115.” This statement permits companies to choose to
measure eligible items at fair value at specified election dates and report
unrealized gains and losses in earnings at each subsequent reporting date on
items for which the fair value option has been elected. The objective
of this statement is to improve financial reporting by providing companies with
the opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. We may decide whether to elect the fair value
option for each eligible item on its election date, subject to certain
requirements described in the statement. U.S. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007. We are
currently evaluating the effect that the adoption of U.S. SFAS No. 159 will have
on our results of operations and financial position and we are not yet in a
position to determine such effects.
In
December 2007, the FASB issued U.S. SFAS No. 141R, “Business Combination” (U.S.
SFAS No. 141R) and U.S. SFAS No. 160, “Non-controlling Interests in Consolidated
Financial Statements—An Amendment of ARB No. 51.” U.S. SFAS No. 141R
requires most of the assets acquired and liabilities assumed in the business
combination to be measured at fair value as of the acquisition
date. In addition, the net assets of non-controlling interests’ share
of the acquired subsidiaries should be recognized at fair value. U.S.
SFAS No. 160 requires us to include non-controlling interests as a separate
component of shareholders’ equity, instead of liability or temporary
equity. U.S. SFAS No. 141R is effective for us for business
combinations consummated on or after January 1, 2009 and U.S. SFAS No. 160 is
effective for us beginning after January 1, 2009. We are currently
evaluating the effect
that the
adoption of U.S. SFAS No. 141R and U.S. SFAS No. 160 will have on our results of
operations and financial position and we are not yet in a position to determine
such effects.
In March
2007, the FASB issued U.S. SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133.”
U.S. SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” does not provide adequate information about how derivative and
hedging activities affect an entity’s financial position, financial performance,
and cash flows. Accordingly, U.S. SFAS No. 161 requires enhanced disclosures
about an entity’s derivative and hedging activities and thereby improves the
transparency of financial reporting. U.S. SFAS No. 161 is effective for fiscal
years and interim periods beginning after November 15, 2008. We do not expect
the adoption of U.S. SFAS No. 161 to have a material effect on our financial
position, results of operations, or cash flows.
In May
2008, the FASB issued U.S. SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” This new standard sets out the framework for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. GAAP. Up to now, the U.S. GAAP
hierarchy has been defined in the U.S. auditing literature. U.S. SFAS 162 will
be effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board’s amendments to their auditing standards. We do
not believe the adoption of U.S. SFAS No. 162 will have a significant
impact on our results of operations and financial position.
We have
historically been able to satisfy our working capital needs from our cash flow
from operations. We have historically funded our capacity expansion from
internally generated cash and, to the extent necessary, the issuance of equity
securities and long-term borrowings. If adequate funds are not available on
satisfactory terms, we may be forced to curtail our expansion plans. Moreover,
our ability to meet our working capital needs from cash flow from operations
will be affected by the demand for our packaging and testing services, which in
turn may be affected by several factors. Many of these factors are outside of
our control, such as economic downturns and declines in the prices of our
services caused by a downturn in the semiconductor industry. See “Item 3. Key
Information—Risk Factors—Risks Relating to Our Business—Our operating results
are subject to significant fluctuations, which could adversely affect the market
value of your investment.” The average selling prices of our packaging and
testing services are likely to be subject to further downward pressure in the
future. To the extent we do not generate sufficient cash flow from our
operations to meet our cash requirements, we will have to rely on external
financing.
Net
cash provided by operating activities amounted to NT$28,306.8 million (US$872.9
million) in 2007,
primarily
as a result of adjusting for non-cash depreciation and amorization of
NT$16,626.1 million. Net cash provided by operating activities amounted to
NT$37,290.0 million in 2006, partially as a result of adjusting for non-cash
depreciation and amortization, and, to a lesser extent, for gain on insurance
settlement and impairment recovery of NT$9,913.8 million. Net cash provided by
operating activities amounted to NT$18,751.0 million in 2005, partially as a
result of adjusting for non-cash depreciation and amortization, including
amortization of goodwill, and loss on fire damage of NT$23,774.5 million. The
decrease in net cash provided by operating activities in 2007 compared to 2006
was primarily due to a decrease in net income to NT$12,165.3 million
(US$375.1 million)
in 2007
from NT$17,416.2 million in 2006 and a net increase in notes and accounts
receivable of NT$9,634.0 million
(US$297.1 million)
,
partially offset by non-cash
gain on insurance settlement and
impairment recovery of NT$4,574.5 million in 2006 and a net increase in
notes and accounts payable
of NT$4,341.3 million (US$133.9 million)
. The increase in net cash
generated by operating activities in 2006 compared to 2005 was primarily due to
a significant increase in net income to NT$17,416.2 million in 2006 from a net
loss of NT$4,691.2 million in 2005 and net decreases in financial assets for
trading and notes and accounts receivable of NT$10,773.9 million, partially
offset by a non-cash gain on insurance settlement and impairment recovery of
NT$4,574.5 million in 2006 compared to a non-cash loss on fire damage of
NT$8,212.8 million in 2005.
Net cash
used in investing activities amounted to NT$18,108.4 million (US$558.4 million)
in 2007, primarily due to the acquisition of property, plant and equipment, such
as machinery and equipment for our packaging, testing
and
interconnect materials operations, of NT$17,190.4 million (US$530.1 million).
Net cash used in investing activities amounted to NT$22,104.5 million in 2006,
primarily due to the acquisition of property, plant and equipment, such as
machinery and equipment for our packaging, testing and interconnect materials
operations, of NT$17,764.2 million and, to a lesser extent, the net increase
acquisition of available-for-sale financial assets of NT$9,134.1 million,
partially offset by proceeds from insurance claims of NT$5,768.0 million. Net
cash used in investing activities amounted to NT$11,632.0 million in 2005,
primarily due to the acquisition of property, plant and equipment, such as
machinery and equipment for our packaging, testing and interconnect materials
operations, of NT$15,611.5 million, partially offset by insurance proceeds in
connection with the fire damage incurred at our facilities in Chung Li, Taiwan
in May 2005.
Net
cash used in financing activities in 2007 amounted to NT$8,488.9 million
(US$261.8 million). This amount reflected primarily the
issuance of cash dividends
of NT$6,941.0 million
,
(US$214.0 million) and a
decrease in long-term debts of NT$4,639.5 million (US$143.1 million), which
was
partially offset by
an inc
rease in short-term
borrowings of NT$3,784.1 million
(US$116.7
million)
. Net cash used in financing activities in 2006
amounted to NT$12,561.1 million. This amount reflected primarily a decrease in
long-term debts of NT$13,745.7 million. Net cash used in financing activities in
2005 amounted to NT$91.8 million. This amount reflected primarily a decrease in
long-term debts of NT$3,221.9 million, which was partially offset by an increase
in short-term borrowings of NT3,638.4 million.
As of
December 31, 2007, our primary source of liquidity was NT$17,157.9 million
(US$529.1 million) of cash and NT$11,058.3 million (US$341.0 million) of
financial assets—current. Our financial assets—current primarily consisted of
investments in open-ended mutual funds. As of December 31, 2007, we had total
unused short-term credit lines of NT$44,336.8 million (US$1,367.2 million), and
total unused long-term credit lines of NT$13,134.3 million (US$405.0 million).
As of December 31, 2007, we had working capital of NT$21,151.1 million (US$652.2
million).
As of
December 31, 2007, we had total borrowings of NT$39,709.9 million (US$1,224.5
million), NT$9,072.1 million (US$279.7 million) of which were short-term
borrowings and NT$30,637.8 million (US$944.8 million) of which were long-term
borrowings. The interest rate for borrowings under our short-term borrowings
ranged from 2.37% to 6.80% per year as of December 31, 2007. Our short-term
loans are primarily revolving facilities with a term of one year, each of which
may be extended on an annual basis with lender consent, and to a lesser extent,
are loans for letters of credit and short-term bills payable. Our long-term
borrowings consist primarily of bank loans, bonds payable and capital lease
obligations. As of December 31, 2007, we had outstanding long-term borrowings,
less current portion, of NT$23,936.0 million (US$738.1 million). As of December
31, 2007, the current portion of our long-term borrowings was NT$6,701.8 million
(US$206.7 million). Our long-term borrowings carried variable interest rates
which ranged between 1.90% and 7.56% per year as of December 31,
2007.
We have
pledged a portion of our assets, with a carrying value of NT$8,497.7 million
(US$262.0 million) as of December 31, 2007, to secure our obligations under our
short-term and long-term facilities.
In March
2008, we entered into a syndicated loan agreement with a banking syndicate led
by Citibank, N.A., Taipei Branch for a NT$24,750.0 million (US$763.2 million)
term loan facility. We have drawn down NT$17,500.0 million from this facility to
finance a portion of the consideration for our acquisition, by way of a scheme
of arrangement under Singapore law, of all the outstanding ordinary shares of
ASE Test that we did not already directly or indirectly own. We are in the
process of negotiating revisions to the loan agreement that would allow us to
draw down the amounts remaining under the facility. In May 2008, we entered into
an additional syndicated loan agreement with a banking syndicate led by
Citibank, N.A., Taipei Branch for a US$200.0 million term loan facility, also
for the purposes of financing our acquisition of ASE Test’s outstanding ordinary
shares. As of June 4, 2008, we had drawn down the entire balance of
this facility.
In
November 2005, we and ASE Test Taiwan entered into a US$100.0 million three-year
revolving receivables acquisition and servicing agreement with ABN Amro Bank
N.V. whereby we and ASE Test, Inc. agree to sell and ABN Amro Bank N.V. agrees
to buy certain eligible receivables. The credit line under this facility was
increased to US$200 million in June 2006. The total accounts receivable sold
under this facility as of December 31, 2005 and 2006 was NT$3,915.0 million and
NT$4,608.2 million, respectively. The agreement was terminated early in December
2007. See “—Off-Balance Sheet Arrangements.”
In August
2005, ASE Test Finance Limited entered into a US$78.0 million five-year
syndicated credit facility for which Citibank, N.A., Taipei Offshore Banking
Branch and Citigroup Global Markets Asia Limited acted as arrangers and
Citibank, N.A., Taipei Offshore Banking Branch acted as agent. We and ASE Test
act as the guarantors for ASE Test Finance Limited. The proceeds were used for
the repayment of loans incurred by ASE Test and ASE Test Finance Limited. The
facility bears interest at LIBOR plus 0.875% per annum.
In March
2005, ASE Shanghai entered into a US$119.0 million five-year syndicated credit
facility for which the Hongkong and Shanghai Banking Corporation Limited,
Shanghai Branch acted as arranger and agent. We agreed to act as guarantor for
ASE Shanghai. We used US$119 million to refinance exiting credit facilities to
fund our capital expenditure requirements. The facility bears interest at LIBOR
plus 0.75% per annum.
In
connection with our leasing of testing equipment, in August 2004, we, along with
ASE Test Taiwan, entered into an agreement with a syndicate of banks arranged by
Citibank, N.A., Taipei Branch whereby such syndicate agreed to purchase up to
US$90.0 million of qualifying lease receivables from eligible leasing companies
for twelve months from the date of the agreement. As evidence of the obligations
entered into under the transaction, we and ASE Test Taiwan issued promissory
notes to such leasing companies indorsed to Citibank, N.A., Taipei
Branch. The leasing companies also executed a mortgage agreement
granting Citibank N.A., Taipei Branch a mortgage on the leased
equipment. This agreement expired in August 2005.
In January
2004, we issued eleven series of secured non-convertible bonds in the aggregate
principal amount of NT$2.75 billion. These bonds bear semi-annual interest at
floating LIBOR-based rates. We are required to repay half of the aggregate
principal amount of the bonds in January 2008 with the remaining due in January
2009. Our payment obligations under the bonds are secured by guarantees provided
by syndicate banks pursuant to a guarantee agreement entered into in December
2003, for which Chinatrust Commercial Bank, Ltd. and The Hongkong and Shanghai
Banking Corporation Limited, Taipei Branch acted as arrangers.
In
September 2003, we issued US$200 million in aggregate principal amount of zero
coupon convertible bonds due 2008. The convertible bonds are convertible into
our common shares and ADSs. In April 2005, we repurchased in the market US$15
million of the convertible bonds. As of April 30, 2008, these
convertible bonds are convertible into our common shares at a conversion price
of NT$26.59 per common share. As of April 30, 2008, US$132.9 million of the
convertible bonds had not been converted.
Our
long-term loans and facilities contain various financial and other covenants
that could trigger a requirement for early payment. Among other things, these
covenants require the maintenance of certain financial ratios, such as liquidity
ratio, indebtedness ratio, interest coverage ratio and other technical
requirements. In general, covenants in the agreements governing our existing
debt, and debt we may incur in the future, may materially restrict our
operations, including our ability to incur debt, pay dividends, make certain
investments and payments, other than in connection with restructurings of
consolidated entities, and encumber or dispose of assets. A default under
one debt instrument may also trigger cross-defaults under our other debt
instruments. An event of default under any debt instrument, if not cured or
waived, could have a material adverse effect on our liquidity, as well as our
financial condition and operations.
We have on
occasion failed to comply with certain financial covenants in some of our loan
agreements. Such non-compliance may also have, through broadly worded
cross-default provisions, resulted in default under some of the agreements
governing our other existing debt. For example, we failed to comply with certain
debt ratios in some of our loan agreements as a result of additional borrowings
to fund increased capital expenditures in 2004 without an increase in net income
and as a result of the fire at our facilities in Chung Li, Taiwan in May 2005.
By July 2005, we had either obtained waivers for, or refinanced on a long-term
basis, all of the relevant loans, and as such are not in default under any of
our existing debt.
We
cannot assure you that we will be able to remain in compliance with our
financial covenants under our loan agreements. T
he
syndicated loan agreements that we entered into in connection with our
privatization of ASE Test in May 2008 may make it more difficult for us to
maintain certain financial ratios or to incur additional debt that may be
necessary
to
fund our operations, expansion or other initiatives.
In the
event of default, we may not be able to cure the default or obtain a waiver, and
our operations could be significantly disrupted and harmed. See “Item 3. Key
Information—Risk Factors—Risks Relating to Our Business—Restrictive covenants
and broad default provisions in our existing debt agreements may materially
restrict our operations as well as adversely affect our liquidity, financial
condition and results of operations.”
Our
contingent obligations consist of guarantees provided by us to our subsidiaries.
As of December 31, 2007, we endorsed and guaranteed the promissory notes of our
subsidiaries in the amount of NT$7,273.7 million (US$224.2 million). Other than
such guarantees, we have no other contingent obligations.
We have
made, and expect to continue to make, substantial capital expenditures in
connection with the expansion of our production capacity. The table below sets
forth our principal capital expenditures incurred for the periods
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
(in
millions)
|
|
Machinery
and equipment
|
|
|
11,883.3
|
|
|
|
13,491.2
|
|
|
|
14,592.8
|
|
|
|
450.0
|
|
Building
and improvements
|
|
|
1,074.1
|
|
|
|
4,239.7
|
|
|
|
3,579.4
|
|
|
|
110.4
|
|
We have
budgeted capital expenditures of approximately US$450.0 million for 2008,
primarily to purchase machinery and equipment in connection with the expansion
of our packaging, testing, and interconnect materials operations. We may adjust
the amount of our capital expenditures upward or downward based on market
conditions, the progress of our expansion plans and cash flow from operations.
Due to the rapid changes in technology in the semiconductor industry, we
frequently need to invest in new machinery and equipment, which may require us
to raise additional capital. We cannot assure you that we will be able to raise
additional capital should it become necessary on terms acceptable to us or at
all. See “Item 3. Key Information—Risk Factors—Risks Relating to Our
Business—Because of the highly cyclical nature of our industry, our capital
requirements are difficult to plan. If we cannot obtain additional capital when
we need it, our growth prospects and future profitability may be adversely
affected.”
We believe
that our existing cash, marketable securities, expected cash flow from
operations and existing credit lines under our loan facilities will be
sufficient to meet our capital expenditures, working capital, cash obligations
under our existing debt and lease arrangements, and other requirements for at
least the next twelve months. We currently hold cash primarily in
U.S. dollars, New Taiwan dollars, Malaysian ringgit, PRC renminbi, Japanese yen
and Korean won. As of December 31, 2007, we had contractual obligations of
NT$33,842.5 million (US$1,043.6 million) due in the next three years. We
currently expect to meet our payment obligations through the expected cash flow
from operations, long-term borrowings and the issuance of additional equity or
equity-linked securities. We will continue to evaluate our capital structure and
may decide from time to time to increase or decrease our financial leverage
through equity offerings or borrowings. The issuance of additional equity or
equity-linked securities may result in additional dilution to our
shareholders.
From time
to time, we evaluate possible investments, acquisitions or divestments and may,
if a suitable opportunity arises, make an investment, acquisition or divestment.
We currently plan to make an additional capital injection in ASESH AT of
US$60.0 million.
Apart
from this, we currently have no commitments to make any material investment,
acquisition or divestment.
Our
treasury team, under the supervision of our chief financial officer, is
responsible for setting our funding and treasury policies and objectives. Our
exposure to financial market risks relate primarily to changes in interest rates
and foreign currency exchange rates. To mitigate these risks, we utilize
derivative financial instruments, the application of which is primarily to
manage these exposures, and not for speculative purposes.
We have,
from time to time, entered into interest rate swap and interest rate swaption
transactions to hedge our interest rate exposure. As of December 31, 2007, we
had NT$2,750.0 million (US$84.8 million) outstanding in interest rate swap
contracts. See “Item 11. Quantitative and Qualitative Disclosures about Market
Risk—Market Risk—Interest Rate Risk.” We have entered into foreign currency
option contracts and forward exchange contracts to hedge our existing assets and
liabilities denominated in foreign currencies and identifiable foreign currency
purchase commitments. As of December 31, 2007, we had no outstanding foreign
currency option contracts and US$234.0 million outstanding in forward contracts.
In October 2003, we entered into cross-currency swap contracts to hedge against
exchange rate fluctuations in connection with our US$200.0 million zero coupon
convertible bonds due 2008, of which US$15.0 million were repurchased in the
market in April 2005. The final outstanding amount
under
these contracts expired in October 2007, and we have subsequently entered into a
number of smaller, monthly cross-currency swap contracts. As of December 31,
2007, we had US$139.2 million outstanding in cross-currency swap contracts. See
“Item 11. Quantitative and Qualitative Disclosures about Market Risk” and note 5
to our consolidated financial statements included in this annual
report.
For 2005,
2006 and 2007, our research and development expenditures totaled approximately
NT$2,785.4 million, NT$2,632.0 million and NT$3,284.1 million (US$101.3
million), respectively. These expenditures represented approximately 3.3%, 2.6%
and 3.2% of net revenues in 2005, 2006 and 2007, respectively. We have
historically expensed all research and development costs as incurred and none is
currently capitalized. As of April 30, 2008, we employed 2,394 employees in
research and development.
Packaging
We
centralize our research and development efforts in packaging technology in our
Kaohsiung, Taiwan facilities. After initial phases of development, we conduct
pilot runs in one of our facilities before new technologies or processes are
implemented commercially at other sites. Facilities with special product
expertise, such as ASE Korea, also conduct research and development of these
specialized products and technologies at their sites. One of the areas of
emphasis for our research and development efforts is improving the efficiency
and technology of our packaging processes. We expect these efforts to continue.
We are now also putting significant research and development efforts into the
development and adoption of new technology. We work closely with the
manufacturers of our packaging equipment, including Towa Corporation and Kulicke
& Soffa Industries Inc., in designing and modifying the equipment used in
our production process. We also work closely with our customers to develop new
product and process technology.
A
significant portion of our research and development efforts is also focused on
the development of advanced substrate production technology for BGA packaging.
Substrate is the principal raw material for BGA packages. Development and
production of advanced substrates involve complex technology and, as a result,
high quality substrates are currently available only from a limited number of
suppliers, located primarily in Japan. We believe that our successful
development of substrate production capability has, among other things, enabled
us to capture an increasingly important value-added component of the packaging
process, helped ensure a stable and cost-effective supply of substrates for our
BGA packaging operations and shortened production time.
Testing
Our
research and development efforts in the area of testing have focused primarily
on improving the efficiency and technology of our testing processes. These
efforts include developing software for parallel testing of logic
semiconductors, rapid automatic generation and cross-platform conversion of test
programs to test logic/mixed-signal semiconductors, automatic code generation
for converting and writing testing programs, testing new products using existing
machines and providing customers remote access to monitor test results. We are
also continuing the development of interface designs to provide for
high-frequency testing by minimizing electrical noise. We work closely with our
customers in designing and modifying testing software and with equipment vendors
to increase the efficiency and reliability of testing equipment. Our research
and development operations also include a mechanical engineering group, which
currently designs handler kits for semiconductor testing and wafer probing, as
well as software to optimize capacity utilization.
We and ASE
Test Taiwan entered into a US$100.0 million, three-year revolving accounts
receivable securitization agreement with a bank in November 2005. The
credit line under this facility was increased to US$200.0 million in June 2006.
The agreement was terminated early in December 2007. The agreement served
to increase our financing flexibility and to meet working capital requirements.
Under the agreement, we and ASE Test Taiwan sold accounts receivable that met
certain eligibility requirements to the bank, which issued securities to third
parties backed by the accounts receivable transferred to the bank.
The
eligibility criteria for the accounts receivable were primarily based on the
accounts receivable customers
’
respective
credit ratings.
Proceeds received from the bank
equaled the net
carrying
value of the sold accounts receivable, less a deferred purchase price receivable
at 20% of such receivables, a guarantee deposit, a program fee and other related
expenses. At the time of the sale, we and ASE Test Taiwan lost control over the
accounts receivable. After the transfer of the accounts receivable, we and ASE
Test Taiwan continued to service, administer and collect the accounts receivable
on behalf of the bank. We and ASE Test Taiwan collected on the initial accounts
receivable sold and transferred new accounts receivable meeting the eligibility
requirements with a similar value to replace the collected accounts receivable.
Total accounts receivable sold was NT$4,608.2 million as of December 31, 2006.
Losses from sales of account receivables were NT$13.4 million, NT$235.5 million
and NT$151.7 million (US$4.7 million) in 2005, 2006 and 2007,
respectively.
We and ASE
Test Taiwan de-recognized accounts receivable at 80% of the carrying value,
representing the portion of the sold accounts receivable on which we and ASE
Test Taiwan lost control at the time of transfer to the bank. If we or ASE Test
Taiwan maintained any control over these sold accounts receivable after the
initial sale, the sale of these accounts receivable would no longer qualify as
an off-balance sheet transaction and the total proceeds receivable from the bank
would have to be recorded as borrowings in our consolidated financial
statements. See notes 2 and 7 to our consolidated financial statements included
in this annual report.
The
following table sets forth the maturity of our contractual obligations as of
December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
|
(in
millions)
|
|
Contractual
Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
(1)
|
|
|
30,545.5
|
|
|
|
11,148.7
|
|
|
|
18,181.9
|
|
|
|
1,214.9
|
|
|
|
—
|
|
Capital
lease obligations
(2)
|
|
|
92.3
|
|
|
|
67.8
|
|
|
|
22.2
|
|
|
|
2.3
|
|
|
|
—
|
|
Operating
leases
(3)
|
|
|
1,249.1
|
|
|
|
548.7
|
|
|
|
486.4
|
|
|
|
214.0
|
|
|
|
—
|
|
Purchase
obligations
(4)
|
|
|
3,386.8
|
|
|
|
3,386.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
(5)(6)(7)(8)
|
|
|
35,273.7
|
|
|
|
15,152.0
|
|
|
|
18,690.5
|
|
|
|
1,431.2
|
|
|
|
—
|
|
(1)
|
Excludes
interest payments.
|
(2)
|
Represents
our commitments under property leases less imputed interest. These
obligations are recorded on our consolidated balance
sheets.
|
(3)
|
Represents
our commitments under leases for land, machinery and equipment such as
testers, and office buildings and equipment. See note 26 to our
consolidated financial statements included in this annual
report.
|
(4)
|
Represents
unpaid commitments for construction. These commitments are not recorded on
our consolidated balance sheets as of December 31, 2007. See note 26 to
our consolidated financial statements included in this annual report.
Total commitments for construction of buildings were approximately
NT$3,679.0 million (US$113.4 million), of which NT$292.2 million (US$9.0
million) had been paid as of December 31,
2007.
|
(5)
|
Excludes
payments that vary based upon our net sales or sales volume, such as
commissions, service fees and royalty payments for technology license
agreements. Royalty expenses in 2007 were approximately NT$246.8 million
(US$7.6 million). See note 26 to our consolidated financial statements
included in this annual report.
|
(6)
|
Excludes
non-binding commitments to purchase machinery and equipment of
approximately NT$7,489.0 million (US$230.9 million) as of December 31,
2007, of which NT$2,052.5 million (US$63.3 million) had been paid. See
note 26 to our consolidated financial statements included in this annual
report.
|
(7)
|
Excludes our minimum
pension funding requirements since such amounts have not been determined.
Under defined benefit pension plans, we made pension contributions of
approximately NT$224.7 million in 2006 and NT$485.2 million (US$15.0
million) in 2007 and we
estimate
that we will contribute approximately NT$163.0 million (US$5.0 million) in
2008. See “—Operating Results and Trend Information—Critical Accounting
Policies and Estimates” and note 17 to our consolidated financial
statements included in this annual
report.
|
(8)
|
We
recognized additional long term taxes payable of NT$18.4 million and
accrued interest and penalties of NT$12.8 million related to uncertain tax
position
s
in the
year ended December 31, 2007. At that time, we were unable to make a
reasonably reliable estimate of the timing of payments in individual years
beyond 12 months due to uncertainties in the timing of the outcome of the
tax audits.
|
Directors
Our board
of directors is elected by our shareholders in a general meeting at which a
quorum, consisting of a majority of all issued and outstanding common shares, is
present. The chairman is elected by the board from among the directors. Our
seven-member board of directors is responsible for the management of our
business.
The term
of office for our directors is three years from the date of election. The
current board of directors began serving on June 22, 2006. The terms of the
current directors expire on June 21, 2009. Directors may serve any number of
consecutive terms and may be removed from office at any time by a resolution
adopted at a meeting of shareholders. Normally, all board members are elected at
the same time, except where the posts of one-third or more of the directors are
vacant, at which time a special meeting of shareholders shall be convened to
elect directors to fill the vacancies. We and our subsidiaries do not have
service contracts with our directors that provide for benefits upon termination
of employment.
Our board
of directors established an audit committee on July 22, 2005 to satisfy the
requirements of Rule 10A-3 under the Exchange Act. The audit committee is
appointed by the board of directors and currently consists of Alan Cheng, who
is independent under Rule 10A-3 and financially literate with
accounting or related financial management expertise. The audit
committee has responsibility for, among other things, overseeing the
qualifications, independence and performance of our independent auditors and the
integrity of our financial statements.
The
following table sets forth information regarding all of our directors as of
April 30, 2008.
|
|
|
|
|
|
|
|
Other
Significant
Positions
Held
|
Jason
C.S. Chang
(1)
|
|
Director,
Chairman and Chief Executive Officer
|
|
1984
|
|
63
|
|
Chairman
of ASE Test; Chairman of ASE Test Taiwan
|
Richard
H.P. Chang
(1)
|
|
Director,
Vice Chairman and President
|
|
1984
|
|
61
|
|
Vice
Chairman of ASE Test; Chairman of Universal Scientific
|
Tien
Wu
(2)
|
|
Director
and Chief Operating Officer
|
|
2003
|
|
50
|
|
Chief
Executive Officer of ISE Labs
|
Joseph
Tung
(2)
|
|
Director,
Chief Financial Officer and Vice President
|
|
1997
|
|
49
|
|
Supervisor
of Universal Scientific; Director of ASE Test
|
Raymond
Lo
(2)
|
|
Director
and General Manager, Kaohsiung packaging facility
|
|
2006
|
|
54
|
|
President
of ASE Test
|
Jeffrey
Chen
(2)
|
|
Director
and Vice President
|
|
2003
|
|
44
|
|
Director
of ASE Test
|
Alan
Cheng
|
|
Director
|
|
2005
|
|
62
|
|
Director
of ASE Test
|
(1)
|
Jason
C.S. Chang and Richard H.P. Chang are
brothers.
|
(2)
|
Representative
of ASE Enterprises, a company organized under the laws of Hong Kong, which
held 16.8% of our outstanding common shares as of April 30, 2008. All of
the outstanding shares of ASE Enterprises are held by a company organized
under the laws of the British Virgin Islands in trust for the benefit of
the family of our Chairman and Chief Executive Officer, Jason C.S. Chang,
who is the sole shareholder and director of that
company.
|
Supervisors
We
currently have five supervisors, each serving a three-year term. The
current supervisors began serving on June 22, 2006, and their terms will expire
on June 21, 2009. The supervisors’ duties and powers include investigation of
our business condition, inspection of our corporate records, verification and
review of financial statements presented by our board of directors at
shareholders’ meetings, convening of shareholders’ meetings, representing us in
negotiations with our directors and notification, when appropriate, to the board
of directors to cease acting in contravention of any applicable law or
regulation, our Articles of Incorporation or the resolutions of our
shareholders’ meeting. Each supervisor is elected by our shareholders and cannot
concurrently serve as a director, managerial officer or other staff member. The
ROC Company Law requires at least one supervisor be appointed at all times, or
two supervisors for a company with publicly issued equity shares, and that a
supervisor’s term of office be no more than three years.
The
following table sets forth information regarding all of our supervisors as of
April 30, 2008.
|
|
|
|
|
|
|
|
Other
Significant
Positions
Held
|
Feng
Mei-Jean
(1)
|
|
Supervisor
|
|
1984
|
|
53
|
|
Supervisor
of J&R Industrial Inc.
|
Samuel
Liu
(2)
|
|
Supervisor
|
|
2005
|
|
60
|
|
Chief
Executive Officer of Universal Scientific
|
Tien-Szu
Chen
(2)
|
|
Supervisor
|
|
2006
|
|
46
|
|
Director
of ASE Test Taiwan
|
John
Ho
(2)
|
|
Supervisor
|
|
1998
|
|
53
|
|
Director
of Universal Scientific
|
Yen-Yi
Tseng
(2)
|
|
Supervisor
|
|
2000
|
|
66
|
|
Chairman
of Hung Ching
|
(1)
|
Feng
Mei-Jean is the wife of Richard H.P.
Chang.
|
(2)
|
Representative
of ASE Test Taiwan.
|
In
accordance with ROC law, each of our directors and supervisors is elected either
in his or her capacity as an individual or as an individual representative of a
corporation or government. Persons designated to represent corporate or
government shareholders as directors are typically nominated by such
shareholders at the annual general meeting and may be replaced as
representatives by such shareholders at will. Of the current directors and
supervisors, four represent ASE Enterprises and four represent ASE Test
Taiwan. The remaining directors and supervisors serve in their
capacity as individuals.
Executive
Officers
The
following table sets forth information regarding all of our executive officers
as of April 30, 2008.
|
|
|
|
|
|
|
Jason
C.S. Chang
|
|
Chairman
and Chief Executive Officer
|
|
24
|
|
63
|
Richard
H.P. Chang
|
|
Vice
Chairman and President
|
|
24
|
|
61
|
Tien
Wu
|
|
Chief
Operating Officer; Chief Executive Officer, ISE Labs
|
|
8
|
|
50
|
Joseph
Tung
|
|
Chief
Financial Officer and Vice President
|
|
13
|
|
49
|
Raymond
Lo
|
|
President,
ASE Test; President, ASE Test Taiwan; General Manager, Kaohsiung packaging
facility
|
|
22
|
|
54
|
Sang
Jin Maeng
|
|
President,
ASE Korea
|
|
9
|
|
56
|
Kwai
Mun Lee
|
|
President,
ASE South-East Asia operations
|
|
10
|
|
45
|
Biographies
of Directors, Supervisors and Executive Officers
Jason
C.S. Chang
has served as Chairman of ASE Inc. since its founding in March
1984 and as its Chief Executive Officer since May 2003. Mr. Chang is also the
Chairman of ASE Test. He holds a degree in
electrical
engineering from National Taiwan University and a master’s degree from the
Illinois Institute of Technology. He is the brother of Richard H.P. Chang, our
Vice Chairman and President.
Richard H.P. Chang
has served
as Vice Chairman of ASE Inc. since November 1999 after having served as
President of ASE Inc. since its founding in March 1984, and served as Chief
Executive Officer of ASE Inc. from July 2000 to April 2003. In February 2003, he
was again appointed President of ASE Inc. upon the retirement of Mr. Leonard Y.
Liu. Mr. Chang is also the Vice Chairman of ASE Test. He holds a degree in
industrial engineering from Chung Yuan Christian University of Taiwan. He is the
brother of Jason C.S. Chang, our Chairman and Chief Executive
Officer.
Tien Wu
has served as a
director of ASE Inc. since June 2003 and Chief Operating Officer since April
2006, prior to which he served as the President of Worldwide Marketing and
Strategy of the ASE Group. Mr. Wu has also served as the Chief Executive Officer
of ISE Labs since March 2003. Prior to joining ASE Inc. in March 2000, Mr. Wu
held various managerial positions with IBM. He holds a B.S.C.E. degree from the
National Taiwan University, a M.S. degree in mechanical engineering and a Ph.D.
in applied mechanics from the University of Pennsylvania.
Joseph Tung
has served as a
director of ASE Inc. since April 1997 and Chief Financial Officer since December
1994. He is also a director of ASE Test. Before joining ASE Inc., Mr. Tung was a
Vice President at Citibank, N.A. He received a degree in economics from the
National Chengchi University of Taiwan and a master’s degree in business
administration from the University of Southern California.
Raymond Lo
has served as a
director of ASE Inc. and General Manager of our packaging facility in Kaohsiung,
Taiwan since April 2006. Mr. Lo has also served as President of ASE
Test since April 2004, prior to which he served as President of ASE Test Taiwan
since 1999 and Vice President of Operations of ASE Inc. since July 1993. Mr. Lo
also served as a supervisor of ASE Inc. between July 2000 and April
2006. Before joining ASE Inc., Mr. Lo was the Director of Quality
Assurance at Zeny Electronics Co. He holds a degree in electronic physics from
the National Chiao-Tung University of Taiwan.
Jeffrey Chen
has served as a
director of ASE Inc. since June 2003 and a director of ASE Test since 1998. He
is also a Vice President of ASE Inc. He was the Chief Financial Officer of ASE
Test from July 1998 to August 2002. Prior to joining the ASE Group, he worked in
the corporate banking department of Citibank, N.A. in Taipei and as a Vice
President of corporate finance at Bankers Trust in Taipei. He holds a degree in
finance and economics from Simon Fraser University in Canada and a master’s
degree in business administration from the University of British Columbia in
Canada.
Alan Cheng
has served as a
director of ASE Inc. since June 2005 and is the Chairman of H.R. Silvine
Electronics, Inc. as well as a director of ASE Test and Hung Ching Development
& Construction Co., Ltd., an affiliate of ours. Mr. Cheng holds a degree in
industrial engineering from Chung Yuan Christian University in Taiwan and a
master’s degree in industrial engineering from Rhode Island
University.
Feng Mei-Jean
has served as a
supervisor of ASE Inc. since March 1984. She holds a degree in economics from
National Taiwan University. She is the wife of Richard H.P. Chang, our Vice
Chairman and President.
Samuel Liu
has served as a
supervisor of ASE Inc. since May 2005. He is currently the Chief Executive
Officer for Universal Scientific Industrial, Inc., an affiliated company of ASE
Inc. Mr. Liu has worked in the electronics industry for over 30 years in various
technical and management roles. He holds a B.S.E.E. from National Taiwan
University and a Ph.D. in material science from Stanford
University.
Tien-Szu Chen
has served as a
supervisor of ASE Inc. since June 2006 and is the President of Power ASE. Mr.
Chen holds a bachelor’s degree in industrial engineering from Chung Yuan
Christian University in Taiwan.
John Ho
has served as a
supervisor of ASE Inc. since April 1998. He is also a director of Universal
Scientific. He served as Chief Financial Officer of ASE Inc. from 1988 until
1995. He holds a degree in business administration from National Taiwan
University and a master’s degree in business administration from the University
of Iowa.
Yen-Yi Tseng
has served as a
supervisor of ASE Inc. since July 2000 and Chairman of Hung Ching since July
2002. Mr. Tseng served as President of Ret-Ser Engineering Agency from 1991 to
1998. He holds a degree in civil engineering from National Taiwan University and
a master’s degree in system engineering from Asian Institute of Technology in
Thailand. He was also a participant in the Program for Management Development at
Harvard Business School.
Sang Jin Maeng
has served as
President of ASE Korea since January 2004, after serving as Senior Vice
President of ASE Korea since July 1999. Mr. Maeng was Vice President
of Motorola Korea, Limited before joining ASE Korea when we acquired Motorola
Korea, Limited. He holds a degree in communication and electronic
engineering from the Civil Aviation College of Korea.
Kwai Mun Lee
has served as
President of our Southeast Asia operations, with responsibility for the
operations of our Penang, Malaysia and Singapore manufacturing facilities, since
March 2006. Prior to this appointment, he served as General Manager of ASE
Singapore Pte. Ltd., formerly ISE Labs Singapore, since May 1998. Before joining
the ASE Group, Mr. Lee held senior management positions at Chartered
Semiconductor and STATSChipPAC. He started his career as an engineer at Intel.
He holds a degree in engineering from the Swinburne Institute of Technology in
Australia.
The
business address of our directors, supervisors and executive officers is our
registered office.
In 2007,
we paid to our directors, supervisors and executive officers approximately
NT$426.7 million (US$13.2 million) in cash remuneration and 468,381 shares in
stock bonus.
In
2007, we granted to our executive officers an aggregate of 20,350,000 of ASE
Inc.
’
s
options under the 2007 plan with an exercise price of NT$30
.65,
and an aggregate of 13,350,000 of ASE Mauritius
’
s
options under the 2007 plan with an exercise price of
US$1.70.
In 2007, we accrued pension costs of NT$42.9
million (US$1.3 million) for retirement benefits for our management. We did not
pay any remuneration in kind to our directors, supervisors or executive officers
in 2007. At our annual general meeting held on June 19, 2008, our shareholders
approved an amendment to our articles of association setting our independent
directors’ remuneration at NT$2.0 million per person per year. We have not
provided any loans to or guarantees for the benefit of any of our directors,
supervisors or executive officers. For information regarding our pension
and other retirement plans and those of our subsidiaries, see note 17 to our
consolidated financial statements included in this annual report.
ASE
Inc. Employee Bonus and Stock Option Plans
We award
bonuses to employees of ASE Inc. and its subsidiaries who are located in Taiwan
based on overall income and individual performance targets. These employees are
eligible to receive bonuses in the form of our common shares valued at par.
Actual amounts of bonuses to individual employees are determined based upon the
employee meeting specified individual performance objectives. In 2005, we
granted an aggregate of 25,567,460 common shares as stock bonuses with an
aggregate value of NT$255.7 million. At our annual shareholders’ meeting held on
June 30, 2005, our shareholders, in addition to approving such stock bonus, also
approved NT$9.5 million as cash bonuses to employees. In 2007, we granted an
aggregate of 53,502,850 common shares as stock bonuses with an aggregate value
of NT$535.0 million. At our annual shareholders’ meeting held on June 28, 2007,
our shareholders, in addition to approving such stock bonus, also approved
NT$535.0 million as cash bonuses to employees. We did not grant any bonuses or
stock options in 2006.
At our
annual shareholders’ meeting held on June 19, 2008, our shareholders approved
the grant of NT$383.2 million as cash bonuses to employees and 38,320,500 common
shares as stock bonuses. These grants are pending ROC regulatory
approval.
We currently maintain three
option plans, adopted in 2002, 2004 and 2007. Pursuant to these
plans, our full-time employees as well as the full-time employees of our
domestic and foreign subsidiaries are eligible to receive stock option grants.
Each option entitles the holder to purchase one ASE Inc. common share at a price
equal to the closing market price on the date of the option issuance, such
exercise price being subject to retroactive adjustment in the event of certain
capital transactions in subsequent periods. Each option is exercisable upon
vesting for five years. Forty percent of the options originally granted vest
upon the second anniversary of the grant date, and an additional 10% of the
options originally granted vest every six months thereafter. Each option expires
at the end of the 10th
year
following its grant date. The options are generally not transferable. As of
December 31, 2007, a total of 159,968,000 options had been granted under the
2002 plan, 145,989,000 of which had an original exercise price of NT$20.80 per
share (currently adjusted to NT$12.40 per share) and 13,979,000 of which had an
original exercise price of NT$24.60 per share (currently adjusted to NT$16.60
per share). As of December 31, 2007, a total of 139,917,000 options had been
granted under the 2004 plan, 124,917,000 of which had an original exercise price
of NT$26.60 per share (currently adjusted to NT$19.60 per share) and 15,000,000
of which had an original exercise price of NT$20.55 per share (currently
adjusted to NT$16.00 per share). As of December 31, 2007, a total of
185,806,000 options had been granted under the 2007 plan. The
original and current exercise price under the 2007 plan is NT$30.65 per
share.
ASE
Test Share Option Plans
As of
December 31, 2007, ASE Test maintained three option plans, which included plans
adopted in 1999, 2000 and 2004. Under ASE Test’s share option plans,
ASE Test’s directors, employees, advisors, consultants and affiliates, some of
whom serve as our directors, supervisors and employees, could, at the discretion
of a committee of its directors administering the plan, be granted options to
purchase its ordinary shares
at
an exercise price of no less than their market value on the date of grant. As of
December 31, 2007, an aggregate of 16,500,000 of ASE Test’s shares had been
reserved for issuance and 8,723,172 options to purchase its shares remained
outstanding under its various option plans. An aggregate of 4,985,000 options
(of which 4,910,000 were outstanding as of December 31, 2007) had been granted
to the directors and executive officers of ASE Test. Options granted under the
various plans were exercisable at exercise prices ranging from US$6.10 to
US$25.00 per share.
On
May
30, 2008
,
we acquired, by way of a scheme of arrangement under Singapore law, all the
outstanding ordinary shares of ASE Test that we did not already directly or
indirectly own, maki
ng
ASE Test our wholly-owned subsidiary. Upon the effectiveness of this
transaction
on May 30, 2008, each ASE Test option
exercisable for ASE Test ordinary shares (whether or not vested) that had a per
share exercise price lower than US$14.78 was deemed to have been exercised by
ASE Test on behalf of the option holder on a cashless basis. We then
acquired these newly issued ASE Test ordinary shares for US$14.78 per share in
cash. As a result, each of these option holders received a cash
payment per share equal to the excess of US$14.78 over the per share exercise
price of their options, less any interest, fees and charges. Each ASE
Test option that had a per share exercise price equal to or higher than US$14.78
was cancelled without any payment to the option holder. See “Item 4.
Information on the Company—History and Development of the Company—ASE Test Share
Acquisition and Privatization.”
ASE
Mauritius Inc. Share Option Plans
As of
December 31, 2007, ASE Mauritius Inc. maintained one option plan adopted in
2007. Under this plan, certain employees of ASE Mauritius Inc. and the ASE
Group are granted options to purchase ordinary shares of ASE Mauritius Inc. at
an exercise price of US$1.70, which exercise price was determined by taking into
account a fairness opinion rendered by an independent appraiser and was reviewed
by our accountants. Each option is exercisable upon vesting for five years and
expires after 10 years. As of December 31, 2007, a total of 30,000,000 options
had been granted under this plan with an exercise price of US$1.70.
The
following table sets forth, for the periods indicated, certain information
concerning our employees for the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
29,039
|
|
|
|
26,986
|
|
|
|
29,942
|
|
Function
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
labor
|
|
|
17,857
|
|
|
|
16,321
|
|
|
|
17,172
|
|
Indirect
labor (manufacturing)
|
|
|
7,167
|
|
|
|
6,614
|
|
|
|
7,321
|
|
Indirect
labor (administration)
|
|
|
2,101
|
|
|
|
2,227
|
|
|
|
2,992
|
|
Research
and development
|
|
|
1,914
|
|
|
|
1,824
|
|
|
|
2,457
|
|
Location
|
|
|
|
|
|
|
|
|
|
|
|
|
Taiwan
|
|
|
20,821
|
|
|
|
19,145
|
|
|
|
18,614
|
|
Malaysia
|
|
|
2,437
|
|
|
|
2,259
|
|
|
|
2,558
|
|
PRC
|
|
|
2,282
|
|
|
|
1,972
|
|
|
|
5,187
|
|
Korea
|
|
|
1,850
|
|
|
|
1,851
|
|
|
|
1,859
|
|
Japan
|
|
|
1,002
|
|
|
|
1,020
|
|
|
|
1,009
|
|
Singapore
|
|
|
303
|
|
|
|
392
|
|
|
|
371
|
|
United
States
|
|
|
344
|
|
|
|
347
|
|
|
|
344
|
|
Eligible
employees may participate in our employee share bonus plan and stock option
plans and ASE Mauritius Inc’s share option plans. See “—Compensation—ASE Inc.
Employee Bonus and Stock Option Plans” and “—Compensation—ASE Mauritius Inc.
Share Option Plans.” See also note 19 to our consolidated financial statements
included in this annual report.
With the
exception of ASE Korea’s employees, our employees are not covered by any
collective bargaining arrangements.
We believe that our
relationship with our employees is good.
The
following table sets forth certain information with respect to our common shares
and options exercisable for our common shares held by our directors, supervisors
and executive officers as of April 30, 2008.
Director,
Supervisor
or
Executive Officer
|
|
Number of ASE
Inc.
Common Shares
Held
|
|
|
Percentage of Total ASE Inc.
Common Shares Issued and Outstanding
|
|
|
Number of Options Held
(1)
|
|
|
Exercise Price of Options
(NT$)
|
|
|
Expiration Date
of
Options
|
Jason
C.S. Chang
|
|
|
55,411,981
(2)
|
|
|
|
1.01%
|
|
|
|
11,180,000
|
|
|
|
12.40
–
30.65
|
|
|
|
|
12/24/2012
–
12
/
19
/201
7
|
Richard
H.P. Chang
|
|
|
71,314,948
|
|
|
|
1.
30%
|
|
|
|
6,770,000
|
|
|
|
12.40
–
30.65
|
|
|
|
|
12/24/2012
–
12
/
19
/201
7
|
Tien
Wu
|
|
|
1,351,214
|
|
|
|
0.02%
|
|
|
|
*
|
|
|
|
12.40
–
30.65
|
|
|
|
|
12/24/2012
–
12
/
19
/201
7
|
Joseph
Tung
|
|
|
2,387,327
|
|
|
|
0.0
4%
|
|
|
|
*
|
|
|
|
12.40
–
30.65
|
|
|
|
|
12/24/2012
–
12
/
19
/201
7
|
Raymond
Lo
|
|
|
1,114,220
|
|
|
|
0.02%
|
|
|
|
|
|
|
|
12.40
–
30.65
|
|
|
|
|
12/24/2012
–
12
/
19
/201
7
|
Jeffrey
Chen
|
|
|
755,717
|
|
|
|
0.0
1%
|
|
|
|
*
|
|
|
|
16.60
–
30.65
|
|
|
|
|
08/22/2013
–
12
/
19
/201
7
|
Alan
Cheng
|
|
|
439,772
|
|
|
|
0.01%
|
|
|
|
*
|
|
|
|
30.65
|
|
|
|
|
12
/
19
/201
7
|
Feng
Mei-Jean
|
|
|
84,677,683
|
|
|
|
1.5
5%
|
|
|
|
200,000
|
|
|
|
30.65
|
|
|
|
|
12
/
19
/201
7
|
Samuel
Liu
|
|
|
66,358
|
|
|
|
0.00%
|
|
|
|
*
|
|
|
|
19.60
|
|
|
|
|
06/30/2014
|
Tien-Szu
Chen
|
|
|
230,634
|
|
|
|
0.00%
|
|
|
|
*
|
|
|
|
12.40
–
30
.65
|
|
|
|
|
12/24/2012
–
12
/
19
/201
7
|
John
Ho
|
|
|
1,225,005
|
|
|
|
0.02%
|
|
|
|
*
|
|
|
|
12.40
–
30.65
|
|
|
|
|
12/24/2012
–
12
/
19
/201
7
|
Yen-Yi
Tseng
|
|
|
303,740
|
|
|
|
0.0
1%
|
|
|
|
*
|
|
|
|
19.60
–
30.65
|
|
|
|
|
06/30/2014
–
12
/
19
/201
7
|
Sang
Jin Maeng
|
|
|
0
|
|
|
|
0.00%
|
|
|
|
*
|
|
|
|
12.40
–
30.65
|
|
|
|
|
12/24/2012
–
12
/
19
/201
7
|
Kwai
Mun Lee
|
|
|
0
|
|
|
|
0.00%
|
|
|
|
*
|
|
|
|
16.60
–
30.65
|
|
|
|
|
08/22/2
013
–
12
/
19
/201
7
|
(1)
|
Each
option covers one of our common
shares.
|
(2)
|
In
addition to holding 1.01% of our common shares directly, Jason C.S. Chang
is the sole shareholder and director of a company that holds all the
outstanding shares of ASE Enterprises, which holds 16.8% of our common
shares. See “Item 7. Major Shareholders and Related Party
Transactions—Major Shareholders.”
|
*
|
The
sum of the number of common shares held and the number of common shares
issuable upon exercise of all options held is less than 1% of our total
outstanding common shares.
|
The
following table sets forth information known to us with respect to the
beneficial ownership of our common shares, as of April 30, 2008, by each
shareholder known by us to beneficially own more than 5% of our outstanding
common shares and all directors, supervisors and executive officers as a
group.
|
|
Common
Shares Beneficially Owned
|
|
Name
of Shareholder or Group
|
|
Number
|
|
|
Percentage
|
|
ASE
Enterprises
(1)
|
|
|
922,787,725
|
|
|
|
16.8
|
%
|
Directors,
supervisors and executive officers as a group
(2)
|
|
|
1,142,066,324
|
|
|
|
20.9
|
%
|
(1)
|
ASE
Enterprises is a company organized under the laws of Hong Kong. All of the
outstanding shares of ASE Enterprises are held by a company organized
under the laws of the British Virgin Islands in trust for the benefit of
the family of our Chairman and Chief Executive Officer, Jason C.S. Chang,
who is the sole shareholder and director of that
company.
|
(2)
|
Includes
shareholding of ASE
Enterprises.
|
The
following table sets forth information relating to our common shares held by our
consolidated subsidiaries and unconsolidated affiliates as of May 30,
2008.
|
|
Common
Shares Beneficially Owned
|
|
Name
of Shareholder
|
|
Number
|
|
|
Percentage
|
|
ASE
Test Taiwan
(1)
|
|
|
958,495
|
|
|
|
0.02
|
%
|
Hung
Ching
(2)
|
|
|
59,508,486
|
|
|
|
1.1
|
%
|
J&R
Holding Limited
(3)
|
|
|
106,684,153
|
|
|
|
1.9
|
%
|
(1)
|
ASE
Test Taiwan is a 99.99%-owned subsidiary of ASE Test, our wholly-owned
subsidiary as of May 30, 2008.
|
(2)
|
As
of May 30, 2008, we held 26.2% of the outstanding shares of Hung Ching.
Chang Yao Hung-ying, who was our director from 1984 to June 2003, our
Chairman and Chief Executive Officer, Jason C.S. Chang, our Vice Chairman
and President, Richard H.P. Chang, and other members of the Chang family
are controlling shareholders of Hung Ching. See “Item 4.
Information on the Company—Organizational Structure—Our Unconsolidated
Affiliates.”
|
(3)
|
J&R
Holding Limited is our wholly-owned subsidiary. J&R Holding
Limited’s ownership of our common shares is the result of the merger of
ASE Chung Li with and into us in August 2004 and subsequent dividends upon
shares received in connection with this
merger.
|
In
connection with the merger of ASE Chung Li and ASE Material with and into ASE
Inc. in August 2004, we and ASE Test have established
a trust to hold and
dispose of 149,175,000 and 5,000,000 of our common shares that were issued to
ASE Test and ASE Test Taiwan, respectively, upon completion of the merger. As a
result, the trustee appointed under the trust agreement has become one of our
shareholders until such common shares are sold as permitted under the rules and
regulations of the Taiwan Stock Exchange and the terms and conditions of the
trust agreement. As of April 30, 2008, as a result of stock dividends, the total
amount of our common shares held by the trust was 205,821,048. See “—Related
Party Transactions.”
None of
our major shareholders has voting rights different from those of our other
shareholders.
Other
than:
|
·
|
FMR
Corp. becoming the beneficial owners of more than 5% of our outstanding
common shares in 2005, and ceasing to be the beneficial owner of more than
5% of our outstanding common shares in
2006;
|
|
·
|
Capital
Group International, Inc. and Capital International, Inc. ceasing to be
beneficial owners of more than 5% of our outstanding common shares in
2005; and
|
|
·
|
the
receipt by J&R Holding Limited, our wholly-owned subsidiary, of
106,684,153 of our outstanding shares in connection with the merger of ASE
Chung Li with and into ASE Inc. in August 2004 and subsequent
dividends.
|
there were
no changes in our major shareholders or significant changes in the percentage
ownership of any of our major shareholders in 2005, 2006 and 2007.
As of May
30, 2008, a total of 5,476,949,209 common shares were outstanding. With certain
limited exceptions, holders of common shares that are not ROC persons are
required to hold their common shares through a brokerage account in the ROC. As
of May 30, 2008, 203,367,765 common shares were registered in the name of a
nominee of Citibank, N.A., the depositary under our ADS deposit agreement.
Citibank, N.A., has advised us that, as of May 30, 2008, 40,669,917 ADSs,
representing 203,349,585 common shares, were held of record by Cede &
Co., and 3,636 ADSs, representing 18,180 common shares, were held by seven other
U.S. persons. The remaining 22 common shares held by Citibank, N.A. are a result
of fractional shares distributed during stock distributions on the common shares
underlying the ADSs. We have no further information as to common shares held, or
beneficially owned, by U.S. persons.
In recent
years, we have awarded our common shares to the employees of our subsidiaries as
part of their compensation, based in part on our consolidated net income and the
subsidiaries’ contribution to the consolidated income. We expect this practice
to continue in the future. Because we recorded a consolidated net
loss in 2005, we did not award any common shares to the employees of
subsidiaries in 2006.
In order
to comply with Singapore law, trusts organized under ROC law have been
established to hold and dispose of our common shares issued to ASE Test and ASE
Test Taiwan in connection with the merger of ASE Chung Li and ASE Material into
our company in August 2004. As of May 30, 2008, these trusts held 199,146,132 of
our common shares issued to ASE Test and 6,674,916 of our common shares issued
to ASE Test Taiwan. Under Section 76(1)(b)(ii) of the Companies Act, Chapter 50,
of Singapore, ASE Test, a Singapore company, may not purport to acquire,
directly or indirectly, shares or units of shares in our company, ASE Test’s
parent company. Pursuant to the applicable trust agreements, the trustee under
each trust is (1) the registered owner of the common shares, (2) authorized to
exercise all of the rights as a shareholder of the common shares, (3) authorized
to sell the common shares, subject to market conditions, when such common shares
become available for resale under ROC law and in accordance with volume
limitations under ROC law, at its sole discretion; provided such common 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 common
shares, and (iii) in a manner consistent with its fiduciary duties owed to ASE
Test and (4) able to transfer and deliver to ASE Test or ASE Test Taiwan the
proceeds from the sale of our common shares and any cash dividends distributed,
as the case may be. Neither ASE Test nor ASE Test Taiwan have any rights with
respect to the common shares held in trust pursuant to the applicable trust
agreements other than the right to receive the proceeds from the sale of such
common shares and cash dividends declared while the shares remain in
trust.
On May 30,
2008, we acquired, by way of a scheme of arrangement under Singapore law, all
the outstanding ordinary shares of ASE Test that we did not already directly or
indirectly own, making ASE Test our wholly-owned subsidiary. See
“Item 4. Information on the Company—History and Development of the Company—ASE
Test Share Acquisition and Privatization.”
We have
historically guaranteed the promissory notes of many of our subsidiaries. As of
December 31, 2007, we had endorsed and guaranteed an aggregate amount of
NT$7,273.7 million (US$224.2 million) of the outstanding promissory notes of our
subsidiaries.
We
constructed a new building in Kaohsiung, Taiwan with Hung Ching, our affiliate
engaged in the development and management of commercial, residential and
industrial real estate in Taiwan. The new building was completed in July 2004
and has approximately 1,172,000 square feet of floor space. We and ASE Test
Taiwan purchased Hung Ching’s interest in the development in January 2005. We
own the first eight floors of the building with floor space of approximately
940,000 square feet and ASE Test Taiwan owns the remaining two floors with floor
space of approximately 232,000 square feet. We use our floor space to house part
of our operations in Kaohsiung. The total cost to us of the construction project
was approximately NT$1,329.2 million.
On May 23,
2006, we purchased from Hung Ching two new buildings in Chung Li, Taiwan that we
built with Hung Ching for NT$1,311.4 million. These buildings have a floor
space of approximately 1,313,000 square feet and house part of our testing,
packaging and interconnect materials operations.
On
December
19, 2007
,
we purchased from Hung Ching an add
itional
building in Chung Li, Taiwan for NT$141.2 million (US$4.4 million). This
building houses power generation and other ancillary support
equipment
.
Not
applicable.
Consolidated
financial statements are set forth under “Item 18. Financial
Statements.”
On January
31, 2006, Tessera, Inc. filed an amended complaint in the United States District
Court for the Northern District of California adding Advanced Semiconductor
Engineering, Inc. and ASE (U.S.) Inc.,
collectively
referred to as
ASE, and other companies to a suit alleging that
ASE’s and the thirteen other defendants’ manufacturing, use, importation, offer
for sale, and sale of various packaged semiconductor products infringed patents
owned by Tessera relating to certain types of semiconductor chip packaging,
and/or breached technology license agreements regarding certain types of
semiconductor chip packages between Tessera and certain defendants, including
ASE. Tessera sought, among other things, monetary damages and injunctive
relief in the lawsuit. On March 27, 2006, ASE filed its answer and
counterclaims with the court.
On May 15,
2007, at Tessera’s request, the United States International Trade Commission, or
ITC, instituted an investigation of certain of ASE’s co-defendants and
other companies, including certain of ASE’s customers, but not ASE and the other
contract chip packagers that were included as defendants in the California case.
In the ITC investigation, Tessera seeks an order preventing these
companies from importing into the United States certain packaged semiconductor
chips and products containing those chips. The ITC investigation involves
two of the same patents asserted in the California case and may involve some of
the same products packaged by ASE that are included in the California case.
The district court in the California case has vacated the trial schedule
and stayed all proceedings until a final resolution is reached in the
ITC investigation. The United States Patent and Trademark Office has also
instituted reexamination proceedings on all the patents Tessera has asserted in
the California case and the ITC investigation. The ITC investigation was
scheduled to begin in February 2008, but the administrative law judge presiding
over the investigation agreed to stay the investigation until conclusion of the
reexamination proceedings. Tessera appealed the administrative law judge’s
ruling to the full Commission, which reversed the stay and ordered the
administrative law judge to continue the hearing. In May 2008, the
administrative law judge re-set the hearing date for the ITC investigation to
July 2008.
After
initiating this ITC investigation, Tessera indicated that it desired to include
ASE and the other contract chip packagers from the California case in a new ITC
investigation. These other contract chip packagers challenged whether
Tessera could initiate an ITC investigation against them because of the license
agreements between each of them and Tessera, which require that litigation take
place only in California. Tessera obtained approval from the California
court to bring a new ITC investigation against the other contract chip packagers
after Tessera agreed to limit such investigation to packages outside the scope
of the licenses of the contract chip packagers. On April 21, 2008, Tessera
filed its ITC complaint against the contract chip packagers, and on May 21,
2008, the ITC instituted a new investigation against them. In addition to
Advanced Semiconductor Engineering, Inc. and ASE (U.S.) Inc., the complaint
names ASE Test Ltd. as a respondent. In addition to the two patents
asserted in the original ITC investigation, the new ITC investigation includes
one additional patent, which is also asserted in the California case. In
the new ITC investigation, Tessera seeks an order excluding from importation
into the U.S. all of the respondents’ “small-format,” non-tape BGA packages that
infringe one or more claims of the asserted patents, and downstream products
containing such packages. In addition, Tessera seeks a general exclusion
order excluding from importation all small format, non-tape BGA packages (and
downstream products containing such packages), regardless of whether such
packages are assembled by the respondents. No schedule has yet been set
for the new
ITC
investigation, and the ASE respondents have not yet responded to the complaint.
Thus far, the United States Patent and Trade Office has found that all of
the claims asserted by Tessera in the new ITC investigation are not patentable,
but the reexamination proceedings have not yet
concluded.
It is not
possible to predict the outcome of the California litigation, the ITC
investigations, the reexamination proceedings, the total costs of resolving
these disputes
,
or
when the stay of the California case will be lifted.
We have historically paid
dividends on our common shares with respect to the results of the preceding year
following approval by our shareholders at the annual general meeting of
shareholders. We have historically paid the large majority of our
dividends in the form of stock. We have paid annual stock dividends on our
common shares since 1989, except in 2002 and 2006 when we did not pay any
dividend due to the losses we incurred in the 2001 and 2005 fiscal years,
respectively. We also paid cash dividends of NT$0.10 per share in 2005 and
NT$1.48 per share in 2007.
At our
annual general meeting of shareholders held on June 19, 2008, our shareholders
approved the distribution of NT$9.4 billion as cash dividends and 158.8 million
common shares as stock dividends. These distributions are pending ROC
regulatory approval.
The
following table sets forth the stock dividends paid during each of the years
indicated and related information.
|
|
Stock
Dividends Per
Common
Shares
(1)
|
|
|
Total
Common
Shares
Issued
as
Stock
Dividends
|
|
|
Outstanding
Common
Shares
on
Record Date
(2)
|
|
|
Percentage
of
Outstanding
Common Shares
Represented
by
Stock Dividends
|
|
|
|
NT$
|
|
|
|
|
|
|
|
|
|
|
1997
|
|
|
3.80
|
|
|
|
277,020,000
|
|
|
|
729,000,000
|
|
|
|
38.0
|
%
|
1998
|
|
|
7.20
|
|
|
|
732,240,000
|
|
|
|
1,017,000,000
|
|
|
|
72.0
|
%
|
1999
|
|
|
1.07
|
|
|
|
190,460,000
|
|
|
|
1,780,000,000
|
|
|
|
10.7
|
%
|
2000
|
|
|
3.15
|
|
|
|
623,811,852
|
|
|
|
1,980,355,086
|
|
|
|
31.5
|
%
|
2001
|
|
|
1.70
|
|
|
|
467,840,000
|
|
|
|
2,752,000,000
|
|
|
|
17.0
|
%
|
2002
|
|
|
—
|
|
|
|
—
|
|
|
|
3,254,800,000
|
|
|
|
—
|
|
2003
|
|
|
1.00
|
|
|
|
325,480,000
|
|
|
|
3,254,800,000
|
|
|
|
10.0
|
%
|
2004
|
|
|
0.57
|
|
|
|
221,977,360
|
|
|
|
3,862,595,437
|
|
|
|
5.7
|
%
|
2005
|
|
|
1.00
|
|
|
|
411,221,140
|
|
|
|
4,113,744,200
|
|
|
|
10.0
|
%
|
2006
|
|
|
—
|
|
|
|
—
|
|
|
|
4,592,508,620
|
|
|
|
—
|
|
2007
|
|
|
1.48
|
|
|
|
694,101,071
|
|
|
|
4,645,295,431
|
|
|
|
14.9
|
%
|
(1)
|
Holders
of common shares receive as a stock dividend the number of common shares
equal to the NT dollar value per common share of the dividend declared
multiplied by the number of common shares owned and divided by the par
value of NT$10 per share. Fractional shares are not issued but are paid in
cash.
|
(2)
|
Aggregate
number of common shares outstanding on the record date applicable to the
dividend payment. Includes common shares issued in the previous year under
our employee bonus plan.
|
In order
to meet the needs of our present and future capital expenditures, we anticipate
paying both stock and cash dividends in the future. The form, frequency and
amount of future cash or stock dividends on our common shares will depend upon
our net income, cash flow, financial condition and other factors. While we
have
a
general
policy of
distributing cash
dividends
ranging from 0%
to 50% of a total dividend distribution, our Articles of Incorporation allow us
to distribute cash dividends in excess of 50% of a dividend
distribution
subject
to shareholder approval and other
factors such as economic
conditions, developments in our
operations and our
cash position. See “Item 10. Additional
information––Articles of Incorporation––Dividends and
Distributions.”
In
general, we are not permitted to distribute dividends or make other
distributions to shareholders for any year where we did not record net income or
retained earnings (excluding reserves). The ROC Company Law also requires that
10% of annual net income (less prior years’ losses and taxes payable, if any) be
set aside as a legal reserve until the accumulated legal reserve equals our
paid-in capital. In addition, our Articles of Incorporation require that before
a dividend is paid pro rata out of our annual net income:
·
|
up
to 2% of our annual net income (less prior years’ losses, taxes payable
and legal and special reserves, if any) should be paid to our directors
and supervisors as compensation;
and
|
·
|
between
7% and 10% of the annual net income (less prior years’ losses, taxes
payable and legal and special reserves, if any) should be paid to our
employees as bonuses; the 7% portion is to be distributed to all employees
in accordance with our employee bonus distribution rules, while any
portion exceeding 7% is to be distributed in accordance with rules
established by our board of directors to individual employees who have
been recognized as having made special contributions to our
company. Such employees include those of our affiliated
companies who meet the criteria set by our board of
directors.
|
·
|
Holders
of ADSs will be entitled to receive dividends, subject to the terms of the
deposit agreement, to the same extent as the holders of the common shares.
Cash dividends will be paid to the depositary in NT dollars and, except as
otherwise provided in the deposit agreement, will be converted by the
depositary into U.S. dollars and paid to holders of ADSs according to the
terms of the deposit agreement. Stock dividends will be distributed to the
depositary and, except as otherwise provided in the deposit agreement,
will be distributed by the depositary, in the form of additional ADSs, to
holders of ADSs according to the terms of the deposit
agreement.
|
Holders of
outstanding common shares on a dividend record date will be entitled to the full
dividend declared without regard to any prior or subsequent transfer of common
shares. Accordingly, holders of outstanding ADSs on the relevant dividend record
date will, subject to the terms of the deposit agreement, be similarly entitled
to the full amount of any dividend declared.
For
information relating to ROC withholding taxes payable on dividends, see “Item
10. Additional Information—Taxation—ROC Taxation—Dividends.”
Other than
as disclosed elsewhere in this annual report, we have not experienced any
significant changes since the date of the annual financial
statements.
Our common
shares were first issued in March 1984 and have been listed on the Taiwan Stock
Exchange since July 1989. The Taiwan Stock Exchange is an auction market where
the securities traded are priced according to supply and demand through
announced bid and ask prices. As of May 30, 2008, there were an aggregate
of 5,476,949,209 of our common shares outstanding. The following
table sets forth, for the periods indicated, the high and low closing prices and
the average daily volume of trading activity on the Taiwan Stock Exchange for
the common shares and the high and low of the daily closing values of the Taiwan
Stock Exchange Index. The closing price for our common shares on the Taiwan
Stock Exchange on May 30, 2008 was NT$31.90 per share.
|
|
|
|
|
Adjusted
Closing
Price
per Share(1)
|
|
|
Average
Daily
Trading
Volume
|
|
|
Taiwan
Stock
Exchange
Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
35.50
|
|
|
|
16.90
|
|
|
|
26.33
|
|
|
|
12.54
|
|
|
|
24,852
|
|
|
|
6,142.3
|
|
|
|
4,139.5
|
|
2004
|
|
|
36.20
|
|
|
|
21.10
|
|
|
|
29.16
|
|
|
|
15.65
|
|
|
|
24,113
|
|
|
|
7,034.1
|
|
|
|
5,316.9
|
|
2005
|
|
|
31.00
|
|
|
|
19.35
|
|
|
|
27.01
|
|
|
|
15.24
|
|
|
|
26,833
|
|
|
|
6,575.5
|
|
|
|
5,633.0
|
|
2006
|
|
|
38.30
|
|
|
|
26.50
|
|
|
|
33.36
|
|
|
|
23.09
|
|
|
|
50,712
|
|
|
|
7,823.7
|
|
|
|
6,257.8
|
|
First
Quarter
|
|
|
31.00
|
|
|
|
26.50
|
|
|
|
27.01
|
|
|
|
23.09
|
|
|
|
45,067
|
|
|
|
6,742.4
|
|
|
|
6,364.6
|
|
Second
Quarter
|
|
|
38.30
|
|
|
|
28.50
|
|
|
|
33.36
|
|
|
|
24.83
|
|
|
|
38,417
|
|
|
|
7,474.1
|
|
|
|
6,299.6
|
|
Third
Quarter
|
|
|
34.00
|
|
|
|
26.60
|
|
|
|
29.62
|
|
|
|
23.17
|
|
|
|
27,901
|
|
|
|
6,946.3
|
|
|
|
6,257.8
|
|
Fourth
Quarter
|
|
|
37.95
|
|
|
|
29.75
|
|
|
|
33.06
|
|
|
|
25.92
|
|
|
|
24,665
|
|
|
|
7,823.7
|
|
|
|
6,875.0
|
|
2007
|
|
|
48.80
|
|
|
|
29.55
|
|
|
|
42.51
|
|
|
|
29.55
|
|
|
|
28,027
|
|
|
|
9,809.9
|
|
|
|
7,344.6
|
|
First
Quarter
|
|
|
41.20
|
|
|
|
35.90
|
|
|
|
35.89
|
|
|
|
31.27
|
|
|
|
24,753
|
|
|
|
7,935.5
|
|
|
|
7,344.6
|
|
Second
Quarter
|
|
|
45.15
|
|
|
|
37.60
|
|
|
|
39.33
|
|
|
|
32.75
|
|
|
|
31,066
|
|
|
|
8,939.2
|
|
|
|
7,875.4
|
|
Third
Quarter
|
|
|
48.80
|
|
|
|
30.55
|
|
|
|
42.51
|
|
|
|
30.05
|
|
|
|
28,760
|
|
|
|
9,744.1
|
|
|
|
8,090.3
|
|
Fourth
Quarter
|
|
|
39.10
|
|
|
|
29.55
|
|
|
|
39.10
|
|
|
|
29.55
|
|
|
|
27,527
|
|
|
|
9,809.9
|
|
|
|
7,804.4
|
|
|
|
|
|
|
Adjusted
Closing
Price
per Share(1)
|
|
|
Average
Daily
Trading
Volume
|
|
|
Taiwan
Stock
Exchange
Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
|
|
|
33.35
|
|
|
|
29.55
|
|
|
|
33.35
|
|
|
|
29.55
|
|
|
|
16,068
|
|
|
|
8,722.4
|
|
|
|
7,807.4
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
31.30
|
|
|
|
25.00
|
|
|
|
31.30
|
|
|
|
25.00
|
|
|
|
23,071
|
|
|
|
8,865.4
|
|
|
|
7,408.4
|
|
January
|
|
|
31.30
|
|
|
|
25.00
|
|
|
|
31.30
|
|
|
|
25.00
|
|
|
|
24,747
|
|
|
|
8,428.8
|
|
|
|
7,408.4
|
|
February
|
|
|
29.45
|
|
|
|
25.75
|
|
|
|
29.45
|
|
|
|
25.75
|
|
|
|
24,447
|
|
|
|
8,462.1
|
|
|
|
7,550.6
|
|
March
|
|
|
30.05
|
|
|
|
25.35
|
|
|
|
30.05
|
|
|
|
25.35
|
|
|
|
20,020
|
|
|
|
8,865.4
|
|
|
|
8,005.5
|
|
Second
Quarter (through May 30)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
|
|
|
32.50
|
|
|
|
30.00
|
|
|
|
32.50
|
|
|
|
30.00
|
|
|
|
26,814
|
|
|
|
9,090.4
|
|
|
|
8,419.7
|
|
May
|
|
|
34.25
|
|
|
|
31.45
|
|
|
|
34.25
|
|
|
|
31.45
|
|
|
|
18,905
|
|
|
|
9,295.2
|
|
|
|
8,619.1
|
|
(1)
|
As
adjusted retroactively by the Taiwan Stock Exchange to give effect to
stock dividends paid in the periods indicated. See “Item 8. Financial
Information—Dividends and Dividend
Policy.”
|
The
performance of the Taiwan Stock Exchange has in recent years been characterized
by extreme price volatility. There are currently limits on the range of daily
price movements on the Taiwan Stock Exchange. In the case of equity securities
traded on the Taiwan Stock Exchange, such as our common shares, fluctuations in
the price of a particular security may not exceed a 7% change either above or
below the previous day’s closing price of such security.
Our ADSs
have been listed on the New York Stock Exchange under the symbol “ASX” since
September 26, 2000. The outstanding ADSs are identified by the CUSIP number
00756M404. As of May 30, 2008, a total of 40,669,917 ADSs were outstanding.
The following table sets forth, for the periods indicated, the high and low
closing prices and the average daily volume of trading activity on the New York
Stock Exchange for our ADSs and the highest and lowest of the daily closing
values of the New York Stock Exchange Index. The closing price for our ADSs on
the New York Stock Exchange on May 30, 2008 was US$5.25 per ADS.
|
|
|
|
|
Adjusted
Closing
Price
per ADS(1)
|
|
|
Average
Daily
Trading
Volume
|
|
|
New
York Stock
Exchange
Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
5.27
|
|
|
|
2.45
|
|
|
|
3.77
|
|
|
|
1.60
|
|
|
|
247
|
|
|
|
6,440.30
|
|
|
|
4,486.70
|
|
2004
|
|
|
5.95
|
|
|
|
3.18
|
|
|
|
4.26
|
|
|
|
2.30
|
|
|
|
292
|
|
|
|
7,253.56
|
|
|
|
6,217.06
|
|
2005
|
|
|
4.49
|
|
|
|
2.85
|
|
|
|
3.76
|
|
|
|
2.34
|
|
|
|
322
|
|
|
|
7,852.18
|
|
|
|
6,935.31
|
|
2006
|
|
|
6.12
|
|
|
|
4.00
|
|
|
|
5.12
|
|
|
|
3.35
|
|
|
|
392
|
|
|
|
9,179.40
|
|
|
|
7,719.78
|
|
First
Quarter
|
|
|
4.79
|
|
|
|
4.00
|
|
|
|
4.01
|
|
|
|
3.35
|
|
|
|
532
|
|
|
|
8,271.79
|
|
|
|
7,902.27
|
|
Second
Quarter
|
|
|
6.12
|
|
|
|
4.33
|
|
|
|
5.12
|
|
|
|
3.62
|
|
|
|
388
|
|
|
|
8,646.96
|
|
|
|
7,719.78
|
|
Third
Quarter
|
|
|
5.22
|
|
|
|
4.07
|
|
|
|
4.37
|
|
|
|
3.40
|
|
|
|
337
|
|
|
|
8,490.68
|
|
|
|
7,892.87
|
|
Fourth
Quarter
|
|
|
6.06
|
|
|
|
4.49
|
|
|
|
5.07
|
|
|
|
3.76
|
|
|
|
315
|
|
|
|
9,179.40
|
|
|
|
8,447.83
|
|
2007
|
|
|
7.45
|
|
|
|
4.59
|
|
|
|
6.23
|
|
|
|
4.58
|
|
|
|
639
|
|
|
|
10,311.61
|
|
|
|
8,837.97
|
|
First
Quarter
|
|
|
6.10
|
|
|
|
5.57
|
|
|
|
5.10
|
|
|
|
4.66
|
|
|
|
296
|
|
|
|
9,453.93
|
|
|
|
8,837.97
|
|
Second
Quarter
|
|
|
6.95
|
|
|
|
5.76
|
|
|
|
5.81
|
|
|
|
4.82
|
|
|
|
832
|
|
|
|
10,064.05
|
|
|
|
9,305.55
|
|
Third
Quarter
|
|
|
7.45
|
|
|
|
4.73
|
|
|
|
6.23
|
|
|
|
4.58
|
|
|
|
782
|
|
|
|
10,220.67
|
|
|
|
9,087.10
|
|
Fourth
Quarter
|
|
|
6.02
|
|
|
|
4.59
|
|
|
|
6.02
|
|
|
|
4.59
|
|
|
|
635
|
|
|
|
10,311.61
|
|
|
|
9,087.10
|
|
December
|
|
|
5.24
|
|
|
|
4.59
|
|
|
|
5.24
|
|
|
|
4.59
|
|
|
|
439
|
|
|
|
10,104.42
|
|
|
|
9,528.67
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
4.98
|
|
|
|
3.98
|
|
|
|
4.98
|
|
|
|
3.98
|
|
|
|
789
|
|
|
|
9,656.00
|
|
|
|
8,489.38
|
|
January
|
|
|
4.79
|
|
|
|
4.03
|
|
|
|
4.79
|
|
|
|
4.03
|
|
|
|
876
|
|
|
|
9,656.00
|
|
|
|
8,661.17
|
|
February
|
|
|
4.70
|
|
|
|
3.98
|
|
|
|
4.70
|
|
|
|
3.98
|
|
|
|
705
|
|
|
|
9,302.80
|
|
|
|
8,818.11
|
|
March
|
|
|
4.98
|
|
|
|
4.05
|
|
|
|
4.98
|
|
|
|
4.05
|
|
|
|
782
|
|
|
|
8,970.39
|
|
|
|
8,489.38
|
|
Second
Quarter (through May 30)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
|
|
|
5.33
|
|
|
|
4.94
|
|
|
|
5.33
|
|
|
|
4.94
|
|
|
|
567
|
|
|
|
9,349.61
|
|
|
|
8,922.84
|
|
May
|
|
|
5.57
|
|
|
|
5.13
|
|
|
|
5.57
|
|
|
|
5.13
|
|
|
|
306
|
|
|
|
9,603.01
|
|
|
|
9,314.02
|
|
(1)
|
As
adjusted retroactively to give effect to stock dividends paid in the
periods indicated.
|
Not
applicable.
The
principal trading market for our common shares is the Taiwan Stock Exchange and
the principal trading market for ADSs representing our common shares is the New
York Stock Exchange.
Not
applicable.
Not
applicable.
Not
applicable.
Not
applicable.
General
We are a
company limited by shares organized under the laws of the ROC. Our
organizational document is our Articles of Incorporation. We have no
by-laws.
Our
Articles of Incorporation provide, in Article 2, that we may engage in the
following types of business:
|
·
|
the
manufacture, assembly, processing, testing and export of various types of
integrated circuitry;
|
|
·
|
the
research, development, design and manufacture, assembly, processing,
testing and export of various computers, electronics, communications,
information products and their peripheral
products;
|
|
·
|
general
import and export trading (excluding businesses that require trading
permits);
|
|
·
|
the
manufacture of electronic parts and
components;
|
|
·
|
the
manufacture of mechanical and electronic devices and materials (including
integrated circuit leadframes, BGA substrates and flip-chip
substrates);
|
|
·
|
wholesale
and retail sales of electronic
materials;
|
|
·
|
technical
support and consulting service for integrated circuit leadframes, BGA
substrates and flip-chip
substrates;
|
|
·
|
except
any business requiring a special permit, any business not prohibited or
restricted by law or regulation.
|
We were
incorporated on March 23, 1984 as a company limited by shares under the ROC
Company Law. Our authorized capital was NT$80,000,000,000, divided into
8,000,000,000 common shares, 5,476,949,209 of which were issued in registered
form and outstanding as of May 30, 2008. We do not have any equity in the
form of preference shares or otherwise outstanding as of the date of this annual
report.
With the
approval of our board of directors and the ROC Financial Supervisory Commission,
Executive Yuan, we may grant stock options to our employees, provided that
NT$8,000,000,000 of our authorized capital is reserved for employee stock
options and that the shares to be issued under any option plan shall not exceed
10% of our outstanding common shares and the total number of shares to be issued
under all option plans shall not exceed 15% of our outstanding common
shares. The exercise price of an option shall not be less than the
closing price of our common shares on the Taiwan Stock Exchange on the grant
date of the option. As of December 31, 2007, we had granted 485,691,000 options
pursuant to employee stock option plans established on August 28, 2002, May 27,
2004 and November 22, 2007 to our full-time employees as well as to full-time
employees of our domestic and foreign subsidiaries. See “Item
6. Directors, Senior Management and Employees—Compensation—ASE Inc.
Employee Bonus and Stock Option Plans.” We have 800,000,000 common shares
reserved for issuance under our employee stock option plans.
Directors
Our
Articles of Incorporation provide that we are to have from seven to nine
directors with tenures of three years who are elected at a shareholders’
meeting. With effect from our 2009 annual general meeting of
shareholders, two of our directors will be required to be independent
directors. There is no minimum amount of shares necessary to stand
for election to a directorship. Many of our directors are representatives
appointed by corporate shareholders which appoint individual representatives.
Re-elections are allowed. The directors have certain powers and
duties, including devising operations strategy, proposing to distribute
dividends or make up losses, proposing to increase or decrease capital,
reviewing material internal rules and contracts, hiring and discharging the
general manager, establishing and dissolving branch offices, reviewing budgets
and audited financial statements and other duties and powers granted by or in
accordance with the ROC Company Law, our Articles of Incorporation or
shareholders resolutions.
The board
of directors is constituted by the directors, who elect a chairman from among
the directors to preside over the meeting of the board. Meetings of
the board may be held in the ROC or by teleconference. A director may
appoint another director to attend a meeting and vote by proxy, but a director
may accept only one proxy.
Dividends
and Distributions
In
general, we are not permitted to distribute dividends or make other
distributions to shareholders in any year in which we did not record net income
or retained earnings (excluding reserves). The ROC Company Law also requires
that 10% of annual net income (less prior years’ losses and taxes payable, if
any) be set aside as a legal reserve until the accumulated legal reserve equals
our paid-in capital. In addition, our Articles of Incorporation require that
before a dividend is paid out of our annual net income:
|
·
|
up
to 2% of our annual net income (less prior years’ losses, taxes payable
and legal and special reserves, if any) should be paid to our directors
and supervisors as compensation;
and
|
|
·
|
between
7% and 10% of the annual net income (less prior years’ losses, taxes
payable and legal and special reserves, if any) should be paid to our
employees as bonuses. The 7% portion is to be distributed to all employees
in accordance with our employee bonus distribution rules, while any
portion exceeding 7%
is
to
be
distributed in accordance with rules established by our board of directors
to individual employees who have been recognized as having made special
contributions to our company. Such employees include those of our
affiliated companies who meet the criteria set by our board of
directors.
|
At
the annual general shareholders’ meeting, our board of directors submits to the
shareholders for their approval any proposal for the distribution of dividends
or the making of any other distribution to shareholders from our net income for
the preceding fiscal year. All common shares outstanding and fully paid as of
the relevant record date are entitled to share equally in any dividend or other
distribution so approved. Dividends may be distributed in cash, in the form of
common shares or a combination of the two, as determined by the shareholders at
the meeting. While we
have
a
general
policy of
distributing cash
dividends
ranging from 0%
to 50% of a total dividend distribution, our Articles of Incorporation allow us
to distribute cash dividends in excess of 50% of a dividend
distribution
su
bject to shareholder approval and
other
factors such as economic
conditions, developments in our
operations and our
cash position. See “Item 8. Financial
Information—Dividends and Dividend Policy.”
We are
also permitted to make distributions to our shareholders of additional common
shares by capitalizing reserves. However, the capitalized portion payable out of
our legal reserve is limited to 50% of the total accumulated legal reserve and
the capitalization can only be effected when the accumulated legal reserve
exceeds 50% of our paid-in capital.
For
information on the dividends we paid in recent years, see “Item 8. Financial
Information—Dividends and Dividend Policy.” For information as to ROC taxes on
dividends and distributions, see “—Taxation—ROC
Taxation—Dividends.”
Changes
in Share Capital
Under ROC
Company Law, any change in the authorized share capital of a company limited by
shares requires an amendment to its Articles of Incorporation. In the case of a
public company such as ourselves, the approval of the ROC Financial Supervisory
Commission, Executive Yuan and the ROC Ministry of Economic Affairs is also
required. Authorized but unissued common shares may be issued, subject to
applicable ROC law, upon terms as our board of directors may
determine.
Preemptive
Rights
Under the
ROC Company Law, when an ROC company issues new shares for cash, existing
shareholders who are listed on the shareholders’ register as of the record date
have preemptive rights to subscribe for the new issue in proportion to their
existing shareholdings, while a company’s employees, whether or not they are
shareholders of the company, have rights to subscribe for 10% to 15% of the new
issue. Any new shares that remain unsubscribed at the expiration of the
subscription period may be offered by us to the public or privately
placed.
In
addition, in accordance with the ROC Securities and Exchange Law, a public
company that intends to offer new shares for cash must offer to the public at
least 10% of the shares to be sold, except under certain circumstances or when
exempted by the ROC Financial Supervisory Commission, Executive Yuan. This
percentage can be increased by a resolution passed at a shareholders’ meeting,
which would diminish the number of new shares subject to the preemptive rights
of existing shareholders.
These
preemptive rights provisions do not apply to offerings of new shares through a
private placement approved at a shareholders’ meeting.
Meetings
of Shareholders
We are
required to hold an ordinary meeting of our shareholders within six months
following the end of each fiscal year. These meetings are generally held in
Kaohsiung, Taiwan. Any shareholder who holds 1% or more of our issued and
outstanding shares may submit one written proposal for discussion at our annual
shareholders’ meeting. Extraordinary shareholders’ meetings may be convened by
resolution of the board of directors or by the board of directors upon the
written request of any shareholder or shareholders who have held 3% or more of
the outstanding common shares for more than one year. Shareholders’ meetings may
also be convened by a supervisor. Notice in writing of general meetings of
shareholders, stating the place, time and purpose, must be dispatched to each
shareholder
at least 30 days, in the case of ordinary meetings, and 15 days, in the case of
extraordinary meetings, before the date set for each meeting. A majority of the
holders of all issued and outstanding common shares present at a shareholders’
meeting constitutes a quorum for meetings of shareholders.
Voting
Rights
Under the
ROC Company Law, shareholders have one vote for each common share held, except
that there are no voting rights for those shares held by us or directly or
indirectly held by controlled companies or affiliates. Under the ROC Company
Law, our directors and supervisors are elected at a shareholders’ meeting
through cumulative voting, unless the articles of incorporation of a company
provide otherwise.
In
general, a resolution can be adopted by the holders of at least a majority of
the common shares represented at a shareholders’ meeting at which the holders of
a majority of all issued and outstanding common shares are present. Under ROC
Company Law, the approval by at least a majority of the common shares
represented at a shareholders’ meeting in which a quorum of at least two-thirds
of all issued and outstanding common shares are represented is required for
major corporate actions, including:
|
·
|
amendment
to the Articles of Incorporation, including increase of authorized share
capital and any changes of the rights of different classes of
shares;
|
|
·
|
transfer
of the company’s entire business or assets or substantial part of its
business or assets;
|
|
·
|
execution,
amendment or termination of any contract through which the company leases
its entire business to others, or the company appoints others to operate
its business or the company operates its business with others on a
continuous basis;
|
|
·
|
acquisition
of the entire business or assets of any other company, which would have a
significant impact on the company’s
operations;
|
|
·
|
distribution
of any stock dividend;
|
|
·
|
dissolution,
merger or spin-off of the company;
and
|
|
·
|
removal
of the directors or supervisors.
|
A
shareholder may be represented at an ordinary or extraordinary meeting by proxy
if a valid proxy form is delivered to us five days before the commencement of
the ordinary or extraordinary shareholders’ meeting.
Holders of
ADSs do not have the right to exercise voting rights with respect to the
underlying common shares, except as described in the deposit
agreement.
Other
Rights of Shareholders
Under the
ROC Company Law, dissenting shareholders are entitled to appraisal rights in
certain major corporate actions such as a proposed amalgamation by the company.
If agreement with the company cannot be reached, a dissenting shareholder may
seek a court order for the company to redeem all of their shares. Shareholders
may exercise their appraisal rights by serving written notice on the company
prior to the related shareholders’ meeting and/or by raising and registering an
objection at the shareholders’ meeting. In addition to appraisal rights,
shareholders have the right to sue for the annulment of any resolution adopted
at a shareholders’ meeting where the procedures were legally defective within 30
days after the date of the shareholders’ meeting. One or more shareholders who
have held more than 3% of the issued and outstanding shares of a company for
more than one year may require a supervisor to bring a derivative action on
behalf of the company against a director as a result of the director's unlawful
actions or failure to act.
Rights
of Holders of Deposited Securities
Except as
described below, holders of ADSs generally have no right under the deposit
agreement to instruct the depositary to exercise the voting rights for the
common shares represented by the ADSs. Instead, by accepting ADSs or any
beneficial interest in ADSs, holders of ADSs are deemed to have authorized and
directed the depositary to appoint our chairman or his designee to represent
them at our shareholders’ meetings and to vote the common shares deposited with
the custodian according to the terms of the deposit agreement.
The
depositary will mail to holders of ADSs any notice of shareholders’ meeting
received from us together with information explaining how to instruct the
depositary to exercise the voting rights of the securities represented by
ADSs.
If we fail
to timely provide the depositary with an English language translation of our
notice of meeting or other materials related to any meeting of owners of common
shares, the depositary will endeavor to cause all the deposited securities
represented by ADSs to be present at the applicable meeting, insofar as
practicable and permitted under applicable law, but will not cause those
securities to be voted.
If the
depositary timely receives voting instructions from owners of at least 51.0% of
the outstanding ADSs to vote in the same direction regarding one or more
resolutions to be proposed at the meeting, including election of directors and
supervisors, the depositary will notify our chairman or his designee to attend
the meeting and vote all the securities represented by the holders’ ADSs in
accordance with the direction received from owners of at least 51.0% of the
outstanding ADSs.
If we have
timely provided the depositary with the materials described in the deposit
agreement and the depositary has not timely received instructions from holders
of at least 51.0% of the outstanding ADSs to vote in the same direction
regarding any resolution to be considered at the meeting, then, holders of ADSs
will be deemed to have authorized and directed the depositary bank to give a
discretionary proxy to our chairman or his designee to attend and vote at the
meeting the common shares represented by the ADSs in any manner, our chairman or
his designee may wish, which may not be in the interests of
holders.
The
ability of the depositary to carry out voting instructions may be limited by
practical and legal limitations and the terms of the securities on deposit. We
cannot assure ADS holders that they will receive voting materials in time to
enable them to return voting instructions to the depositary in a timely
manner.
While
shareholders who own 1% or more of our outstanding shares are entitled to submit
one proposal to be considered at our annual general meetings, only holders
representing at least 51% of our ADSs outstanding at the relevant record date
are entitled to submit one proposal to be considered at our annual general
meetings. Hence, only one proposal may be submitted on behalf of all ADS
holders.
Register
of Shareholders and Record Dates
Our share
registrar, President Securities Corp., maintains our register of shareholders at
its offices in Taipei, Taiwan, enters transfers of common shares in our register
upon presentation of, among other documents, certificates representing the
common shares transferred and acts as paying agent for any dividends or
distributions with respect to our common shares. Under the ROC Company Law and
our Articles of Incorporation, we may, by giving advance public notice, set a
record date and close the register of shareholders for a specified period in
order for us to determine the shareholders or pledgees that are entitled to
rights pertaining to the common shares. The specified period required is as
follows:
|
·
|
ordinary
shareholders’ meeting—60 days;
|
|
·
|
extraordinary
shareholders’ meeting—30 days; and
|
|
·
|
relevant
record date—five days.
|
Annual
Financial Statements
At least
ten days before the annual ordinary shareholders’ meeting, our annual financial
statements must be available at our principal executive office in Kaohsiung,
Taiwan for inspection by the shareholders.
Transfer
of Common Shares
The
transfer of common shares in registered form is effected by endorsement and
delivery of the related share certificates but, in order to assert shareholders’
rights against us, the transferee must have his name and address registered on
our register of shareholders. Shareholders are required to file their respective
specimen seals, also known as chops, with us. Chops are official stamps widely
used in Taiwan by individuals and other entities to authenticate the execution
of official and commercial documents.
Acquisition
of Common Shares by ASE Inc.
Under the
ROC Securities and Exchange Law, we may purchase our own common shares for
treasury stock in limited circumstances, including:
|
·
|
to
transfer shares to our employees;
|
|
·
|
to
deliver shares upon the conversion or exercise of bonds with warrants,
preferred shares with warrants, convertible notes, convertible preferred
shares or warrants issued by us;
and
|
|
·
|
to
maintain our credit and our shareholders’ equity, provided that the shares
so purchased shall be canceled.
|
We may
purchase our common shares on the Taiwan Stock Exchange or by means of a public
tender offer. These transactions require the approval of a majority of our board
of directors at a meeting in which at least two-thirds of the directors are in
attendance. The total amount of common shares purchased for treasury stock may
not exceed 10% of the total outstanding shares. In addition, the total cost of
the purchased shares shall not exceed the aggregate amount of our retained
earnings, any premium from share issuances and the realized portion of our
capital reserve.
We may not
pledge or hypothecate any of our shares purchased by us. In addition,
we may not exercise any shareholders’ right attaching to such
shares. In the event that we purchase our shares on the Taiwan
Securities Exchange, our affiliates, directors, supervisors, managers, and their
respective spouses and minor children and/or nominees are prohibited from
selling any of our shares during the period in which we are purchasing our
shares.
Pursuant
to the amended ROC Company Law, effective from November 14, 2001, our
subsidiaries are not permitted to acquire our common shares. This restriction
does not affect any acquisition of our common shares made by our subsidiaries
prior to November 14, 2001.
Liquidation
Rights
In the
event of our liquidation, the assets remaining after payment of all debts,
liquidation expenses and taxes will be distributed pro rata to the shareholders
in accordance with the relevant provisions of the ROC Company Law and our
Articles of Incorporation.
Transfer
Restrictions
Substantial
Shareholders
The ROC
Securities and Exchange Law currently requires:
|
·
|
each
director, supervisor, executive officer or substantial shareholder (that
is, a shareholder who, together with his or her spouse, minor children or
nominees, holds more than 10% of the shares of a public company) to report
any change in that person’s shareholding to the issuer of the shares and
the ROC Financial Supervisory Commission, Executive Yuan;
and
|
|
·
|
each
director, supervisor, executive officer or substantial shareholder, after
acquiring the status of director, supervisor, executive officer or
substantial shareholder for a period of six months, to report his or her
intent to transfer any shares on the Taiwan Stock Exchange to the ROC
Financial Supervisory Commission, Executive Yuan at least three days
before the intended transfer, unless the number of shares to be
transferred is less than 10,000
shares.
|
In
addition, the number of shares that can be sold or transferred on the Taiwan
Stock Exchange by any person subject to the restrictions described above on any
given day may not exceed:
|
·
|
0.2%
of the outstanding shares of the company in the case of a company with no
more than 30 million outstanding shares;
or
|
|
·
|
0.2%
of 30 million shares plus 0.1% of the outstanding shares exceeding 30
million shares in the case of a company with more than 30 million
outstanding shares; or
|
|
·
|
in
any case, 5% of the average trading volume (number of shares) on the
Taiwan Stock Exchange for the ten consecutive trading days preceding the
reporting day on which the director, supervisor, manager or substantial
shareholder reports the intended share transfer to the ROC Financial
Supervisory Commission, Executive
Yuan.
|
These
restrictions do not apply to sales or transfers of our ADSs.
Common
Shares Issued to Substantial Shareholders in Connection with a
Merger
The rules
and regulations of the Taiwan Stock Exchange impose certain transfer
restrictions on common shares of a Taiwan Stock Exchange listed company issued
to a substantial shareholder (as defined under the ROC Securities and Exchange
Law and described under “—Substantial Shareholders”) of an unlisted company to
be merged with and into the acquiror. A substantial shareholder of an unlisted
company to be merged with and into a Taiwan Stock Exchange listed company is
restricted from selling or transferring common shares received in connection
with such merger for a period of six months after such shares are listed on the
Taiwan Stock Exchange. After the initial six-month lock-up period, such holder
is permitted to sell or transfer 50% of its holdings of the common shares
received in the merger. After one year from the date of the listing of the
common shares, the holder is permitted to sell or transfer all the remaining
common shares received in the merger.
Joint
Venture Agreement by and among Powerchip Semiconductor Corp. and Advanced
Semiconductor Engineering, Inc.
On July
14, 2006, we entered into a joint venture agreement with Powerchip Semiconductor
Corp. to establish Power ASE to focus on packaging and testing of memory
semiconductors. Pursuant to the joint venture agreement, we invested US$30.0
million for a 60.0% of the equity interest in Power ASE and Powerchip invested
US$20.0 million for the remaining 40.0%.
Sale
and Purchase Agreement by and among Seacoast Profits Limited and J&R Holding
Limited
On January
11, 2007, we, through our subsidiary J&R Holding Limited, entered into a
sale and purchase agreement with Seacoast Profits Limited in connection with the
acquisition of all the shares of Top Master Enterprises Limited, the sole
shareholder of ASESH AT, for a purchase price of US$60.0 million.
Equity
Interests Transfer Agreement by and among NXP B.V., NXP Semiconductors Suzhou
Ltd. and J&R Holding Limited
On August
6, 2007, we, through our subsidiary J&R Holding Limited, entered into an
equity interests transfer agreement with NXP Semiconductors and NXP
Semiconductors Suzhou Ltd. in connection with our establishment of a joint
venture with NXP Semiconductors. Pursuant to the equity interests transfer
agreement, we acquired 60.0% of the shares of NXP Semiconductors Suzhou Ltd.,
now known as ASEN, from NXP
Semiconductors for a
purchase price of US$21.6 million. NXP Semiconductors retained the
remaining 40.0% of the shares.
Scheme
Implementation Agreement between Advanced Semiconductor Engineering, Inc. and
ASE Test Limited
On
September 4, 2007, we and ASE Test entered into a scheme implementation
agreement under which we agreed to acquire
, by way of a scheme of
arrangement
under Singapore law, or the
Scheme, all
the outstanding ordinary shares of ASE Test that we
did not already directly or indirectly own for US$14.78 in cash for each ASE
Test ordinary share and the New Taiwan dollar equivalent of US$0.185 in cash
(based on the prevailing exchange rate) for each ASE Test depositary share.
The Scheme became effective
on May 30, 2008 and ASE Test became our wholly-owned subsidiary.
For
additional information on this
transaction
, see “Item 4.
Information on the Company—History and Development of the Company—ASE Test Share
Acquisition and Privatization.”
Syndicated
Loan Agreements
between
Advanced
Semiconductor Engineering, Inc.
and banking syndicates led
by
Citibank, N.A., Taipei Branch
On
March 3, 2008, we entered into a syndicated loan agreement with a banking
syndicate led by Citibank, N.A., Taipei Branch for a NT$24,750.0 million
(US$763.2 million) term loan facility for the purposes of financing our
acquisition of
all
the outstanding ordinary shares of ASE Test
pursuant to the
Scheme
. On May 29, 2008, we entered into an additional
syndicated loan agreement with a banking syndicate led by Citibank, N.A., Taipei
Branch for a US$200.0 million term loan facility, also
in connection with the
Scheme
. For more information on
th
e Scheme
, see “Item 4.
Information on the Company—History and Development of the Company—ASE Test Share
Acquisition and Privatization.”
Equity
Purchase Agreement between Aimhigh Global Corp., TCC Steel and J&R Holding
Limited in respect of Weihai Aimhigh Electronic Co. Ltd.
On March
17, 2008, we, through our subsidiary J&R Holding Limited, entered into an
equity purchase agreement with Aimhigh Global Corp. and TCC Steel in connection
with the acquisition of 100.0% of ASE Weihai Inc., formerly known as Weihai
Aimhigh Electronic Co. Ltd., for a purchase price of US$7.0
million.
ROC
Exchange Controls
The ROC
Foreign Exchange Control Law and regulations provide that all foreign exchange
transactions must be executed by banks designated by the ROC Financial
Supervisory Commission, Executive Yuan and by the Central Bank of the Republic
of China (Taiwan) to engage in such transactions. Current regulations favor
trade-related foreign exchange transactions. Consequently, foreign currency
earned from exports of merchandise and services may now be retained and used
freely by exporters, and all foreign currency needed for the importation of
merchandise and services may be purchased freely from the designated foreign
exchange banks.
Apart from
trade, ROC companies and resident individuals may, without foreign exchange
approval, remit outside and into the ROC foreign currency of up to US$50 million
(or its equivalent) and US$5 million (or its equivalent) respectively in each
calendar year. The above limits apply to remittances involving a conversion of
NT dollars to a foreign currency and vice versa. A requirement is also imposed
on all enterprises to register medium- and long-term foreign debt with the
Central Bank of the Republic of China (Taiwan).
In
addition, foreign persons may, subject to specified requirements, but without
foreign exchange approval of the Central Bank of the Republic of China (Taiwan),
remit outside and into the ROC foreign currencies of up to US$100,000 (or its
equivalent) for each remittance. The above limit applies to remittances
involving a conversion of NT dollars to a foreign currency and vice versa. The
above limit does not, however, apply to the conversion of NT dollars into other
currencies, including U.S. dollars, from the proceeds of sale of any underlying
shares withdrawn from a depositary receipt facility.
ROC
Taxation
The
following discussion describes the material ROC tax consequences of the
ownership and disposition of the common shares or ADSs to a non-resident
individual or non-resident entity that holds the common shares or ADSs (referred
to here as a “non-ROC holder”). As used in the preceding sentence, a
“non-resident individual” is a non-ROC national who owns the common shares or
ADSs and is not physically present in the ROC for 183 days or more during any
calendar year and a “non-resident entity” is a corporation or a non-corporate
body that owns the common shares or ADSs, is organized under the laws of a
jurisdiction other than the ROC and has no fixed place of business or business
agent in the ROC.
Dividends
Dividends
(whether in cash, common shares or ADSs) declared by us out of retained earnings
and distributed to a non-ROC holder in respect of common shares or ADSs are
subject to ROC withholding tax, currently at the rate of 20% on the amount of
the distribution (in the case of cash dividends) or on the par value of the
distributed common shares (in the case of stock dividends). A 10% undistributed
earnings tax is imposed on a ROC company for its after-tax earnings generated
after January 1, 1998 which are not distributed in the following year. The
undistributed earnings tax so paid will further reduce the retained earnings
available for future distribution. When we declare a dividend out of those
retained earnings, an amount in respect of the undistributed earnings tax, up to
a maximum amount of 10% of the dividend to be distributed, will be credited
against the 20% withholding tax imposed on the non-ROC holders.
Distributions
of stock dividends out of capital reserves will not be subject to withholding
tax.
Capital
Gains
Under
current ROC law, capital gain realized upon the sale or other disposition of
securities is exempt from ROC income tax. This exemption currently applies to
capital gains derived from the sale of common shares.
Sales of
ADSs by non-ROC holders are not regarded as sales of ROC securities and thus any
gains derived from transfers of ADSs are not currently subject to ROC income
tax.
Sale
Securities
transaction tax will be imposed on the seller at the rate of 0.3% of the
transaction price upon a sale of common shares. Transfers of ADSs are
not subject to ROC securities transaction tax.
Subscription
Rights
Distributions
of statutory subscription rights for the common shares in compliance with the
ROC Company Act are currently not subject to ROC tax. Proceeds derived from
sales of statutory subscription rights evidenced by securities are currently
exempted from income tax but are subject to securities transaction tax,
currently at the rate of 0.3% of the gross amount received. Income derived from
sales of statutory subscription rights which are not evidenced by securities are
subject to income tax (capital gains tax) at a fixed rate of 20% of the income.
Subject to compliance with ROC law, we, in our sole discretion, may determine
whether statutory subscription rights are evidenced by securities.
Estate
and Gift Tax
ROC estate
tax is payable on any property within the ROC of a deceased non-resident
individual, and ROC gift tax is payable on any property within the ROC donated
by a non-resident individual. Estate tax is currently imposed at rates ranging
from 2% of the first NT$670,000 to 50% of amounts in excess of NT$111,320,000.
Gift tax is imposed at rates ranging from 4% of the first NT$670,000 donated to
50% of amounts donated in excess of NT$50,090,000. Under the ROC Estate and Gift
Act, shares and bonds issued by ROC companies are deemed
located in
the ROC without regard to the location of the owner. It is unclear
whether a holder of ADSs will be considered to own common shares for this
purpose.
Tax
Treaty
At
present, the ROC has income tax treaties with Indonesia, Singapore, New Zealand,
Australia, the United Kingdom, South Africa, Gambia, Swaziland, Malaysia,
Macedonia, the Netherlands, Senegal, Sweden, Belgium, Denmark and Vietnam. These
tax treaties may limit the rate of ROC withholding tax on dividends paid with
respect to common shares in ROC companies. It is unclear whether a non-ROC
holder of ADSs will be considered to own common shares for the purposes of such
treaties. Accordingly, a holder of ADSs who is otherwise entitled to the benefit
of a treaty should consult its own tax advisers concerning eligibility for
benefit under the treaty with respect to the ADSs as the case may be. The United
States does not have an income tax treaty with the ROC.
United
States Federal Income Taxation
The
following discussion describes the material U.S. federal income tax consequences
of the ownership and disposition of common shares or ADSs to those U.S. holders
described below who hold such common shares or ADSs as capital assets for U.S.
federal income tax purposes. For these purposes, you are a U.S. holder if you
are a beneficial owner of common shares or ADSs and are, for U.S. federal income
tax purposes:
|
·
|
a
citizen or resident of the United
States;
|
|
·
|
a
corporation, or other entity taxable as a corporation, created or
organized under the laws of the United States or of any political
subdivision of the United States;
or
|
|
·
|
an
estate or trust the income of which is subject to U.S. federal income tax
purposes regardless of its source.
|
This
discussion assumes that we are not a passive foreign investment company, as
discussed below.
This
discussion does not address all of the tax consequences that may be relevant in
light of your particular circumstances. In particular, it does not address all
of the tax consequences that may be relevant to holders subject to special
rules, including:
|
·
|
persons
subject to the alternative minimum
tax;
|
|
·
|
dealers
or traders in securities or foreign
currencies;
|
|
·
|
certain
financial institutions;
|
|
·
|
partnerships
or other entities classified as partnerships for U.S. federal income tax
purposes;
|
|
·
|
persons
carrying on a trade or business in the
ROC;
|
|
·
|
persons
who hold or will hold common shares or ADSs as part of a straddle, hedge,
conversion transaction, integrated transaction or similar
transaction;
|
|
·
|
persons
whose functional currency for U.S. federal income tax purposes is not the
U.S. dollar;
|
|
·
|
persons
who own 10% or more of our voting stock;
or
|
|
·
|
persons
who acquired our common shares or ADSs pursuant to the exercise of any
employee stock option or otherwise as
compensation.
|
This
discussion is based on the Internal Revenue Code of 1986, as amended, final,
temporary and proposed Treasury regulations, administrative announcements and
judicial decisions, all as of the date hereof. These laws and regulations are
subject to change, possibly with retroactive effect. This discussion is also
based in part on representations by the depositary and assumes that each
obligation under the deposit agreement and any related agreement will be
performed in accordance with its terms.
In
general, for U.S. federal income tax purposes, a U.S. holder of ADSs should be
treated as the holder of the common shares represented by the ADSs.
The U.S.
Treasury has expressed concerns that parties to whom American depositary
receipts are released before delivery of shares to the depositary
(“pre-release”) may be taking actions that are inconsistent with the claiming of
foreign tax credits by the holders of American depositary receipts. Such actions
would also be inconsistent with the claiming of the reduced rate of tax
applicable to dividends received by certain noncorporate U.S. holders.
Accordingly, the analysis of the creditability of ROC taxes and the availability
of the reduced tax rate for dividends received by certain noncorporate U.S.
holders, both described below, could be affected by actions that may be taken by
parties to whom the ADSs are pre-released.
Please
consult your tax adviser with regard to the application of the U.S. federal
income tax laws to common shares or ADSs as well as any tax consequences arising
under the laws of any state, local or non-U.S. taxing
jurisdictions.
Dividends
Distributions
paid on common shares or ADSs (other than certain pro rata distributions of
common shares to all shareholders, including holders of ADSs), including the
amount of any ROC taxes withheld thereon, reduced by any credit against the
withholding tax on account of the 10% retained earnings tax imposed on us,
generally will constitute foreign source dividend income to the extent paid out
of our current or accumulated earnings and profits as determined in accordance
with U.S. federal income tax principles. Because we do not maintain calculations
of our earnings and profits under U.S. federal income tax principles, we expect
that distributions will generally be reported to U.S. holders as dividends. The
amount you will be required to include in income for any dividend paid in NT
dollars will be equal to the U.S. dollar value of the NT dollars paid,
calculated by reference to the exchange rate in effect on the date the payment
is received by the depositary (in the case of ADSs) or by you (in the case of
common shares), regardless of whether the payment is in fact converted into U.S.
dollars on the date of receipt. If you do not convert the amount of any dividend
income received into U.S. dollars and you realize gain or loss on a sale or
other disposition of NT dollars, it generally will be U.S. source ordinary
income or loss. The amount of any distribution of property other than cash will
be the fair market value of such property on the date of distribution. You will
not be entitled to a dividends-received deduction for dividends you
receive.
Subject to
applicable limitations and the discussion above regarding concerns expressed by
the U.S. Treasury, under current law, certain dividends paid by qualified
foreign corporations to certain noncorporate U.S. holders in taxable years
beginning before January 1, 2011 are taxable at a maximum rate of 15%. A foreign
corporation is treated as a qualified foreign corporation with respect to
dividends paid on stock that is readily tradable on a securities market in the
United States, such as the New York Stock Exchange, where our ADSs are traded.
You should consult your own tax advisers to determine whether the favorable
rates may apply to dividends you receive and whether you are subject to any
special rules that limit your ability to be taxed at this favorable
rate.
Subject to
applicable limitations and restrictions and the discussion above regarding
concerns expressed by the U.S. Treasury, the ROC taxes withheld from dividend
distributions, reduced by any credit against the withholding tax which is paid
by the Company on account of the 10% retained earnings tax, will be eligible for
credit against your U.S. federal income tax liability. The limitation on foreign
taxes eligible for credit is calculated separately with respect to specific
classes of income. The rules governing foreign tax credits are complex and,
therefore, you should consult your own tax adviser regarding the availability of
foreign tax credits in your particular circumstances. Instead of
claiming a credit, you may, at your election, deduct such otherwise creditable
ROC taxes in computing your taxable income, subject to generally applicable
limitations under U.S. law.
Certain
pro rata
distributions
of common shares by a company to all of its shareholders, including holders of
ADSs, will not be subject to U.S. federal income tax. Accordingly, these
distributions will not give rise to U.S. federal income against which the ROC
tax imposed on these distributions may be credited. You should consult your tax
adviser as to whether any ROC tax imposed on these
pro rata
distributions of
common shares may be creditable against your U.S. foreign source income from
other sources.
Capital
Gains
You will
generally recognize U.S. source capital gain or loss for U.S. federal income tax
purposes on the sale or exchange of common shares or ADSs, which will be
long-term capital gain or loss if the common shares or ADSs were held for more
than one year. The amount of gain or loss will be equal to the
difference between your tax basis in the common shares or ADSs disposed of and
the amount realized on disposition. You should consult your own tax adviser
about the treatment of capital gains, which may be taxed at lower rates than
ordinary income for non-corporate taxpayers, and capital losses, the
deductibility of which may be limited.
Deposits
and withdrawals of common shares by a U.S. holder in exchange for ADSs will not
result in realization of gain or loss for U.S. federal income tax
purposes.
Passive
Foreign Investment Company Rules
We believe
that we were not a passive foreign investment company, or PFIC, for U.S. federal
income tax purposes for 2007. However, since PFIC status depends upon
the composition of our income and assets and the market value of our assets
(including, among others, less than 25 percent owned equity investments) from
time to time, there can be no assurance that we will not be considered a PFIC
for any taxable year. If we were treated as a PFIC for any taxable
year during which a U.S. holder held a common share or an ADS, certain adverse
consequences could apply the U.S. holder.
Information
Reporting and Backup Withholding
Payment of
dividends and sales proceeds that are made within the United States or through
certain U.S.-related financial intermediaries generally are subject to
information reporting and to backup withholding unless (i) you are a corporation
or other exempt recipient or (ii) in the case of backup withholding, you provide
a correct taxpayer identification number and certify that you are not subject to
backup withholding.
The amount
of any backup withholding from a payment to you will be allowed as a credit
against your United States federal income tax liability and may entitle you to a
refund, provided that the required information is furnished to the Internal
Revenue Service.
Not
applicable.
Not
applicable.
We file
annual reports on Form 20-F and periodic reports on Form 6-K with the SEC. You
can read and copy these reports and other information at the SEC’s Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can also
request copies of the documents, upon payment of a duplicating fee, by writing
to the Public Reference Section of the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the Public Reference
Room. The reports and other information we file electronically with the SEC are
also available to the public from the SEC’s website at
http://www.sec.gov
.
Market
Risk
Our
exposure to financial market risks relates primarily to changes in interest
rates and foreign currency exchange rates. To mitigate these risks we utilize
derivative financial instruments, the application of which is primarily to
manage these exposures and not for speculative purposes.
Interest Rate
Risk
. Our exposure to interest rate risks relates primarily to
our long-term floating rate debt, which is normally incurred to support our
corporate activities and capital expenditures.
In
December 2003, we entered into an interest rate swap contract whereby we pay NT
dollars at the 90-day BA rate minus 0.70% in exchange for three possible payoff
scenarios: (1) if the US dollar 6-month LIBOR is below 0.95%, we receive the US
dollar 6-month LIBOR per annum; (2) if the US dollar 6-month LIBOR is equal to
or above 0.95% and equal to or below 2.00%, we receive 3.60% per annum; and (3)
if the US dollar 6-month LIBOR is above 2.00%, we receive either 4.00% minus US
dollar 6-month LIBOR or 0%, whichever is greater. The contract has a notional
amount of NT$2,750.0 million, of which NT$1,375.0 million expired in January
2008 and the remaining amount expires in January 2009. As of December 31, 2007,
the contract’s fair value was negative NT$20.3 million (US$0.6
million).
In October
2003, we entered into two cross-currency swap contracts to hedge against
reductions in value caused by changes in foreign currency exchange rates, as
well as to manage our exposure to interest rates. The final outstanding amounts
under these contracts expired in October 2007, and we have subsequently entered
into a number of smaller, monthly cross-currency swap contracts. See “
¾
Foreign Currency Exchange
Rate Risk.”
The table
below sets forth information relating to our significant obligations that are
sensitive to interest rate fluctuations as of December 31, 2007.
|
|
Expected
Maturity Date
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair
Value
|
|
|
|
(in
millions, except percentages)
|
|
Short-term
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable
rate (NT$)
|
|
|
556.0
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
556.0
|
|
|
|
556.0
|
|
Average
interest rate
|
|
|
2.67
|
%
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2.67
|
%
|
|
|
|
|
Variable
rate (US$)
|
|
|
204.0
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
204.0
|
|
|
|
204.0
|
|
Average
interest rate
|
|
|
4.62
|
%
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
4.62
|
%
|
|
|
|
|
Variable
rate (RMB)
|
|
|
393.5
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
393.5
|
|
|
|
393.5
|
|
Average
interest rate
|
|
|
3.94
|
%
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3.94
|
%
|
|
|
|
|
Long-term
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable
rate (NT$)
|
|
|
1,843.8
|
|
|
|
5,146.6
|
|
|
|
3,142.2
|
|
|
|
1,144.2
|
|
|
|
26.7
|
|
|
|
–
|
|
|
|
11,303.5
|
|
|
|
11,303.5
|
|
Average
interest rate
|
|
|
3.46
|
%
|
|
|
2.34
|
%
|
|
|
1.76
|
%
|
|
|
1.04
|
%
|
|
|
3.88
|
%
|
|
|
–
|
|
|
|
2.23
|
%
|
|
|
|
|
Fixed
rate (NT$)
|
|
|
45.2
|
|
|
|
16.5
|
|
|
|
5.1
|
|
|
|
0.6
|
|
|
|
0.3
|
|
|
|
–
|
|
|
|
67.7
|
|
|
|
67.7
|
|
Average
interest rate
|
|
|
5.36
|
%
|
|
|
5.36
|
%
|
|
|
5.55
|
%
|
|
|
7.33
|
%
|
|
|
7.82
|
%
|
|
|
–
|
|
|
|
5.40
|
%
|
|
|
|
|
Variable
rate (US$)
|
|
|
124.6
|
|
|
|
316.1
|
|
|
|
90.0
|
|
|
|
0.9
|
|
|
|
–
|
|
|
|
–
|
|
|
|
531.6
|
|
|
|
531.6
|
|
Average
interest rate
|
|
|
5.24
|
%
|
|
|
4.08
|
%
|
|
|
5.54
|
%
|
|
|
5.63
|
%
|
|
|
–
|
|
|
|
–
|
|
|
|
4.60
|
%
|
|
|
|
|
Fixed
rate (US$)
|
|
|
0.7
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
–
|
|
|
|
–
|
|
|
|
0.7
|
|
|
|
0.7
|
|
Average
interest rate
|
|
|
6.57
|
%
|
|
|
15.3
|
%
|
|
|
15.3
|
%
|
|
|
15.3
|
%
|
|
|
–
|
|
|
|
–
|
|
|
|
7.24
|
%
|
|
|
|
|
Variable
rate (JP¥)
|
|
|
1,200.0
|
|
|
|
1,600.0
|
|
|
|
800.0
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3,600.0
|
|
|
|
3,600.0
|
|
Average
interest rate
|
|
|
2.24
|
%
|
|
|
2.36
|
%
|
|
|
2.60
|
%
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2.37
|
%
|
|
|
|
|
Variable
rate (RMB)
|
|
|
89.7
|
|
|
|
59.8
|
|
|
|
64.9
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
214.4
|
|
|
|
214.4
|
|
Average
interest rate
|
|
|
5.66
|
%
|
|
|
5.83
|
%
|
|
|
6.31
|
%
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
5.90
|
%
|
|
|
|
|
*
Indicates amount is less than US$0.1 million.
Foreign Currency
Exchange Rate Risk
. Our foreign currency exposure gives rise
to market risk associated with exchange rate movements against the NT dollar,
our functional currency. Currently, the majority of our revenues from packaging
and testing services are denominated in U.S. dollars, with a portion denominated
in NT dollars and Japanese yen. Our costs of revenues and operating expenses
associated with packaging and testing services are incurred in several
currencies, primarily in NT dollars and U.S. dollars, as well as, to a lesser
extent, Korean won, Japanese yen, Malaysian ringgit and PRC renminbi. In
addition, a substantial portion of our capital expenditures, primarily for the
purchase of packaging and testing equipment, has been, and is expected to
continue to be, denominated primarily in U.S. dollars with the remainder in
Japanese yen. Fluctuations in exchange rates, primarily among the U.S. dollar,
the NT dollar, the PRC renminbi and the Japanese yen, will affect our costs and
operating margins and could result in exchange losses and increased costs in NT
dollar and other local currency terms. Despite hedging and mitigating techniques
implemented by us, fluctuations in exchange rates have affected, and may
continue to affect, our financial condition and results of
operations.
We
recorded net foreign exchange
gains
of NT$154.3 million,
NT$92.8 million
and
NT$403.5 million
(US$12.4 million) in
2005,
2006 and 2007, respectively.
In 2005, 2006 and 2007, the average exchange
rate of the NT dollar to the U.S. dollar was 32.13, 32.51 and 32.85,
respectively, calculated using noon buying rates in The City of New York for
cable transfers in NT dollars as certified for customs purposes by the Federal
Reserve Bank of New York.
Foreign
currency denominated liabilities as of December 31, 2007 primarily include U.S.
dollar debt and Japanese yen debt. As of December 31, 2007, approximately 53.4%
of our cash and accounts receivable were denominated in U.S. dollars, with a
substantial portion of the remainder denominated primarily in NT dollars and
Japanese yen. As of December 31, 2007, approximately 84.5% of our accounts
payable and payable for properties were denominated in currencies other than the
NT dollar. To protect against reductions in value and the volatility of future
cash flows caused by changes in foreign currency exchange rates, we utilize
currency forward contracts from time to time to reduce the impact of foreign
currency fluctuations on our results of operations. Our policy is to account for
these contracts on a mark-to-market rate basis.
In October
2003, we entered into two cross-currency swap contracts to hedge against
exchange rate fluctuations in connection with our US$200.0 million zero coupon
convertible bonds due 2008, of which US$15.0 million were repurchased in the
market in April 2005.
The terms
of one of such contracts provided that we pay NT dollars at a fixed rate of 1.7%
and receive U.S. dollars at a fixed rate of 2.7%. The contract rate was
US$/NT$33.95. The contract had a notional amount of US$157.0 million/NT$5,330.2
million. In April 2005, the notional amount of US$15.0 million was terminated
early because of the repurchase in the market of a portion of our foreign
convertible bonds. The remaining US$142.0 million expired in October
2007.
The other
such contract was terminated in December 2005. Under this contract we were to
pay U.S. dollars at a floating rate that is the percentage by which LIBOR is
greater than 2% and receive NT dollars at a floating rate that is the percentage
by which LIBOR is less than 2%. The contract rate was US$/NT$33.95. The contract
had a notional amount of US$43.0 million/NT$1,459.9 million.
In 2007,
following the expiration of the final outstanding amounts under our October 2003
contracts, we entered into a number of smaller, monthly cross-currency swap
contracts. As of December 31, 2007, we had US$139.2 million outstanding under
these contracts. The terms of the contracts provide that we pay NT dollars at a
fixed rate of 1.7% and receive U.S. dollars at a fixed rate of
4.45%. The contract rate for these contracts is US$/NT$32.522. As of
December 31, 2007, the contracts had a fair value of negative NT$7.5 million
(US$0.2 million).
The table
below sets forth our outstanding forward exchange contracts in aggregate terms
by type of contract as of December 31, 2007.
Forward
Exchange Contracts
|
|
|
Sell
US$ against NT$
|
|
Notional
Amount
|
US$190.0
million
|
Weighted
Average Strike Price
|
US$/NT$32.267
|
Fair
Value
|
Negative
US$0.45 million
|
|
|
Sell
US$ against JP¥
|
|
Notional
Amount
|
US$16.0
million
|
Weighted
Average Strike Price
|
US$/JP¥111.48
|
Fair
Value
|
Negative
US$0.14 million
|
|
|
Sell
US$ against KRW
|
|
Notional
Amount
|
US$5.0
million
|
Weighted
Average Strike Price
|
US$/KRW939.5
|
Fair
Value
|
US$0.04
million
|
|
|
Buy
US$ against NT$
|
|
Notional
Amount
|
US$15.0
million
|
Weighted
Average Strike Price
|
US$/NT$32.203
|
Fair
Value
|
US$0.08
million
|
|
|
Sell
US$ against MYR
|
|
Notional
Amount
|
US$8.0
million
|
Weighted
Average Strike Price
|
US$/MYR3.324
|
Fair
Value
|
US$0.05
million
|
Other Market
Risk.
Our
exposure to other market risk relates primarily to our investments in
publicly-traded stock and open-ended mutual funds. The value of these
investments may fluctuate based on various factors including prevailing market
conditions. Moreover, the fair value of investments in unlisted securities may
be significantly different from their carrying value. Of our investments in
publicly-traded stocks and open-ended mutual funds held as of December 31, 2007,
NT$1,599.4 million (US$49.3 million) were classified as financial assets held
for trading and NT$9.406.3 million (US$290.1 million) were classified as
available-for-sale financial assets.
Not
applicable.
Not
applicable.
Not
applicable.
Disclosure
Controls and Procedures
As of
December 31, 2007, we, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
performed an evaluation of the effectiveness of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act.
Our management necessarily applied its judgment in assessing the costs and
benefits of such controls and procedures,
which by
their nature can provide only reasonable assurance regarding management’s
control objectives. Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are effective for recording, processing, summarizing and reporting, within the
time periods specified in the SEC’s rules and forms, information required to be
disclosed in the reports we file or submit under the Exchange Act, and for
accumulating and communicating such information to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.
Management’s
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Rule 13a-15(f) or 15d-15(f)
promulgated under the Securities Exchange Act of 1934.
Because of
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2007. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework.
Based on
this assessment, management concluded that, as of December 31, 2007, our
internal control over financial reporting is effective based on those
criteria.
Attestation
Report of the Registered Public Accounting Firm
To the
Board of Directors and Shareholders of
Advanced
Semiconductor Engineering, Inc.
We have
audited the internal control over financial reporting of Advanced Semiconductor
Engineering, Inc. and subsidiaries (the
“
Company”) as of
December 31, 2007, based on criteria established in
Internal Control—Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, the company’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company’s board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because of
the inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls,
material misstatements due to error or fraud may not be prevented or detected on
a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007, based on the criteria
established in
Internal
Control—Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have
also audited, in accordance with auditing standards generally accepted in the
Republic of China and the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements as of and for the
year ended December 31, 2007 of the Company and our report dated April 10, 2008
expressed an unqualified opinion on those financial statements.
/s/
Deloitte & Touche
Deloitte
& Touche
Taipei,
Taiwan
The
Republic of China
April 10,
2008
Changes
in Internal Control Over Financial Reporting
There has
been no change in our internal control over financial reporting that occurred
during the period covered by this annual report that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
Our board
of directors determined that Alan Cheng is an audit committee financial expert
as defined under the applicable rules of the SEC issued pursuant to Section 407
of the Sarbanes-Oxley Act of 2002 and is independent for the purposes of Rule
10A-3 of the Exchange Act.
We have
adopted a code of ethics that satisfies the requirements of Item 16B of Form
20-F and applies to all employees, officers, supervisors and directors of our
company and our subsidiaries, including our Chief Executive Officer and Chief
Financial Officer. We have posted our code of ethics on our website at
http://www.aseglobal.com.
Policy
on Pre-Approval of Audit and Non-Audit Services of Independent Registered Public
Accounting Firm
Our audit
committee, which was established on July 22, 2005, pre-approves all audit and
non-audit services provided by our independent registered public accounting
firm, including audit services, audit-related services, tax services and other
services, on a case-by-case basis. Accordingly, we have not
established any pre-approval policies and procedures. Prior to the establishment
of our audit committee, such services were pre-approved by our board of
directors.
Independent
Registered Public Accounting Firm’s Fees
The
following table sets forth the aggregate fees by categories specified below in
connection with certain professional services rendered by Deloitte & Touche.
We did not pay any other fees to our independent registered public accounting
firm during the periods indicated below.
|
|
For
the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
(in
thousands)
|
|
Audit
fees
(1)
|
|
|
110,695.1
|
|
|
|
116,097.2
|
|
|
|
3,579.9
|
|
Audit-related
fees
(2)
|
|
|
1,658.7
|
|
|
|
5,240.1
|
|
|
|
161.6
|
|
Tax
fees
(3)
|
|
|
12,056.8
|
|
|
|
11,540.7
|
|
|
|
355.9
|
|
All
other fees
(4)
|
|
|
2,388.4
|
|
|
|
2,535.4
|
|
|
|
78.2
|
|
Total
|
|
|
126,799.0
|
|
|
|
135,413.4
|
|
|
|
4,175.6
|
|
(1)
|
Audit
fees are defined as the standard audit and review work that needs to be
performed each year in order to issue an opinion on our consolidated
financial statements and to issue reports on the local statutory financial
statements. It also includes services that can only be provided by our
auditor such as statutory audits required by the Tax Bureau of the ROC and
the Customs Bureau of the ROC, auditing of non-recurring transactions and
application of new accounting policies, pre-issuance reviews of quarterly
financial results, consents and comfort letters and any other audit
services required for SEC or other regulatory
filings.
|
(2)
|
Audit-related
fees include assurance and related services provided by auditors that are
reasonably related to the performance of the audit or review of our
financial statements and not reported above under “Audit fees.” They
comprise amounts for services such as acquisition due diligence and
consultation concerning financial accounting and reporting
matters.
|
(3)
|
Tax
fees consist of professional services rendered by Deloitte & Touche
for tax compliance and tax advice. The services for the fees
disclosed under this category include tax return preparation and technical
tax advice.
|
(4)
|
Other
fees primarily consist of fees for agreed-upon procedures as required by
the ROC government for capital investments in the PRC and the review of an
application of one of our subsidiaries to ROC regulatory authorities for
an initial public offering.
|
Not
applicable.
None of
our equity securities were purchased by ourselves or our affiliated purchasers
in 2007.
The
Company has elected to provide financial statements for fiscal year 2007 and the
related information pursuant to Item 18.
Reference
is made to pages F-1 to F-70 of this annual report.
The
consolidated financial statements of the Company and the report thereon by its
independent registered public accounting firm listed below are attached hereto
as follows:
|
(a)
|
Report
of Independent Registered Public Accounting Firm of the Company dated
April 10, 2008 (page F-1 to F-2).
|
|
(b)
|
Consolidated
Balance Sheets of the Company and subsidiaries as of December 31, 2006 and
2007 (page F-3).
|
|
(c)
|
Consolidated
Statements of Operations of the Company and subsidiaries for the years
ended December 31, 2005, 2006 and 2007 (page F-4 to
F-6).
|
|
(d)
|
Consolidated
Statements of Changes in Shareholders’ Equity of the Company and
subsidiaries for the years ended December 31, 2005, 2006 and 2007 (page
F-7).
|
|
(e)
|
Consolidated
Statements of Cash Flows of the Company and subsidiaries for the years
ended December 31, 2005, 2006 and 2007 (pages F-8 to
F-10).
|
|
(f)
|
Notes
to Consolidated Financial Statements of the Company and subsidiaries
(pages F-11 to F-70).
|
1.
|
Articles
of Incorporation of the Registrant (English translation of Chinese)
(incorporating all amendments as of June 19,
2008).
|
2.
|
(a)
|
Amended
and Restated Deposit Agreement dated as of September 29, 2000 among ASE
Inc., Citibank N.A., as depositary, and Holders and Beneficial Holders of
American Depositary Shares evidenced by American Depositary Receipts
issued thereunder, including the form of American Depositary Receipt
(incorporated by reference to Exhibit (a) to our registration statement on
Form F-6 (File No. 333-108834) filed on September 16,
2003).
|
|
(b)
|
Letter
Agreement dated as of February 1, 2001 by and between ASE Inc. and
Citibank N.A., as depositary for the sole purpose of accommodating the
surrender of ASE Inc’s Rule 144A Global Depositary Shares, the issuance of
American Depositary Shares and the delivery of American Depositary
Receipts in the context of the termination of ASE Inc.’s Rule 144A
Depositary Receipts Facility (incorporated by reference to Exhibit (b)(i)
to our registration statement on Post-Effective Amendment No. 1 to Form
F-6 (File No. 333-108834) filed on April 3,
2006).
|
|
(c)
|
Letter
Agreement dated as of September 25, 2003 by and between ASE Inc. and
Citibank N.A., as depositary for the sole purpose of accommodating the
issuance of American Depositary Shares upon ASE Inc.’s deposit of its
shares with the depositary following the conversion of certain bonds
issued by ASE Inc. in accordance with, and subject to, the terms and
conditions of the indenture governing such bonds (incorporated by
reference to Exhibit (b)(ii) to our registration statement on
Post-Effective Amendment No. 1 to Form F-6 (File No. 333-108834) filed on
April 3, 2006).
|
|
(d)
|
Amendment
No. 1 to Amended and Restated Deposit Agreement dated as of April 6, 2006
among ASE Inc., Citibank N.A., as depositary, and Holders and Beneficial
Holders of American Depositary Shares evidenced by American Depositary
Receipts issued thereunder, including the form of American Depositary
Receipt (incorporated by reference to Exhibit (a)(ii) to our registration
statement on Post-Effective Amendment No. 2 to Form F-6 (File No.
333-108834) filed on October 25,
2006).
|
|
(e)
|
Form
of Amendment No. 2 to Amended and Restated Deposit Agreement among ASE
Inc., Citibank N.A., as depositary, and Holders and Beneficial Holders of
American Depositary Shares evidenced by American Depositary Receipts
issued thereunder, including the form of American Depositary Receipt
(incorporated by reference to Exhibit (a)(iii) to our registration
statement on Post-Effective Amendment No. 2 to Form F-6 (File No.
333-108834) filed on October 25,
2006).
|
4.
|
(a)
|
Asset
Purchase Agreement dated as of July 3, 1999 among ASE (Chung Li) Inc., ASE
Inc., Motorola Electronics Taiwan, Ltd. and Motorola, Inc. (incorporated
by reference to Exhibit 10.2 to ASE Test’s registration statement on Form
F-3 (File No. 333-10892) filed on September 27, 1999 (the “ASE Test 1999
Form-3”)).
|
|
(b)
|
Agreement
dated as of June 5, 2002 among ASE (Chung Li) Inc., ASE Inc., Motorola
Electronics Taiwan, Ltd. and Motorola, Inc. amending certain earn-out
arrangements provided for in Section 2.09(b)(ii)(D) of the Asset Purchase
Agreement dated as of July 3, 1999 among the same parties (incorporated by
reference to Exhibit 4(b) to our annual report on Form 20-F (File No.
001-16125) for the year ended December 31, 2002 filed on June 30,
2003).
|
|
(c)
|
Stock
Purchase Agreement dated as of July 3, 1999 among ASE Investment (Labuan)
Inc., ASE Inc., Motorola Asia Ltd. and Motorola, Inc. relating to the
purchase and sale of 100.0% of the common stock of Motorola Korea Ltd.
(incorporated by reference to Exhibit 10.3 to the ASE Test 1999 Form
F-3).
|
|
(d)†
|
BGA
Immunity Agreement dated as of January 25, 1994 between ASE Inc. and
Motorola, Inc. (incorporated by reference to Exhibit 10.6 to the Form
F-1).
|
|
(e)†
|
Amendment
dated March 18, 2003 renewing the BGA Immunity Agreement dated as of
January 25, 1994 between ASE Inc. and Motorola, Inc. (incorporated by
reference to Exhibit 4(g) to our annual report on Form 20-F (File No.
001-16125) for the year ended December 31, 2003 filed on June 30,
2004).
|
|
(f)
|
Consent
dated June 10, 2004 to the Assignment of the BGA Immunity Agreement
between ASE Inc. and Motorola, Inc. dated January 25, 1994 (incorporated
by reference to Exhibit 4(h) to our annual report on Form 20-F (File No.
001-16125) for the year ended December 31, 2003 filed on June 30,
2004).
|
|
(g)
|
Asset
Purchase Agreement by and among Flextronics Manufacturing (M) Sdn Bhd, as
Buyer, ASE Electronics (M) Sdn. Bhd. as Company, dated as of October 3,
2005 (incorporated by reference to Exhibit 4(g) to our annual report on
Form 20-F (File No. 001-16125) for the year ended December 31, 2005 filed
on June 19, 2006).
|
|
(h)
|
Joint
Venture Agreement dated as of July 14, 2006 among Advanced Semiconductor
Engineering, Inc. and Powerchip Semiconductor Corp. relating to the
establishment of, and our investment of 60.0% in, Power ASE (incorporated
by reference to Exhibit 4(r) to our annual report on Form 20-F (File No.
001-16125) for the year ended December 31, 2006 filed on June 25, 2007, as
amended).
|
|
(i)
|
Sale
and Purchase Agreement dated January 11, 2007 among J&R Holding
Limited and Seacoast Profits Limited relating to our acquisition of 100%
of GAPT (incorporated by reference to Exhibit 4(s) to our annual report on
Form 20-F (File No. 001-16125) for the year ended December 31, 2006 filed
on June 25, 2007, as
amended).
|
|
(j)
|
Equity
Interests Transfer Agreement dated August 6, 2007 by and among NXP B.V.,
NXP Semiconductors Suzhou Ltd. and J&R Holding Limited relating to our
acquisition of 60% of ASEN, our joint venture with NXP
Semiconductors.
|
|
(k)
|
Scheme
Implementation Agreement dated September 4, 2007 between Advanced
Semiconductor Engineering, Inc. and ASE Test Limited relating to our
acquisition of all the outstanding ordinary shares of, and the
privatization of, ASE Test
(incorporated
by reference to Appendix A to Exhibit (a)(1) to Schedule 13E-3 (File No.
005-55723) filed by ASE Test on
Jan
uary
4, 2008
).
|
|
(l)
|
Syndicated
Loan Agreement in the amount of NT$24,750 million dated March 3, 2008
among Advanced Semiconductor Engineering, Inc., Citibank, N.A., Taipei
Branch and the banks and banking institutions listed on Schedule I thereto
relating to our acquisition of all the outstanding ordinary shares of, and
the privatization of, ASE
Test.
|
|
(m)
|
Equity
Purchase Agreement dated March 17, 2008 between Aimhigh Global Corp., TCC
Steel and J&R Holding Limited in respect of Weihai Aimhigh Electronic
Co. Ltd. relating to our acquisition of 100% of ASE Weihai
Inc.
|
|
(n)
|
Syndicated
Loan Agreement in the amount of US$200 million dated May 29, 2008 among
Advanced Semiconductor Engineering, Inc., Citibank, N.A., Taipei Branch
and the banks and banking institutions listed on Schedule I thereto
relating to our acquisition of all the outstanding ordinary shares
of, and the privatization of, ASE
Test.
|
12.
|
(a)
|
Certification
of Jason C.S. Chang, Chief Executive Officer of Advanced Semiconductor
Engineering, Inc. required by Rule 13a-14(a) of the Exchange
Act.
|
|
(b)
|
Certification
of Joseph Tung, Chief Financial Officer of Advanced Semiconductor
Engineering, Inc. required by Rule 13a-14(a) of the Exchange
Act.
|
|
13.
|
Certification
of the Chief Executive Officer and the Chief Financial Officer of Advanced
Semiconductor Engineering, Inc. required by Rule 13a-14(b) of the Exchange
Act and Section 1350 of Chapter 63 of Title 18 of the United States
Code.
|
____________________
†
|
Does
not contain portions for which confidential treatment has been
granted.
|
The
Company agrees to furnish to the Securities and Exchange Commission upon request
a copy of any instrument which defines the rights of holders of long-term debt
of the Company and its consolidated subsidiaries.
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
ADVANCED
SEMICONDUCTOR
ENGINEERING,
INC.
|
|
|
|
By:
|
/s/
Joseph Tung
|
|
|
Joseph
Tung
|
|
|
Chief
Financial Officer
|
|
Date: June
30, 2008
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Consolidated
Financial Statements of Advanced Semiconductor Engineering, Inc. and
Subsidiaries
|
|
|
F-1
|
|
F-3
|
|
F-4
|
|
F-7
|
|
F-8
|
|
F-11
|
Advanced
Semiconductor Engineering,
Inc.
and Subsidiaries
Consolidated
Financial Statements for the
Years Ended
December
31, 2005,
2006 and
2007 and
Report
of Independent Registered Public Accounting Firm
The Board
of Directors and Shareholders
Advanced
Semiconductor Engineering, Inc.
We have
audited the accompanying consolidated balance sheets of Advanced Semiconductor
Engineering, Inc. (a corporation incorporated under the laws of the Republic of
China) and its subsidiaries (collectively the “Company”) as of December 31, 2006
and 2007, and the related consolidated statements of operations, changes in
shareholders’ equity and cash flows for each of the three years in the period
ended December 31, 2007, all expressed in New Taiwan dollars. These
consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the Rules Governing the Audit of
Financial Statements by Certified Public Accountants, auditing standards
generally accepted in the Republic of China and the Standards of the Public
Company Accounting Oversight Board (United States). Those rules and
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of December 31, 2006 and 2007, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
2007, in conformity with the Guidelines Governing the Preparation of Financial
Reports by Securities Issuers, the requirements of the Business Accounting Law
and Guidelines Governing Business Accounting relevant to financial accounting
standards, and accounting principles generally accepted in the Republic of
China.
As
discussed in Note 29 to the consolidated financial statements, the Company
incurred fire damage to its production line and facilities in Chung Li, Taiwan
on May 1, 2005. The Company recognized an estimated loss of
NT$13,479,079 thousand for the damage to its inventories, building, machinery
and equipment, net of NT$4,641,000 thousand of insurance receivable in
2005. The Company reached a final settlement with the insurers in
June 2006 with regards to the fire damage referred to above. The
final settlement amount of NT$8,068,000 thousand, less the NT$4,641,000 thousand
recorded in 2005 and the related repair and restoring expenses of NT$1,043,132
thousand, was recorded as a gain in 2006. The Company also reversed
NT$2,190,583 thousand of previously recorded impairment charges on these
fire-damaged building, machinery and equipment due to an increase in the
estimated service potential of the assets. The net amount of
NT$4,574,451 thousand was recognized as a gain on insurance settlement and
impairment recovery.
As
discussed in Note 3 to the consolidated financial statements, the Company
adopted the Republic of China Statement of Financial Accounting Standards No.
34, “Financial Instruments: Recognition and Measurement”, No. 36,
“Financial Instruments: Disclosure and Presentation” and other
revised Statements on January 1, 2006.
Accounting
principles generally accepted in the Republic of China differ in certain
significant respects from accounting principles generally accepted in the United
States of America. Information relating to the nature and effect of
such differences is presented in Note 31 to the consolidated financial
statements.
Our audits
also comprehended the translation of New Taiwan dollar amounts into U.S. dollar
amounts and, in our opinion, such translation has been made in conformity with
the basis stated in Note 2 to the consolidated financial
statements. Such U.S. dollar amounts are presented solely for the
convenience of the readers.
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial
reporting as of December 31, 2007, based on the criteria established in
Internal Control-Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated April 10, 2008 expressed an unqualified
opinion on the Company’s internal control over financial reporting.
/s/
Deloitte & Touche
Taipei,
Taiwan
The
Republic of China
April 10,
2008
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
(Amounts
in Thousands, Except Par Value)
|
|
December
31
|
|
|
|
|
|
December
31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
2006
|
|
|
2007
|
|
ASSETS
|
|
NT$
|
|
|
NT$
|
|
|
US$
(Note 2)
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Cash
(Note 4)
|
|
$
|
15,730,075
|
|
|
$
|
17,157,935
|
|
|
$
|
529,076
|
|
|
Short-term
borrowings (Note 14)
|
|
|
$
|
2,868,138
|
|
|
$
|
8,922,330
|
|
|
$
|
275,126
|
|
Financial
assets at fair value
through profit
or loss (Notes 2,
3, 5 and 23)
|
|
|
1,557,903
|
|
|
|
1,601,994
|
|
|
|
49,399
|
|
|
Short-term
bills payable
|
|
|
|
-
|
|
|
|
149,831
|
|
|
|
4,620
|
|
Available-for-sale
financial assets (Notes 2, 3, 6 and 23)
|
|
|
9,346,415
|
|
|
|
9,406,327
|
|
|
|
290,050
|
|
|
Financial
liabilities at fair value through profit or loss (Notes 2, 3, 5 and
23)
|
|
|
|
352,583
|
|
|
|
44,331
|
|
|
|
1,367
|
|
Held-to-maturity
financial assets (Notes 2 and 23)
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1,542
|
|
|
Notes
and accounts payable
|
|
|
|
7,304,812
|
|
|
|
9,242,092
|
|
|
|
284,986
|
|
Notes
receivable
|
|
|
109,912
|
|
|
|
62,451
|
|
|
|
1,926
|
|
|
Income
tax payable (Notes 2 and 21)
|
|
|
|
1,332,000
|
|
|
|
1,237,325
|
|
|
|
38,154
|
|
Accounts
receivable, net (Notes 2 and 7)
|
|
|
11,344,961
|
|
|
|
18,685,052
|
|
|
|
576,166
|
|
|
Accrued
expenses (Note 17)
|
|
|
|
3,108,175
|
|
|
|
4,045,167
|
|
|
|
124,735
|
|
Other
receivables
|
|
|
915,390
|
|
|
|
936,466
|
|
|
|
28,877
|
|
|
Payable
for properties
|
|
|
|
3,082,384
|
|
|
|
4,137,437
|
|
|
|
127,581
|
|
Guarantee
deposits (Note 23)
|
|
|
323,216
|
|
|
|
332,717
|
|
|
|
10,259
|
|
|
Current
portion of bonds payable (Notes 2, 15 and 23)
|
|
|
|
3,798,233
|
|
|
|
1,375,000
|
|
|
|
42,399
|
|
Inventories
(Notes 2 and 8)
|
|
|
5,674,010
|
|
|
|
5,596,875
|
|
|
|
172,583
|
|
|
Current
portion of long-term bank loans (Notes 16, 23 and 25)
|
|
|
|
1,292,040
|
|
|
|
5,258,946
|
|
|
|
162,163
|
|
Deferred
income tax assets, net (Notes 2 and 21)
|
|
|
2,808,184
|
|
|
|
2,075,256
|
|
|
|
63,992
|
|
|
Temporary
receipts (Note 7)
|
|
|
|
2,503,125
|
|
|
|
96,009
|
|
|
|
2,960
|
|
Other
current assets
|
|
|
952,732
|
|
|
|
996,948
|
|
|
|
30,741
|
|
|
Deferred
income tax liabilities (Notes 2 and 21)
|
|
|
|
-
|
|
|
|
121,499
|
|
|
|
3,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion of capital lease obligations (Notes 2 and 23)
|
|
|
|
540,736
|
|
|
|
67,838
|
|
|
|
2,092
|
|
Total
current assets
|
|
|
48,762,798
|
|
|
|
56,902,021
|
|
|
|
1,754,611
|
|
|
Other
|
|
|
|
1,828,016
|
|
|
|
1,053,149
|
|
|
|
32,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
|
28,010,242
|
|
|
|
35,750,954
|
|
|
|
1,102,404
|
|
Held-to-maturity
financial assets (Notes 2 and 23)
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
assets carried at cost (Notes 2, 9 and 23)
|
|
|
1,595,597
|
|
|
|
525,025
|
|
|
|
16,189
|
|
|
LONG-TERM
DEBTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
method investments (Notes 2 and 10)
|
|
|
4,088,949
|
|
|
|
4,325,119
|
|
|
|
133,368
|
|
|
Long-term
bonds payable (Notes 2, 15 and 23)
|
|
|
|
5,758,611
|
|
|
|
5,889,735
|
|
|
|
181,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
bank loans (Notes 16, 23 and 25)
|
|
|
|
23,571,786
|
|
|
|
18,021,762
|
|
|
|
555,713
|
|
Total
long-term investments
|
|
|
5,734,546
|
|
|
|
4,850,144
|
|
|
|
149,557
|
|
|
Capital
lease obligations (Notes 2 and 23)
|
|
|
|
67,903
|
|
|
|
24,512
|
|
|
|
756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY,
PLANT AND EQUIPMENT (Notes 2, 11, 24 and 25)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
long-term debts
|
|
|
|
29,398,300
|
|
|
|
23,936,009
|
|
|
|
738,083
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,284,577
|
|
|
|
2,287,739
|
|
|
|
70,544
|
|
|
OTHER
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
and improvements
|
|
|
30,508,824
|
|
|
|
36,355,071
|
|
|
|
1,121,032
|
|
|
Accrued
pension cost (Notes 2 and 17)
|
|
|
|
2,296,384
|
|
|
|
2,168,954
|
|
|
|
66,881
|
|
Machinery
and equipment
|
|
|
100,838,100
|
|
|
|
113,204,238
|
|
|
|
3,490,726
|
|
|
Deferred
income tax liabilities (Notes 2 and 21)
|
|
|
|
25,888
|
|
|
|
150,009
|
|
|
|
4,626
|
|
Transportation
equipment
|
|
|
165,665
|
|
|
|
192,330
|
|
|
|
5,931
|
|
|
Other
|
|
|
|
183,303
|
|
|
|
631,636
|
|
|
|
19,476
|
|
Furniture
and fixtures
|
|
|
2,951,547
|
|
|
|
3,250,435
|
|
|
|
100,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased
assets and leasehold improvements
|
|
|
1,042,889
|
|
|
|
571,940
|
|
|
|
17,636
|
|
|
Total
other liabilities
|
|
|
|
2,505,575
|
|
|
|
2,950,599
|
|
|
|
90,983
|
|
Total
cost
|
|
|
137,791,602
|
|
|
|
155,861,753
|
|
|
|
4,806,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
(71,608,252
|
)
|
|
|
(84,480,618
|
)
|
|
|
(2,605,014
|
)
|
|
Total
liabilities
|
|
|
|
59,914,117
|
|
|
|
62,637,562
|
|
|
|
1,931,470
|
|
|
|
|
66,183,350
|
|
|
|
71,381,135
|
|
|
|
2,201,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
in progress
|
|
|
3,678,333
|
|
|
|
3,442,925
|
|
|
|
106,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery
in transit and prepayments
|
|
|
3,682,071
|
|
|
|
6,964,269
|
|
|
|
214,747
|
|
|
EQUITY
ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT (Notes 2, 3 and
18
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
property, plant and equipment
|
|
|
73,543,754
|
|
|
|
81,788,329
|
|
|
|
2,521,996
|
|
|
Capital
stock - NT$10 par value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized
- 7,000,000 thousand shares in 2006 and 8,000,000 thousand shares in
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
- 4,592,509 thousand shares in 2006 and 5,447,559 thousand shares in
2007
|
|
|
|
45,925,086
|
|
|
|
54,475,589
|
|
|
|
1,679,790
|
|
Patents
(Note 2)
|
|
|
4,081
|
|
|
|
5,950
|
|
|
|
183
|
|
|
Capital
received in advance
|
|
|
|
384,428
|
|
|
|
491,883
|
|
|
|
15,168
|
|
Goodwill
(Notes 2, 3 and 12)
|
|
|
2,831,274
|
|
|
|
3,188,117
|
|
|
|
98,308
|
|
|
Capital
surplus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
pension cost (Notes 2 and 17)
|
|
|
13,265
|
|
|
|
52,058
|
|
|
|
1,605
|
|
|
Capital
in excess of par value
|
|
|
|
269,027
|
|
|
|
1,842,027
|
|
|
|
56,800
|
|
Land
use rights (Notes 2 and 25)
|
|
|
600,322
|
|
|
|
1,486,209
|
|
|
|
45,828
|
|
|
Treasury
stock transactions
|
|
|
|
16,768
|
|
|
|
288,713
|
|
|
|
8,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
investment
|
|
|
|
3,519,973
|
|
|
|
3,535,840
|
|
|
|
109,030
|
|
Total
intangible assets
|
|
|
3,448,942
|
|
|
|
4,732,334
|
|
|
|
145,924
|
|
|
Other
|
|
|
|
-
|
|
|
|
728,254
|
|
|
|
22,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
capital surplus
|
|
|
|
3,805,768
|
|
|
|
6,394,834
|
|
|
|
197,189
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
|
16,985,043
|
|
|
|
13,898,213
|
|
|
|
428,560
|
|
Idle
assets (Notes 2, 13 and 25)
|
|
|
51,212
|
|
|
|
751,974
|
|
|
|
23,188
|
|
|
Other
equity adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantee
deposits (Notes 23 and 25)
|
|
|
314,489
|
|
|
|
157,589
|
|
|
|
4,859
|
|
|
Unrealized
gain or loss on financial instruments
|
|
|
|
416,400
|
|
|
|
402,518
|
|
|
|
12,412
|
|
Deferred
charges, net (Note 2)
|
|
|
1,880,712
|
|
|
|
1,353,603
|
|
|
|
41,739
|
|
|
Cumulative
translation adjustments
|
|
|
|
1,330,651
|
|
|
|
2,179,808
|
|
|
|
67,215
|
|
Deferred
income tax assets, net (Notes 2 and 21)
|
|
|
2,512,421
|
|
|
|
1,461,402
|
|
|
|
45,063
|
|
|
Unrecognized
pension cost
|
|
|
|
(19,041
|
)
|
|
|
(6,516
|
)
|
|
|
(201
|
)
|
Restricted
assets (Notes 23 and 25)
|
|
|
336,463
|
|
|
|
279,068
|
|
|
|
8,605
|
|
|
Treasury
stock - 184,713 thousand shares in 2006 and 210,715 thousand shares in
2007
|
|
|
|
(2,808,436
|
)
|
|
|
(2,662,968
|
)
|
|
|
(82,114
|
)
|
Other
|
|
|
455,539
|
|
|
|
100,986
|
|
|
|
3,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other equity adjustments
|
|
|
|
(1,080,426
|
)
|
|
|
(87,158
|
)
|
|
|
(2,688
|
)
|
Total
other assets
|
|
|
5,550,836
|
|
|
|
4,104,622
|
|
|
|
126,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
equity attributable to shareholders of the parent
|
|
|
|
66,019,899
|
|
|
|
75,173,361
|
|
|
|
2,318,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MINORITY
INTEREST IN CONSOLIDATED SUBSIDIARIES
|
|
|
|
11,106,860
|
|
|
|
14,566,527
|
|
|
|
449,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
|
77,126,759
|
|
|
|
89,739,888
|
|
|
|
2,767,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
137,040,876
|
|
|
$
|
152,377,450
|
|
|
$
|
4,698,657
|
|
|
TOTAL
|
|
|
$
|
137,040,876
|
|
|
$
|
152,377,450
|
|
|
$
|
4,698,657
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
(With
Deloitte & Touche audit report dated April 10, 2008)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
(Amounts
in Thousands, Except Per Share Data)
|
|
Year
Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES (Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging
|
|
$
|
66,022,940
|
|
|
$
|
76,820,475
|
|
|
$
|
78,516,274
|
|
|
$
|
2,421,100
|
|
Testing
|
|
|
17,121,986
|
|
|
|
21,429,584
|
|
|
|
20,007,839
|
|
|
|
616,955
|
|
Other
|
|
|
890,872
|
|
|
|
2,173,588
|
|
|
|
2,638,956
|
|
|
|
81,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
net revenues
|
|
|
84,035,798
|
|
|
|
100,423,647
|
|
|
|
101,163,069
|
|
|
|
3,119,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUES (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging
|
|
|
55,894,282
|
|
|
|
57,539,702
|
|
|
|
57,926,623
|
|
|
|
1,786,205
|
|
Testing
|
|
|
12,688,893
|
|
|
|
12,701,354
|
|
|
|
12,404,933
|
|
|
|
382,514
|
|
Other
|
|
|
934,829
|
|
|
|
1,402,211
|
|
|
|
1,743,150
|
|
|
|
53,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
cost of revenues
|
|
|
69,518,004
|
|
|
|
71,643,267
|
|
|
|
72,074,706
|
|
|
|
2,222,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
14,517,794
|
|
|
|
28,780,380
|
|
|
|
29,088,363
|
|
|
|
896,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES (Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
2,785,432
|
|
|
|
2,632,036
|
|
|
|
3,284,088
|
|
|
|
101,266
|
|
Selling
|
|
|
1,100,023
|
|
|
|
1,320,646
|
|
|
|
1,068,614
|
|
|
|
32,951
|
|
General
and administrative
|
|
|
4,813,177
|
|
|
|
4,381,267
|
|
|
|
5,438,495
|
|
|
|
167,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
8,698,632
|
|
|
|
8,333,949
|
|
|
|
9,791,197
|
|
|
|
301,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
5,819,162
|
|
|
|
20,446,431
|
|
|
|
19,297,166
|
|
|
|
595,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-OPERATING
INCOME AND GAINS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income (Note 23)
|
|
|
173,325
|
|
|
|
406,364
|
|
|
|
348,660
|
|
|
|
10,751
|
|
Gain
on valuation of financial assets, net (Notes 3, 5 and 23)
|
|
|
-
|
|
|
|
29,278
|
|
|
|
205,997
|
|
|
|
6,352
|
|
Gain
on valuation of financial liabilities, net (Notes 5 and
23)
|
|
|
20,919
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Equity
in earnings of equity method investees (Notes 2, 3 and 10)
|
|
|
74,292
|
|
|
|
315,654
|
|
|
|
345,705
|
|
|
|
10,660
|
|
Foreign
exchange gain, net
|
|
|
154,275
|
|
|
|
92,819
|
|
|
|
403,532
|
|
|
|
12,443
|
|
Gain
on insurance settlement and impairment recovery (Note 29)
|
|
|
-
|
|
|
|
4,574,451
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
324,132
|
|
|
|
961,041
|
|
|
|
1,176,137
|
|
|
|
36,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-operating income and gains
|
|
|
746,943
|
|
|
|
6,379,607
|
|
|
|
2,480,031
|
|
|
|
76,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-OPERATING
EXPENSES AND LOSSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense (Notes 11 and 23)
|
|
|
1,571,058
|
|
|
|
1,620,294
|
|
|
|
1,574,524
|
|
|
|
48,551
|
|
Loss
on valuation of financial liabilities (Notes 5 and 23)
|
|
|
-
|
|
|
|
289,847
|
|
|
|
28,583
|
|
|
|
881
|
|
Loss
on inventory valuation and obsolescence
|
|
|
611,679
|
|
|
|
1,143,925
|
|
|
|
634,457
|
|
|
|
19,564
|
|
Impairment
loss (Notes 9 and 13)
|
|
|
-
|
|
|
|
-
|
|
|
|
994,682
|
|
|
|
30,672
|
|
Loss
on fire damage (Note 29)
|
|
|
8,838,079
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
(Note 7)
|
|
|
1,219,135
|
|
|
|
1,520,548
|
|
|
|
1,193,083
|
|
|
|
36,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-operating expenses and losses
|
|
|
12,239,951
|
|
|
|
4,574,614
|
|
|
|
4,425,329
|
|
|
|
136,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE INCOME TAX
|
|
|
(5,673,846
|
)
|
|
|
22,251,424
|
|
|
|
17,351,868
|
|
|
|
535,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAX BENEFIT (EXPENSE) (Notes 2 and 21)
|
|
|
118,656
|
|
|
|
(2,084,787
|
)
|
|
|
(3,357,384
|
)
|
|
|
(103,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
|
|
(5,555,190
|
)
|
|
|
20,166,637
|
|
|
|
13,994,484
|
|
|
|
431,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DISCONTINUED
OPERATIONS (Note 28)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations, net of income tax expense of NT$2,147
thousand
|
|
|
120,962
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gain
on disposal of discontinued operations, net of income tax expense of
NT$1,920 thousand
|
|
|
232,737
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
353,699
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Amounts
in Thousands, Except Per Share Data)
|
|
Year
Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES
|
|
$
|
(5,201,491
|
)
|
|
$
|
20,166,637
|
|
|
$
|
13,994,484
|
|
|
$
|
431,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES, NET OF INCOME TAX BENEFIT OF
NT$114,168 THOUSAND IN 2006 (Note 3)
|
|
|
-
|
|
|
|
(342,503
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$
|
(5,201,491
|
)
|
|
$
|
19,824,134
|
|
|
$
|
13,994,484
|
|
|
$
|
431,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATTRIBUTABLE
TO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders
of the parent
|
|
$
|
(4,691,187
|
)
|
|
$
|
17,416,151
|
|
|
$
|
12,165,249
|
|
|
$
|
375,123
|
|
Minority
interest
|
|
|
(510,304
|
)
|
|
|
2,407,983
|
|
|
|
1,829,235
|
|
|
|
56,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(5,201,491
|
)
|
|
$
|
19,824,134
|
|
|
$
|
13,994,484
|
|
|
$
|
431,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
(LOSS) PER SHARE (Note 22)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(1.13
|
)
|
|
|
3.73
|
|
|
|
2.64
|
|
|
|
0.08
|
|
Discontinued
operations
|
|
|
0.07
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
(0.09
|
)
|
|
|
-
|
|
|
|
-
|
|
Income
(loss) attributable to shareholders
of
the parent
|
|
|
(1.06
|
)
|
|
|
3.64
|
|
|
|
2.64
|
|
|
|
0.08
|
|
After
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(0.99
|
)
|
|
|
3.48
|
|
|
|
2.34
|
|
|
|
0.07
|
|
Discontinued
operations
|
|
|
0.07
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
(0.07
|
)
|
|
|
-
|
|
|
|
-
|
|
Income
(loss) attributable to shareholders
of
the parent
|
|
|
(0.92
|
)
|
|
|
3.41
|
|
|
|
2.34
|
|
|
|
0.07
|
|
Diluted
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(1.13
|
)
|
|
|
3.56
|
|
|
|
2.55
|
|
|
|
0.08
|
|
Discontinued
operations
|
|
|
0.07
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
(0.08
|
)
|
|
|
-
|
|
|
|
-
|
|
Income
(loss) attributable to shareholders
of
the parent
|
|
|
(1.06
|
)
|
|
|
3.48
|
|
|
|
2.55
|
|
|
|
0.08
|
|
After
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(0.99
|
)
|
|
|
3.31
|
|
|
|
2.26
|
|
|
|
0.07
|
|
Discontinued
operations
|
|
|
0.07
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
(0.06
|
)
|
|
|
-
|
|
|
|
-
|
|
Income
(loss) attributable to shareholders
of
the parent
|
|
|
(0.92
|
)
|
|
|
3.25
|
|
|
|
2.26
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
PER ADS (Note 22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
(loss) per ADS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(5.64
|
)
|
|
|
18.67
|
|
|
|
13.20
|
|
|
|
0.41
|
|
Discontinued
operations
|
|
|
0.35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
(0.45
|
)
|
|
|
-
|
|
|
|
-
|
|
Income
(loss) attributable to shareholders
of
the parent
|
|
|
(5.29
|
)
|
|
|
18.22
|
|
|
|
13.20
|
|
|
|
0.41
|
|
After
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(4.97
|
)
|
|
|
17.39
|
|
|
|
11.69
|
|
|
|
0.36
|
|
Discontinued
operations
|
|
|
0.35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
(0.34
|
)
|
|
|
-
|
|
|
|
-
|
|
Income
(loss) attributable to shareholders
of
the parent
|
|
|
(4.62
|
)
|
|
|
17.05
|
|
|
|
11.69
|
|
|
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Amounts
in Thousands, Except Per Share Data)
|
|
Year
Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
(Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per ADS
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(5.64
|
)
|
|
|
17.82
|
|
|
|
12.77
|
|
|
|
0.39
|
|
Discontinued
operations
|
|
|
0.35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
(0.42
|
)
|
|
|
-
|
|
|
|
-
|
|
Income
(loss) attributable to shareholders
of
the parent
|
|
|
(5.29
|
)
|
|
|
17.40
|
|
|
|
12.77
|
|
|
|
0.39
|
|
After
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(4.97
|
)
|
|
|
16.58
|
|
|
|
11.29
|
|
|
|
0.35
|
|
Discontinued
operations
|
|
|
0.35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
(0.32
|
)
|
|
|
-
|
|
|
|
-
|
|
Income
(loss) attributable to shareholders
of
the parent
|
|
|
(4.62
|
)
|
|
|
16.26
|
|
|
|
11.29
|
|
|
|
0.35
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
(With
Deloitte & Touche audit report dated April 10, 2008)
(Concluded)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
Retained
Earnings
(Accumulated
Deficit)
|
|
|
Other
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unappropriated
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
Gain
(Loss)
|
|
|
Cumulative
|
|
|
Unrecognized
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Capital
|
|
Received
|
|
|
Capital
|
|
|
Legal
|
|
|
(Accumulated
|
|
|
on
Financial
|
|
|
Translation
|
|
|
Pension
|
|
|
Treasury
|
|
|
Minority
|
|
|
Shareholders’
|
|
|
|
Stock
|
|
in
Advance
|
|
|
Surplus
|
|
|
Reserve
|
|
|
Deficit)
|
|
|
Instruments
|
|
|
Adjustments
|
|
|
Cost
|
|
|
Stock
|
|
|
Interest
|
|
|
Equity
|
|
New Taiwan
dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
JANUARY 1, 2005
|
|
$
|
41,000,000
|
|
$
|
42,759
|
|
|
$
|
6,972,656
|
|
|
$
|
1,325,944
|
|
|
$
|
4,250,388
|
|
|
$
|
(107,221
|
)
|
|
$
|
640,379
|
|
|
$
|
(4,710
|
)
|
|
$
|
(2,808,436
|
)
|
|
$
|
8,404,826
|
|
|
$
|
59,716,585
|
|
Appropriations
of 2004 earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal
reserve
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
420,969
|
|
|
|
(420,969
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Compensation
to directors and supervisors
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(75,720
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(75,720
|
)
|
Bonus
to employees - cash
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,536
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,536
|
)
|
Bonus
to employees - stock
|
|
|
255,675
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(255,675
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cash
dividends - 1%
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(411,221
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(411,221
|
)
|
Stock
dividends - 6.99%
|
|
|
2,878,548
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,878,548
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Capital
surplus transferred to common stock - 2.99%
|
|
|
1,233,663
|
|
|
-
|
|
|
|
(1,233,663
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjustment
of equity in subsidiaries
|
|
|
-
|
|
|
-
|
|
|
|
18,043
|
|
|
|
-
|
|
|
|
-
|
|
|
|
700
|
|
|
|
-
|
|
|
|
(12,711
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
6,032
|
|
Valuation
on derivative financial instruments
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,607
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,607
|
|
Stock
options exercised by employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
205,837
|
|
|
(42,759
|
)
|
|
|
159,256
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
322,334
|
|
Capital
received in advance
|
|
|
-
|
|
|
156,228
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
156,228
|
|
Net
loss in 2005
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,691,187
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(510,304
|
)
|
|
|
(5,201,491
|
)
|
Changes
in minority interest
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,466
|
|
|
|
7,466
|
|
Cumulative
translation adjustments
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
432,132
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
432,132
|
|
BALANCE,
DECEMBER 31, 2005
|
|
|
45,573,723
|
|
|
156,228
|
|
|
|
5,916,292
|
|
|
|
1,746,913
|
|
|
|
(4,492,468
|
)
|
|
|
(69,914
|
)
|
|
|
1,072,511
|
|
|
|
(17,421
|
)
|
|
|
(2,808,436
|
)
|
|
|
7,901,988
|
|
|
|
54,979,416
|
|
Effect
of adopting ROC SFAS No. 34
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(129,179
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(129,179
|
)
|
Offset
against deficit
|
|
|
-
|
|
|
-
|
|
|
|
(2,314,447
|
)
|
|
|
(1,746,913
|
)
|
|
|
4,061,360
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Unrealized
gain on available-for-sale financial assets
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,827
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,827
|
|
Valuation
on derivative financial instruments
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
129,179
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
129,179
|
|
Adjustment
of equity in subsidiaries
|
|
|
-
|
|
|
-
|
|
|
|
(65,104
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
469,487
|
|
|
|
-
|
|
|
|
(1,620
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
402,763
|
|
Stock
options exercised by employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
351,363
|
|
|
(156,228
|
)
|
|
|
269,027
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
464,162
|
|
Capital
received in advance
|
|
|
-
|
|
|
384,428
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
384,428
|
|
Net
income in 2006
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,416,151
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,407,983
|
|
|
|
19,824,134
|
|
Changes
in minority interest
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
796,889
|
|
|
|
796,889
|
|
Cumulative
translation adjustments
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
258,140
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
258,140
|
|
BALANCE,
DECEMBER 31, 2006
|
|
|
45,925,086
|
|
|
384,428
|
|
|
|
3,805,768
|
|
|
|
-
|
|
|
|
16,985,043
|
|
|
|
416,400
|
|
|
|
1,330,651
|
|
|
|
(19,041
|
)
|
|
|
(2,808,436
|
)
|
|
|
11,106,860
|
|
|
|
77,126,759
|
|
Appropriations
of 2006 earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal
reserve
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
1,698,504
|
|
|
|
(1,698,504
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Compensation
to directors and supervisors
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(300,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(300,000
|
)
|
Bonus
to employees - cash
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(535,028
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(535,028
|
)
|
Bonus
to employees - stock
|
|
|
535,029
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(535,029
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cash
dividends - 15%
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,941,011
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,941,011
|
)
|
Stock
dividends - 15%
|
|
|
6,941,011
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,941,011
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjustment
of equity in subsidiaries
|
|
|
-
|
|
|
-
|
|
|
|
15,867
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(15,069
|
)
|
|
|
-
|
|
|
|
12,525
|
|
|
|
145,468
|
|
|
|
-
|
|
|
|
158,791
|
|
Cash
dividends paid to subsidiaries
|
|
|
-
|
|
|
-
|
|
|
|
271,945
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
271,945
|
|
Unrealized
gain on available-for-sale financial assets
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,187
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,187
|
|
Stock
options exercised by employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
697,276
|
|
|
(384,428
|
)
|
|
|
649,392
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
962,240
|
|
Capital
received in advance
|
|
|
-
|
|
|
61,952
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61,952
|
|
Conversion
of convertible bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
377,187
|
|
|
-
|
|
|
|
923,608
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,300,795
|
|
Capital
received in advance
|
|
|
-
|
|
|
429,931
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
429,931
|
|
Capital
surplus from accrued interest on foreign convertible bonds
|
|
|
-
|
|
|
-
|
|
|
|
728,254
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
728,254
|
|
Net
income in 2007
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,165,249
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,829,235
|
|
|
|
13,994,484
|
|
Changes
in minority interest
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,630,432
|
|
|
|
1,630,432
|
|
Cumulative
translation adjustments
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
849,157
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
849,157
|
|
BALANCE,
DECEMBER 31, 2007
|
|
$
|
54,475,589
|
|
$
|
491,883
|
|
|
$
|
6,394,834
|
|
|
$
|
1,698,504
|
|
|
$
|
12,199,709
|
|
|
$
|
402,518
|
|
|
$
|
2,179,808
|
|
|
$
|
(6,516
|
)
|
|
$
|
(2,662,968
|
)
|
|
$
|
14,566,527
|
|
|
$
|
89,739,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
JANUARY 1, 2007
|
|
$
|
1,416,130
|
|
$
|
11,854
|
|
|
$
|
117,354
|
|
|
$
|
-
|
|
|
$
|
523,745
|
|
|
$
|
12,840
|
|
|
$
|
41,031
|
|
|
$
|
(587
|
)
|
|
$
|
(86,600
|
)
|
|
$
|
342,487
|
|
|
$
|
2,378,254
|
|
Appropriations
of 2006 earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal
reserve
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
52,374
|
|
|
|
(52,374
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Compensation
to directors and supervisors
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,252
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,252
|
)
|
Bonus
to employees - cash
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,498
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,498
|
)
|
Bonus
to employees - stock
|
|
|
16,498
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,498
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cash
dividends - 15%
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(214,030
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(214,030
|
)
|
Stock
dividends - 15%
|
|
|
214,030
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(214,030
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjustment
of equity in subsidiaries
|
|
|
-
|
|
|
-
|
|
|
|
489
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(465
|
)
|
|
|
-
|
|
|
|
386
|
|
|
|
4,486
|
|
|
|
-
|
|
|
|
4,896
|
|
Cash
dividends paid to subsidiaries
|
|
|
-
|
|
|
-
|
|
|
|
8,386
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,386
|
|
Unrealized
gain on available-for-sale financial assets
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37
|
|
Stock
options exercised by employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
21,501
|
|
|
(11,854
|
)
|
|
|
20,024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29,671
|
|
Capital
received in advance
|
|
|
-
|
|
|
1,911
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,911
|
|
Conversion
of convertible bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
11,631
|
|
|
-
|
|
|
|
28,480
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,111
|
|
Capital
received in advance
|
|
|
-
|
|
|
13,257
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,257
|
|
Capital
surplus from accrued interest on foreign convertible bonds
|
|
|
-
|
|
|
-
|
|
|
|
22,456
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,456
|
|
Net
income in 2007
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
375,123
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,406
|
|
|
|
431,529
|
|
Changes
in minority interest
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,275
|
|
|
|
50,275
|
|
Cumulative
translation adjustments
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,184
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,184
|
|
BALANCE,
DECEMBER 31, 2007
|
|
$
|
1,679,790
|
|
$
|
15,168
|
|
|
$
|
197,189
|
|
|
$
|
52,374
|
|
|
$
|
376,186
|
|
|
$
|
12,412
|
|
|
$
|
67,215
|
|
|
$
|
(201
|
)
|
|
$
|
(82,114
|
)
|
|
$
|
449,168
|
|
|
$
|
2,767,187
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
(With
Deloitte & Touche audit report dated April 10, 2008)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
|
|
Year
Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(5,201,491
|
)
|
|
$
|
19,824,134
|
|
|
$
|
13,994,484
|
|
|
$
|
431,529
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
342,503
|
|
|
|
-
|
|
|
|
-
|
|
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
13,990,219
|
|
|
|
13,488,180
|
|
|
|
15,558,722
|
|
|
|
479,763
|
|
Amortization
|
|
|
1,042,560
|
|
|
|
1,000,031
|
|
|
|
1,067,430
|
|
|
|
32,915
|
|
Equity
in earnings of equity method investees, net of cash dividends
received
|
|
|
(74,292
|
)
|
|
|
(222,847
|
)
|
|
|
(191,188
|
)
|
|
|
(5,895
|
)
|
Impairment
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
994,682
|
|
|
|
30,672
|
|
Accrued
interest on foreign convertible bonds
|
|
|
241,394
|
|
|
|
247,155
|
|
|
|
177,111
|
|
|
|
5,461
|
|
Provision
for inventory valuation and obsolescence
|
|
|
611,679
|
|
|
|
1,143,925
|
|
|
|
634,457
|
|
|
|
19,564
|
|
Loss
on fire damage (gain on insurance settlement and impairment
recovery)
|
|
|
8,212,780
|
|
|
|
(4,574,451
|
)
|
|
|
-
|
|
|
|
-
|
|
Deferred
income taxes
|
|
|
(481,310
|
)
|
|
|
481,919
|
|
|
|
2,029,567
|
|
|
|
62,583
|
|
Amortization
of goodwill
|
|
|
528,943
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
620,280
|
|
|
|
200,936
|
|
|
|
(119,654
|
)
|
|
|
(3,690
|
)
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
assets for trading
|
|
|
(1,782,863
|
)
|
|
|
2,773,501
|
|
|
|
(44,091
|
)
|
|
|
(1,360
|
)
|
Notes
and accounts receivable
|
|
|
(2,024,569
|
)
|
|
|
4,192,941
|
|
|
|
(5,441,054
|
)
|
|
|
(167,778
|
)
|
Other
receivable
|
|
|
(621,283
|
)
|
|
|
573,125
|
|
|
|
(95,286
|
)
|
|
|
(2,938
|
)
|
Inventories
|
|
|
87,290
|
|
|
|
1,363,885
|
|
|
|
(317,620
|
)
|
|
|
(9,794
|
)
|
Other
current assets
|
|
|
100,859
|
|
|
|
(228,740
|
)
|
|
|
88,894
|
|
|
|
2,741
|
|
Financial
liabilities for trading
|
|
|
(80,852
|
)
|
|
|
(436,667
|
)
|
|
|
(308,252
|
)
|
|
|
(9,505
|
)
|
Notes
and accounts payable
|
|
|
3,134,747
|
|
|
|
(3,679,883
|
)
|
|
|
661,423
|
|
|
|
20,395
|
|
Income
tax payable
|
|
|
(249,958
|
)
|
|
|
1,294,249
|
|
|
|
(94,783
|
)
|
|
|
(2,923
|
)
|
Accrued
expenses and other current liabilities
|
|
|
705,200
|
|
|
|
(522,403
|
)
|
|
|
(268,766
|
)
|
|
|
(8,288
|
)
|
Other
liabilities
|
|
|
(8,246
|
)
|
|
|
28,526
|
|
|
|
(19,298
|
)
|
|
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
18,751,087
|
|
|
|
37,290,019
|
|
|
|
28,306,778
|
|
|
|
872,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of property, plant and equipment
|
|
|
(15,611,549
|
)
|
|
|
(17,764,237
|
)
|
|
|
(17,190,432
|
)
|
|
|
(530,078
|
)
|
Proceeds
from disposal of property, plant and equipment
|
|
|
1,119,132
|
|
|
|
413,540
|
|
|
|
347,470
|
|
|
|
10,714
|
|
Acquisition
of available-for-sale financial assets
|
|
|
(795,770
|
)
|
|
|
(16,652,840
|
)
|
|
|
(11,768,642
|
)
|
|
|
(362,894
|
)
|
Proceeds
from disposal of available-for-sale financial assets
|
|
|
1,503,175
|
|
|
|
7,518,738
|
|
|
|
11,825,157
|
|
|
|
364,636
|
|
Acquisition
of financial assets carried at cost
|
|
|
-
|
|
|
|
(320,881
|
)
|
|
|
(17,970
|
)
|
|
|
(554
|
)
|
Proceeds
from disposal of financial assets carried at cost
|
|
|
21,465
|
|
|
|
-
|
|
|
|
910,307
|
|
|
|
28,070
|
|
Acquisition
of subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
(846,889
|
)
|
|
|
(26,114
|
)
|
Acquisition
of equity method investments
|
|
|
(104,738
|
)
|
|
|
(309
|
)
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from return of capital by equity method investments
|
|
|
60,706
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Decrease
in guaranteed deposits
|
|
|
-
|
|
|
|
-
|
|
|
|
147,399
|
|
|
|
4,545
|
|
Proceeds
from insurance claims
|
|
|
2,300,000
|
|
|
|
5,768,000
|
|
|
|
-
|
|
|
|
-
|
|
Decrease
(increase) in restricted assets
|
|
|
(4,198
|
)
|
|
|
(69,326
|
)
|
|
|
57,395
|
|
|
|
1,770
|
|
Increase
in other assets
|
|
|
(598,680
|
)
|
|
|
(815,006
|
)
|
|
|
(894,892
|
)
|
|
|
(27,594
|
)
|
Proceeds
from disposal of discontinued operations
|
|
|
566,411
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Acquisition
of land use rights
|
|
|
(87,912
|
)
|
|
|
(182,187
|
)
|
|
|
(677,264
|
)
|
|
|
(20,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(11,631,958
|
)
|
|
|
(22,104,508
|
)
|
|
|
(18,108,361
|
)
|
|
|
(558,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from (repayments of):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
3,638,444
|
|
|
|
(2,216,799
|
)
|
|
|
3,784,091
|
|
|
|
116,685
|
|
Short-term
bills payable
|
|
|
(908,816
|
)
|
|
|
-
|
|
|
|
149,831
|
|
|
|
4,620
|
|
(Continued)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Year
Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
convertible bonds
|
|
$
|
(502,748
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Proceeds
from long-term debts
|
|
|
24,514,627
|
|
|
|
16,148,800
|
|
|
|
3,072,061
|
|
|
|
94,729
|
|
Repayments
of long-term debts and capital lease obligations
|
|
|
(27,736,492
|
)
|
|
|
(29,894,517
|
)
|
|
|
(7,711,576
|
)
|
|
|
(237,791
|
)
|
Increase
(decrease) in guarantee deposits received
|
|
|
-
|
|
|
|
261,754
|
|
|
|
(212,271
|
)
|
|
|
(6,546
|
)
|
Increase
(decrease) in collection of accounts receivable sold
|
|
|
887,354
|
|
|
|
1,491,110
|
|
|
|
(2,378,464
|
)
|
|
|
(73,341
|
)
|
Proceeds
from exercise of stock options by employees
|
|
|
478,562
|
|
|
|
848,590
|
|
|
|
1,024,192
|
|
|
|
31,582
|
|
Compensation
to directors and supervisors and bonus to employees
|
|
|
(75,720
|
)
|
|
|
(9,536
|
)
|
|
|
(835,028
|
)
|
|
|
(25,750
|
)
|
Cash
dividends
|
|
|
(394,453
|
)
|
|
|
-
|
|
|
|
(6,941,011
|
)
|
|
|
(214,030
|
)
|
Increase
in minority interest
|
|
|
7,466
|
|
|
|
809,544
|
|
|
|
1,559,288
|
|
|
|
48,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
(91,776
|
)
|
|
|
(12,561,054
|
)
|
|
|
(8,488,887
|
)
|
|
|
(261,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE CHANGES
|
|
|
261,332
|
|
|
|
(162,734
|
)
|
|
|
(281,670
|
)
|
|
|
(8,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF FIRST INCLUSION FOR CONSOLIDATION OF A SUBSIDIARY
|
|
|
-
|
|
|
|
4,564
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH
|
|
|
7,288,685
|
|
|
|
2,466,287
|
|
|
|
1,427,860
|
|
|
|
44,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH,
BEGINNING OF YEAR
|
|
|
5,975,103
|
|
|
|
13,263,788
|
|
|
|
15,730,075
|
|
|
|
485,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH,
END OF YEAR
|
|
$
|
13,263,788
|
|
|
$
|
15,730,075
|
|
|
$
|
17,157,935
|
|
|
$
|
529,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid (excluding capitalized interest)
|
|
$
|
1,759,546
|
|
|
$
|
1,689,075
|
|
|
$
|
1,605,936
|
|
|
$
|
49,520
|
|
Income
tax paid
|
|
$
|
612,612
|
|
|
$
|
308,619
|
|
|
$
|
1,604,529
|
|
|
$
|
49,477
|
|
Cash
paid for acquisition of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of property, plant and equipment
|
|
$
|
(12,957,405
|
)
|
|
$
|
(17,730,935
|
)
|
|
$
|
(18,172,155
|
)
|
|
$
|
(560,350
|
)
|
Increase
(decrease) in payable
|
|
|
(2,891,017
|
)
|
|
|
(444,718
|
)
|
|
|
973,359
|
|
|
|
30,014
|
|
Increase
in capital lease obligations
|
|
|
236,873
|
|
|
|
411,416
|
|
|
|
8,364
|
|
|
|
258
|
|
|
|
$
|
(15,611,549
|
)
|
|
$
|
(17,764,237
|
)
|
|
$
|
(17,190,432
|
)
|
|
$
|
(530,078
|
)
|
Cash
received from disposal of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from disposal of property, plant and equipment
|
|
$
|
1,119,132
|
|
|
$
|
637,541
|
|
|
$
|
259,924
|
|
|
$
|
8,015
|
|
Decrease
(increase) in other receivables
|
|
|
-
|
|
|
|
(224,001
|
)
|
|
|
87,546
|
|
|
|
2,699
|
|
|
|
$
|
1,119,132
|
|
|
$
|
413,540
|
|
|
$
|
347,470
|
|
|
$
|
10,714
|
|
Cash
received from disposal of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
price
|
|
$
|
625,559
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Increase
in receivable
|
|
|
(59,148
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
566,411
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash
paid for acquisition of subsidiaries (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of assets acquired from Top Master Enterprises Limited
(“TME”)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,588,859
|
|
|
$
|
264,843
|
|
Less: Fair
value of liabilities from TME
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,633,099
|
)
|
|
|
(204,536
|
)
|
Net
fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
1,955,760
|
|
|
|
60,307
|
|
Less: Cash
received at acquisition
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,180,780
|
)
|
|
|
(36,410
|
)
|
Net
cash outflow
|
|
|
-
|
|
|
|
-
|
|
|
|
774,980
|
|
|
|
23,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of assets acquired from ASEN Semiconductors Co., Ltd.
(“ASEN”)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,655,886
|
|
|
|
51,060
|
|
Less: Fair
value of liabilities from ASEN
|
|
|
-
|
|
|
|
-
|
|
|
|
(461,144
|
)
|
|
|
(14,220
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,194,742
|
|
|
|
36,840
|
|
Allocated
to minority interest
|
|
|
-
|
|
|
|
-
|
|
|
|
(489,134
|
)
|
|
|
(15,083
|
)
|
(Continued)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Year
Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
fair value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
705,608
|
|
|
$
|
21,757
|
|
Less: Cash
received at acquisition
|
|
|
-
|
|
|
|
-
|
|
|
|
(633,699
|
)
|
|
|
(19,540
|
)
|
Net
cash outflow
|
|
|
-
|
|
|
|
-
|
|
|
|
71,909
|
|
|
|
2,217
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
846,889
|
|
|
$
|
26,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES NOT AFFECTING CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds
converted to capital stock
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,730,726
|
|
|
$
|
53,368
|
|
Current
portion of long-term bank loans
|
|
|
5,232,529
|
|
|
|
1,292,040
|
|
|
|
5,258,946
|
|
|
|
162,163
|
|
Current
portion of bonds payable
|
|
|
-
|
|
|
|
3,798,233
|
|
|
|
1,375,000
|
|
|
|
42,399
|
|
Current
portion of capital lease obligations
|
|
|
205,662
|
|
|
|
540,736
|
|
|
|
67,838
|
|
|
|
2,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,438,191
|
|
|
$
|
5,631,009
|
|
|
$
|
8,432,510
|
|
|
$
|
260,022
|
|
SUPPLEMENTAL
DISCLOSURES
The effect
of first inclusion for consolidation of a subsidiary, Shanghai Ding Hui Real
Estate Development Co., Ltd., was as follows:
|
|
December
31,
2005
|
|
|
|
NT$
|
|
Cash
|
|
$
|
4,564
|
|
Others
|
|
|
76,874
|
|
Total
assets
|
|
|
81,438
|
|
Liabilities
|
|
|
-
|
|
Total
shareholders’ equity
|
|
$
|
81,438
|
|
|
|
|
|
|
Equity
attributable to:
|
|
|
|
|
Minority
interest in consolidated subsidiaries
|
|
$
|
8,145
|
|
Shareholders
of the parent
|
|
|
73,293
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
(With
Deloitte & Touche audit report dated April 10, 2008)
(Concluded)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
DECEMBER
31, 2005, 2006 AND 2007
(Amounts
in Thousands, Except Per Share Data and Unless Otherwise
Stated)
1.
HISTORY AND
ORGANIZATION
Advanced
Semiconductor Engineering, Inc. (“ASE Inc. or including its subsidiaries,
collectively the “Company”), a corporation incorporated under the laws of
Republic of China (the “ROC”), is an independent provider of semiconductor
packaging and testing services and offers a comprehensive range of advanced IC
packaging and testing service. The common shares of ASE Inc. are
traded on the Taiwan Stock Exchange under the symbol “2311”. Since
September 2000, the common shares of ASE Inc. have been traded on the New York
Stock Exchange under the symbol “ASX” in the form of American depositary shares
(“ADS”). The Company and its affiliates are together referred to as
the “ASE Group”.
As of
December 31, 2006 and 2007, the Company had approximately 27,000 and 30,000
employees, respectively.
Set forth
is a brief overview of the Company’s organizational
structure.
|
a.
|
Wholly-owned
subsidiaries as of December 31,
2007:
|
|
1)
|
ASE
Holding Limited (incorporated in Bermuda in April 1990), which holds
shares in ASE Group companies;
|
|
2)
|
ASE
Marketing Services Ltd. (incorporated in Hong Kong in February 1991),
which is engaged in trading activities. ASE Marketing Services
Ltd. was dissolved in July 2007;
|
|
3)
|
J&R
Holding Limited (incorporated in Bermuda in December 1995), which holds
shares in ASE Group companies;
|
|
4)
|
ASE
Marketing & Service Japan Co., Ltd. (incorporated in Japan in November
2003), which is engaged in marketing and provides sales services in the
packaging and testing markets; and
|
|
5)
|
Innosource
Limited (“Innosource”), which is a holding company incorporated in the
British Virgin Islands in June 2001 and through which the Company invested
in ASE (Kun Shan) Inc. and ASE Module (Shanghai) Inc. Due to an
organizational restructuring, the Company transferred its shareholding in
ASE (Kun Shan) from Innosource to Omniquest Industrial Limited
(“Omniquest”), a subsidiary of ASE Inc. through direct and indirect
ownership, and invested an additional US$30,000 thousand in Omniquest in
August 2006. As of December 31, 2007, Innosource held a 20%
ownership interest in Omniquest.
|
|
b.
|
As
of December 31, 2007, the Company held more than 50% ownership interest in
the following subsidiaries:
|
|
1)
|
99.5%
ownership interest in ASE Technologies, Inc. (incorporated in the ROC in
June 1991), which is engaged in the research and development, manufacture
and sales of computers and related accessories. ASE
Technologies, Inc. is in the process of
liquidation;
|
|
2)
|
90.0%
ownership interest in ASE Network Inc. (incorporated in the ROC in January
2000), which is engaged in investing activities. ASE Network
Inc. is in the process of liquidation and returned NT$808,110 thousand
(US$24,919 thousand) to ASE Inc in 2007;
and
|
|
3)
|
65.6%
direct ownership interest in Omniquest, which the other 20.0% and 14.4%
held through Innosource and J&R Holding Limited,
respectively. Omniquest invested in ASE (Shanghai) Inc. (“ASE
Shanghai”) and ASE High-Tech (Shanghai) Inc. in September 1990 and
February 2006, respectively. As a result of an investment
restructuring, the Company made new investments in ASE Corporation
(incorporated in the British Cayman Islands in August 2006 and has two
wholly-owned subsidiaries, ASE Mauritius Inc. and ASE Labuan Inc.) through
Omniquest. The Company then transferred the shareholding in ASE
Shanghai, ASE (Kun Shan) Inc. and ASE High-Tech (Shanghai) Inc. from
Omniquest to ASE Mauritius
Inc.
|
ASE
Shanghai held a 90% ownership interest in Shanghai Ding Hui Real Estate
Development Co., Ltd.
In March
2006, ASE Inc. established ASE Electronics Inc. (“ASE Electronics”) in ASE
Electronics is engaged in the production of substrates. In June 2006,
the shareholders’ meeting of ASE Inc. resolved to spin off its material
operation and transfer the related assets and liabilities to ASE
Electronics. Further, in order to streamline global strategy and
financial planning, ASE Inc. transferred its ownership of ASE Electronics to ASE
Labuan Inc.
|
c.
|
ASE
Holding Limited has the following wholly-owned or majority-owned
subsidiaries:
|
|
1)
|
ASEP
Realty Corporation (incorporated in the Philippines in December 1995),
which is in the process of
liquidation;
|
|
2)
|
ASE
Holding Electronics (Philippines), Incorporated (incorporated in the
Philippines in December 1995), which manufactures electronic products,
components and semiconductors, and is in the process of liquidation;
and
|
|
|
|
|
3)
|
70.0%
ownership interest in ASE Investment (Labuan) Inc. (incorporated in
Malaysia in June 1999). ASE Investment (Labuan) Inc. holds
shares in ASE Korea Inc. (“ASE Korea”) (incorporated in Korea in 1999),
which engages in the packaging and testing of
semiconductors. In addition, ASE Test Limited owns the
remaining 30.0% ownership interest in ASE Investment (Labuan)
Inc.
|
A portion
of the share capital of the subsidiaries incorporated in the Philippines is held
by certain Filipino individuals, on behalf of the Company, in order to comply
with Philippine legal requirements.
|
d.
|
J&R
Holding Limited (“J&R”) has the following wholly-owned or
majority-owned subsidiaries:
|
|
1)
|
100.0%
ownership interest in J&R Industrial Inc. (incorporated in the ROC in
April 1999), which is mainly engaged in the leasing of substrate,
packaging and testing equipment to ASE Group companies. J&R
Industrial Inc. reduced its capital and returned NT$2,953,000 thousand to
J&R in June 2006;
|
|
2)
|
100.0%
ownership interest in Grand Innovation Co., Ltd. (incorporated in the
British Virgin Islands in March 2001), which is engaged in investing
activities;
|
|
|
|
|
3)
|
39.3%
ownership interest in ASE Test Limited (“ASE Test”) (incorporated in
Singapore in May 1996), which holds shares in ASE Group
companies. ASE Holding Limited holds another 11.0% ownership
interest in ASE Test. Since June 1996, shares of ASE Test have
been traded on the NASDAQ National Market in the United States under the
symbol “ASTSF”. In addition, J&R offered part of its shares
in ASE Test in the form in Taiwan Depositary Receipts (“TDR”), which are
traded on the Taiwan Stock Exchange under the symbol
“9101”;
|
On
September 4, 2007, ASE Inc. entered into a scheme implementation agreement (the
“Scheme Implementation Agreement”) with ASE Test, pursuant to which ASE Inc.
agreed to acquire the outstanding ordinary shares (including those represented
by TDRs) of ASE Test other than those held by the Company. The
proposed acquisition will be effected by way of a scheme of arrangement under
Section 210 of the Companies Act, Chapter 50 of Singapore (the
“Scheme”). According to the terms of the Scheme Implementation
Agreement, upon the effectiveness of the Scheme, the ordinary shares of ASE Test
listed on NASDAQ (the “ASE Test NASDAQ Shares”) will be acquired by ASE Inc. for
US $14.78 per share in cash, and the TDRs will be acquired by ASE Inc. for the
New Taiwan dollar equivalent of US $0.185 per TDR in cash (based on the
prevailing exchange rate) (such consideration referred to herein as “Scheme
Consideration”). If the Scheme becomes effective, ASE Test will
become an indirect wholly-owned subsidiary of ASE Inc., and ASE Test NASDAQ
Shares and TDRs will be delisted from NASDAQ and the Taiwan Stock Exchange,
respectively. As of April 10, 2008, the acquisition is still in
progress.
|
4)
|
100%
ownership interest in ASE Japan Co., Ltd. (“ASE Japan”) (incorporated in
Japan in May 2004), which is engaged in the packaging and testing of
integrated circuit;
|
|
5)
|
100%
ownership interest in ASE (U.S.) Inc. (incorporated in the USA in December
1983), which is engaged in marketing and provides sales services relating
to packaging and testing;
|
|
6)
|
58.9%
ownership interest in PowerASE Technology Holding Limited (“PowerASE
Limited”) (incorporated in the British Cayman Islands in December 2006),
which is a holding company that invested in PowerASE Technology Inc.
(incorporated in the ROC in June 2006). ASE Inc. and J&R
Holding Limited together had a 60% and 56% ownership interest in PowerASE
Technology Inc. as of December 31, 2006 and 2007,
respectively. PowerASE Technology Inc. is engaged in the
packaging and testing of memory integrated
circuit;
|
|
7)
|
100%
ownership interest in Top Master Enterprises Limited (“TME”) (incorporated
in the British Virgin Islands in November 2005), which is a holding
company and holds 100% ownership interest in Global Advanced Packaging
Technology Limited (“GAPT – Cayman”) (incorporated in the British Cayman
Islands in October 1990). GAPT – Cayman holds shares in ASE
Group companies. In order to streamline the structure, TME was merged with
J&R in December 2007. TME is in the process of
liquidation.
|
Fair
values of assets and liabilities of TME and its subsidiaries as of the
acquisition date were as follows:
|
|
NT$
|
|
|
|
|
|
Cash
|
|
$
|
1,180,780
|
|
Accounts
receivable
|
|
|
1,446,989
|
|
Inventories
|
|
|
213,162
|
|
Property,
plant and equipment
|
|
|
5,061,048
|
|
Land
use right
|
|
|
153,087
|
|
Goodwill
|
|
|
365,366
|
|
Other
assets
|
|
|
168,427
|
|
Short-term
borrowings
|
|
|
(2,270,101
|
)
|
Accounts
payable
|
|
|
(933,440
|
)
|
Long-term
bank loans
|
|
|
(2,384,342
|
)
|
Other
liabilities
|
|
|
(1,045,216
|
)
|
|
|
$
|
1,955,760
|
|
|
8)
|
60%
ownership interest in Suzhou ASEN Semiconductors Co., Ltd (“ASEN”)
(formerly Suzhou NXP Semiconductors, incorporated in China in May 2001),
which is engaged in the packaging and testing of
semiconductors. In September 2007, J&R paid NT$705,608
thousand (US$21,600 thousand) to acquire a 60% ownership interest in ASEN
from Holland NXP B.V.
|
Fair
values of assets and liabilities of ASEN as of the acquisition date were as
follows:
|
|
NT$
|
|
|
|
|
|
Cash
|
|
$
|
633,699
|
|
Accounts
receivable
|
|
|
366,320
|
|
Inventories
|
|
|
26,539
|
|
Property,
plant and equipment
|
|
|
626,104
|
|
Other
assets
|
|
|
3,224
|
|
Accounts
payable
|
|
|
(314,324
|
)
|
Payable
for properties
|
|
|
(81,694
|
)
|
Other
liabilities
|
|
|
(65,126
|
)
|
|
|
|
1,194,742
|
|
Minority
interest
|
|
|
(489,134
|
)
|
|
|
$
|
705,608
|
|
|
e.
|
ASE
Test has four direct subsidiaries:
|
|
1)
|
ASE
Test, Inc. (incorporated in the ROC in December 1987 and wholly-owned by
ASE Test), which is engaged in the testing of
semiconductors;
|
|
2)
|
ASE
Holdings (Singapore) Pte Ltd. (incorporated in Singapore in December
1994), which is engaged in investing
activities;
|
|
3)
|
ASE
Test Holdings, Limited (“ASE Test Holdings”) (incorporated in the Cayman
Islands in April 1999), which is engaged in investing activities;
and
|
|
4)
|
ASE
Test Finance Limited (“ASE Test Finance”) (incorporated in Mauritius in
June 1999), which is engaged in financing
activities.
|
ASE
Holding (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 (Note
28).
ASE Test
Holdings has a wholly-owned subsidiary, ISE Labs, Inc. (“ISE Labs”)
(incorporated in California, U.S.A. in November 1983). ISE Labs 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.
|
f.
|
GAPT
– Cayman has two subsidiaries:
|
|
1)
|
100%
ownership interest in ASE Assembly & Test (Shanghai) Limited (“ASESH
AT”) (formerly Global Advanced Packaging Technology Limited, incorporated
in Shanghai in 1990), which is engaged in the packaging and testing of
semiconductors, and holds a 100% ownership interest in Wei Yu Hong Xin
Semiconductors Inc. (“Wei Yu Hong Xin”). As of December 31,
2007, Wei Yu Hong Xin was in the development stage;
and
|
|
2)
|
100%
ownership interest in ASE Assembly & Test (H.K.) Limited (formerly
Global Advanced Packaging Technology (H.K.) Limited, incorporated in Hong
Kong in September 2001), which is a holding company that holds a 100%
ownership interest in Global Advanced Packaging Technology North America
Inc., which is engaged in customer service and is in the process of
liquidation.
|
2.
SIGNIFICANT ACCOUNTING
POLICIES
The
accompanying consolidated financial statements have been prepared in conformity
with the Guidelines Governing the Preparation of Financial Reports by Securities
Issuers, 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,
sales discounts and inventory valuations, depreciation of property, plant, and
equipment, losses on impairment of assets, pension expenses, gains or losses on
valuation of financial instruments and valuation allowances for deferred income
tax assets. Actual results may differ from these
estimates. Significant accounting policies are summarized as
follows:
The
Company prepares its consolidated financial statements pursuant to ROC GAAP with
reconciliation to accounting principles generally accepted in the United States
of America (“U.S. GAAP”) (Note 31). The accompanying consolidated
balance sheets are presented as of December 31, 2006 and 2007, and the
accompanying consolidated statements of operations, changes in shareholders’
equity and cash flows are presented for each of the three years in the period
ended December 31, 2007.
The
consolidated financial statements include the accounts of ASE Inc. and all of
the aforementioned subsidiaries. All significant intercompany
accounts and transactions are eliminated upon consolidation.
Current
and Noncurrent Assets and Liabilities
Current
assets include cash and those assets held primarily for trading purposes or to
be realized, sold or consumed within one year from the balance sheet
date. Current liabilities are obligations incurred for trading
purposes or to be settled within one year from the balance sheet
date. Assets and liabilities that are not classified as current are
classified as noncurrent assets and liabilities,
respectively.
Financial
Assets/Liabilities at Fair Value through Profit or Loss
Financial
instruments classified as financial assets or financial liabilities at fair
value through profit or loss (“FVTPL”) include financial assets or financial
liabilities held for trading. The Company recognizes a financial
asset or financial liability on its balance sheet when the Company becomes a
party to the contractual provisions of the financial instrument. A
financial asset is derecognized when the Company has lost control of its
contractual rights over the financial asset. A financial liability is
derecognized when the obligation specified in the relevant contract is
discharged, cancelled or expired.
Financial
instruments at FVTPL are initially measured at fair
value. Transaction costs directly attributable to the acquisition of
financial assets at FVTPL are recognized immediately in profit or
loss. At each balance sheet date subsequent to initial recognition,
financial assets or financial liabilities at FVTPL are remeasured at fair value,
with changes in fair value recognized directly in profit or loss in the year in
which they arise. On derecognition of a financial asset or a
financial liability, the difference between its carrying amount and the sum of
the consideration received and receivable or consideration paid and payable is
recognized in profit or loss. A regular way purchase or sale of
financial assets is recognized and derecognized on a settlement date
basis.
A
derivative that does not qualify for hedge accounting is classified as a
financial asset or a financial liability held for trading. If the
fair value of the derivative is positive, the derivative is recognized as a
financial asset; otherwise, the derivative is recognized as a financial
liability.
Fair
values of open-ended mutual funds and derivatives with no quoted price in an
active market are estimated using the net asset value and valuation techniques,
respectively.
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
recognized and derecognized on a settlement date basis.
The
recognition and derecognition bases of available-for-sale financial assets are
similar to those of financial assets at FVTPL.
Fair
values 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 an 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, Allowance for Doubtful Accounts and Allowance for Sales
Discounts
Revenues
from semiconductor packaging and 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, the 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
or receivable.
An
allowance for doubtful accounts is provided based on an evaluation of the
collectibility of receivables. The Company determines the amount of
the 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 allowance for sales discounts is recognized based on
historical experience in the same period sales are
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 the 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 the disposal of financial
assets.
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, work in process,
finished goods, supplies in transit and construction in progress are stated at
the lower of cost or market value. Market value represents net
realizable value for finished goods, work in process and construction in
progress, and replacement costs for raw materials, supplies and spare
parts.
Raw
materials, supplies and spare parts are recorded at moving average cost; work in
process and finished goods are recorded at standard cost and adjusted to the
approximate weighted average cost at the balance sheet
date. Estimated losses on obsolescence and slow-moving items are
recognized and included in the allowance for losses.
Construction
in progress for the Company’s real estate developer is accounted for using the
completed-contract method.
Held-to-maturity
Financial Assets
Held-to-maturity
financial assets are carried at amortized cost using the effective interest
method. Those financial assets are initially measured at fair value
plus transaction costs that are directly attributable to the
acquisition. Gains or losses are recognized when the financial assets
are derecognized, impaired or amortized.
If certain
objective evidence indicates that a held-to-maturity financial asset is
impaired, a loss is recognized currently. If, in a subsequent period,
the amount of the impairment loss decreases and the decrease is clearly
attributable to an event which occurred after the impairment loss was
recognized, the previously recognized impairment loss is reversed to the extent
of the decrease. The reversal may not result in a carrying amount
that exceeds the amortized cost that would have been determined as if no
impairment loss had been recognized.
Financial
Assets Carried at Cost
Investments,
such as non-publicly traded stocks 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. If certain objective evidence indicates that
such a financial asset is impaired, a loss is recognized. A
subsequent reversal of such impairment loss is not allowed.
Cash
dividends are recognized as investment income on the declaration
date. Stock dividends which are not recognized as investment income
are recorded as an increase in the number of shares held and the cost per share
is recalculated based on the new total number of shares.
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
companies’ operating and financial policy decisions are accounted for using the
equity method. Prior to January 1, 2006, the difference between the
acquisition cost and the Company’s proportionate share in the investee’s equity
was amortized by the straight-line method over 10 years. Effective
January 1, 2006, pursuant to the revised ROC SFAS No. 5, “Long-term Investments
under Equity Securities” (“ROC SFAS No. 5”), the acquisition cost is analyzed,
and the acquisition cost in excess of the Company’s share of the fair value of
the identifiable net assets acquired is recognized as goodwill. Such
goodwill is not amortized but instead is tested for impairment annually or
whenever there are indications that the investments are
impaired.
When the
Company subscribes for additional investees’ shares at a percentage different
from its existing ownership percentage, the resulting carrying amount of the
investment in the investees differs from the
amount of
the Company’s share in the investee’s net equity. The Company records
such a difference as an adjustment to equity method investments with the
corresponding amount charged or credited to capital surplus.
Gains or
losses on sales between the Company and equity method investees are deferred in
proportion to the Company’s ownership percentage in the investees until such
gains or losses are realized through transactions with third
parties. Gains or losses on sales between equity method investees are
deferred in proportion to the product of the Company’s ownership percentages in
the investees until they are realized through transactions with third
parties.
At the
balance sheet date, the Company tests investments for
impairment. When an impairment is identified, the carrying amount of
the investments is reduced, with the related impairment loss recognized in
earnings.
Property,
Plant and Equipment
Property,
plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment. Equipment held under capital leases is
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 equipment
at the inception of the lease. Machinery in transit, construction in
progress and prepayments 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 overhaul and improvements are capitalized, while
maintenance and repairs are expensed as incurred.
Depreciation
is computed using the straight-line method over estimated service life, which
ranges as follows: buildings and improvements, 3 to 55 years;
machinery and equipment, 1 to 10 years; furniture and fixtures, 2 to 15 years;
transportation equipment, 1 to 10 years; and leased assets and leasehold
improvements, 3 to 5 years. In the event that an asset which has been
depreciated to its residual value is still in service, its residual value is
further depreciated over its re-estimated service life.
When
property, plant and equipment are retired or disposed of, their cost and
accumulated depreciation are removed from the accounts and any gain or loss is
credited or charged to non-operating income or losses.
Patents
are recorded at cost and amortized using the straight-line method over estimated
useful life. Land use rights are amortized over the contract terms of
50 to 60 years.
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 on a straight-line basis 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.
The
Company evaluates whether its goodwill is impaired on an annual
basis. If the carrying amount of goodwill is determined to exceed its
recoverable amount, an impairment loss is recognized at an amount equal to that
excess. A reversal of such impairment loss is
prohibited.
Idle
assets are stated at the lower of their fair value or carrying
amount. The carrying amount in excess of the fair value is recognized
as an impairment loss. The remaining book value is depreciated using
the straight-line method.
The
Company evaluates whether or not there are indications that
assets (primarily property, plant and equipment, intangible assets, and
long-term investments) may be impaired as of 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 an impairment loss. When the
recoverable amount subsequently increases, the impairment loss previously
recognized is reversed and recorded as a gain. However, the carrying
amount of an asset (other than goodwill) after the reversal of the 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 consist of certain intangibles and other assets, including license fees,
telecommunications and computer network systems and bond issuance
costs. Amortization of deferred charges is computed on a
straight-line basis over 2 to 5 years.
Pension
cost under defined benefit plans are determined by actuarial
valuations.
Contributions
made under defined contribution plans are recognized as pension cost during the
period in which employees render services.
Prior to
the adoption of ROC SFAS No. 34 and No. 36 on January 1, 2006, convertible bonds
were recorded as a financial liability. The stated redemption price
in excess of the face value of the bond is recognized as interest expense over
the period from the issuance date to the date the put option becomes
exercisable, using the effective interest rate method. If the market
price of the common shares into which the bonds are convertible is higher than
the redemption price at the time the put option becomes exercisable, the related
accrued interest is transferred to capital surplus. Conversion of
convertible bonds into common shares is accounted for by the book value
method. Under this method, unamortized bond issuance costs and
accrued interest, together with face value of converted bonds, are written off,
and the common shares issued are recorded at their par value, with any excess
recorded as capital surplus. No change in accounting treatment was
required for convertible bonds after the adoption of ROC SFAS No. 34 and No.
36.
All
stock-based compensation for awards granted or modified after January 1, 2004 is
accounted for by the related interpretations of the Accounting Research and
Development Foundation (“ARDF”) in the ROC. The Company recognizes
compensation cost based on the intrinsic value method, whereby the compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the stock at the date of the grant over the amount an employee must pay
to acquire the stock. The intrinsic value of the options is
recognized as expense over the requisite service or vesting
period.
The
Company’s shares held by its subsidiaries are accounted for as treasury stock
and, accordingly, the cost of such shares is reclassified from long-term
investments to treasury stock upon consolidation.
Research
and Development Costs
Research
and development costs are charged to expenses as incurred.
The
Company applies intra-period and inter-period allocations for its income tax
whereby (1) a portion of current income tax expense is allocated to the income
from discontinued operations and the cumulative effect of changes in accounting
principles; and (2) deferred income tax assets and liabilities are recognized
for the tax effects of temporary differences, loss carryforwards and unused tax
credits. Valuation allowances are provided to the extent, if any,
that it is more likely than not that deferred income tax assets will not be
realized. A deferred tax asset or liability is classified as current
or noncurrent in accordance with the classification of its related asset or
liability. However, if a deferred tax asset or liability does not
relate to an asset or liability in the financial statements, then it is
classified as either current or noncurrent based on the expected length of time
before it is realized or settled.
Any tax
credits arising from purchases of machinery, equipment and technology, research
and development expenditures, and personnel training expenditures are recognized
using the flow-through method.
Adjustments
of prior years’ income tax are added to or deducted from the current year’s tax
provision.
Income tax
on undistributed earnings is recorded by ASE Inc. and subsidiaries under
jurisdiction of ROC at the rate of 10% and is recorded as an expense in the year
shareholders’ resolve the distribution of earnings.
Foreign
Currency Transactions and Translation of Foreign-currency Financial
Statements
The
functional and reporting currency of the Company is the New Taiwan dollar, while
the functional currencies of its major subsidiaries are their local currencies,
namely, the U.S. dollar, Japanese yen, Korea Won, Renminbi and Malaysia Ringgit,
respectively.
Non-derivative
foreign currency transactions are recorded in local currencies at the rates of
exchange in effect when the transactions occur. Exchange differences
arising from settlement of foreign-currency assets and liabilities are
recognized in profit or loss.
At the
balance sheet date, foreign-currency monetary assets and liabilities are
revalued using prevailing exchange rates and the exchange differences are
recognized in profit or loss.
At the
balance sheet date, foreign-currency nonmonetary assets (such as equity
instruments) and liabilities that are measured at fair value are revalued using
prevailing exchange rates, with the exchange differences treated as
follows:
|
a.
|
Recognized
in shareholders’ equity if the changes in fair value are recognized in
shareholders’ equity;
|
|
b.
|
Recognized
in profit or loss if the changes in fair value is recognized in profit or
loss.
|
If an
investee’s functional currency is a foreign currency, translation adjustments
will result from the translation of the investee’s financial statements into the
reporting currency of the Company. Such adjustments are accumulated
and reported as a separate component of shareholders’ equity.
The
financial statements of foreign subsidiaries are translated into New Taiwan
dollars at the following exchange rates: Assets and liabilities –
spot rates at the end of year; shareholders’ equity – historical rates; income
and expenses – average rates during the year. The resulting
translation adjustments are recorded as a separate component of shareholders’
equity.
Derivative
Financial Instruments for Hedging
Derivatives
that qualify as effective hedging instruments are measured at fair value, with
subsequent changes in fair value recognized in profit or loss, or in
shareholders’ equity, depending on the nature of the hedging
relationship.
Hedge
accounting recognizes in profit or loss the offsetting effects of changes in
fair values of the hedging instrument and the hedged item as
follows:
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.
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
year or years 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.
Recent
Accounting Pronouncements
In March
2007, the 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
appropriations of earnings under ROC GAAP. Based on management’s
reasonable estimate, the Company believes that the adoption of this standard
will result in a charge to earnings of approximately 10% to 12% of the net
income for 2008. However, the actual percentage to be paid in profit
sharing bonuses is subject to the approval of the Company’s
shareholders.
The ARDF
also issued ROC SFAS No. 39, “Share-based Payment” (“ROC SFAS No. 39”) in August
2007, which requires ROC companies to record share-based payment transactions in
the financial statements at fair value. ROC SFAS No. 39 should be
applied to financial statements for fiscal years beginning on or after January
1, 2008. The Company will recognize compensation expense if the
Company grants new options or revises the existing option plans on or after
January 1, 2008.
The ARDF
revised ROC SFAS No. 10, “Inventories” (“ROC SFAS No. 10”) in November 2007,
which requires inventories to be stated at the lower of cost or net realizable
value item by item. Inventories are recorded by the specific
identification method, first-in, first-out method or weighted average
method. The last-in, first-out method is no longer
permitted. The revised ROC SFAS No. 10 should be applied to financial
statements for fiscal years beginning on or after January 1,
2009. Early adoption is permitted. The Company is
currently evaluating the effect that the adoption of the revised ROC SFAS No. 10
will have on the results of operations and financial position of the Company,
and is not yet in a position to determine such effect.
The
Company prepares its consolidated financial statements in New Taiwan
dollars. A translation of the 2007 financial statements into U.S.
dollars is included solely for the convenience of the reader, and has been based
on the U.S. Federal Reserve Bank of New York noon buying rate of NT$32.43 to
US$1.00 in effect on December 31, 2007. The translation should not be
construed as a representation that the New Taiwan dollar amounts have been,
could have been, or could in the future be, converted into U.S. dollars at this
or
any other
rate of exchange.
Certain
accounts in the consolidated financial statements as of December 31, 2006 and
for the years ended December 31, 2005 and 2006 have been reclassified to conform
to the classifications of the consolidated financial statements as of and for
the year ended December 31, 2007.
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 adoption of ROC SFAS No. 37 and ROC SFAS No. 38 had
no impact on the results of operations and financial position of the
Company.
On January
1, 2006, the Company adopted the newly released ROC SFAS No. 34, “Financial
Instruments: Recognition and Measurement” and No. 36, “Financial
Instruments: Disclosure and Presentation” and revisions of previously
released ROC SFAS No. 5 and No. 25.
|
a.
|
Effect
of adopting the newly released SFASs and revisions of previously released
SFASs
|
|
1)
|
The
Company 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 FVTPL were included in
the cumulative effect of changes in accounting principles; and 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.
The effect
of adopting the newly released SFASs is summarized as
follows:
|
|
Recognized
as Cumulative Effect of Changes in
Accounting
Principles
(Net of income tax)
|
|
|
Recognized
as a Separate Component of Shareholders’
Equity
(Net of income tax)
|
|
|
|
NT$
|
|
|
NT$
|
|
|
|
|
|
|
|
|
Financial
assets at FVTPL
|
|
|
503
|
|
|
|
-
|
|
Financial
liabilities at FVTPL
|
|
|
(343,006
|
)
|
|
|
-
|
|
Derivative
financial liabilities for hedging
|
|
|
-
|
|
|
|
(129,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(342,503
|
)
|
|
|
(129,179
|
)
|
In
addition to the effect shown above, the adoption of ROC SFAS No. 34 and No. 36
also resulted in an increase in net income before cumulative effect of changes
in accounting principles of NT$242,961 thousand, a decrease in net income of
NT$99,542 thousand (net of income tax effect of NT$33,181 thousand), and a
decrease in basic earnings per share (after income tax) of NT$0.02 for the year
ended December 31, 2006.
|
2)
|
The
Company adopted the newly revised ROC SFAS No. 5 and No. 25, which
prescribe that investment premiums, representing goodwill, not be
amortized and instead be assessed for impairment at least on an annual
basis. This change resulted in an increase in net income before
cumulative effect of changes in accounting principles of NT$619,397
thousand and an increase in basic earnings per share (after income tax) of
NT$0.12 for the year ended December 31,
2006.
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Cash
on hand
|
|
|
8,186
|
|
|
|
6,817
|
|
|
|
210
|
|
Checking
and saving accounts
|
|
|
13,482,961
|
|
|
|
12,232,305
|
|
|
|
377,191
|
|
Time
deposits
|
|
|
2,238,928
|
|
|
|
4,918,813
|
|
|
|
151,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,730,075
|
|
|
|
17,157,935
|
|
|
|
529,076
|
|
5.
FINANCIAL
INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Financial
assets for trading
|
|
|
|
|
|
|
|
|
|
Open-ended
mutual funds
|
|
|
1,546,450
|
|
|
|
1,599,353
|
|
|
|
49,317
|
|
Forward
exchange contracts
|
|
|
11,453
|
|
|
|
2,641
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,557,903
|
|
|
|
1,601,994
|
|
|
|
49,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities for trading
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swap contract
|
|
|
58,990
|
|
|
|
20,319
|
|
|
|
627
|
|
Forward
exchange contracts
|
|
|
19,172
|
|
|
|
16,493
|
|
|
|
509
|
|
Cross
currency swap contracts
|
|
|
274,421
|
|
|
|
7,519
|
|
|
|
231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
352,583
|
|
|
|
44,331
|
|
|
|
1,367
|
|
The
Company entered into derivative contracts during the years ended December 31,
2006 and 2007 to manage exposures to foreign exchange and interest rate
risk.
Information
on such derivative transactions is as follows:
|
a.
|
Interest
rate swap contract
|
As of
December 31, 2006 and 2007, the notional amount of the outstanding contract was
NT$2,750,000 thousand. Interest receipt and payment were based on
floating rates semi-annually. The maturity date of the contract is
January 9, 2009.
|
b.
|
Forward
exchange contracts
|
The
outstanding forward exchange contracts at December 31, 2006 and 2007 were as
follows:
|
|
Contract
|
|
|
Amount
|
Currency
|
Maturity
Date
|
(in
Thousands)
|
|
|
|
December 31,
2006
|
|
|
|
|
|
USD/JPY
|
2007.01.09-2007.03.22
|
USD23,300/JPY2,718,849
|
USD/NTD
|
2007.01.11-2007.03.01
|
USD69,000/NTD2,229,074
|
USD/KRW
|
2007.01.09-2007.02.09
|
USD13,000/KRW12,408,440
|
|
|
|
December 31,
2007
|
|
|
|
|
|
USD/JPY
|
2008.01.10-2008.03.24
|
USD16,000/JPY1,783,727
|
USD/NTD
|
2008.01.07-2008.03.28
|
USD190,000/NTD6,130,684
|
USD/KRW
|
2008.01.28
|
USD5,000/KRW4,697,500
|
USD/MYR
|
2008.01.08-2008.02.12
|
USD8,000/MYR26,594
|
NTD/USD
|
2008.01.22-2008.02.12
|
NTD483,050/USD15,000
|
|
c.
|
Cross-currency
swap contracts
|
The
Company entered into cross-currency swap contracts with banks to manage its
exposure to interest rate and exchange rate fluctuations associated with its
long-term bonds payable. The outstanding contracts at December 31,
2006 and 2007 were as follows:
Maturity
Date
|
Contract
Amount
(in
Thousands)
|
Interest
Payment
|
Interest
Receipt
|
|
|
|
|
De
cember
31, 20
06
|
|
|
|
|
|
|
|
2007.10.22
|
USD 142,000
|
1.7%
|
2.7%
|
|
|
|
|
December
31
, 2007
|
|
|
|
|
|
|
|
2008.01.24
|
USD 139,159
|
1.7%
|
4.45%
|
|
d.
|
Interest
rate swaption contract
|
In April
2004, the Company entered into an interest rate swaption contract which was to
expire in October 2007. The terms of the contract provided that if
the interest rate (USD 6 Month LIBOR at 11 a.m. London time and set on London
Business Days) ever reached 5 % before the expiration of the contract, the
interest to be paid to the bank during the contract period would be calculated
based on the arrangement of the revised contract on the notional amount of
US$157,000 thousand. The contract was terminated in March
2006.
For the
years ended December 31, 2005, 2006 and 2007, the gain on valuation of financial
assets held for trading was, NT$0, NT$29,278 thousand and NT$205,997 thousand
(US$6,352 thousand), respectively; the gain (loss) on valuation of financial
liabilities held for trading was NT$20,919 thousand, NT$(289,847) thousand and
NT $(28,583) thousand (US$881 thousand), respectively.
6.
AVAILABLE-FOR-SALE
FINANCIAL ASSETS
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Open-ended
mutual funds
|
|
|
9,228,994
|
|
|
|
9,292,448
|
|
|
|
286,540
|
|
Government
and corporate bonds
|
|
|
-
|
|
|
|
88,874
|
|
|
|
2,739
|
|
Publicly-traded
stocks
|
|
|
117,421
|
|
|
|
25,005
|
|
|
|
771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,346,415
|
|
|
|
9,406,327
|
|
|
|
290,050
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
11,639,978
|
|
|
|
18,921,546
|
|
|
|
583,458
|
|
Allowance
for doubtful accounts (Note 2)
|
|
|
(244,366
|
)
|
|
|
(109,727
|
)
|
|
|
(3,383
|
)
|
Allowance
for sales allowances (Note 2)
|
|
|
(50,651
|
)
|
|
|
(128,586
|
)
|
|
|
(3,965
|
)
|
|
|
|
11,344,961
|
|
|
|
18,683,233
|
|
|
|
576,110
|
|
Accounts
receivable - related parties
|
|
|
-
|
|
|
|
1,819
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,344,961
|
|
|
|
18,685,052
|
|
|
|
576,166
|
|
The
changes in allowances for doubtful accounts and sales discounts are as
follows:
|
|
Doubtful
|
|
|
Sales
|
|
|
|
Accounts
|
|
|
Discounts
|
|
|
|
NT$
|
|
|
NT$
|
|
|
|
|
|
|
|
|
Balance
at January 1, 2005
|
|
|
428,776
|
|
|
|
68,742
|
|
Additions
|
|
|
35,712
|
|
|
|
79,488
|
|
Write-offs
|
|
|
(81,880
|
)
|
|
|
(22,448
|
)
|
Balance
at December 31, 2005
|
|
|
382,608
|
|
|
|
125,782
|
|
Additions
|
|
|
2,464
|
|
|
|
34,738
|
|
Reversal
|
|
|
(92,748
|
)
|
|
|
(6,652
|
)
|
Write-offs
|
|
|
(47,958
|
)
|
|
|
(103,217
|
)
|
Balance
at December 31, 2006
|
|
|
244,366
|
|
|
|
50,651
|
|
From
newly acquired subsidiaries
|
|
|
11,900
|
|
|
|
-
|
|
Additions
|
|
|
18,972
|
|
|
|
87,200
|
|
Reversal
|
|
|
(142,685
|
)
|
|
|
(1,755
|
)
|
Write-offs
|
|
|
(22,826
|
)
|
|
|
(7,510
|
)
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
109,727
|
|
|
|
128,586
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 1, 2007
|
|
|
7,535
|
|
|
|
1,562
|
|
From
newly acquired subsidiaries
|
|
|
367
|
|
|
|
-
|
|
Additions
|
|
|
585
|
|
|
|
2,689
|
|
Reversal
|
|
|
(4,400
|
)
|
|
|
(54
|
)
|
Write-offs
|
|
|
(704
|
)
|
|
|
(232
|
)
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
3,383
|
|
|
|
3,965
|
|
In
November 2005, ASE Inc. and ASE Test Inc. entered into a three-year revolving
accounts receivable securitization agreement with a bank for US$100
million. The credit line was increased to US$200 million in June
2006. The agreement was early terminated in December
2007.
Under the
agreement, ASE Inc. and ASE Test Inc. transferred a pool of accounts receivable
to the bank, which issued securities backed by these accounts
receivable. Proceeds received from the bank were the net book value
of the pool of accounts receivable, less a deferred purchase price receivable at
20% of the accounts receivable sold, guarantee deposit, program fee and other
related expenses. The Company surrendered 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. Losses from sale of receivables were NT$13,374 thousand,
NT$235,509 thousand and NT$151,746 thousand (US$4,679 thousand) in 2005, 2006
and 2007, respectively.
After the
transfer of the accounts receivable, the Company continued to service,
administer, and collect these accounts receivable on behalf of the
bank. Collections not yet passed over to the bank amounted to
NT$2,378,464 thousand as of December 31, 2006 and were included in temporary
receipts. Total accounts receivable sold was NT$4,608,182 thousand as
of December 31, 2006.
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
|
3,663,475
|
|
|
|
3,327,118
|
|
|
|
102,594
|
|
Supplies
and spare parts
|
|
|
800,668
|
|
|
|
718,912
|
|
|
|
22,168
|
|
Work
in process
|
|
|
526,680
|
|
|
|
763,236
|
|
|
|
23,535
|
|
Finished
goods
|
|
|
609,982
|
|
|
|
699,197
|
|
|
|
21,560
|
|
Supplies
in transit
|
|
|
162,395
|
|
|
|
203,955
|
|
|
|
6,289
|
|
Construction
in progress
|
|
|
484,805
|
|
|
|
552,965
|
|
|
|
17,051
|
|
|
|
|
6,248,005
|
|
|
|
6,265,383
|
|
|
|
193,197
|
|
Allowance
for valuation and obsolescence (Note 2)
|
|
|
(573,995
|
)
|
|
|
(668,508
|
)
|
|
|
(20,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,674,010
|
|
|
|
5,596,875
|
|
|
|
172,583
|
|
The
movement of the allowance for valuation and obsolescence is as
follows:
|
|
NT$
|
|
|
|
|
|
Balance
at January 1, 2005
|
|
|
205,403
|
|
Additions
|
|
|
678,590
|
|
Write-offs
|
|
|
(393,002
|
)
|
Balance
at December 31, 2005
|
|
|
490,991
|
|
Additions
|
|
|
1,143,925
|
|
Write-offs
|
|
|
(1,060,921
|
)
|
Balance
at December 31, 2006
|
|
|
573,995
|
|
From
newly acquired subsidiaries
|
|
|
124,229
|
|
Additions
|
|
|
634,457
|
|
Write-offs
|
|
|
(664,173
|
)
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
668,508
|
|
|
|
US$
|
|
|
|
|
|
Balance
at January 1, 2007
|
|
|
17,700
|
|
From
newly acquired subsidiaries
|
|
|
3,830
|
|
Additions
|
|
|
19,564
|
|
Write-offs
|
|
|
(20,480
|
)
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
20,614
|
|
9.
FINANCIAL
ASSETS CARRIED AT COST
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Non-publicly
traded common stocks
|
|
|
|
|
|
|
|
|
|
H&HH
Venture Investment Corporation
|
|
|
65,790
|
|
|
|
73,921
|
|
|
|
2,279
|
|
Global
Strategic Investment Inc.
|
|
|
65,192
|
|
|
|
64,886
|
|
|
|
2,001
|
|
UC
Fund II
|
|
|
32,596
|
|
|
|
32,443
|
|
|
|
1,000
|
|
Taiwan
Fixed Network Co., Ltd.
|
|
|
1,050,000
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
7
|
|
|
|
1,138
|
|
|
|
35
|
|
Non-publicly
traded preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
ID
Solutions, Inc.
|
|
|
16,166
|
|
|
|
25,899
|
|
|
|
799
|
|
Limited
Partnership
|
|
|
|
|
|
|
|
|
|
|
|
|
Ripley
Cable Holdings I, L.P.
|
|
|
275,120
|
|
|
|
247,915
|
|
|
|
7,645
|
|
Crimson
Velocity Fund, L.P.
|
|
|
90,726
|
|
|
|
78,823
|
|
|
|
2,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,595,597
|
|
|
|
525,025
|
|
|
|
16,189
|
|
There is
no quoted price from an active market for these investments and fair value is
not readily available. In addition, the Company owns less than 20% of
these investments and can’t exercise significant influence. Therefore, these
investments are carried at cost.
The
Company recognized an impairment loss of NT$178,500 thousand (US$5,504 thousand)
based on the public purchase price in March 2007 on the investment in Taiwan
Fixed Network Co., Ltd. and disposed of it in April 2007.
10. EQUITY
METHOD INVESTMENTS
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
%
of
|
|
|
|
|
|
|
|
|
%
of
|
|
|
|
|
|
|
Owner-
|
|
|
|
|
|
|
|
|
Owner-
|
|
|
|
NT$
|
|
|
ship
|
|
|
NT$
|
|
|
US$
|
|
|
ship
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publicly
traded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Universal
Scientific Industrial Co., Ltd.
|
|
|
3,074,221
|
|
|
|
19.8
|
|
|
|
3,317,168
|
|
|
|
102,287
|
|
|
|
18.7
|
|
Hung
Ching Development & Construction Co.
|
|
|
958,417
|
|
|
|
26.4
|
|
|
|
955,939
|
|
|
|
29,477
|
|
|
|
26.2
|
|
Non-publicly
traded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hung
Ching Kwan Co.
|
|
|
352,414
|
|
|
|
27.3
|
|
|
|
349,937
|
|
|
|
10,791
|
|
|
|
27.3
|
|
Inprocomm,
Inc.
|
|
|
2,224
|
|
|
|
32.1
|
|
|
|
2,224
|
|
|
|
68
|
|
|
|
32.1
|
|
Intergrated
Programmable Communication, Inc.
|
|
|
1,822
|
|
|
|
26.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
4,389,098
|
|
|
|
|
|
|
|
4,625,268
|
|
|
|
142,623
|
|
|
|
|
|
Deferred
gain on transfer of land
|
|
|
(300,149
|
)
|
|
|
|
|
|
|
(300,149
|
)
|
|
|
(9,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,088,949
|
|
|
|
|
|
|
|
4,325,119
|
|
|
|
133,368
|
|
|
|
|
|
The market
value of the publicly traded stocks was NT$4,525,391 thousand and NT$4,419,516
thousand (US$136,279 thousand) as of December 31, 2006 and 2007,
respectively.
The
difference between the cost of investment and equity in investees’ net assets as
of December 31, 2006 and 2007 was as follows:
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
371,436
|
|
|
|
371,436
|
|
|
|
11,453
|
|
Unrealized
sales profit
|
|
|
(277,315
|
)
|
|
|
(269,512
|
)
|
|
|
(8,310
|
)
|
Deferred
gain on transfer of land
|
|
|
(300,149
|
)
|
|
|
(300,149
|
)
|
|
|
(9,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(206,028
|
)
|
|
|
(198,225
|
)
|
|
|
(6,112
|
)
|
The
Company acquired shares of Universal Scientific Industrial Co., Ltd. (“USI”)
from the open market. As of December 31, 2007, the Company had made
an accumulated investment of NT$3,838,677 thousand (US$118,368 thousand) and
owned 18.7% of the outstanding shares. The Company continues to exercise
significant influence over USI, therefore the investment was accounted for by
the equity method. USI is engaged in the manufacturing, processing
and sale of computer peripherals, integrated circuits, electrical parts,
personal computers and related accessories. The difference between
the cost of investment and the Company’s share in the net equity of USI
amounting to NT$371,436 thousand is attributable to
goodwill. Effective January 1, 2006, goodwill is no longer amortized
and instead is tested for impairment at least annually.
The
Company acquired shares of Hung Ching Development & Construction Co.
(“HCDC”) from the open market. As of December 31, 2007, the Company
had made an accumulated investment of NT$2,845,913 thousand (US$87,756
thousand). HCDC is engaged in the development and management of
commercial, residential and industrial real estate properties in
Taiwan
The
Company acquired a 27.3% equity interest in Hung Ching Kwan Co. (“HCKC”) in 1992
by transferring to HCKC a parcel of land valued at NT$390,470
thousand. The resulting gain of NT$300,149 thousand, which represents
the excess of such value over the cost of the land plus land value increment
tax, has been deferred until the disposal of this investment.
As of
December 31, 2007, Inprocomm, Inc. was in the process of liquidation and
Intergrated Programmable Communication, Inc. had completed its
liquidations.
The
Company recorded equity in earnings of equity method investees of NT$74,292
thousand, NT$315,654 thousand and NT$345,705 thousand (US$10,660 thousand) in
2005, 2006 and 2007, respectively.
11.
|
PROPERTY,
PLANT AND EQUIPMENT
|
Accumulated
depreciation consisted of:
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
and improvements
|
|
|
7,035,205
|
|
|
|
9,246,951
|
|
|
|
285,136
|
|
Machinery
and equipment
|
|
|
62,065,807
|
|
|
|
72,613,519
|
|
|
|
2,239,085
|
|
Transportation
equipment
|
|
|
80,112
|
|
|
|
95,801
|
|
|
|
2,954
|
|
Furniture
and fixtures
|
|
|
1,916,860
|
|
|
|
2,210,469
|
|
|
|
68,161
|
|
Leased
assets and leasehold improvements
|
|
|
510,268
|
|
|
|
313,878
|
|
|
|
9,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,608,252
|
|
|
|
84,480,618
|
|
|
|
2,605,014
|
|
Information
about interest expense is as follows:
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest expense including
capitalized
interest
|
|
|
1,830,018
|
|
|
|
1,861,482
|
|
|
|
1,744,718
|
|
|
|
53,800
|
|
Less: Capitalized
interest (included in
property,
plant and equipment)
|
|
|
(258,960
|
)
|
|
|
(241,188
|
)
|
|
|
(170,194
|
)
|
|
|
(5,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
1,571,058
|
|
|
|
1,620,294
|
|
|
|
1,574,524
|
|
|
|
48,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization
rate
|
|
|
1.93%-5.53
|
%
|
|
|
1.69%-6.07
|
%
|
|
|
1.56%-6.33
|
%
|
|
|
|
|
Goodwill
arose from purchases of the following:
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Chung Li shares
|
|
|
957,166
|
|
|
|
957,166
|
|
|
|
29,515
|
|
ISE
Labs shares
|
|
|
672,948
|
|
|
|
669,789
|
|
|
|
20,654
|
|
ASE
Test shares
|
|
|
570,496
|
|
|
|
567,819
|
|
|
|
17,509
|
|
ASE
Material shares
|
|
|
423,664
|
|
|
|
423,664
|
|
|
|
13,064
|
|
GAPT-Cayman
and TME shares
|
|
|
-
|
|
|
|
363,650
|
|
|
|
11,213
|
|
ASE
Korea shares
|
|
|
167,747
|
|
|
|
166,960
|
|
|
|
5,148
|
|
ASE
Japan shares
|
|
|
23,489
|
|
|
|
23,379
|
|
|
|
721
|
|
ASE
(U.S.) shares
|
|
|
15,764
|
|
|
|
15,690
|
|
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,831,274
|
|
|
|
3,188,117
|
|
|
|
98,308
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Idle
assets (Note 2)
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
Furniture
and fixtures
|
|
|
-
|
|
|
|
24,877
|
|
|
|
767
|
|
Machinery
and equipment
|
|
|
76,500
|
|
|
|
1,406,213
|
|
|
|
43,362
|
|
Deferred
charges
|
|
|
-
|
|
|
|
7,532
|
|
|
|
232
|
|
|
|
|
76,500
|
|
|
|
1,438,622
|
|
|
|
44,361
|
|
Accumulated
depreciation
|
|
|
(25,288
|
)
|
|
|
(265,308
|
)
|
|
|
(8,181
|
)
|
Accumulated
impairment
|
|
|
-
|
|
|
|
(421,340
|
)
|
|
|
(12,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,212
|
|
|
|
751,974
|
|
|
|
23,188
|
|
The idle
assets and accumulated impairment were due to the fact that in December 2007 ASE
Electronics identified an impairment in its Flip-Chip production line caused by
various commercial factors. According to an independent appraiser’s report, ASE
Electronics recognized an impairment loss of NT$816,182 thousand (US$25,168
thousand), of which NT$394,842 thousand (US$12,176 thousand) was recognized for
deferred charges.
14.
SHORT-TERM
BORROWINGS
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Revolving
– interest at 1.80%-7.33% and
2.37%-6.80%
at December 31, 2006 and 2007
|
|
|
2,868,138
|
|
|
|
8,678,473
|
|
|
|
267,606
|
|
Letters
of credit - interest at 5.64%-5.85% at
December
31, 2007
|
|
|
-
|
|
|
|
243,857
|
|
|
|
7,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,868,138
|
|
|
|
8,922,330
|
|
|
|
275,126
|
|
15.
LONG-TERM
BONDS PAYABLE
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
convertible bonds
|
|
|
6,030,260
|
|
|
|
4,514,735
|
|
|
|
139,215
|
|
Accrued
interest
|
|
|
776,584
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
6,806,844
|
|
|
|
4,514,735
|
|
|
|
139,215
|
|
Domestic
secured bonds
|
|
|
2,750,000
|
|
|
|
2,750,000
|
|
|
|
84,798
|
|
|
|
|
9,556,844
|
|
|
|
7,264,735
|
|
|
|
224,013
|
|
Current
portion
|
|
|
(3,798,233
|
)
|
|
|
(1,375,000
|
)
|
|
|
(42,399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,758,611
|
|
|
|
5,889,735
|
|
|
|
181,614
|
|
Information
on long-term bonds payable is as follows:
|
a.
|
Foreign
convertible bonds
|
In
September 2003, the Company issued US$200,000 thousand of unsecured zero coupon
convertible bonds due September 2008, consisting of 200,000 units with face
value of US$1,000 each. The bonds bear an implied interest rate of
3.75%. As of December 31, 2007, bonds amounting to US$45,841 thousand
were converted to common shares. In April 2005, the Company redeemed
US$15,000 thousand of the bonds. Outstanding convertible bonds were
US$185,000 thousand and US$139,159 thousand as of December 31, 2006 and 2007,
respectively.
From 31
days after the date of issuance through 10 days before the due date, bondholders
have the right to convert the bonds into common shares or ADS of ASE Inc. at the
specified conversion price. The conversion price is based on the
market price at the time of issuance.
The
Company may redeem the bonds at the early redemption price
if:
|
1)
|
On
or at any time after September 2007, the closing price of the common
shares for a period of 20 consecutive trading days is higher than 130% of
the conversion price (NT$26.59 per share on December 31, 2007) in effect
on each such trading day;
|
|
2)
|
At
least 90% of the bonds have already been converted, redeemed, or purchased
and cancelled; or
|
|
3)
|
If
the applicable tax law is unfavorably changed, the Company may redeem at
any time all, but not some, of the
bonds.
|
According
to the stipulation of redemption, unless the bonds have been previously
redeemed, repurchased and cancelled, or converted, bondholders shall have the
right to require the Company to purchase for cash the bonds at 116.02% of their
face value on September 25, 2007. The stipulation of redemption
expired on September 25, 2007, on which date the closing price of the common
shares into which the bonds are convertible was higher than the redemption
price, and therefore all the accrued interest was transferred to capital
surplus.
The bonds
are due in September 2008; in addition, holders of the bonds have the right to
request the redemption of the bonds on September 2007. However, the
Company at December 31, 2006 and 2007 had obtained new long term credit lines to
refinance the bonds on a long-term basis. Therefore, the bonds were
not classified as short-term debts.
|
b.
|
Domestic
secured bonds
|
In January
2004, the Company issued NT$2.75 billion of domestic secured bonds, which
consisted of 275 units with face value of NT$10 million each and are repayable
in January 2008 and 2009 in two equal payments. The interest, payable
semiannually, was calculated at 0%-0.27% in 2006 and 0% in 2007. A
syndicate of banks has guaranteed the bonds and has the right to request the
Company to redeem the bonds early in the event the Company violates certain
provisions of the guarantee agreement.
Long-term
bank loans consisted of the following:
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Revolving
bank loans
|
|
|
17,356,844
|
|
|
|
14,736,559
|
|
|
|
454,411
|
|
Loans
for specified purposes
|
|
|
4,901,734
|
|
|
|
4,999,230
|
|
|
|
154,155
|
|
Mortgage
loans
|
|
|
2,605,248
|
|
|
|
3,544,919
|
|
|
|
109,310
|
|
|
|
|
24,863,826
|
|
|
|
23,280,708
|
|
|
|
717,876
|
|
Current
portion
|
|
|
(1,292,040
|
)
|
|
|
(5,258,946
|
)
|
|
|
(162,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,571,786
|
|
|
|
18,021,762
|
|
|
|
555,713
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated
bank loan due from September 2007 to
June
2011 - effective interest rate was1.51%-6.16%
at
December 31, 2006 and 1.90%-5.81% at
December
31, 2007
|
|
|
|
|
|
|
|
|
|
ASE
Inc.
|
|
|
9,600,000
|
|
|
|
6,900,000
|
|
|
|
212,766
|
|
ASE
Shanghai
|
|
|
3,878,924
|
|
|
|
3,860,717
|
|
|
|
119,048
|
|
ASE
Japan
|
|
|
1,096,000
|
|
|
|
1,042,919
|
|
|
|
32,159
|
|
Revolving
credit lines due from May 2008 to August
2011
- effective interest rate was 2.25%-6.12% at
December
31, 2006 and 2.73%-6.00% at
December
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
J&R
Holding Limited
|
|
|
-
|
|
|
|
837,638
|
|
|
|
25,829
|
|
PowerASE
Technology Inc.
|
|
|
-
|
|
|
|
800,000
|
|
|
|
24,669
|
|
ASE
Shanghai
|
|
|
-
|
|
|
|
753,070
|
|
|
|
23,221
|
|
ASE
Inc.
|
|
|
1,010,000
|
|
|
|
200,000
|
|
|
|
6,167
|
|
Other
|
|
|
1,771,920
|
|
|
|
342,215
|
|
|
|
10,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,356,844
|
|
|
|
14,736,559
|
|
|
|
454,411
|
|
The loan
agreements contain the following financial and non-financial
covenants:
|
1)
|
Without
the prior written consent from the majority of the banks, the Company
should not make any significant change in operation, provide financing to
any other entity other than in the normal course of business, 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;
|
|
2)
|
The
Company should not merge with any other entity or make investments in
excess of NT$10.0 billion or acquire significant assets from another
entity without the prior written consent from the majority of the
banks;
|
|
3)
|
The
Company’s tangible net worth, as defined in the loan agreements, should
not be less than NT$45.0 billion at any time;
and
|
|
4)
|
The
Company should maintain certain financial
ratios.
|
As of
December 31, 2007, the loan agreement for syndicated bank loans of ASE Shanghai
also contains similar covenants with respect to negative pledge, disposal of
assets, merger and certain financial ratios.
As of
December 31, 2007 and for the year ended December 31, 2007, the Company was in
compliance with all of the loan covenants.
|
b.
|
Loans
for specified purposes
|
Such loans
were restricted to the repayment of other loans or purchase of machinery.
The effective interest rates ranged from 6.10% to 6.35% at December 31,
2006 and 5.47% to 6.00% at December 31, 2007.
Mortgage
loans obtained by the Company are repayable in quarterly payments or a lump sum
payment at maturity. The effective interest rates ranged from 2.50%
to 6.80% at December 31, 2006 and 2.91% to 7.56% at December 31,
2007.
As of
December 31, 2007, the maturities of long-term bonds payable (Note 15) and
long-term bank loans were as follows:
|
|
Amount
|
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
Within
one year
|
|
|
11,148,681
|
|
|
|
343,777
|
|
During
the second year
|
|
|
11,617,095
|
|
|
|
358,221
|
|
During
the third year
|
|
|
6,564,815
|
|
|
|
202,430
|
|
During
the fourth year
|
|
|
1,188,185
|
|
|
|
36,639
|
|
During
the fifth year and thereafter
|
|
|
26,667
|
|
|
|
822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,545,443
|
|
|
|
941,889
|
|
Long-term
bonds payable (Note 15) and long-term bank loans by currencies were detailed as
follows:
|
|
December
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
NT$
|
15,099,112
|
|
|
NT$
|
11,303,510
|
|
|
|
US$
|
559,135
|
|
|
US$
|
531,605
|
|
|
|
¥
|
4,000,000
|
|
|
¥
|
3,600,000
|
|
|
|
RMB
|
-
|
|
|
RMB
|
214,376
|
|
17.
PENSION
PLANS
Defined
Contribution Pension Plans
|
a.
|
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 plan. The employees of the Company who were
subject to the Labor Standards Law (the “LS Law”) of the ROC before the
enforcement of this Act were allowed to choose to be subject to the
pension mechanism under the Act or continue to be subject to the pension
mechanism under the LS Law. For those employees who were
subject to the LS 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 have been
retained.
|
|
b.
|
ISE
Labs has a defined contribution savings 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 401(k). ASE Test Malaysia and ASE Singapore Pte Ltd.
also have a defined contribution pension plan
each.
|
|
c.
|
According
to local regulations, ASE Shanghai, ASESH AT and ASEN made contributions
to local governments based on each employee’s average wage at a rate of
22%.
|
Under
defined contribution plans, the Company recognized pension cost of NT$184,332
thousand, NT$403,572 thousand and NT$483,717 thousand (US$14,916 thousand) for
the years ended December 31, 2005, 2006 and 2007,
respectively.
Executive
Managers Pension Plan
ASE Inc.,
ASE Test, Inc. and ASE Electronics maintain pension plans for executive
managers. Pension cost for these managers was NT$25,226
thousand, NT$18,141 thousand and NT$42,916 thousand (US$1,323 thousand) for the
years ended December 31, 2005, 2006 and 2007, respectively. As of December
31, 2006 and 2007 accrued pension cost was NT$43,367 thousand and NT$83,617
thousand (US$2,578 thousand), respectively. Pension payment was
NT$2,666 thousand (US$ 82 thousand) for the year ended December 31,
2007.
Defined
Benefit Pension Plans
|
a.
|
The
Company has a defined benefit pension plan under the LS
Law. The pension benefits are calculated based on the length of
service and average base salary in the six months prior to
retirement. The Company contributes an amount equal to 2% of
monthly salaries to a retirement fund, which is deposited with the
Bank of Taiwan (the “BOT”) (the Central Trust of China merged with the BOT
in July 2007, with the BOT as the survivor entity) in the name of, and is
administrated by, the employees’ pension monitoring
committee.
|
|
b.
|
ASE
Japan has a pension plan under which eligible employees with more than ten
years of service are entitled to receive pension benefits based on their
length of service and pay at the time of termination. In
addition, ASE Korea has a pension plan under which eligible employees and
directors with more than one year of service are entitled to receive a
lump-sum payment upon termination of their service with ASE Korea, based
on their length of service and pay at the time of
termination.
|
As of
December 31, 2006 and 2007, the asset allocation was primarily in cash, equity
securities and debt securities. Furthermore, under the LS Law, the
rate of return on assets shall not be less than the average interest rate on a
two-year time deposit published by the local banks. The government is
responsible for any shortfall in the event that the rate of return is less than
the required rate of return.
Information
about defined benefit pension plans is summarized as follows:
|
a.
|
Pension
cost for these entities consist of:
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
|
488,610
|
|
|
|
366,314
|
|
|
|
379,750
|
|
|
|
11,710
|
|
Interest
|
|
|
98,144
|
|
|
|
91,386
|
|
|
|
86,490
|
|
|
|
2,667
|
|
Projected
return on plan assets
|
|
|
(33,862
|
)
|
|
|
(35,408
|
)
|
|
|
(37,312
|
)
|
|
|
(1,151
|
)
|
Amortization
|
|
|
19,292
|
|
|
|
11,751
|
|
|
|
17,958
|
|
|
|
554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
572,184
|
|
|
|
434,043
|
|
|
|
446,886
|
|
|
|
13,780
|
|
|
b.
|
Other
pension information based on actuarial calculations of the plans is as
follows:
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Benefit
obligation
|
|
|
|
|
|
|
|
|
|
Vested
benefit obligation
|
|
|
932,231
|
|
|
|
994,534
|
|
|
|
30,667
|
|
Non-vested
benefit obligation
|
|
|
1,465,560
|
|
|
|
1,675,759
|
|
|
|
51,673
|
|
Accumulated
benefit obligation
|
|
|
2,397,791
|
|
|
|
2,670,293
|
|
|
|
82,340
|
|
Additional
benefit based on future salaries
|
|
|
2,077,171
|
|
|
|
2,180,892
|
|
|
|
67,249
|
|
Projected
benefit obligation
|
|
|
4,474,962
|
|
|
|
4,851,185
|
|
|
|
149,589
|
|
Fair
value of plan assets
|
|
|
(1,657,132
|
)
|
|
|
(2,132,706
|
)
|
|
|
(65,763
|
)
|
Funded
status
|
|
|
2,817,830
|
|
|
|
2,718,479
|
|
|
|
83,826
|
|
Unrecognized
net transition obligation
|
|
|
(89,604
|
)
|
|
|
(80,492
|
)
|
|
|
(2,482
|
)
|
Unrecognized
prior service cost
|
|
|
(13,069
|
)
|
|
|
(12,343
|
)
|
|
|
(380
|
)
|
Unrecognized
net actuarial loss
|
|
|
(476,534
|
)
|
|
|
(590,509
|
)
|
|
|
(18,209
|
)
|
Additional
pension liability
|
|
|
24,063
|
|
|
|
59,513
|
|
|
|
1,835
|
|
Recorded
under accrued expenses
|
|
|
(9,669
|
)
|
|
|
(9,311
|
)
|
|
|
(287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
pension cost
|
|
|
2,253,017
|
|
|
|
2,085,337
|
|
|
|
64,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
c.
Vested benefit
|
|
|
876,035
|
|
|
|
1,026,162
|
|
|
|
31,642
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
d.
Actuarial assumptions used
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
rate
|
|
|
2.25%-4.70%
|
|
|
|
2.5%-4.9%
|
|
Increase
in future salary level
|
|
|
2.50%-5.00%
|
|
|
|
2.5%-5.0%
|
|
Expected
rate of return on plan assets
|
|
|
2.50%-2.75%
|
|
|
|
2.5%-3.0%
|
|
|
|
Year Ended December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
e.
Contributions to the funds
|
|
|
224,678
|
|
|
|
485,244
|
|
|
|
14,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
f.
Payments from the funds
|
|
|
41,740
|
|
|
|
48,285
|
|
|
|
1,489
|
|
|
g.
|
The
Company expects to make contributions of NT$163,025 thousand (US$5,027
thousand) to its defined benefit pension plans in
2008.
|
|
h.
|
Expected
benefit payments:
|
Year
of Payments
|
|
NT$
|
|
|
|
|
|
2008
|
|
|
132,686
|
|
2009
|
|
|
155,934
|
|
2010
|
|
|
164,770
|
|
2011
|
|
|
194,359
|
|
2012
and thereafter
|
|
|
1,295,142
|
|
Plan
assets and obligations reflected herein were measured as of December 31, 2006
and 2007.
The
Company reserved common stocks of NT$5,000,000 thousand for employee stock
option plans. For the year ended December 31, 2007, employees
exercised options and paid NT$1,024,192 thousand (US$31,582 thousand), of which
NT$61,952 thousand (US$1,911 thousand) was recognized as “capital received in
advance” as of December 31, 2007.
For the
year ended December 31, 2007, long-term bonds payable converted to common stocks
amounted to NT$1,730,726 thousand (US$53,368 thousand), of which NT$429,931
thousand (US$13,257 thousand) was recognized as “capital received in advance” as
of December 31, 2007.
American
Depositary Shares
In
September 2000, ASE Inc. issued 20,000 thousand ADS, representing 100,000
thousand common shares. As of December 31, 2007, 41,806 thousand ADS
were outstanding and represented approximately 209,031 thousand common shares of
ASE Inc., or 3.84% of the total outstanding common shares (including treasury
stock).
Under the
ROC Company Law, capital surplus from paid-in capital in excess of par value and
from treasury stock transactions may be used to offset a deficit. In
addition, such capital surplus may be transferred to capital, subject to a
specified limit under relevant regulations.
Capital
surplus from long-term investments may not be used for any
purpose.
Appropriation
of Retained Earnings
The
Company’s Articles of Incorporation provide that the annual net income shall be
appropriated in the order as shown below:
|
a.
|
Offset
against a deficit, if any;
|
|
b.
|
10.0%
of the remainder from a. as legal
reserve;
|
|
c.
|
Special
reserve in accordance with relevant laws or regulations or as requested by
the authorities in charge;
|
|
d.
|
An
amount equal to the excess of the income from long-term investments
accounted for by the equity method, over cash dividends as special
reserve;
|
|
e.
|
Not
more than 2.0% of the remainder from d. as compensation to directors and
supervisors;
|
|
f.
|
Between
5.0% to 7.0% of the remainder from e. as a bonus to employees, of which
5.0% shall be distributed in accordance with the employee bonus plan and
the excess shall be distributed to specified employees as decided by the
board of directors; and
|
|
g.
|
The
remainder from f. as dividends to
shareholders.
|
Under the
ROC Company Law, the appropriation for legal reserve shall be made until the
reserve reaches the Company’s paid-in capital. The reserve may be
used to offset a deficit, or be distributed as dividends and bonuses for
the portion in excess of 50% of the paid-in capital if the Company has no
unappropriated earnings and the reserve balance has exceeded 50% of the
Company’s paid-in capital. Also, when the reserve has reached 50% of
paid-in capital, up to 50% thereof may be transferred to capital stock if the
Company doesn’t have a deficit.
The
shareholders’ meeting held in June 2006 approved to offset the deficit incurred
in 2005 with NT$1,746,913 thousand of legal reserve and NT$2,314,447 thousand of
capital surplus.
The
appropriation of 2006 earnings resolved at the Company’s annual
shareholders’ meeting and the appropriation of 2007 earnings to be resolved by
the Company’s annual shareholders’ meeting is as follows:
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Legal
reserve
|
|
|
1,698,504
|
|
|
|
1,216,525
|
|
|
|
37,513
|
|
Compensation
to directors and supervisors
|
|
|
300,000
|
|
|
|
216,000
|
|
|
|
6,661
|
|
Bonus
to employees - cash
|
|
|
535,028
|
|
|
|
383,205
|
|
|
|
11,816
|
|
Bonus
to employees - stock
|
|
|
535,029
|
|
|
|
383,205
|
|
|
|
11,816
|
|
Stock
dividends - NT$1.5 in 2006 and NT$0.09 in 2007
|
|
|
6,941,011
|
|
|
|
492,723
|
|
|
|
15,193
|
|
Cash
dividends - NT$1.5 in 2006 and NT$1.71 in 2007
|
|
|
6,941,011
|
|
|
|
9,361,728
|
|
|
|
288,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,950,583
|
|
|
|
12,053,386
|
|
|
|
371,674
|
|
Had the
bonus to employees, directors and supervisors been charged to expense in 2006,
the basic earnings per share (after income tax) for the year ended December 31,
2006 would have decreased from NT$3.41 to NT$3.14.
The shares
distributed as a bonus to employees represented 53,503 thousand common shares
and 1.17% of the total outstanding common shares as of December 31,
2006.
Information
about the appropriations of earnings is available on the Market Observation Post
System website of the Taiwan Stock Exchange.
In order
to meet the needs of the Company’s present and future capital expenditures, the
Company’s dividend distribution shall be primarily in the form of stock
dividends. Cash dividends may also be distributed in certain
circumstances. However, the percentage of cash dividends generally
shall not exceed 50% of the total dividends declared.
With
respect to the percentage of cash dividends to be paid referred to in the
preceding paragraph, the Company may decide the most suitable percentage of cash
dividends in accordance with its current operational status, and taking into
consideration the budget plan for the following year. The board of
directors shall propose a profit distribution plan, which shall be submitted to
the shareholders for approval.
Under the
Integrated Income Tax System which became effective on January 1, 1998, ROC
resident shareholders are allowed a tax credit for their proportionate share of
the income tax paid by the Company on earnings generated since January 1,
1998. Non-resident shareholders are allowed only a tax credit from
the 10% income tax on undistributed earnings, which can be used to deduct the
withholding income tax on dividends. An Imputation Credit Account
(ICA) is maintained by the Company for such income tax and the tax credit
allocated to each shareholder. The maximum credit available for
allocation to each shareholder cannot exceed the balance shown in the ICA on the
date of distribution of dividends.
As of
December 31, 2007, the balance of the ICA amounted to NT$11,874 thousand (US$366
thousand). The creditable ratio for the distribution of 2005 and 2006 earnings
is 4.55% and 6.01% (estimated), respectively.
Unrealized
Gain on Financial Instruments
Movements
of the unrealized gain on financial instruments for the years ended December 31,
2006 and 2007 were as follows:
|
|
Available-for-
sale
Financial Assets
|
|
|
Equity-method
Investments
|
|
|
Cash
Flow Hedges
|
|
|
Total
|
|
|
Total
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2006
|
|
|
-
|
|
|
|
(69,914
|
)
|
|
|
-
|
|
|
|
(69,914
|
)
|
|
|
(2,156
|
)
|
Effect
of initial adoption of ROC SFAS
No.
34
|
|
|
-
|
|
|
|
-
|
|
|
|
(129,179
|
)
|
|
|
(129,179
|
)
|
|
|
(3,983
|
)
|
Recognized
directly in shareholders’ equity
|
|
|
35,559
|
|
|
|
469,487
|
|
|
|
-
|
|
|
|
505,046
|
|
|
|
15,573
|
|
Removed
from shareholders’ equity and
recognized
in earnings
|
|
|
(18,732
|
)
|
|
|
-
|
|
|
|
129,179
|
|
|
|
110,447
|
|
|
|
3,406
|
|
Balance,
December 31, 2006
|
|
|
16,827
|
|
|
|
399,573
|
|
|
|
-
|
|
|
|
416,400
|
|
|
|
12,840
|
|
Recognized
directly in shareholders’ equity
|
|
|
94,795
|
|
|
|
(15,069
|
)
|
|
|
-
|
|
|
|
79,726
|
|
|
|
2,458
|
|
Removed
from shareholders’ equity and
recognized
in earnings
|
|
|
(93,608
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(93,608
|
)
|
|
|
(2,886
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
18,014
|
|
|
|
384,504
|
|
|
|
-
|
|
|
|
402,518
|
|
|
|
12,412
|
|
As of
December 31, 2006 and 2007, information regarding treasury shares held by
subsidiaries was as follows:
|
|
|
|
|
Calculated
by the Company’s Ownership
|
|
|
|
|
|
|
|
|
|
Book
|
|
|
Market
|
|
|
|
Thousand
|
|
|
Thousand
|
|
|
Value
|
|
|
Value
|
|
Subsidiary
|
|
Shares
|
|
|
Shares
|
|
|
NT$
|
|
|
NT$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Test
|
|
|
173,482
|
|
|
|
88,389
|
|
|
|
1,337,211
|
|
|
|
3,270,405
|
|
J&R
Holding Limited
|
|
|
92,936
|
|
|
|
92,936
|
|
|
|
1,405,334
|
|
|
|
3,438,630
|
|
ASE
Test, Inc.
|
|
|
6,650
|
|
|
|
3,388
|
|
|
|
65,891
|
|
|
|
125,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,068
|
|
|
|
184,713
|
|
|
|
2,808,436
|
|
|
|
6,834,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Test
|
|
|
199,146
|
|
|
|
100,191
|
|
|
|
1,255,148
|
|
|
|
3,256,189
|
|
J&R
Holding Limited
|
|
|
106,684
|
|
|
|
106,684
|
|
|
|
1,335,870
|
|
|
|
3,467,235
|
|
ASE
Test, Inc.
|
|
|
7,634
|
|
|
|
3,840
|
|
|
|
71,950
|
|
|
|
124,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,464
|
|
|
|
210,715
|
|
|
|
2,662,968
|
|
|
|
6,848,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
Value
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Test
|
|
|
|
|
|
|
|
|
|
|
38,703
|
|
|
|
100,407
|
|
J&R
Holding Limited
|
|
|
|
|
|
|
|
|
|
|
41,192
|
|
|
|
106,914
|
|
ASE
Test, Inc.
|
|
|
|
|
|
|
|
|
|
|
2,219
|
|
|
|
3,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,114
|
|
|
|
211,170
|
|
Cash
dividends received in 2007 by the subsidiaries from the Company were NT$271,945
thousand (US$8,386 thousand), which were recorded as capital
surplus.
ASE Inc.
issued common shares in connection with its merger with ASE Chung Li and ASE
Material. The shares held by its subsidiaries were reclassified from
long-term investments to treasury stock. ASE Inc.’s subsidiary, ASE
Test, is a Singapore incorporated company and may not acquire, directly or
indirectly, shares in ASE Inc. under Singapore laws. In order to
comply with relevant regulations, a trust has been established to hold the
shares acquired by ASE Test in connection with the merger. Pursuant
to the trust agreement, ASE Test’s rights with respect to the shares held in
trust are limited to the right to receive the proceeds from the sale of such
shares and any cash dividends declared while the shares remain in
trust.
Although
these shares are treated as treasury stock in the consolidated financial
statements, the shareholders are entitled to exercise their rights on these
shares, except for participation in capital increases through cash contribution
and exercise of voting rights.
19.
EMPLOYEE
STOCK OPTION PLANS
In order
to attract, retain and reward employees, ASE Inc. adopted three employee stock
option plans, the 2002 Plan, 2004 Plan and 2007 Plan, which were approved in
August 2002, May 2004 and November 2007, respectively. The maximum
number of units authorized to be granted under the 2002 Plan, 2004 Plan and 2007
Plan is 160,000 thousand, 140,000 thousand and 200,000 thousand, respectively,
with each unit representing the right to purchase one share of common stock when
exercisable. Under the terms of the plans, stock option rights are
granted at an exercise price equal to the closing price of the common shares
listed on the Taiwan Stock Exchange on the date of grant. The option
rights of these plans are valid for ten years and exercisable at certain
percentages subsequent to the second anniversary of the grant
date.
Information
regarding outstanding and exercisable stock options for the years ended December
31, 2005, 2006 and 2007 was as follows:
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
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
|
|
|
|
Options
(in
|
|
|
Per
Share
|
|
|
Fair
Value
|
|
|
Options
(in
|
|
|
Per
Share
|
|
|
Fair
Value
|
|
|
Options
(in
|
|
|
Per
Share
|
|
|
Fair
Value
|
|
|
|
Thousands)
|
|
|
(NT$)
|
|
|
(NT$)
|
|
|
Thousands)
|
|
|
(NT$)
|
|
|
(NT$)
|
|
|
Thousands)
|
|
|
(NT$)
|
|
|
(NT$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
outstanding
balance
|
|
|
260,047
|
|
|
|
19.5
|
|
|
|
|
|
|
227,341
|
|
|
|
19.8
|
|
|
|
|
|
|
171,256
|
|
|
|
16.6
|
|
|
|
|
Options
granted
|
|
|
15,000
|
|
|
|
18.6
|
|
|
|
7.09
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
185,806
|
|
|
|
30.7
|
|
|
|
11.8
|
|
Options
forfeited
|
|
|
(19,945
|
)
|
|
|
20.1
|
|
|
|
|
|
|
|
(11,086
|
)
|
|
|
20.7
|
|
|
|
|
|
|
|
(6,927
|
)
|
|
|
17.3
|
|
|
|
|
|
Options
exercised
|
|
|
(27,761
|
)
|
|
|
16.2
|
|
|
|
|
|
|
|
(44,999
|
)
|
|
|
18.9
|
|
|
|
|
|
|
|
(54,387
|
)
|
|
|
15.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
outstanding
balance
|
|
|
227,341
|
|
|
|
19.8
|
|
|
|
|
|
|
|
171,256
|
|
|
|
20.0
|
|
|
|
|
|
|
|
295,748
|
|
|
|
25.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
exercisable
balance
|
|
|
50,152
|
|
|
|
16.5
|
|
|
|
|
|
|
|
78,092
|
|
|
|
19.4
|
|
|
|
|
|
|
|
71,096
|
|
|
|
16.0
|
|
|
|
|
|
The
numbers of outstanding options and their exercise prices have been adjusted to
reflect the dilution attributable to the distribution of stock dividends in
accordance with the terms of the plans.
Information
regarding outstanding and exercisable stock options as of December 31, 2007 was
as follows:
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
|
Number
of
|
|
|
Remaining
|
|
|
Number
of
|
|
|
Remaining
|
|
Exercise
|
|
|
Options
(in
|
|
|
Contractual
|
|
|
Options
(in
|
|
|
Contractual
|
|
Price
(NT$)
|
|
|
Thousands)
|
|
|
Life
(Years)
|
|
|
Thousands)
|
|
|
Life
(Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.4
|
|
|
|
32,179
|
|
|
|
5.0
|
|
|
|
31,620
|
|
|
|
5.0
|
|
16.6
|
|
|
|
6,174
|
|
|
|
5.6
|
|
|
|
4,327
|
|
|
|
5.6
|
|
19.6
|
|
|
|
61,577
|
|
|
|
6.5
|
|
|
|
31,324
|
|
|
|
6.5
|
|
16.0
|
|
|
|
10,012
|
|
|
|
7.4
|
|
|
|
3,825
|
|
|
|
7.4
|
|
30.7
|
|
|
|
185,806
|
|
|
|
10.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
295,748
|
|
|
|
|
|
|
|
71,096
|
|
|
|
|
|
As of
December 31, 2007, the number of options that were expected to vest was 188,161
thousand.
As of
December 31, 2007, the aggregate intrinsic value of outstanding and exercisable
stock options was NT$2,048,247 thousand (US$63,159 thousand) and NT$1,171,549
thousand (US$36,125 thousand), respectively. Total intrinsic value of
options exercised in the years ended December 31, 2005, 2006 and 2007 was
NT$177,938 thousand, NT$585,948 thousand and NT$1,198,329 thousand (US$36,951
thousand), respectively.
The fair
value of the stock options issued was determined using the Black-Scholes option
pricing model with the following assumptions:
Expected
dividend yield
|
3.00%
|
Expected
volatility
|
46.0%-59.0%
|
Risk
free interest rate
|
1.80%-2.51%
|
Expected
life
|
5.0-6.5
years
|
ASE Test
adopted three employee stock option plans, the 1999 Plan, 2000 Plan and 2004
Plan. Under the terms of these plans, each unit represents the right
to purchase one share of common stock of ASE Test and is exercisable based on a
vesting schedule at an exercise price equal to the closing price of the stock’s
closing price on the date of grant. The option rights of all plans
are valid for ten years.
Information
regarding outstanding and exercisable stock options granted or modified after
January 1, 2004 for the years ended December 31, 2005, 2006 and 2007 was as
follows:
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
|
Exercise
|
|
|
Average
|
|
|
|
|
|
Exercise
|
|
|
Average
|
|
|
|
|
|
Exercise
|
|
|
Average
|
|
|
|
Number
of
|
|
|
Price
|
|
|
Grant
Date
|
|
|
Number
of
|
|
|
Price
|
|
|
Grant
Date
|
|
|
Number
of
|
|
|
Price
|
|
|
Grant
Date
|
|
|
|
Options
(in
|
|
|
Per
Share
|
|
|
Fair
Value
|
|
|
Options
(in
|
|
|
Per
Share
|
|
|
Fair
Value
|
|
|
Options
(in
|
|
|
Per
Share
|
|
|
Fair
Value
|
|
|
|
Thousands)
|
|
|
(US$)
|
|
|
(US$)
|
|
|
Thousands)
|
|
|
(US$)
|
|
|
(US$)
|
|
|
Thousands)
|
|
|
(US$)
|
|
|
(US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
outstanding
balance
|
|
|
260
|
|
|
|
6.18
|
|
|
|
|
|
|
293
|
|
|
|
6.21
|
|
|
|
|
|
|
414
|
|
|
|
7.28
|
|
|
|
|
Options
granted
|
|
|
33
|
|
|
|
6.50
|
|
|
|
3.49
|
|
|
|
130
|
|
|
|
9.60
|
|
|
|
5.32
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options
forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
6.10
|
|
|
|
|
|
Options
exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
6.10
|
|
|
|
|
|
|
|
(34
|
)
|
|
|
7.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
outstanding
balance
|
|
|
293
|
|
|
|
6.21
|
|
|
|
|
|
|
|
414
|
|
|
|
7.28
|
|
|
|
|
|
|
|
368
|
|
|
|
7.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
exercisable
balance
|
|
|
66
|
|
|
|
6.25
|
|
|
|
|
|
|
|
135
|
|
|
|
7.90
|
|
|
|
|
|
|
|
185
|
|
|
|
6.79
|
|
|
|
|
|
Information
regarding outstanding and exercisable stock options as of December 31, 2007 was
as follows:
|
|
Outstanding
|
|
Exercisable
|
|
|
|
Number
of
|
|
Remaining
|
|
Number
of
|
|
Remaining
|
|
Exercise
|
|
Options
(in
|
|
Contractual
|
|
Options
(in
|
|
Contractual
|
|
Price
(US$)
|
|
Thousands)
|
|
Life
(Years)
|
|
Thousands)
|
|
Life
(Years)
|
|
|
|
|
|
|
|
|
|
|
|
5.50
|
|
60
|
|
6.6
|
|
36
|
|
6.6
|
|
6.10
|
|
21
|
|
6.8
|
|
9
|
|
6.8
|
|
6.50
|
|
173
|
|
6.6
|
|
111
|
|
6.6
|
|
9.79
|
|
108
|
|
8.3
|
|
28
|
|
8.3
|
|
8.10
|
|
6
|
|
8.6
|
|
1
|
|
8.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
368
|
|
|
|
185
|
|
|
|
The fair
value of the stock options issued was determined using the Black-Scholes option
pricing model with the following assumptions:
Expected
dividend yield
|
0%
|
|
Expected
volatility
|
59.95%-62.03%
|
|
Risk
free interest rate
|
4.88%
|
|
Expected
life
|
3-5
years
|
|
When the
Scheme discussed in Note 1 becomes effective, each ASE Test stock options that
have a per share exercise price lower than the per share Scheme Consideration
will be deemed to have been exercised as of the Books Closure Date by ASE Test
on behalf of the option holder on a cashless basis through a broker, and the ASE
Test ordinary shares issued upon such mandatory exercise of the option will be
acquired by ASE Inc. for the Scheme Consideration of US$14.78 per ASE Test
NASDAQ Share in cash, and as a result the option holder will receive a cash
payment equal to the excess of the per share Scheme Consideration over the per
share exercise price of such ASE Test option, less any interest, fee and charges
of the broker. Each ASE Test option that has a per share exercise
price equal to or higher than the per share Scheme Consideration will be
cancelled without any payment to the option holder. The Books Closure
Date is the date on which the Register of Transfer and the Register of Members
of ASE Test will be closed for the purpose of determining which ASE Test
shareholders (excluding the Company) are entitled to receive the Scheme
Consideration pursuant to the Scheme.
ASE
Mauritius Inc. Option Plan
ASE
Mauritius Inc. adopted an employee stock option plan which was approved in
November 2007. Under the terms of the plan, each unit represents the
right to purchase one share of common stock of ASE Mauritius Inc. when
exercisable. The options are valid for ten years and exercisable at
certain percentages subsequent to the second anniversary of the grant
date.
Information
regarding outstanding and exercisable stock options for the year ended December
31, 2007 was as follows:
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
|
Exercise
|
|
|
Average
|
|
|
|
Number
of
|
|
|
Price
|
|
|
Grant
Date
|
|
|
|
Shares
(in
|
|
|
Per
Share
|
|
|
Fair
Value
|
|
|
|
Thousands)
|
|
|
(US$)
|
|
|
(US$)
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
outstanding balance
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Option
granted
|
|
|
30,000
|
|
|
|
1.7
|
|
|
|
0.9
|
|
Option
exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
outstanding balance
|
|
|
30,000
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
exercisable balance
|
|
|
-
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2007, the remaining contractual life is ten
years.
The fair
value of the stock options issued was determined using a Black-Scholes option
pricing model with the following assumptions:
Expected
dividend yield
|
-
|
|
Expected
volatility
|
47.21%
|
|
Risk
free interest rate
|
4.17%
|
|
Expected
life
|
6.5
years
|
|
For
purposes of pro forma disclosure, the estimated fair values of the options are
amortized to expense over the option vesting periods. Had the Company
recorded compensation cost based on the estimated grant date fair value, the
Company’s net income (loss) would have been reduced to the pro forma amounts
below
:
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) for calculation of basic
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
|
(4,691,187
|
)
|
|
|
17,416,151
|
|
|
|
12,165,249
|
|
|
|
375,123
|
|
Pro
forma
|
|
|
(5,924,330
|
)
|
|
|
16,301,168
|
|
|
|
12,013,309
|
|
|
|
370,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (loss) for calculation of diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
|
(4,691,187
|
)
|
|
|
17,582,151
|
|
|
|
12,280,224
|
|
|
|
378,669
|
|
Pro
forma
|
|
|
(5,924,330
|
)
|
|
|
16,467,168
|
|
|
|
12,128,284
|
|
|
|
373,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS as reported
|
|
|
(0.92
|
)
|
|
|
3.41
|
|
|
|
2.34
|
|
|
|
0.07
|
|
Pro
forma basic EPS
|
|
|
(1.17
|
)
|
|
|
3.19
|
|
|
|
2.31
|
|
|
|
0.07
|
|
Diluted
EPS as reported
|
|
|
(0.92
|
)
|
|
|
3.25
|
|
|
|
2.26
|
|
|
|
0.07
|
|
Pro
forma diluted EPS
|
|
|
(1.17
|
)
|
|
|
3.05
|
|
|
|
2.23
|
|
|
|
0.07
|
|
20.
PERSONNEL
EXPENDITURE AND DEPRECIATION AND AMORTIZATION
|
|
Year Ended December 31,
2005
|
|
|
Year Ended December 31,
2006
|
|
|
|
Cost
of
|
|
|
Operating
|
|
|
|
|
|
Cost
of
|
|
|
Operating
|
|
|
|
|
|
|
Revenues
|
|
|
Expenses
|
|
|
Total
|
|
|
Revenues
|
|
|
Expenses
|
|
|
Total
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
Personnel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
10,661,821
|
|
|
|
3,314,091
|
|
|
|
13,975,912
|
|
|
|
11,247,354
|
|
|
|
3,401,115
|
|
|
|
14,648,469
|
|
Pension cost
|
|
|
676,226
|
|
|
|
181,192
|
|
|
|
857,418
|
|
|
|
748,437
|
|
|
|
191,233
|
|
|
|
939,670
|
|
Labor and health
insurance
|
|
|
823,231
|
|
|
|
226,243
|
|
|
|
1,049,474
|
|
|
|
862,163
|
|
|
|
242,791
|
|
|
|
1,104,954
|
|
Others
|
|
|
955,882
|
|
|
|
346,502
|
|
|
|
1,302,384
|
|
|
|
1,175,983
|
|
|
|
395,931
|
|
|
|
1,571,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,117,160
|
|
|
|
4,068,028
|
|
|
|
17,185,188
|
|
|
|
14,033,937
|
|
|
|
4,231,070
|
|
|
|
18,265,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
13,286,081
|
|
|
|
704,138
|
|
|
|
13,990,219
|
|
|
|
12,736,924
|
|
|
|
751,256
|
|
|
|
13,488,180
|
|
Amortization
|
|
|
687,178
|
|
|
|
884,325
|
|
|
|
1,571,503
|
|
|
|
576,102
|
|
|
|
423,929
|
|
|
|
1,000,031
|
|
|
|
Year Ended December 31,
2007
|
|
|
|
Cost
of
|
|
|
Operating
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
Expenses
|
|
|
Total
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Personnel
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
11,452,437
|
|
|
|
3,873,339
|
|
|
|
15,325,776
|
|
|
|
472,580
|
|
Pension cost
|
|
|
749,844
|
|
|
|
227,878
|
|
|
|
977,722
|
|
|
|
30,149
|
|
Labor and health
insurance
|
|
|
851,918
|
|
|
|
291,508
|
|
|
|
1,143,426
|
|
|
|
35,258
|
|
Others
|
|
|
1,086,676
|
|
|
|
434,229
|
|
|
|
1,520,905
|
|
|
|
46,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,140,875
|
|
|
|
4,826,954
|
|
|
|
18,967,829
|
|
|
|
584,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
14,668,139
|
|
|
|
890,583
|
|
|
|
15,558,722
|
|
|
|
479,763
|
|
Amortization
|
|
|
630,435
|
|
|
|
436,995
|
|
|
|
1,067,430
|
|
|
|
32,915
|
|
The ROC
government enacted the Alternative Minimum Tax Act (the “AMT Act”), which became
effective on January 1, 2006. The alternative minimum tax (“AMT”)
imposed under the AMT Act is a supplemental tax levied at a rate of 10% which is
payable if the income tax payable determined pursuant to the Income Tax Law is
below the minimum amount prescribed under the AMT Act. The taxable
income for calculating the AMT includes most of the income that is exempted from
income tax under various laws and statutes. The Company has
considered the impact of the AMT Act in the determination of its tax
liabilities.
|
a.
|
Income
tax expense (benefit) is summarized as
follows:
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
(benefit) based on pre-tax
accounting
income (loss) at
statutory
rates
|
|
|
(1,038,061
|
)
|
|
|
5,957,310
|
|
|
|
4,491,629
|
|
|
|
138,502
|
|
Cumulative
effect of changes in
accounting
principles
|
|
|
-
|
|
|
|
(114,168
|
)
|
|
|
-
|
|
|
|
-
|
|
Add
(less) tax effects of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent
differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt
income
|
|
|
-
|
|
|
|
(778,834
|
)
|
|
|
(1,016,270
|
)
|
|
|
(31,337
|
)
|
Equity
in earnings of equity
method
investees
|
|
|
(18,573
|
)
|
|
|
(78,914
|
)
|
|
|
(86,426
|
)
|
|
|
(2,665
|
)
|
Other
|
|
|
2,997
|
|
|
|
(10,516
|
)
|
|
|
(27,283
|
)
|
|
|
(841
|
)
|
Temporary
differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
tax credits
|
|
|
(104,856
|
)
|
|
|
(375,764
|
)
|
|
|
(343,542
|
)
|
|
|
(10,593
|
)
|
Impairment
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
204,046
|
|
|
|
6,292
|
|
Loss
carryforwards
|
|
|
1,370,960
|
|
|
|
(1,246,641
|
)
|
|
|
(6,904
|
)
|
|
|
(213
|
)
|
Accrued
interest on bonds
|
|
|
56,586
|
|
|
|
60,855
|
|
|
|
44,278
|
|
|
|
1,365
|
|
Depreciation
|
|
|
(36,969
|
)
|
|
|
174,853
|
|
|
|
(223,598
|
)
|
|
|
(6,895
|
)
|
Other
|
|
|
335,705
|
|
|
|
(409,395
|
)
|
|
|
(109,544
|
)
|
|
|
(3,378
|
)
|
|
|
|
567,789
|
|
|
|
3,178,786
|
|
|
|
2,926,386
|
|
|
|
90,237
|
|
Income
tax on undistributed
earnings
|
|
|
173,834
|
|
|
|
-
|
|
|
|
298,782
|
|
|
|
9,213
|
|
Credits
for investments and research
and
development
|
|
|
(292,195
|
)
|
|
|
(1,697,397
|
)
|
|
|
(1,754,907
|
)
|
|
|
(54,114
|
)
|
Deferred
income tax
|
|
|
(481,310
|
)
|
|
|
367,751
|
|
|
|
2,029,567
|
|
|
|
62,583
|
|
Tax
separately levied on interest
from
short-term bills
|
|
|
-
|
|
|
|
-
|
|
|
|
275
|
|
|
|
9
|
|
Adjustment
of prior year’s income tax
|
|
|
(86,774
|
)
|
|
|
121,479
|
|
|
|
(142,719
|
)
|
|
|
(4,401
|
)
|
Cumulative
effect of changes in
accounting
principles
|
|
|
-
|
|
|
|
114,168
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense (benefit)
|
|
|
(118,656
|
)
|
|
|
2,084,787
|
|
|
|
3,357,384
|
|
|
|
103,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
|
b.
|
The
above-mentioned taxes on pre-tax accounting income (loss) based on
applicable statutory rates for both domestic and foreign entities are
shown below:
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Domestic
entities in ROC
(25%
statutory rate)
|
|
|
(1,255,167
|
)
|
|
|
5,570,158
|
|
|
|
3,797,475
|
|
|
|
117,097
|
|
Foreign
entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Korea (27.5%-30.8%
statutory
rate)
|
|
|
41,159
|
|
|
|
97,499
|
|
|
|
297,857
|
|
|
|
9,185
|
|
ASE
Japan (40%-42.99% statutory
rate)
|
|
|
182,148
|
|
|
|
182,372
|
|
|
|
140,751
|
|
|
|
4,340
|
|
ISE
Labs (34%-35% federal tax
rate
and 6% state tax rate)
|
|
|
(2,963
|
)
|
|
|
(11,141
|
)
|
|
|
(15,480
|
)
|
|
|
(477
|
)
|
ASE
Test Malaysia (27%-28%
statutory
rate)
|
|
|
(3,238
|
)
|
|
|
118,422
|
|
|
|
271,026
|
|
|
|
8,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,038,061
|
)
|
|
|
5,957,310
|
|
|
|
4,491,629
|
|
|
|
138,502
|
|
|
c.
|
Deferred
income tax assets (liabilities) were as
follows:
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Current
deferred income tax assets
|
|
|
|
|
|
|
|
|
|
Unused
tax credits
|
|
|
2,405,057
|
|
|
|
1,992,245
|
|
|
|
61,432
|
|
Accrued
interest on bonds
|
|
|
160,675
|
|
|
|
-
|
|
|
|
-
|
|
Loss
carryforwards
|
|
|
6,904
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
259,091
|
|
|
|
288,778
|
|
|
|
8,905
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,831,727
|
|
|
|
2,281,023
|
|
|
|
70,337
|
|
Valuation
allowance
|
|
|
(23,543
|
)
|
|
|
(205,767
|
)
|
|
|
(6,345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
current deferred income tax assets
|
|
|
2,808,184
|
|
|
|
2,075,256
|
|
|
|
63,992
|
|
Net
current deferred income tax liabilities
|
|
|
-
|
|
|
|
(121,499
|
)
|
|
|
(3,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
deferred income tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused
tax credits
|
|
|
2,927,041
|
|
|
|
1,904,773
|
|
|
|
58,735
|
|
Accrued
pension costs
|
|
|
261,000
|
|
|
|
185,528
|
|
|
|
5,721
|
|
Loss
carryforwards
|
|
|
267,157
|
|
|
|
170,541
|
|
|
|
5,259
|
|
Impairment
loss
|
|
|
-
|
|
|
|
178,368
|
|
|
|
5,500
|
|
Depreciation
|
|
|
-
|
|
|
|
(352,129
|
)
|
|
|
(10,858
|
)
|
Others
|
|
|
128,317
|
|
|
|
60,028
|
|
|
|
1,850
|
|
|
|
|
3,583,515
|
|
|
|
2,147,109
|
|
|
|
66,207
|
|
Valuation
allowance
|
|
|
(1,071,094
|
)
|
|
|
(685,707
|
)
|
|
|
(21,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
non-current deferred income tax assets
|
|
|
2,512,421
|
|
|
|
1,461,402
|
|
|
|
45,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
non-current deferred income tax liabilities
|
|
|
(25,888
|
)
|
|
|
(150,009
|
)
|
|
|
(4,626
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,294,717
|
|
|
|
3,265,150
|
|
|
|
100,682
|
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
In
assessing the realizability of deferred income tax assets, the Company considers
its future taxable earnings and expected timing of the reversal of temporary
differences. In addition, in the event future taxable earnings do not
materialize as forecasted, 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.
The tax
holidays for the Company are as follows:
|
1)
|
A
portion of the Company’s income from packing of semiconductors is exempt
from income tax for the five years ending December 2007 and September
2009. A portion of ASE Chung Li branch’s income from
manufacturing, processing and testing of semiconductors is exempt from
income tax for the five years ending December 2007 and
2011.
|
|
2)
|
A
portion of ASE Test, Inc.’s income from testing of semiconductors is
exempt from income tax for the five years ending
2010.
|
|
3)
|
A
portion of PowerASE Technology Inc.’s income is exempt from income tax for
the five years ending in the fourth quarter of
2012.
|
|
4)
|
Under
the tax laws in China, the income of ASE Shanghai and ASESH AT was wholly
exempt from income tax from 2006 to 2007 and is entitled to a 50%
reduction in income tax from 2008 to
2010.
|
According
to the tax law amended on January 1, 2008, dividends distributed by entities in
China out of earnings generated in 2008 and onward are subject to a 10%
withholding tax.
|
5)
|
ASE
Singapore Pte Ltd. has been granted pioneer status under the provisions of
the Economic Expansion Incentives (Relief from Income Tax) Act for its
operation 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 of these tax holidays was NT$0, NT$0.16 and NT$0.20 for the
years ended December 31, 2005, 2006 and 2007, respectively.
|
d.
|
As
of December 31, 2007, unused tax credits, which may be utilized to offset
future income tax, are set forth
below:
|
Year
of Expiry
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
2008
|
|
|
1,571,561
|
|
|
|
48,460
|
|
2009
|
|
|
837,701
|
|
|
|
25,831
|
|
2010
|
|
|
665,003
|
|
|
|
20,506
|
|
2011
|
|
|
651,635
|
|
|
|
20,094
|
|
2012
and thereafter
|
|
|
171,118
|
|
|
|
5,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,897,018
|
|
|
|
120,167
|
|
In the
ROC, the tax credits may be utilized to reduce up to 50% of income tax payable
each year. In the year of expiry, all remaining unused tax credits
may be used.
Income tax
returns of ASE Inc. have been examined by the ROC tax authorities through 2003.
ASE Inc. disagreed with the result of an examination relating to its 2002 income
tax return and appealed the case to the High Administrative Court. In
January 2007, the High Administrative Court judged against ASE
Inc. As a result, ASE Inc. recognized the related income tax expense
in 2006 and appealed this case to the Supreme Administrative
Court.
22.
EARNINGS
(LOSS) PER SHARE
The stock
options and convertible bonds issued by ASE Inc. and the stock options issued by
ASE Test had a dilutive effect on the 2006 and 2007 EPS
calculation. The numerators and denominators used in the EPS
calculation were as follows:
|
a.
|
Numerator
- net income (loss)
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
|
Before
|
|
|
After
|
|
|
Before
|
|
|
After
|
|
|
|
Income Tax
|
|
|
Income Tax
|
|
|
Income Tax
|
|
|
Income Tax
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(5,722,984
|
)
|
|
|
(5,044,886
|
)
|
|
|
19,067,237
|
|
|
|
17,758,654
|
|
Discontinued
operations
|
|
|
357,766
|
|
|
|
353,699
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
-
|
|
|
|
(456,671
|
)
|
|
|
(342,503
|
)
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) attributable to shareholders of the parent
|
|
|
(5,365,218
|
)
|
|
|
(4,691,187
|
)
|
|
|
18,610,566
|
|
|
|
17,416,151
|
|
Interest
on convertible bonds, net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
213,079
|
|
|
|
168,993
|
|
Employee
stock options issued by ASE Test
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,993
|
)
|
|
|
(2,993
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) attributable to shareholders of the parent
|
|
|
(5,365,218
|
)
|
|
|
(4,691,187
|
)
|
|
|
18,820,652
|
|
|
|
17,582,151
|
|
|
|
Year Ended December 31,
2007
|
|
|
|
Before Income Tax
|
|
|
After Income Tax
|
|
|
|
NT$
|
|
|
US$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
attributable to shareholders of the parent
|
|
|
13,729,800
|
|
|
|
423,367
|
|
|
|
12,165,249
|
|
|
|
375,123
|
|
Interest
on convertible bonds, net of tax
|
|
|
177,111
|
|
|
|
5,461
|
|
|
|
139,635
|
|
|
|
4,306
|
|
Employee
stock options issued by ASE Test
|
|
|
(24,660
|
)
|
|
|
(760
|
)
|
|
|
(24,660
|
)
|
|
|
(760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
attributable to shareholders of the parent
|
|
|
13,882,251
|
|
|
|
428,068
|
|
|
|
12,280,224
|
|
|
|
378,669
|
|
|
b.
|
Denominator
- shares (in thousands)
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common stock
|
|
|
4,100,661
|
|
|
|
4,566,952
|
|
|
|
4,611,951
|
|
Retroactive
adjustments for capitalization of retained
earnings
|
|
|
1,159,764
|
|
|
|
727,676
|
|
|
|
747,604
|
|
Shares
issued in connection with stock options
exercised
by employees
|
|
|
20,609
|
|
|
|
26,207
|
|
|
|
29,314
|
|
Conversion
of convertible bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
24,448
|
|
Shares
held by subsidiaries
|
|
|
(214,144
|
)
|
|
|
(214,144
|
)
|
|
|
(210,715
|
)
|
Number
of shares used for purposes of the basic EPS
calculation
|
|
|
5,066,890
|
|
|
|
5,106,691
|
|
|
|
5,202,602
|
|
Potential
number of shares issuable upon exercise of
options
|
|
|
-
|
|
|
|
72,611
|
|
|
|
60,930
|
|
Potential
number of shares issuable upon
conversion
of convertible bonds
|
|
|
-
|
|
|
|
228,527
|
|
|
|
172,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares used in the diluted EPS calculation
|
|
|
5,066,890
|
|
|
|
5,407,829
|
|
|
|
5,436,443
|
|
For
purposes of the ADS calculation, the denominator represents the above-mentioned
weighted average outstanding shares divided by five (one ADS represents five
common shares). The numerator was the same.
The
weighted average number of shares outstanding for EPS calculation has been
retroactively adjusted for the issuance of stock dividends and employee stock
bonuses. This adjustment caused the loss per share for the year ended
December 31, 2005 to decrease from NT$1.07 to NT$0.92. This
adjustment caused the basic and diluted after income tax EPS for the year ended
December 31, 2006 to decrease from NT$3.95 to NT$3.41 and from NT$3.77 to
NT$3.25, respectively.
23.
DISCLOSURES
FOR FINANCIAL INSTRUMENTS
|
a.
|
Fair
values of financial instruments were as
follows:
|
|
|
December
31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
NT$
|
|
|
US$
|
|
Non-derivative
financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at
fair value through
profit or
loss
|
|
|
1,546,450
|
|
|
|
1,546,450
|
|
|
|
1,599,353
|
|
|
|
49,317
|
|
|
|
1,599,353
|
|
|
|
49,317
|
|
Available-for-sale
financial assets
|
|
|
9,346,415
|
|
|
|
9,346,415
|
|
|
|
9,406,327
|
|
|
|
290,050
|
|
|
|
9,406,327
|
|
|
|
290,050
|
|
Held-to-maturity
financial assets
|
|
|
50,000
|
|
|
|
|
|
|
|
50,000
|
|
|
|
1,542
|
|
|
|
|
|
|
|
|
|
Financial assets
carried at cost
|
|
|
1,595,597
|
|
|
|
|
|
|
|
525,025
|
|
|
|
16,189
|
|
|
|
|
|
|
|
|
|
Guarantee
deposits
|
|
|
637,705
|
|
|
|
637,705
|
|
|
|
490,306
|
|
|
|
15,118
|
|
|
|
490,306
|
|
|
|
15,118
|
|
Restricted
assets
|
|
|
336,463
|
|
|
|
336,463
|
|
|
|
279,068
|
|
|
|
8,605
|
|
|
|
279,068
|
|
|
|
8,605
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term bonds
payable (including
current
portion)
|
|
|
9,556,844
|
|
|
|
10,262,526
|
|
|
|
7,264,735
|
|
|
|
224,013
|
|
|
|
8,494,109
|
|
|
|
261,921
|
|
Long-term bank loans
(including current
portion)
|
|
|
24,863,826
|
|
|
|
24,863,826
|
|
|
|
23,280,708
|
|
|
|
717,876
|
|
|
|
23,280,708
|
|
|
|
717,876
|
|
Capital lease
obligations (including
current
portion)
|
|
|
608,639
|
|
|
|
608,639
|
|
|
|
92,350
|
|
|
|
2,848
|
|
|
|
92,350
|
|
|
|
2,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
contract
|
|
|
(58,990
|
)
|
|
|
(58,990
|
)
|
|
|
(20,319
|
)
|
|
|
(627
|
)
|
|
|
(20,319
|
)
|
|
|
(627
|
)
|
Cross currency swap
contracts
|
|
|
(274,421
|
)
|
|
|
(274,421
|
)
|
|
|
(7,519
|
)
|
|
|
(231
|
)
|
|
|
(7,519
|
)
|
|
|
(231
|
)
|
Forward exchange
contracts
|
|
|
(7,719
|
)
|
|
|
(7,719
|
)
|
|
|
(13,852
|
)
|
|
|
(427
|
)
|
|
|
(13,852
|
)
|
|
|
(427
|
)
|
|
b.
|
Methods
and assumptions used in the estimation of fair values of financial
instruments were as follows:
|
|
1)
|
The
aforementioned financial instruments do not include cash, notes and
accounts receivable, other receivables, short-term borrowings, notes and
accounts payable, payable for properties, and temporary
receipts. These financial instruments’ carrying amounts
approximate their fair values.
|
|
2)
|
Fair
values of financial assets at fair value through profit or loss and
available-for-sale financial assets were determined using their quoted
market prices in an active market. Fair values of derivatives
were determined using valuation techniques incorporating estimates and
assumptions consistent with those generally used by other market
participants to price financial
instruments.
|
|
3)
|
Financial
assets carried at cost and held-to-maturity financial assets are
investments in unquoted securities, which have no quoted prices in an
active market and entail an unreasonably high cost to obtain verifiable
fair values. Therefore, no fair value is
presented.
|
|
4)
|
The
interest rate of long-term debts except bonds payable was floating;
therefore, their fair values approximate carrying amounts. Fair
value of bonds payable was based on their quoted market
price.
|
|
5)
|
The
carrying amounts of guarantee deposits and restricted assets reflect their
fair values.
|
|
c.
|
Valuation
gains (losses) from changes in fair value of financial instruments
determined using valuation techniques were NT$20,919 thousand,
NT$(260,569) thousand and NT$177,414 thousand (US$5,471 thousand) for the
years ended December 31, 2005, 2006 and 2007,
respectively.
|
|
d.
|
As
of December 31, 2006 and 2007, financial assets exposed to fair value
interest rate risk amounted to NT$288,389 thousand and NT$185,821 thousand
(US$5,730 thousand), respectively, financial liabilities exposed to fair
value interest rate risk amounted to NT$7,428,267 thousand and
NT$4,739,247 thousand (US$146,138 thousand), respectively, financial
assets exposed to cash flow interest rate risk amounted to NT$13,911,303
thousand and NT$14,045,750 thousand (US$433,110 thousand), respectively,
and financial liabilities exposed to cash flow interest rate risk amounted
to NT$26,960,168 thousand and NT$34,207,038 thousand (US$1,054,796
thousand), respectively.
|
|
e.
|
For
the years ended December 31, 2005, 2006 and 2007, interest income of
NT$173,325 thousand, NT$406,364 thousand and NT$364,933 thousand
(US$11,253 thousand), and interest expense (including capitalized
interest) of NT$1,791,947 thousand, NT$1,841,401 thousand and NT$1,696,609
thousand (US$52,316 thousand) were associated with financial assets or
liabilities other than those at
FVTPL.
|
|
f.
|
Strategy
for financial risk
|
The
derivative instruments employed by the Company are to mitigate risks arising
from ordinary business operation. All derivative transactions entered
into by the Company are designated as either hedging or speculating, which are
governed by separate internal guidelines and controls. Derivative
transactions entered into for hedging purposes must hedge risk against
fluctuations in foreign exchange and interest rates arising from operating
activities. The currency and the amount of derivative instruments
held by the Company must match its assets and liabilities.
|
g.
|
Information
about financial risk
|
All
derivative financial instruments are mainly held to hedge the exchange rate
fluctuations of foreign - currency - denominated assets and liabilities and
interest rate fluctuations on its floating rate long-term
loans. Exchange gains or losses on these derivative contracts are
likely to be offset by gains or losses on the hedged assets and
liabilities. Interest rate risks are also controlled because the
expected cost of capital is fixed. Thus, market risk for derivative
contracts is believed to be immaterial.
The
Company holds open-ended mutual funds, which are subject to price risk. The fair
value of these funds will decrease by NT$15,994 thousand (US$493 thousand) if
their market price decrease by 1%.
Credit
risk represents the potential loss that would be incurred by the Company if
counter parties or third parties breached contracts. Credit risk
represents the positive fair values of contracts as of the balance sheet
date. The Company’s maximum credit risk on financial instruments
approximated their carrying amounts as of December 31, 2006 and
2007.
The
Company’s operating funds are deemed sufficient to meet cash flow demand;
therefore, the Company’s liquidity risk is not considered to be
significant.
The
Company’s investments in open-ended mutual funds are traded in active markets
and can be disposed of quickly at close to their fair values. The
Company’s financial assets carried at cost have no active markets; therefore,
liquidity risk for such assets is expected to be high.
|
4)
|
Cash
flow interest rate risk
|
The
Company’s short and long-term loans are floating interest rate
debts. When the market interest rate increases by 1%, the Company’s
annual cash flows will increase by NT$342,000 thousand (US$10,546
thousand).
24.
RELATED
PARTY TRANSACTIONS
The
Company purchased real estate from HCDC for NT$1,311,429 thousand and NT$141,238
thousand (US$4,355 thousand) in 2006 and 2007, respectively, and the prices were
based on fair market values of the assets as assessed by the
appraisers. As of December 31, 2006 and 2007, NT$1,311,429 thousand
and NT$70,619 thousand (US$2,178 thousand), respectively, had been
paid.
25.
ASSETS
PLEDGED OR MORTGAGED
The
following assets have been pledged or mortgaged as collateral for bank loans,
import duties for raw materials and as guaranty deposits for employment of
foreign labor, etc:
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
507,534
|
|
|
|
505,151
|
|
|
|
15,577
|
|
Buildings
and improvements
|
|
|
2,093,043
|
|
|
|
2,835,856
|
|
|
|
87,445
|
|
Machinery
and equipment
|
|
|
2,542,862
|
|
|
|
4,807,205
|
|
|
|
148,233
|
|
Land
use rights
|
|
|
-
|
|
|
|
152,982
|
|
|
|
4,717
|
|
Idle
assets
|
|
|
-
|
|
|
|
196,552
|
|
|
|
6,061
|
|
Restricted
assets
|
|
|
336,463
|
|
|
|
279,068
|
|
|
|
8,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,479,902
|
|
|
|
8,776,814
|
|
|
|
270,638
|
|
26.
COMMITMENTS
AND CONTINGENCIES
|
a.
|
ASE
Inc. and ASE Test, Inc. lease the land on which their buildings are
situated under various operating lease agreements with the ROC government
expiring on various dates through September 2017. The
agreements grant these entities the option to renew the leases and reserve
the right for the lessor to adjust the lease payments upon an increase in
the assessed value of the land and to terminate the leases under certain
conditions. In addition, the Company leases buildings,
machinery and equipment under non-cancelable operating
leases.
|
The future
minimum lease payments under the above-mentioned operating leases are as
follows:
Operating
Leases
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
2008
|
|
|
548,706
|
|
|
|
16,920
|
|
2009
|
|
|
284,324
|
|
|
|
8,767
|
|
2010
|
|
|
202,036
|
|
|
|
6,230
|
|
2011
|
|
|
58,318
|
|
|
|
1,798
|
|
2012
and thereafter
|
|
|
155,731
|
|
|
|
4,802
|
|
|
|
|
|
|
|
|
|
|
Total
minimum lease payments
|
|
|
1,249,115
|
|
|
|
38,517
|
|
|
b.
|
As
of December 31, 2007, unused letters of credit were approximately
NT$726,000 thousand (US$22,387
thousand).
|
|
c.
|
As
of December 31, 2007, commitments to purchase machinery and equipment were
approximately NT$7,489,000 thousand (US$230,928 thousand), of which
NT$2,052,545 thousand (US$63,292 thousand) had been
prepaid.
|
|
d.
|
As
of December 31, 2007, outstanding commitments related to the construction
of buildings were
|
approximately
NT$3,679,000 thousand (US$113,444 thousand), of which NT$292,226 thousand
(US$9,011 thousand) had been prepaid.
|
e.
|
The
Company entered into technology license agreements with foreign companies
which will expire on various dates through 2017. Pursuant to
the agreements, the Company shall pay royalties based on specified
percentages of sales volume and licensing fees to the counter
parties. Royalties and licensing fees paid in the years ended
December 31, 2005, 2006 and 2007 were approximately NT$179,061 thousand,
NT$282,381 thousand and NT$246,849 thousand (US$7,612 thousand),
respectively.
|
|
f.
|
Tessera
Inc. filed an amended complaint in the United States District Court for
the Northern District of California in February 2006 adding the Company to
a suit alleging that the Company infringed patents owned by Tessera (the
“California Litigation”). At Tessera’s request, the United
States International Trade Commission (“ITC”) instituted an investigation
of certain of the Company’s co-defendants and other
companies.
|
The
district court in the California Litigation has vacated the trial schedule and
stayed all proceedings pending a final resolution of the First ITC
Investigation. The United States Patent and Trademark Office have
also instituted reexamination proceedings on all the patents Tessera has
asserted in the California Litigation and the ITC Investigation. As
of April 10, 2008, the impact of results of the California Litigation or the ITC
Investigation cannot be estimated.
In March
2008, the Company entered into an agreement to acquire Weihai-Aimhigh
Semiconductor Co. Ltd., an enterprise in China, for US$7,000 thousand. As of
April 10, 2008, the investment is still in progress.
The
Company entered into a five-year syndicated loan agreement with Citibank, N.A,
Taipei Branch and 21 other banks for a NT$24,750,000 thousand credit
facility. Proceeds from the facility will be used to finance the
proposed acquisition by ASE Inc. of the outstanding ordinary shares of ASE Test
(Note 1 d.). The syndicated loan agreement also has covenants including negative
pledge, disposals, merger and certain financial ratios.
28.
DISCONTINUED
OPERATIONS
ASE Test
Malaysia sold its camera module assembly operations in early October 2005 for
US$19,116 thousand, which covers the book value of the equipment and inventory,
plus an acquisition premium. As a result, the Company reclassified
the camera module assembly segment as discontinued
operations.
Summarized
below are operating results of the discontinued segment for the period from
January 1, 2005 to October 3, 2005:
|
|
NT$
|
|
|
|
|
|
Net
revenues
|
|
|
2,095,835
|
|
Cost
of revenues
|
|
|
1,885,492
|
|
Gross
profit
|
|
|
210,343
|
|
Operating
expenses
|
|
|
44,909
|
|
Non-operating
expenses
|
|
|
42,325
|
|
Income
from discontinued operations before income tax
|
|
|
123,109
|
|
Income
tax expense
|
|
|
2,147
|
|
Income
from discontinued operations
|
|
|
120,962
|
|
Gain
on disposal of assets
|
|
|
234,657
|
|
Income
tax expense
|
|
|
1,920
|
|
Gain
on disposal of discontinued operations
|
|
|
232,737
|
|
|
|
|
|
|
|
|
|
353,699
|
|
ASE Inc.
and its subsidiary, ASE Test, Inc., incurred fire damage to their production
lines in Chung Li, Taiwan on May 1, 2005, and recognized an estimated loss of
NT$13,479,079 thousand for damages to their inventories, building, machinery and
equipment. With the assistance of external counsel, the Company
submitted insurance claims of NT$4,641,000 thousand to its insurers for
compensation for damages which the Company believes to be clearly identifiable
and reasonably estimated, and recorded the amount as an offset to fire loss in
2005.
The
Company reached a final settlement with the insurers in June 2006 with regards
to the fire damage incurred to the production lines and facilities in Chung
Li. The final settlement amount of NT$8,068,000 thousand, offset by
the NT$4,641,000 thousand recorded in 2005 and the related repair and restoring
expenses of NT$1,043,132 thousand, was recorded in 2006. The Company
also reversed NT$2,190,583 thousand of impairment loss recognized in 2005 after
careful analysis of the increase in the estimated service potential of the
production line facilities by an external specialist. The net amount
of NT$4,574,451 thousand was recognized as a gain on insurance settlement and
loss recovery in 2006. All of the insurance recoveries were received
in August 2006.
30.
SEGMENT
AND GEOGRAPHICAL INFORMATION
|
a.
|
Geographical
sales and long-lived assets
information
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
|
|
|
|
%
of
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
NT$
|
|
|
Revenues
|
|
|
NT$
|
|
|
Revenues
|
|
|
NT$
|
|
|
US$
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
America
|
|
|
43,294,394
|
|
|
|
52
|
|
|
|
53,280,483
|
|
|
|
53
|
|
|
|
50,389,904
|
|
|
|
1,553,805
|
|
|
|
50
|
|
Taiwan
|
|
|
16,798,661
|
|
|
|
20
|
|
|
|
18,810,441
|
|
|
|
19
|
|
|
|
21,413,369
|
|
|
|
660,295
|
|
|
|
21
|
|
Asia
|
|
|
13,649,326
|
|
|
|
16
|
|
|
|
15,752,825
|
|
|
|
16
|
|
|
|
16,760,893
|
|
|
|
516,833
|
|
|
|
17
|
|
Europe
|
|
|
10,293,167
|
|
|
|
12
|
|
|
|
12,579,366
|
|
|
|
12
|
|
|
|
12,597,299
|
|
|
|
388,446
|
|
|
|
12
|
|
Other
|
|
|
250
|
|
|
|
-
|
|
|
|
532
|
|
|
|
-
|
|
|
|
1,604
|
|
|
|
50
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,035,798
|
|
|
|
100
|
|
|
|
100,423,647
|
|
|
|
100
|
|
|
|
101,163,069
|
|
|
|
3,119,429
|
|
|
|
100
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
%
|
|
|
NT$
|
|
|
US$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taiwan
|
|
|
49,802,688
|
|
|
|
68
|
|
|
|
47,364,686
|
|
|
|
1,460,521
|
|
|
|
58
|
|
Asia
|
|
|
23,307,342
|
|
|
|
32
|
|
|
|
34,074,540
|
|
|
|
1,050,710
|
|
|
|
42
|
|
America
|
|
|
433,724
|
|
|
|
-
|
|
|
|
349,103
|
|
|
|
10,765
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,543,754
|
|
|
|
100
|
|
|
|
81,788,329
|
|
|
|
2,521,996
|
|
|
|
100
|
|
For the
years ended December 31, 2005, 2006 and 2007, the Company did not have a single
customer to which the net revenues exceeded 10% of total net
revenues.
|
c.
|
Reported
segment information
|
The
Company has three reportable segments: Packaging, testing and
investing and other. The Company packages bare semiconductors into
finished semiconductors with enhanced electrical and thermal characteristics;
provides testing services, including front-end engineering testing, wafer
probing and final testing services; and engages in investing
activities. The accounting policies for segments are the same as
those described in Note 2. Segment information for the years ended
December 31, 2005, 2006 and 2007 was as follows:
|
|
Packaging
|
|
|
Testing
|
|
|
Other
|
|
|
Total
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from external customers
|
NT
|
$
|
66,022,940
|
|
NT
|
$
|
17,121,986
|
|
NT
|
$
|
890,872
|
|
NT
|
$
|
84,035,798
|
|
Inter-segment
revenues
|
|
|
84,909
|
|
|
|
86,810
|
|
|
|
2,454,643
|
|
|
|
2,626,362
|
|
Interest
income
|
|
|
108,362
|
|
|
|
32,013
|
|
|
|
32,950
|
|
|
|
173,325
|
|
Interest
expense
|
|
|
(965,068
|
)
|
|
|
(194,310
|
)
|
|
|
(411,680
|
)
|
|
|
(1,571,058
|
)
|
Net
interest expense
|
|
|
(856,706
|
)
|
|
|
(162,297
|
)
|
|
|
(378,730
|
)
|
|
|
(1,397,733
|
)
|
Depreciation
and amortization
|
|
|
8,351,842
|
|
|
|
5,786,034
|
|
|
|
1,275,970
|
|
|
|
15,413,846
|
|
Loss
on fire damage
|
|
|
(2,973,506
|
)
|
|
|
(2,420,339
|
)
|
|
|
(3,444,234
|
)
|
|
|
(8,838,079
|
)
|
Segment
profit (loss)
|
|
|
791,286
|
|
|
|
(575,806
|
)
|
|
|
(5,889,326
|
)
|
|
|
(5,673,846
|
)
|
Segment
assets
|
|
|
77,135,982
|
|
|
|
30,547,884
|
|
|
|
23,441,615
|
|
|
|
131,125,481
|
|
Expenditures
for segment assets
|
|
|
6,359,429
|
|
|
|
2,527,322
|
|
|
|
4,070,654
|
|
|
|
12,957,405
|
|
Goodwill
|
|
|
775,899
|
|
|
|
1,627,567
|
|
|
|
439,556
|
|
|
|
2,843,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from external customers
|
|
|
76,820,475
|
|
|
|
21,429,584
|
|
|
|
2,173,588
|
|
|
|
100,423,647
|
|
Inter-segment
revenues
|
|
|
74,879
|
|
|
|
51,214
|
|
|
|
5,821,221
|
|
|
|
5,947,314
|
|
Interest
income
|
|
|
193,412
|
|
|
|
66,237
|
|
|
|
146,715
|
|
|
|
406,364
|
|
Interest
expense
|
|
|
(861,737
|
)
|
|
|
(145,669
|
)
|
|
|
(612,888
|
)
|
|
|
(1,620,294
|
)
|
Net
interest expense
|
|
|
(668,325
|
)
|
|
|
(79,432
|
)
|
|
|
(466,173
|
)
|
|
|
(1,213,930
|
)
|
Depreciation
and amortization
|
|
|
8,245,204
|
|
|
|
4,889,792
|
|
|
|
1,353,215
|
|
|
|
14,488,211
|
|
Gain
on insurance settlement and impairment recovery
|
|
|
1,758,957
|
|
|
|
1,637,709
|
|
|
|
1,177,785
|
|
|
|
4,574,451
|
|
Segment
profit (loss)
|
|
|
14,679,021
|
|
|
|
7,829,473
|
|
|
|
(257,070
|
)
|
|
|
22,251,424
|
|
Segment
assets
|
|
|
78,958,866
|
|
|
|
33,095,566
|
|
|
|
24,986,444
|
|
|
|
137,040,876
|
|
Expenditures
for segment assets
|
|
|
7,025,247
|
|
|
|
4,859,188
|
|
|
|
5,846,500
|
|
|
|
17,730,935
|
|
Goodwill
|
|
|
772,148
|
|
|
|
1,619,698
|
|
|
|
439,428
|
|
|
|
2,831,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from external customers
|
|
|
78,516,274
|
|
|
|
20,007,839
|
|
|
|
2,638,956
|
|
|
|
101,163,069
|
|
Inter-segment
revenues
|
|
|
222,086
|
|
|
|
45,576
|
|
|
|
8,769,842
|
|
|
|
9,037,504
|
|
Interest
income
|
|
|
229,917
|
|
|
|
85,363
|
|
|
|
33,380
|
|
|
|
348,660
|
|
Interest
expense
|
|
|
(773,671
|
)
|
|
|
(87,635
|
)
|
|
|
(713,218
|
)
|
|
|
(1,574,524
|
)
|
Net
interest expense
|
|
|
(543,754
|
)
|
|
|
(2,272
|
)
|
|
|
(679,838
|
)
|
|
|
(1,225,864
|
)
|
Depreciation
and amortization
|
|
|
9,379,964
|
|
|
|
5,410,619
|
|
|
|
1,835,569
|
|
|
|
16,626,152
|
|
Segment
profit (loss)
|
|
|
14,879,301
|
|
|
|
5,359,835
|
|
|
|
(941,970
|
)
|
|
|
19,297,166
|
|
Segment
assets
|
|
|
91,802,902
|
|
|
|
36,968,716
|
|
|
|
23,605,832
|
|
|
|
152,377,450
|
|
Expenditures
for segment assets
|
|
|
10,502,494
|
|
|
|
6,330,268
|
|
|
|
1,339,393
|
|
|
|
18,172,155
|
|
Goodwill
|
|
|
1,040,509
|
|
|
|
1,708,255
|
|
|
|
439,353
|
|
|
|
3,188,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from external customers
|
US
|
$
|
2,421,100
|
|
US
|
$
|
616,955
|
|
US
|
$
|
81,374
|
|
US
|
$
|
3,119,429
|
|
Inter-segment
revenues
|
|
|
6,848
|
|
|
|
1,405
|
|
|
|
270,424
|
|
|
|
278,677
|
|
Interest
income
|
|
|
7,090
|
|
|
|
2,632
|
|
|
|
1,029
|
|
|
|
10,751
|
|
Interest
expense
|
|
|
(23,857
|
)
|
|
|
(2,702
|
)
|
|
|
(21,992
|
)
|
|
|
(48,551
|
)
|
Net
interest expense
|
|
|
(16,767
|
)
|
|
|
(70
|
)
|
|
|
(20,963
|
)
|
|
|
(37,800
|
)
|
Depreciation
and amortization
|
|
|
289,237
|
|
|
|
166,840
|
|
|
|
56,601
|
|
|
|
512,678
|
|
Segment
profit (loss)
|
|
|
458,813
|
|
|
|
165,274
|
|
|
|
(29,046
|
)
|
|
|
595,041
|
|
Segment
assets
|
|
|
2,830,802
|
|
|
|
1,139,954
|
|
|
|
727,901
|
|
|
|
4,698,657
|
|
Expenditures
for segment assets
|
|
|
323,851
|
|
|
|
195,198
|
|
|
|
41,301
|
|
|
|
560,350
|
|
Goodwill
|
|
|
32,085
|
|
|
|
52,675
|
|
|
|
13,548
|
|
|
|
98,308
|
|
31.
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 consolidated financial statements have been prepared in accordance
with ROC GAAP, which differs in the following respects from U.S.
GAAP:
The
Company 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 year in which the changes occur through comprehensive
income. The Company adopted U.S. SFAS No. 158 on December 31,
2006. 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.
ROC SFAS
No. 18, “Accounting for Pensions” is similar in many respects to U.S. SFAS No.
87 and was adopted by the Company 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 and the related amortization.
Under ROC
GAAP, prior to January 1, 2006, marketable securities were carried at the lower
of aggregate cost or market, and debt securities were carried at cost, with only
unrealized losses recognized. Effective January 1, 2006, the Company
adopted ROC SFAS No. 34, “Financial Instruments: Recognition and
Measurement”, and No. 36, “Financial Instruments: Disclosure and
Presentation”. Financial instruments including debt securities and
equity securities are categorized as financial assets or liabilities at fair
value through profit or loss (“FVTPL”), available-for-sale (“AFS”) or
held-to-maturity (“HTM”) securities. Financial assets at FVTPL has
two sub-categories financial assets designated on initial recognition as assets
to be measured at fair value with fair value changes recognized in profit or
loss, and financial assets that are classified as held for
trading. These classifications are similar to those required by U.S.
SFAS No. 115, “Accounting for Certain Investments in Debt and Equity
Securities”.
Under U.S.
SFAS No.115, debt and equity securities that have readily determinable fair
values are classified as either trading, AFS or HTM securities. Debt
securities that the Company has the positive intent and ability to hold to
maturity are classified as HTM securities and reported at amortized
cost. Debt and equity securities that are bought and traded for
short-term profit are classified as trading securities and reported at fair
value, with unrealized gains and losses included in earnings. Debt
and equity securities not classified as either HTM or trading are classified as
AFS securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of shareholders’
equity.
Upon
adoption of ROC SFAS No. 34 and No. 36, the Company recorded a cumulative effect
of changes in accounting principles of NT$342,503 thousand for the year ended
December 31, 2006 for marketable securities and derivative financial
instruments, of which NT$16,331 thousand relates to the adjustment of the
carrying basis of trading securities to fair market value. Such
adjustment, representing the unrealized gain on trading securities already
recognized under U.S. GAAP in 2005, was reversed in 2006 as a one-time
reconciling adjustment between U.S. GAAP and ROC GAAP.
Upon
adoption of ROC GAAP No. 34 and No. 36, the Company also adjusted the carrying
value of the marketable securities categorized as AFS, which were carried at the
lower of aggregate cost or market with unrealized losses included in earnings,
to fair market value on January 1, 2006. Therefore, prior to January
1, 2006, unrealized gains and losses included in shareholders’ equity associated
with AFS marketable securities under ROC GAAP were different from those under
U.S. GAAP.
|
c.
|
Bonuses
to employees, directors and
supervisors
|
According
to ROC regulations and the Articles of Incorporation of the Company, a portion
of distributable 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. Before January 1, 2008, 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 to earnings in the year earned. Shares
issued as part of these bonuses are recorded at fair market
value. Since the amount and form of such bonuses are not usually
determinable until the shareholders’ meeting in the subsequent year, the total
amount of the aforementioned bonuses is initially accrued based on management’s
estimate regarding the amount to be paid based on the Company’s Articles of
Incorporation. 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 the shareholders.
|
d.
|
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.
|
e.
|
Depreciation
on the excess of book value on transfer of buildings between consolidated
subsidiaries
|
ASE Test,
Inc. purchased buildings and facilities from ASE Technologies Inc. in
1997. The purchase price was based on market value, which meant the
portion of the purchase price in excess of book value of NT$17,667 thousand was
capitalized by ASE Test, Inc. as allowed under ROC GAAP. Under U.S.
GAAP, transfers of assets between entities under common control are recorded at
historical cost. Therefore, depreciation on the capitalized excess
amount recorded under ROC GAAP is reversed under U.S. GAAP until the buildings
and facilities are fully depreciated or disposed of.
|
f.
|
Gain
on sales of subsidiary’s stock
|
The
carrying value of stock investments in ASE Test by J&R Holding Limited under
ROC GAAP is different from that under U.S. GAAP mainly due to the differences in
accounting for bonuses to employees, directors and
supervisors.
|
g.
|
Effects
of U.S. GAAP adjustments on equity-method
investments
|
The
carrying amounts of equity-method investments and the investment income (loss)
recognized by the equity method in HCDC, HCKC and USI are reflected in the
consolidated financial statements under ROC GAAP. The financial
statements of these equity-method investees prepared under ROC GAAP are
different from the financial statements of such equity-method investees prepared
under U.S. GAAP mainly due to the differences in accounting for bonuses to
employees, directors and supervisors, stock options and the depreciation of
buildings. Therefore, the investment income (loss) has been adjusted
to reflect the differences between ROC GAAP and U.S. GAAP in the investees’
financial statements.
|
h.
|
Impairment
of long-lived assets
|
Under U.S.
GAAP, an impairment loss is recognized when the carrying amount of an asset or a
group of assets is not recoverable from the expected future cash flows and the
impairment loss is measured as the difference between the fair value and the
carrying amount of the asset or group of assets. The impairment loss
is recorded in earnings and cannot be reversed
subsequently. Effective January 1, 2002, long-lived assets (excluding
goodwill and other indefinite lived assets) held and used by the Company are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
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
discounted 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.
As
discussed in Note 29, the Company reversed NT$2,190,583 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 and facilities by an
external specialist. Such reversal 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.
Under ROC
GAAP, stock dividends are recorded at par value with a charge to retained
earnings. Under U.S. GAAP, if the ratio of distribution is less than
25 percent of the same class of shares outstanding, the fair value of the shares
issued should be charged to retained earnings. The difference for
stock dividends paid in 2005 and 2007 is treated as an additional reduction to
retained earnings and an increase to capital surplus of NT$3,944 million and
NT$14,264 million (US$439,833 thousand), respectively.
|
j.
|
Stock-based
compensation
|
Under U.S.
GAAP, stock-based compensation expense for the year ended December 31, 2006
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 estimated in accordance with the provisions of U.S. SFAS No. 123R,
“Share-Based Payment” (“U.S. SFAS No. 123R”). The Company recognizes
compensation expense 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 32e for a further discussion on
stock-based compensation.
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; therefore, these
options 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 the ROC. 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 years ended December 31, 2005, 2006 and
2007.
|
k.
|
Derivative
financial instruments
|
Under ROC
GAAP, prior to January 1, 2006, the Company accounted for certain derivative
instruments as cash flow hedges of certain forecasted transactions and
accordingly any gains or losses on such contracts were recorded to other
component of shareholder's equity. Effective January 1, 2006, the
Company adopted ROC SFAS No. 34, which requires derivatives that do not qualify
for hedge accounting be recorded as “financial assets or liabilities at fair
value through profit or loss” and accounted for at fair value as described in
Note 2.
Under U.S.
GAAP, accounting for derivative instruments is covered under U.S. SFAS No. 133,
as amended by U.S. SFAS No. 138, which requires that all companies recognize
derivative instruments as assets and liabilities in the balance sheet at fair
value. If certain conditions are met, including certain rigorous
documentation requirements, entities may elect to designate a derivative
instrument as a hedging instrument. Under U.S. GAAP, the Company does
not apply hedge accounting, and derivatives have historically been, and continue
to be, recorded on the consolidated balance sheet at fair value, with changes in
fair value recorded in current period earnings.
Before
January 1, 2006, under ROC GAAP, the Company amortized goodwill arising from
acquisitions over 10 years.
As
discussed in Note 3, 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 reviews
goodwill for impairment in accordance with the provision of the standard and
found no impairment as of December 31, 2006 and 2007.
Under U.S.
GAAP, the Company adopted U.S. SFAS No. 142, “Goodwill and Other Intangible
Assets” (“U.S. SFAS No. 142”) on January 1, 2002, which requires the Company to
review for possible impairment 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, “Business Combinations” and U.S. SFAS No. 142. As a result,
the Company ceased to amortize goodwill effective January 1,
2002. Definite-lived intangible assets continue to be amortized over
their estimated useful lives.
The
determination of whether or not goodwill is impaired under U.S. SFAS No.142 is
made by first estimating the fair value of the reporting unit and comparing the
fair value of a reporting unit with its carrying amount, including
goodwill. If the carrying amount of a reporting unit exceeds its 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 the underlying assets and
liabilities. If the carrying amount of the reporting unit’s goodwill
exceeds the implied fair value of that goodwill, an impairment loss shall be
recognized in an amount equal to that excess.
|
m.
|
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. In 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.
|
n.
|
Impairment
of long-term investments
|
ROC GAAP
and U.S. GAAP require an assessment of impairment of long-term investments
whenever events or circumstances indicate a decline in value that may be other
than temporary. The criteria for determining whether or not an
impairment charge is required are similar under ROC GAAP and U.S. GAAP; however,
the methods to measure the amount of impairment may be based on different
estimates of fair values depending on the circumstances. When
impairment is determined to have occurred, U.S. GAAP generally requires the
market price to be used, if available, to determine the fair value of the
long-term investment and measure the amount of impairment at the reporting
date. Under ROC GAAP, if the investments have an inactive market,
another measure of fair value may be used. No impairment charge was
incurred under U.S. GAAP in 2005, 2006 and 2007.
Under both
ROC GAAP and U.S. GAAP, basic earnings per share is calculated by dividing net
income by the weighted average number of shares outstanding in each
period. Other shares issued out of 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 intrinsic value method to account for its stock-based compensation
under APB No. 25, and had no unrecognized compensation cost to be included in
the assumed proceeds calculation. However, upon adoption of U.S. SFAS
No. 123R, the Company now has unrecognized compensation cost, and therefore, the
number of shares included in the diluted earnings per share calculation under
U.S. GAAP will be different from that under ROC GAAP.
|
p.
|
Uncertainty
in income taxes
|
Under ROC
GAAP, uncertainty in income taxes or adjustments of prior years’ income taxes is
recorded as current year’s income tax expense. Under U.S. GAAP, 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 consolidated 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 year 2007. The adoption of FIN 48
resulted in a cumulative effect of NT$24,154 thousand (US$745 thousand), which
was recorded as an adjustment to retained earnings at the beginning of
2007.
The
following schedule reconciles net income (loss) and shareholders’ equity under
ROC GAAP as reported in the consolidated financial statements to the approximate
net income (loss) and shareholders’ equity amounts as determined under U.S.
GAAP, giving effect to adjustments for the differences listed
above.
|
|
Year
Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Net income
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) based on ROC GAAP
|
|
|
(4,691,187
|
)
|
|
|
17,416,151
|
|
|
|
12,165,249
|
|
|
|
375,123
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a. Pension
benefits
|
|
|
(14,748
|
)
|
|
|
104,011
|
|
|
|
4,382
|
|
|
|
135
|
|
b. Marketable
securities
|
|
|
12,145
|
|
|
|
(16,331
|
)
|
|
|
-
|
|
|
|
-
|
|
c. Bonuses
to employees, directors and supervisors
|
|
|
(191,184
|
)
|
|
|
(1,656,438
|
)
|
|
|
(2,054,493
|
)
|
|
|
(63,351
|
)
|
d. Depreciation
of buildings
|
|
|
(2,517
|
)
|
|
|
(103,493
|
)
|
|
|
(116,574
|
)
|
|
|
(3,595
|
)
|
e. Depreciation
on the excess of book value of building transferred
between
subsidiaries
|
|
|
432
|
|
|
|
432
|
|
|
|
432
|
|
|
|
13
|
|
g. Effect
of U.S. GAAP adjustments on equity-method investees
|
|
|
100,868
|
|
|
|
(38,719
|
)
|
|
|
(26,414
|
)
|
|
|
(814
|
)
|
h. Impairment
loss reversal, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoverable
amount
|
|
|
-
|
|
|
|
(2,190,583
|
)
|
|
|
-
|
|
|
|
-
|
|
Depreciation
on recoverable amount
|
|
|
-
|
|
|
|
85,631
|
|
|
|
254,406
|
|
|
|
7,845
|
|
Gain
on disposal of impairment recovery
|
|
|
-
|
|
|
|
-
|
|
|
|
58,871
|
|
|
|
1,815
|
|
j. Stock
option compensation
|
|
|
(976,986
|
)
|
|
|
(635,041
|
)
|
|
|
(489,490
|
)
|
|
|
(15,094
|
)
|
j. Cumulative
effect of changes in accounting principles for adopting
U.S.
SFAS No. 123R
|
|
|
-
|
|
|
|
45,976
|
|
|
|
-
|
|
|
|
-
|
|
k. Derivative
financial instruments
|
|
|
(216,037
|
)
|
|
|
590,481
|
|
|
|
-
|
|
|
|
-
|
|
l. Goodwill
amortization
|
|
|
528,943
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
m. Undistributed
earnings tax
|
|
|
-
|
|
|
|
(300,438
|
)
|
|
|
122,448
|
|
|
|
3,776
|
|
p. Adjustment
upon adoption of FIN 48
|
|
|
-
|
|
|
|
-
|
|
|
|
24,154
|
|
|
|
745
|
|
Effect
of U.S. GAAP adjustments on income tax
|
|
|
71,629
|
|
|
|
404,491
|
|
|
|
(43,603
|
)
|
|
|
(1,345
|
)
|
Effect
of U.S. GAAP adjustments on minority interest
|
|
|
(151,884
|
)
|
|
|
416,566
|
|
|
|
31,738
|
|
|
|
978
|
|
Net
decrease in net income (loss)
|
|
|
(839,339
|
)
|
|
|
(3,293,455
|
)
|
|
|
(2,234,143
|
)
|
|
|
(68,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) based on U.S. GAAP
|
|
|
(5,530,526
|
)
|
|
|
14,122,696
|
|
|
|
9,931,106
|
|
|
|
306,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(1.10
|
)
|
|
|
2.77
|
|
|
|
1.91
|
|
|
|
0.06
|
|
Diluted
|
|
|
(1.10
|
)
|
|
|
2.64
|
|
|
|
1.85
|
|
|
|
0.06
|
|
Earnings
(loss) per ADS (Note 32 (h) )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(5.48
|
)
|
|
|
13.83
|
|
|
|
9.54
|
|
|
|
0.29
|
|
Diluted
|
|
|
(5.48
|
)
|
|
|
13.22
|
|
|
|
9.23
|
|
|
|
0.28
|
|
Number
of weighted average outstanding shares (in thousands) (Note 32 (h)
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
5,046,208
|
|
|
|
5,106,690
|
|
|
|
5,202,602
|
|
|
|
5,202,602
|
|
Diluted
|
|
|
5,046,208
|
|
|
|
5,403,893
|
|
|
|
5,444,040
|
|
|
|
5,444,040
|
|
Number
of ADS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,009,242
|
|
|
|
1,021,338
|
|
|
|
1,040,520
|
|
|
|
1,040,520
|
|
Diluted
|
|
|
1,009,242
|
|
|
|
1,080,779
|
|
|
|
1,088,808
|
|
|
|
1,088,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity based on ROC GAAP
|
|
|
46,948,249
|
|
|
|
66,019,899
|
|
|
|
75,173,361
|
|
|
|
2,318,019
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a. Pension
benefits (expenses) and additional liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
benefits (expenses)
|
|
|
(45,793
|
)
|
|
|
58,218
|
|
|
|
62,600
|
|
|
|
1,930
|
|
Unrecognized
pension cost on adoption of U.S. SFAS No.158
|
|
|
-
|
|
|
|
(613,362
|
)
|
|
|
(613,362
|
)
|
|
|
(18,913
|
)
|
Defined
benefit pension plan adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,153
|
)
|
|
|
(807
|
)
|
b. Marketable
securities
|
|
|
16,331
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
c. Bonuses
to employees, directors and supervisors
|
|
|
-
|
|
|
|
(1,656,438
|
)
|
|
|
(1,241,391
|
)
|
|
|
(38,279
|
)
|
d. Depreciation
of buildings
|
|
|
(478,794
|
)
|
|
|
(582,287
|
)
|
|
|
(698,861
|
)
|
|
|
(21,550
|
)
|
e. Depreciation
on the excess of book value of building transferred
between
subsidiaries
|
|
|
(14,031
|
)
|
|
|
(13,599
|
)
|
|
|
(13,167
|
)
|
|
|
(406
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
|
Year
Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
f. Adjustment
of carrying value of subsidiaries’ long-term
investment
|
|
|
(8,619
|
)
|
|
|
(8,619
|
)
|
|
|
(8,619
|
)
|
|
|
(266
|
)
|
g. Effects
of U.S. GAAP adjustments on equity-method investees
|
|
|
649,723
|
|
|
|
611,004
|
|
|
|
273,901
|
|
|
|
8,446
|
|
h. Impairment
loss reversal, net
|
|
|
-
|
|
|
|
(2,104,952
|
)
|
|
|
(1,791,675
|
)
|
|
|
(55,248
|
)
|
i. Stock
option compensation
|
|
|
(908,661
|
)
|
|
|
(908,661
|
)
|
|
|
(908,661
|
)
|
|
|
(28,019
|
)
|
k. Derivative
financial instruments
|
|
|
(461,301
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
l. Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
3,041,351
|
|
|
|
3,041,351
|
|
|
|
3,041,351
|
|
|
|
93,782
|
|
Impairment
loss
|
|
|
(1,600,618
|
)
|
|
|
(1,600,618
|
)
|
|
|
(1,600,618
|
)
|
|
|
(49,356
|
)
|
m. Undistributed
earnings tax
|
|
|
-
|
|
|
|
(300,438
|
)
|
|
|
(177,990
|
)
|
|
|
(5,488
|
)
|
n. Impairment
loss on equity-method investments
|
|
|
(2,078,620
|
)
|
|
|
(2,078,620
|
)
|
|
|
(2,078,620
|
)
|
|
|
(64,096
|
)
|
Effect
of U.S. GAAP adjustments on income tax
|
|
|
231,134
|
|
|
|
635,625
|
|
|
|
592,022
|
|
|
|
18,255
|
|
Effect
on U.S. GAAP adjustments on minority interest
|
|
|
(331,016
|
)
|
|
|
85,550
|
|
|
|
117,288
|
|
|
|
3,617
|
|
Net
decrease in shareholders‘ equity
|
|
|
(1,988,914
|
)
|
|
|
(5,435,846
|
)
|
|
|
(5,071,955
|
)
|
|
|
(156,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity based on U.S. GAAP
|
|
|
44,959,335
|
|
|
|
60,584,053
|
|
|
|
70,101,406
|
|
|
|
2,161,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
|
|
|
|
|
|
Year
Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Changes in
shareholders’ equity based on U.S. GAAP
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
|
48,657,096
|
|
|
|
44,959,335
|
|
|
|
60,584,053
|
|
|
|
1,868,149
|
|
Net
income (loss) for the year
|
|
|
(5,530,526
|
)
|
|
|
14,122,696
|
|
|
|
9,931,106
|
|
|
|
306,231
|
|
Capital
received in advance
|
|
|
156,228
|
|
|
|
384,428
|
|
|
|
491,883
|
|
|
|
15,168
|
|
Adjustment
for bonuses to employees, directors and supervisors
|
|
|
350,274
|
|
|
|
-
|
|
|
|
1,634,513
|
|
|
|
50,401
|
|
Adjustment
for stock option compensation
|
|
|
976,986
|
|
|
|
635,041
|
|
|
|
489,490
|
|
|
|
15,094
|
|
Cumulative
effect of changes in accounting principles for adopting U.S.
SFAS
No. 123R.
|
|
|
-
|
|
|
|
(45,976
|
)
|
|
|
-
|
|
|
|
-
|
|
Translation
adjustment
|
|
|
432,132
|
|
|
|
258,140
|
|
|
|
849,157
|
|
|
|
26,184
|
|
Adjustment
from changes in ownership percentage of investees
|
|
|
18,043
|
|
|
|
(65,104
|
)
|
|
|
15,867
|
|
|
|
489
|
|
Unrealized
gain (loss) on financial assets
|
|
|
-
|
|
|
|
486,314
|
|
|
|
(13,882
|
)
|
|
|
(428
|
)
|
Unrealized
gain on long-term investment
|
|
|
700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuance
of common stock from stock options exercised by employees
|
|
|
322,334
|
|
|
|
464,162
|
|
|
|
962,240
|
|
|
|
29,671
|
|
Cash
dividends
|
|
|
(411,221
|
)
|
|
|
-
|
|
|
|
(6,941,011
|
)
|
|
|
(214,030
|
)
|
Conversion
of convertible bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
1,300,795
|
|
|
|
40,111
|
|
Cash
dividends paid to subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
271,945
|
|
|
|
8,386
|
|
Capital
surplus from accrued interest of foreign convertible bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
728,254
|
|
|
|
22,456
|
|
Adjustment
upon adoption of FIN 48
|
|
|
-
|
|
|
|
-
|
|
|
|
(24,154
|
)
|
|
|
(745
|
)
|
Effects
of U.S. GAAP adjustments on equity-method investees
|
|
|
-
|
|
|
|
-
|
|
|
|
(165,222
|
)
|
|
|
(5,095
|
)
|
Unrecognized
pension cost
|
|
|
(12,711
|
)
|
|
|
(1,621
|
)
|
|
|
12,525
|
|
|
|
386
|
|
Unrecognized
pension cost on adoption of U.S. SFAS No.158
|
|
|
-
|
|
|
|
(613,362
|
)
|
|
|
-
|
|
|
|
-
|
|
Defined
benefit pension plan adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,153
|
)
|
|
|
(807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
end of year
|
|
|
44,959,335
|
|
|
|
60,584,053
|
|
|
|
70,101,406
|
|
|
|
2,161,621
|
|
The U.S.
GAAP condensed consolidated balance sheets as of December 31, 2006 and 2007, and
consolidated statements of operations for the years ended December 31, 2005,
2006 and 2007 were as follows:
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Current
assets
|
|
|
48,762,798
|
|
|
|
56,902,021
|
|
|
|
1,754,611
|
|
Long-term
investments
|
|
|
4,266,930
|
|
|
|
3,045,425
|
|
|
|
93,908
|
|
Property,
plant and equipment
|
|
|
70,894,128
|
|
|
|
80,036,599
|
|
|
|
2,467,980
|
|
Intangible
assets
|
|
|
3,972,395
|
|
|
|
5,255,787
|
|
|
|
162,066
|
|
Other
assets
|
|
|
5,834,811
|
|
|
|
3,766,680
|
|
|
|
116,147
|
|
Total
assets
|
|
|
133,731,062
|
|
|
|
149,006,512
|
|
|
|
4,594,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
29,666,680
|
|
|
|
36,992,344
|
|
|
|
1,140,682
|
|
Long-term
debts
|
|
|
29,398,300
|
|
|
|
23,936,009
|
|
|
|
738,083
|
|
Other
liabilities
|
|
|
3,060,719
|
|
|
|
3,527,514
|
|
|
|
108,773
|
|
Total
liabilities
|
|
|
62,125,699
|
|
|
|
64,455,867
|
|
|
|
1,987,538
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Minority
interest in consolidated subsidiaries
|
|
|
11,021,310
|
|
|
|
14,449,239
|
|
|
|
445,553
|
|
Equity
attributable to shareholders of the parent
|
|
|
60,584,053
|
|
|
|
70,101,406
|
|
|
|
2,161,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$
|
133,731,062
|
|
|
$
|
149,006,512
|
|
|
$
|
4,594,712
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
84,035,798
|
|
|
|
100,423,647
|
|
|
|
101,163,069
|
|
|
|
3,119,429
|
|
Cost
of revenues
|
|
|
70,544,393
|
|
|
|
73,366,954
|
|
|
|
75,134,707
|
|
|
|
2,316,828
|
|
Gross
profit
|
|
|
13,491,405
|
|
|
|
27,056,693
|
|
|
|
26,028,362
|
|
|
|
802,601
|
|
Operating
expenses
|
|
|
21,882,857
|
|
|
|
10,113,817
|
|
|
|
11,108,707
|
|
|
|
342,544
|
|
Income
(loss) from operations
|
|
|
(8,391,452
|
)
|
|
|
16,942,876
|
|
|
|
14,919,655
|
|
|
|
460,057
|
|
Net
non-operating income
|
|
|
1,958,522
|
|
|
|
1,448,498
|
|
|
|
71,382
|
|
|
|
2,201
|
|
Income
(loss) from continuing operations before
income
tax
|
|
|
(6,432,930
|
)
|
|
|
18,391,374
|
|
|
|
14,991,037
|
|
|
|
462,258
|
|
Income
tax benefit (expense)
|
|
|
190,285
|
|
|
|
(1,980,734
|
)
|
|
|
(3,262,434
|
)
|
|
|
(100,600
|
)
|
Income
(loss) from continuing operations
|
|
|
(6,242,645
|
)
|
|
|
16,410,640
|
|
|
|
11,728,603
|
|
|
|
361,658
|
|
Discontinued
operations
|
|
|
353,699
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cumulative
effect of changes in accounting principles
|
|
|
-
|
|
|
|
(296,527
|
)
|
|
|
-
|
|
|
|
-
|
|
Minority
interest in net loss (income) of subsidiaries
|
|
|
358,420
|
|
|
|
(1,991,417
|
)
|
|
|
(1,797,497
|
)
|
|
|
(55,427
|
)
|
Net
income (loss)
|
|
|
(5,530,526
|
)
|
|
|
14,122,696
|
|
|
|
9,931,106
|
|
|
|
306,231
|
|
The
Company applies ROC SFAS No. 17, “Statement of Cash Flows”. Its
objectives and principles are similar to those set out in the U.S. SFAS No. 95,
“Statement of Cash Flows”. Summarized cash flow data by operating,
investing and financing activities in accordance with U.S. SFAS No. 95 are as
follows:
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Cash
flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating
activities
|
|
|
18,675,367
|
|
|
|
37,280,483
|
|
|
|
27,471,750
|
|
|
|
847,108
|
|
Net
cash used in investing activities
|
|
|
(11,631,958
|
)
|
|
|
(22,104,508
|
)
|
|
|
(18,108,361
|
)
|
|
|
(558,383
|
)
|
Net
cash provided by financing
activities
|
|
|
(16,056
|
)
|
|
|
(12,551,518
|
)
|
|
|
(7,653,859
|
)
|
|
|
(236,010
|
)
|
Net
decrease in cash
|
|
|
7,027,353
|
|
|
|
2,624,457
|
|
|
|
1,709,530
|
|
|
|
52,715
|
|
Cash,
beginning of year
|
|
|
5,975,103
|
|
|
|
13,263,788
|
|
|
|
15,730,075
|
|
|
|
485,047
|
|
Effect
of first inclusion for
consolidation
of subsidiary
|
|
|
-
|
|
|
|
4,564
|
|
|
|
-
|
|
|
|
-
|
|
Effect
of exchange rate changes in
cash
|
|
|
261,332
|
|
|
|
(162,734
|
)
|
|
|
(281,670
|
)
|
|
|
(8,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of year
|
|
|
13,263,788
|
|
|
|
15,730,075
|
|
|
|
17,157,935
|
|
|
|
529,076
|
|
The
significant reclassifications for U.S. GAAP cash flow statements pertain to
bonuses to employees directors and supervisors shown in the operating activities
under U.S. GAAP as opposed to financing activities under ROC GAAP.
32.
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”
(“U.S. SFAS No. 157”), 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 does not expect the
adoption of U.S. SFAS No.157 to impact the Company’s consolidated financial
position or results of operations.
In
February 2007, the FASB issued U.S. SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities- Including an amendment of FASB
Statement No.115” (“U.S. SFAS No. 159”). This statement permits
companies to choose to measure eligible items at fair value at specified
election dates and report unrealized gains and losses in earnings at each
subsequent reporting date on items for which the fair value option has been
elected. The objective of this statement is to improve financial
reporting by providing companies with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. The
Company may decide whether to elect the fair value option for each eligible item
on its election date, subject to certain requirements described in the
statement. U.S. SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007. The Company is currently evaluating the
effect that the adoption of U.S. SFAS No. 159 will have on the results of
operations and financial position of the Company, and is not yet in a position
to determine such effects.
In
December 2007, the FASB issued U.S. SFAS No. 141R, “Business Combination” (“U.S.
SFAS No. 141R”) and U.S. SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements- an amendment of ARB No. 51” (“U.S. SFAS No.
160”). U.S. SFAS No. 141R requires most of the assets acquired and
liabilities assumed in the business combination to be measured at fair value as
of the acquisition date. In addition, the net assets of
non-controlling interests’ share of the acquired subsidiaries should be
recognized at fair value. U.S. SFAS No. 160 requires the Company to
include non-controlling interests as a separate component of shareholders’
equity, instead of liability or temporary equity. U.S. SFAS No. 141R
is effective for the Company for business combinations consummated on or after
January 1, 2009 and U.S. SFAS No. 160 is effective for the Company beginning
after January 1, 2009. The Company is currently evaluating the effect
that the adoption of U.S. No. SFAS 141R and U.S. SFAS No. 160 will have on the
results of operations and financial positions of the Company, and is not yet in
a position to determine such effects.
Set forth
below is pension information about the defined benefit plans disclosed in
accordance with U.S. SFAS No. 132:
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Components of net
periodic benefit
cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
|
488,303
|
|
|
|
267,351
|
|
|
|
382,371
|
|
|
|
11,791
|
|
Interest
cost
|
|
|
98,268
|
|
|
|
89,761
|
|
|
|
86,490
|
|
|
|
2,667
|
|
Expected
return on plan assets
|
|
|
(33,862
|
)
|
|
|
(34,777
|
)
|
|
|
(37,312
|
)
|
|
|
(1,151
|
)
|
Amortization
|
|
|
16,187
|
|
|
|
7,697
|
|
|
|
10,955
|
|
|
|
338
|
|
Curtailment
loss on pension
|
|
|
18,036
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
periodic benefit cost
|
|
|
586,932
|
|
|
|
330,032
|
|
|
|
442,504
|
|
|
|
13,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
obligation at beginning of
year
|
|
|
3,797,207
|
|
|
|
4,006,601
|
|
|
|
4,474,962
|
|
|
|
137,988
|
|
Service
cost
|
|
|
488,303
|
|
|
|
376,027
|
|
|
|
382,371
|
|
|
|
11,791
|
|
Interest
cost
|
|
|
98,268
|
|
|
|
88,341
|
|
|
|
86,490
|
|
|
|
2,667
|
|
Initial
adoption of U.S. SFAS
No.
158
|
|
|
-
|
|
|
|
31,691
|
|
|
|
-
|
|
|
|
-
|
|
Curtailment
of settlement gain
|
|
|
-
|
|
|
|
(29,327
|
)
|
|
|
(13,562
|
)
|
|
|
(418
|
)
|
Actuarial
loss (gain)
|
|
|
(212,871
|
)
|
|
|
250,851
|
|
|
|
112,780
|
|
|
|
3,478
|
|
Benefits
paid
|
|
|
(20,065
|
)
|
|
|
(285,063
|
)
|
|
|
(245,692
|
)
|
|
|
(7,576
|
)
|
Exchange
loss (gain)
|
|
|
(144,241
|
)
|
|
|
35,841
|
|
|
|
53,836
|
|
|
|
1,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
obligation at end of year
|
|
|
4,006,601
|
|
|
|
4,474,962
|
|
|
|
4,851,185
|
|
|
|
149,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of plan assets at
beginning
of year
|
|
|
1,051,460
|
|
|
|
1,421,105
|
|
|
|
1,657,132
|
|
|
|
51,099
|
|
Actual
return on plan assets
|
|
|
96,113
|
|
|
|
51,438
|
|
|
|
41,577
|
|
|
|
1,282
|
|
Employer
contribution
|
|
|
350,226
|
|
|
|
223,136
|
|
|
|
482,282
|
|
|
|
14,871
|
|
Benefits
paid
|
|
|
(76,694
|
)
|
|
|
(38,547
|
)
|
|
|
(48,285
|
)
|
|
|
(1,489
|
)
|
|
|
|
1,421,105
|
|
|
|
1,657,132
|
|
|
|
2,132,706
|
|
|
|
65,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded
status
|
|
|
2,585,496
|
|
|
|
2,817,830
|
|
|
|
2,718,479
|
|
|
|
83,826
|
|
Unrecognized
net transition obligation
|
|
|
(6,803
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Unrecognized
prior service cost
|
|
|
(276
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Unrecognized
actuarial loss
|
|
|
(303,348
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Additional
liability
|
|
|
12,259
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
amount recognized
|
|
|
2,287,328
|
|
|
|
2,817,830
|
|
|
|
2,718,479
|
|
|
|
83,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
|
2005
|
2006
|
2007
|
|
|
|
|
Discount
rate
|
2.50%
to 4.40 %
|
2.25%
to 4.70 %
|
2.25%
to 4.90%
|
Increase
in future salary level
|
2.50%
to 5.00 %
|
2.50%
to 5.00 %
|
2.50%
to 5.00%
|
Expected
return on plan assets
|
2.50%
to 2.75 %
|
2.50%
to 2.75 %
|
2.50%
to 3.00%
|
The
Company has no other post-retirement or post-employment benefit
plans.
At
December 31, 2006 and 2007, marketable securities by category were as
follows.
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
Holding
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Gains
|
|
|
Carrying Amount
|
|
|
Fair Value
|
|
|
Holding Gains
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
NT$
|
|
|
US$
|
|
|
NT$
|
|
|
US$
|
|
Trading
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Open-ended
mutual funds
|
|
|
1,546,450
|
|
|
|
1,546,450
|
|
|
|
8,420
|
|
|
|
1,599,353
|
|
|
|
49,317
|
|
|
|
1,599,353
|
|
|
|
49,317
|
|
|
|
12,127
|
|
|
|
374
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Open-ended
mutual funds
|
|
|
9,228,994
|
|
|
|
9,228,994
|
|
|
|
28,994
|
|
|
|
9,292,448
|
|
|
|
286,540
|
|
|
|
9,292,448
|
|
|
|
286,540
|
|
|
|
72,661
|
|
|
|
2,241
|
|
Government
bonds and corporate bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,874
|
|
|
|
2,739
|
|
|
|
88,874
|
|
|
|
2,739
|
|
|
|
-
|
|
|
|
-
|
|
Publicly-trading
stocks
|
|
|
117,421
|
|
|
|
117,421
|
|
|
|
42,728
|
|
|
|
25,005
|
|
|
|
771
|
|
|
|
25,005
|
|
|
|
771
|
|
|
|
3,701
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,892,865
|
|
|
|
10,892,865
|
|
|
|
80,142
|
|
|
|
11,005,680
|
|
|
|
339,367
|
|
|
|
11,005,680
|
|
|
|
339,367
|
|
|
|
88,489
|
|
|
|
2,729
|
|
The
Company uses the average cost method for trading securities and
available-for-sale securities when determining their cost
basis. Proceeds from sales of available-for-sale securities for the
years ended December 31, 2005, 2006 and 2007 were NT$1,503,175 thousand,
NT$7,518,738 thousand and NT$11,825,157 thousand (US$364,636 thousand),
respectively. Net realized gains on these sales for the years ended
December 31, 2005, 2006 and 2007 were NT$65,199 thousand, NT$56,748 thousand and
NT$111,586 thousand (US$3,441 thousand), respectively.
|
d.
|
Income
tax expense (benefit)
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
income tax expense (benefit)
|
|
|
(1,095,366
|
)
|
|
|
2,842,198
|
|
|
|
1,178,383
|
|
|
|
36,336
|
|
Deferred
income tax
|
|
|
(552,939
|
)
|
|
|
(36,740
|
)
|
|
|
2,073,170
|
|
|
|
63,928
|
|
Loss
carryforwards
|
|
|
1,370,960
|
|
|
|
(1,246,641
|
)
|
|
|
(6,904
|
)
|
|
|
(213
|
)
|
Income
tax on undistributed earnings
|
|
|
173,834
|
|
|
|
300,438
|
|
|
|
176,334
|
|
|
|
5,437
|
|
Tax
separately levied on interest from short-term bills
|
|
|
-
|
|
|
|
-
|
|
|
|
275
|
|
|
|
9
|
|
Adjustment
of prior years’ income
taxes
|
|
|
(86,774
|
)
|
|
|
121,479
|
|
|
|
(158,824
|
)
|
|
|
(4,897
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense (benefit)
|
|
|
(190,285
|
)
|
|
|
1,980,734
|
|
|
|
3,262,434
|
|
|
|
100,600
|
|
A
reconciliation between the income tax calculated on pre-tax financial statement
income based on statutory tax rates and the income tax expense (benefit) which
conforms to U.S. GAAP is as follows:
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
(benefit) based on pre-tax
accounting
income (loss) at
statutory
rates
|
|
|
(1,398,039
|
)
|
|
|
5,107,933
|
|
|
|
3,907,344
|
|
|
|
120,486
|
|
Add
(less) tax effects of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent
differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
holiday
|
|
|
-
|
|
|
|
(778,834
|
)
|
|
|
(1,016,270
|
)
|
|
|
(31,337
|
)
|
Gain
from sale of securities
|
|
|
(8,829
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Investment
income
|
|
|
(53,909
|
)
|
|
|
(69,234
|
)
|
|
|
(79,823
|
)
|
|
|
(2,461
|
)
|
Bonuses
to employees, directors
and
supervisor
|
|
|
292,043
|
|
|
|
572,870
|
|
|
|
635,995
|
|
|
|
19,611
|
|
Other
|
|
|
59,916
|
|
|
|
(114,765
|
)
|
|
|
(35,326
|
)
|
|
|
(1,089
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credits
for investments and
research
and development
|
|
|
(292,195
|
)
|
|
|
(1,697,397
|
)
|
|
|
(1,754,907
|
)
|
|
|
(54,114
|
)
|
Loss
carryforwards
|
|
|
1,370,960
|
|
|
|
(1,246,641
|
)
|
|
|
(6,904
|
)
|
|
|
(213
|
)
|
Deferred
|
|
|
(247,292
|
)
|
|
|
(215,115
|
)
|
|
|
1,594,540
|
|
|
|
49,168
|
|
Tax
separately levied on interest from short-term bills
|
|
|
-
|
|
|
|
-
|
|
|
|
275
|
|
|
|
9
|
|
Income
taxes (10%) on undistributed
earnings
|
|
|
173,834
|
|
|
|
300,438
|
|
|
|
176,334
|
|
|
|
5,437
|
|
Adjustment
of prior year’s income tax
|
|
|
(86,774
|
)
|
|
|
121,479
|
|
|
|
(158,824
|
)
|
|
|
(4,897
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense (benefit)
|
|
|
(190,285
|
)
|
|
|
1,980,734
|
|
|
|
3,262,434
|
|
|
|
100,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
The
abovementioned taxes on pretax accounting income (loss) at statutory rates for
domestic and foreign entities are shown below:
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
entities in ROC (25%
statutory
rate)
|
|
|
(1,617,173
|
)
|
|
|
4,720,781
|
|
|
|
3,213,190
|
|
|
|
99,081
|
|
Foreign
entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASE
Korea (27.5%-30.8% statutory rate)
|
|
|
41,159
|
|
|
|
97,499
|
|
|
|
297,857
|
|
|
|
9,185
|
|
ASE
Japan (40%-42.99% statutory rate)
|
|
|
182,148
|
|
|
|
182,372
|
|
|
|
140,751
|
|
|
|
4,340
|
|
ASE
Test Malaysia (27%-28% statutory rate)
|
|
|
(1,210
|
)
|
|
|
118,422
|
|
|
|
271,026
|
|
|
|
8,357
|
|
ISE
Labs (34%-35%federal tax
rate
and 6% state tax rate)
|
|
|
(2,963
|
)
|
|
|
(11,141
|
)
|
|
|
(15,480
|
)
|
|
|
(477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,398,039
|
)
|
|
|
5,107,933
|
|
|
|
3,907,344
|
|
|
|
120,486
|
|
Deferred
income tax assets and liabilities as of December 31, 2006 and 2007 are
summarized as follows:
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Current
deferred income tax assets
|
|
|
|
|
|
|
|
|
|
Unused
tax credits
|
|
|
2,405,057
|
|
|
|
1,992,245
|
|
|
|
61,432
|
|
Loss
carryforwards
|
|
|
6,904
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
419,766
|
|
|
|
288,778
|
|
|
|
8,905
|
|
|
|
|
2,831,727
|
|
|
|
2,281,023
|
|
|
|
70,337
|
|
Valuation
allowance
|
|
|
(23,543
|
)
|
|
|
(205,767
|
)
|
|
|
(6,345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,808,184
|
|
|
|
2,075,256
|
|
|
|
63,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
current deferred income tax liabilities
|
|
|
-
|
|
|
|
(121,499
|
)
|
|
|
(3,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
|
December 31
|
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
deferred income tax assets (liabilities)
|
|
|
|
|
|
|
|
|
|
Unused
tax credits
|
|
|
2,927,041
|
|
|
|
1,904,773
|
|
|
|
58,735
|
|
Accrued
pension costs
|
|
|
261,000
|
|
|
|
185,528
|
|
|
|
5,721
|
|
Loss
carryforwards
|
|
|
267,157
|
|
|
|
170,541
|
|
|
|
5,259
|
|
Impairment
loss
|
|
|
526,238
|
|
|
|
453,491
|
|
|
|
13,984
|
|
Others
|
|
|
(62,734
|
)
|
|
|
(153,192
|
)
|
|
|
(4,725
|
)
|
|
|
|
3,918,702
|
|
|
|
2,561,141
|
|
|
|
78,974
|
|
Valuation
allowance
|
|
|
(1,071,094
|
)
|
|
|
(685,707
|
)
|
|
|
(21,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,847,608
|
|
|
|
1,875,434
|
|
|
|
57,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
deferred income tax liabilities
|
|
|
(25,888
|
)
|
|
|
(150,009
|
)
|
|
|
(4,626
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
|
e.
|
Employee
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 year ended December
31, 2006 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 the intrinsic value of certain outstanding share-based awards for
which it was not possible to reasonably 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 a change in accounting
principle of $18,084 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 by ASE Inc. under the intrinsic value method
prescribed by “APB 25” and related interpretations, and provided the required
pro forma disclosures prescribed by U.S. SFAS No. 123, as amended. In
March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”)
regarding the 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 year ended December 31, 2006 were lower by NT$16,614 thousand and
NT$12,640 thousand, respectively, than if the Company had continued to account
for stock-based compensation under APB 25. Information regarding the
Company’s stock option plans is as follows:
ASE Inc. and ASE Mauritius
Inc. Option Plan
Information
regarding these employee stock option plans is provided in Note
19.
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, 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 stock options to directors, officers and key
employees to purchase ASE Test’s shares which vest ratably over a period of five
years from the date of grant options. If any granted shares are
forfeited, the shares may be granted again, to the extent of any such
forfeiture.
The
exercise price of each stock option was equal to the stock’s closing price on
the date of grant. Options granted under the 1999, 2000 and 2004
Option Plans expire ten years after the date of grant.
Information
regarding the Option Plans of ASE Test is presented below (in U.S.
dollars):
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Average
|
|
|
|
Intrinsic
|
|
|
|
Number
of
|
|
|
Price
|
|
|
Grant
Date
|
|
|
|
Value
(In
|
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Fair
Value
|
|
|
|
Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
options at January 1, 2005
|
|
|
10,877,448
|
|
|
$
|
10.48
|
|
|
|
|
|
|
|
|
Options
granted
|
|
|
32,500
|
|
|
|
6.50
|
|
|
$
|
3.49
|
|
|
|
|
|
Options
exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Options
forfeited
|
|
|
(358,884
|
)
|
|
|
10.97
|
|
|
|
|
|
|
|
|
|
Options
expired
|
|
|
(60,000
|
)
|
|
|
25.00
|
|
|
|
|
|
|
|
|
|
Outstanding
options at December 31, 2005
|
|
|
10,491,064
|
|
|
|
10.37
|
|
|
|
|
|
|
|
|
|
Options
granted
|
|
|
130,000
|
|
|
|
9.60
|
|
|
$
|
5.32
|
|
|
|
|
|
Options
exercised
|
|
|
(79,201
|
)
|
|
|
8.56
|
|
|
|
|
|
|
|
|
|
Options
forfeited
|
|
|
(216,825
|
)
|
|
|
11.60
|
|
|
|
|
|
|
|
|
|
Options
expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding
options at December 31, 2006
|
|
|
10,325,038
|
|
|
|
10.34
|
|
|
|
|
|
|
|
|
|
Options
granted
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
Options
exercised
|
|
|
(1,200,503
|
)
|
|
|
8.98
|
|
|
|
|
|
|
|
|
|
Options
forfeited
|
|
|
(401,363
|
)
|
|
|
14.00
|
|
|
|
|
|
|
|
|
|
Options
expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding
options at December 31, 2007
|
|
|
8,723,172
|
|
|
|
10.36
|
|
|
|
|
|
|
$
|
37,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
options at December 31, 2007
|
|
|
7,988,772
|
|
|
|
10.24
|
|
|
|
|
|
|
$
|
35,208
|
|
As of
December 31, 2007, the number of options expected to vest was
723,158.
Total
intrinsic value of options exercised for the years ended December 31, 2006 and
2007 was US$76 thousand and US$4,952 thousand, respectively.
As of
December 31, 2007, information regarding weighted average exercise prices and
remaining contractual lives were as follows (in U.S.
dollars):
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Average
|
|
|
Number
|
|
|
Exercise
|
|
|
Average
|
|
|
|
|
of
|
|
|
Price
|
|
|
Remaining
|
|
|
of
|
|
|
Price
|
|
|
Remaining
|
|
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Life
(Years)
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Life
(Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
with exercise price of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$20
- $25
|
|
|
|
481,500
|
|
|
$
|
21.82
|
|
|
|
1.85
|
|
|
|
481,500
|
|
|
$
|
21.82
|
|
|
|
1.85
|
|
$11.5
- $12.95
|
|
|
|
1,989,950
|
|
|
|
12.81
|
|
|
|
5.68
|
|
|
|
1,438,550
|
|
|
|
12.75
|
|
|
|
5.58
|
|
$5.5
- $9.79
|
|
|
|
6,251,722
|
|
|
|
8.70
|
|
|
|
3.35
|
|
|
|
6,068,722
|
|
|
|
8.73
|
|
|
|
3.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,723,172
|
|
|
|
|
|
|
|
3.80
|
|
|
|
7,988,772
|
|
|
|
|
|
|
|
3.57
|
|
ASE Test
has used the fair value based method (based on the Black-Scholes model) to
evaluate the options granted with the following assumptions:
|
2005
|
2006
|
|
|
|
Risk-free
interest rate
|
3.88%
|
4.88%
|
Expected
life
|
5
years
|
3-5
years
|
Expected
volatility
|
59.06%
|
59.95%-
62.03%
|
Expected
dividend
|
0%
|
0%
|
For
purposes of pro forma disclosure, the estimated fair value of the options is
amortized to expense over the option rights vesting periods. Had the
Company recorded compensation cost based on the estimated grant date fair value,
as defined by U.S. SFAS No. 123, the Company’s net loss for the year ended
December 31, 2005 under U.S. GAAP would have been reduced to the pro forma
amounts below.
|
|
Year
Ended
December
|
|
|
|
|
31, 2005
|
|
|
|
NT$
|
|
|
|
|
|
|
Net
loss based on U.S. GAAP
|
|
|
(5,530,526
|
)
|
Stock
- based compensation expense (net of tax)
|
|
|
(424,746
|
)
|
|
|
|
|
|
Pro
forma net loss based on U.S. GAAP
|
|
|
(5,955,272
|
)
|
|
|
|
|
|
Reported
loss per share
|
|
|
|
|
Basic
|
|
|
(1.10
|
)
|
Diluted
|
|
|
(1.10
|
)
|
Pro
forma loss per share
|
|
|
|
|
Basic
|
|
|
(1.18
|
)
|
Diluted
|
|
|
(1.18
|
)
|
Reported
loss per ADS
|
|
|
|
|
Basic
|
|
|
(5.48
|
)
|
Diluted
|
|
|
(5.48
|
)
|
Pro
forma loss per ADS
|
|
|
|
|
Basic
|
|
|
(5.90
|
)
|
Diluted
|
|
|
(5.90
|
)
|
|
f.
|
In
accordance with U.S. SFAS No. 130, “Reporting Comprehensive Income”, the
statements of comprehensive income (loss) for the years ended December 31,
2005, 2006 and 2007 are presented
below:
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) based on U.S.
GAAP
|
|
|
(5,530,526
|
)
|
|
|
14,122,696
|
|
|
|
9,931,106
|
|
|
|
306,231
|
|
Translation
adjustments on
subsidiaries,
net of income tax
expense
of NT$108,033 thousand,
NT$64,535
thousand and
NT$212,289
thousand in 2005,
2006
and 2007, respectively
|
|
|
324,099
|
|
|
|
193,605
|
|
|
|
636,868
|
|
|
|
19,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain on financial
instruments
|
|
|
-
|
|
|
|
486,314
|
|
|
|
(13,882
|
)
|
|
|
(428
|
)
|
Unrecognized
pension cost
|
|
|
(12,711
|
)
|
|
|
(1,621
|
)
|
|
|
(13,628
|
)
|
|
|
(420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
|
(5,219,138
|
)
|
|
|
14,800,994
|
|
|
|
10,540,464
|
|
|
|
325,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
On January
1, 2002, the Company adopted U.S. SFAS No. 142, which requires that goodwill no
longer be amortized, and instead, be tested for impairment on at least an annual
basis. In conjunction with the implementation of U.S. SFAS No. 142,
the Company completed a goodwill impairment review as of January 1, 2002 using a
fair-value based approach in accordance with the provision of the standard and
found no impairment.
As of
December 31, 2006 and 2007, the Company had goodwill of NT$3,354,727 thousand
and NT$3,711,570 thousand (US$114,449 thousand), respectively, primarily from
the reporting units of the testing operation.
Changes in
the carrying amount of goodwill for the years ended December 31, 2006 and 2007,
by reportable segment, were as follows:
|
|
Packaging
|
|
|
Testing
|
|
|
Other
|
|
|
Total
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31,
2005
|
|
|
843,909
|
|
|
|
2,010,530
|
|
|
|
512,036
|
|
|
|
3,366,475
|
|
|
|
103,807
|
|
Translation
adjustment
|
|
|
(737
|
)
|
|
|
(10,883
|
)
|
|
|
(128
|
)
|
|
|
(11,748
|
)
|
|
|
(362
|
)
|
Balance
as of December 31,
2006
|
|
|
843,172
|
|
|
|
1,999,647
|
|
|
|
511,908
|
|
|
|
3,354,727
|
|
|
|
103,445
|
|
Goodwill
acquired
|
|
|
327,285
|
|
|
|
36,365
|
|
|
|
-
|
|
|
|
363,650
|
|
|
|
11,213
|
|
Translation
adjustment
|
|
|
(426
|
)
|
|
|
(6,307
|
)
|
|
|
(74
|
)
|
|
|
(6,807
|
)
|
|
|
(209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31,
2007
|
|
|
1,170,031
|
|
|
|
2,029,705
|
|
|
|
511,834
|
|
|
|
3,711,570
|
|
|
|
114,449
|
|
U.S. SFAS
No. 128 requires the presentation of basic and diluted earnings per
share. Basic earnings per share was computed based on the weighted
average number of common shares outstanding during the year. Diluted
earnings per share included the effect of dilutive potential common shares (such
as stock options issued calculated using the treasury stock
method).
The
following table represents the calculation of basic and diluted earnings (loss)
per share:
|
|
Year Ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
NT$
|
|
|
NT$
|
|
|
NT$
|
|
|
US$
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
(5,530,526
|
)
|
|
|
14,122,696
|
|
|
|
9,931,106
|
|
|
|
306,231
|
|
Effect
of ASE Test’s stock option plans
|
|
|
-
|
|
|
|
(1,663
|
)
|
|
|
(20,185
|
)
|
|
|
(622
|
)
|
Interest,
net of tax, on
convertible
bonds
|
|
|
-
|
|
|
|
168,993
|
|
|
|
139
,
635
|
|
|
|
4,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
(5,530,526
|
)
|
|
|
14,290,026
|
|
|
|
10,050,55
6
|
|
|
|
309,91
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average outstanding shares (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
5,046,208
|
|
|
|
5,106,690
|
|
|
|
5,202,602
|
|
|
|
5,202,602
|
|
Effect
of dilutive securities
|
|
|
-
|
|
|
|
297
,
203
|
|
|
|
241
,
438
|
|
|
|
241
,
438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
5
,
046
,
208
|
|
|
|
5
,
403
,
893
|
|
|
|
5
,
444
,
040
|
|
|
|
5
,
444
,
040
|
|
Diluted
earnings per share excluded the effect of the 227,341 thousand options and
convertible bonds for the year ended December 31, 2005 as a result of net
loss. For the years ended December 31, 2006 and 2007, no options or
convertible bonds were excluded from the calculation of diluted
EPS.
The
denominator used for purposes of calculating earnings (loss) per ADS was the
above-mentioned weighted average outstanding shares divided by five (one ADS
represents five common shares). The numerator was the same as
mentioned in the above EPS calculation.
|
i.
|
In
accordance with FIN 48 disclosure requirements, the following table
summarizes the activity related to the gross unrecognized tax benefits
from January 1, 2007 to December 31,
2007:
|
|
|
Year
Ended December 31, 2007
|
|
|
|
NT$
|
|
|
US$
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2007
|
|
$
|
16,105
|
|
|
$
|
497
|
|
Increase
related to prior year tax positions
|
|
|
-
|
|
|
|
-
|
|
Increase
related to current year tax positions
|
|
|
2,300
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2007
|
|
$
|
18,405
|
|
|
$
|
567
|
|
As of
December 31, 2007, the Company did not expect any material change to the amount
of unrecognized tax benefits during the next twelve months.
Upon
adoption of FIN 48, the Company recorded interest expense and penalties as
interest expense and other non-operating expense, respectively. For
the year ended December 31, 2007, the total amount of interest expense and
penalties related to tax uncertainty was approximately NT$4,887 thousand (US$149
thousand). The total amount of interest and penalties recognized
as of December 31, 2007 was NT$12,810 thousand (US$394
thousand).
The
Company files income tax returns in major tax jurisdictions including the ROC,
Malaysia, Japan and Korea. The income tax returns for 2001
through 2007 generally remain subject to examination by the respective tax
authorities.
F-70
Exhibit
1
Advanced
Semiconductor Engineering, Inc.
Articles
of Incorporation
(Translation)
Chapter
One:
General
Principles
Article 1.
This company is called
日月光半導體製造股份有限公司
, and
is registered as a company limited by shares according to the Company
Law. The English name of this company is Advanced Semiconductor
Engineering, Inc.
Article 2.
This company is engaged in the following
businesses:
(1)
|
The
manufacture, assembly, processing, test and export of various types of
integrated circuitry;
|
(2)
|
The
research, development, design and manufacture, assembly, processing, test
and export of various computers, electronics, communications, information
products and their peripheral
products;
|
(3)
|
General
import and export trading business (excluding the approved businesses
requiring special permits);
|
(4)
|
CC01080
Electronic parts and components manufacture
business.
|
(5)
|
CC01990
Other mechanical, electronic and mechanical devices manufacture businesses
(integrated circuit lead frame, ball grid array substrate and flip chip
substrate).
|
(6)
|
F119010
Electronic material wholesale
business.
|
(7)
|
F219010
Electronic material retail
business.
|
(8)
|
I199990
Other consulting service businesses (technical and counseling service for
integrated circuit lead frame, ball grid array substrate and flip chip
substrate).
|
(9)
|
I601010
Leasing business.
|
(10)
|
All
other businesses not prohibited or restricted by laws and regulations
except special permitted
businesses.
|
Article 3.
The investment made by this company in other companies
as limited liability shareholder thereof is not subject to the limitation that
such investment shall not exceed a certain percentage of the paid-in capital as
set forth in the Company Law.
Article 4.
This company may provide guaranty.
Article
5.
This company's headquarter is
located in the Nantze Export Processing Zone, Kaohsiung, Taiwan, R.O.C. and may
set up domestic or foreign branch offices as resolved by the Board of Directors,
if necessary.
Chapter
Two:
Shares
Article 6.
The total capital of the Company is set for NT$80
billion in 8 billion shares and the par value of each share is NT$10, of which
the reserved employee stock option warrant amounts to NT$8 billion. The Board of
Directors is authorized to issue the un-issued shares in different
phase.
Article
7.
The share certificates shall be in
registered form and have the signatures or seals of at least three directors of
this company and shall be legally authenticated before issuance.
Article 8.
No registration of share transfer shall be made within sixty
days before each regular shareholders meeting, or within thirty days before each
extraordinary shareholders meeting or five days before the record date for
dividends, bonuses or other distributions as determined by this
company.
Article
9.
The rules governing stock
affairs shall be made pursuant to the laws and the regulations of the relevant
authorities.
Chapter
Three: Shareholders
Meeting
Article
10.
Shareholders meetings include regular
meetings and extraordinary meetings. Regular meetings shall be held
once annually within 6 months of each fiscal year convened by the Board of
Directors. Extraordinary meetings will be held according to the law
whenever necessary.
Article 11.
Shareholders meetings shall be convened by written notice
stating the date, place and purpose dispatched to each shareholder at least 30
days, in case of regular meetings, and 15 days, in case of extraordinary
meetings, prior to the date set for such meeting.
Article 12.
Unless otherwise required by the Company Law, the resolution
shall be adopted by at least a majority of the votes of Shareholders present at
a shareholders meeting which hold a majority of all issued and outstanding
shares.
Article
13.
Each and every shareholder of the
Company, unless stipulated by Article 179 of The Company Law that has no voting
right for each and every share they own, shall have one voting
right.
Article
14.
Any shareholder, who for any reason is
unable to attend shareholders meetings, may execute a proxy printed by this
company to authorize a proxy attending the meeting for him in which the
authorization matters shall expressly stated. Such proxy shall be
submitted to this company at least 5 days prior to the shareholders
meeting.
Article
15.
The shareholders meeting shall be convened by
the Board of Directors unless otherwise stipulated in the Company Law, and the
person presiding the meeting will be the chairman. If the chairman is
on leave or for any reason could not discharge his duty, Paragraph 3 of Article
208 of the Company Law should apply. If the shareholders meeting is
called by a person entitled to do so other than the chairman, the person shall
be the chairman. If two or more persons are entitled to call the
shareholders meeting, those persons shall elect one as the
chairman.
Chapter
Four:
Directors, supervisors and
managers
Article 16.
This Company has 7 to 9 directors including 2 independent directors and 5
to 7 non-independent directors and 5 to 7 supervisors with tenures of 3 years
and who are elected from among the persons with legal
capacities. Re-elections are allowed. When the Company conducts the
election of the directors as described in the preceding paragraph, the directors
and supervisors shall be elected in accordance with Article 198 of the Company
Law and relative laws and regulations. Independent and non-independent directors
will be elected together in the same election, except that votes for independent
directors and votes for non-independent directors will be tabulated and ranked
separately. Candidates to whom the ballots cast represent a prevailing number of
votes shall be deemed independent and non-independent directors
elect.
Article
16-1.
The Company adopts the candidates nomination
system in the election of independent directors. The Board of Directors and any
shareholder holding 1% or more of the total number of outstanding shares issued
by the Company may submit to the Company in writing a roster of independent
director candidates. After reviewing the qualification of each independent
director candidate nominated and concluding that such nominated independent
director candidates meet the qualification of the independent directors, the
Board of Directors shall submit the final roster of all the qualified
independent director candidates to the shareholders meeting for election. In
case of the shareholders meeting is convened by other convener(s) who is
entitled to convene the shareholders meeting, the candidates' qualification
shall be reviewed by the person who actually convenes the shareholders meeting
and the final roster of all the qualified independent director candidates shall
be submitted to the shareholders meeting for election afterward. The methods of
acceptance and public announcement in connection with the nomination of the
independent director candidates shall be in accordance with Company Law,
Securities and Exchange Act and other relevant laws and
regulations.
Article 16-2.
The
remuneration of independent directors of the Company is NT$2 million for each
independent director per year. In case of the term of office of an independent
director is less than 1 year, the remuneration thereof shall be calculated with
the proportion of his/her actual serving days.
Article
17.
The
Board of Directors is constituted by directors. Their powers and
duties are as follows:
|
(1).
|
Devising
operations strategy.
|
|
(2).
|
Proposing
to distribute dividends or make up
losses.
|
|
(3).
|
Proposing
to increase or decrease capital.
|
|
(4).
|
Reviewing
material internal rules and
contracts.
|
|
(5).
|
Hiring
and discharging the general
manager.
|
|
(6).
|
Establishing
and dissolving branch offices.
|
|
(7).
|
Reviewing
budgets and audited financial
statements.
|
|
(8).
|
Other
duties and powers granted by or in accordance with the Company Law or
shareholders resolutions.
|
Article 18.
The Board of Directors is constituted by directors, and
the chairman and vice chairman is elected by the majority of the directors at a
board
meeting at
which the majority of directors are present. If the chairman is on
leave or for any reason could not discharge his duties, his acting proxy shall
be elected in accordance with Article 208 of the Company Law.
Article
19.
Unless otherwise stipulated by The
Company Law, meeting of the Board of Directors shall be convened by the
Chairperson according to law. And the meeting of the Board of Directors should
be convened at the location where the Company is headquartered or at a location
convenient to directors or by videoconferencing.
Article
20.
A director may appoint another
director to attend the Board of Directors meeting and to exercise the voting
right, but a director can accept only one proxy.
Chapter
Five: Managers
Article 21.
This company has one general manager. The
appointment, discharge and salary of the general manager shall be managed in
accordance with Article 29 of Company Law.
Chapter
Six: Accounting
Article
22.
The fiscal year of this company
starts from January 1 and ends on December 31 every year. At the end
of each fiscal year, the Board of Directors shall prepare financial and
accounting books in accordance with the Company Law and submit them to the
regular shareholders meeting for recognition.
Article
23.
The annual net income ("Income")
shall not be distributed before:
|
(1)
|
Making
up losses, if any;
|
|
(2)
|
10%
being set aside as legal reserve;
|
|
(3)
|
A
special reserve being set aside pursuant to the laws or regulation of
governmental authority;
|
|
(4)
|
Setting
aside a special reserve equal to the (unrealized) investment income under
equity method for long-term investment, excluding cash dividends (the
realized income shall be classified as earnings for
distribution);
|
|
If
any Income remains, it shall be distributed as
follows:
|
|
(5)
|
Not
more than 2% of the balance (i.e., the Income deducting (1) to (4) above)
as compensation to directors and
supervisors;
|
|
(6)
|
Not
less than 7% and not more than 10% of the balance (i.e. the Income
deducting (1) to (5) above) as bonus to employees (the 7% portion being
distributed to all employees in the form of stock bonus in accordance with
the employee bonus rules, while the portion exceeding 7% being distributed
to individual employees (having special contributions) in accordance with
the rules made by the board of directors with the authority granted
hereby); and
|
|
(7)
|
The
remainder is distributed in proportion to the aggregate amount of
outstanding shares proposed by the
board.
|
|
"Employees"
referred to in subparagraph (6) above include employees of affiliated
companies meeting certain qualifications. Such qualifications
are to be determined by the Board of
Directors.
|
Article 24.
This Company is at the developing stage. In
order to accommodate the capital demand for the present and future business
development and satisfy the shareholder's demand for the cash, this Company
adopts Residual Dividend Policy as its dividend policy to distribute the
dividends. Under aforesaid policy, 0 to 50% of the dividends are to be
distributed in the form of cash dividends and the remains are to be distributed
in the form of stock dividends, provided that the adjustment of ratio of cash
dividends and stock dividends would be made on the basis of necessity with
considering the factors such as economy, operation development and the cash
position. The dividends distribution proposal shall be made by the Board of
Directors and submitted to the shareholders meeting for approval.
Chapter
Seven: Appendix
Article
25.
|
The
constitutive rules and the operation rules of this company shall be
decided otherwise.
|
Article
26.
|
Any
matter not covered by this Articles of Incorporation shall be subject to
the Company Law.
|
Article
27.
|
This
Articles of Incorporation was enacted on March 31, 1984 as approved by all
the promoters.
|
|
The
first amendment was made on May 3, 1984.
The
second amendment was made on June 11, 1984.
The
third amendment was made on June 25, 1984.
The
fourth amendment was made on May 28, 1986.
The
fifth amendment was made on July 10, 1986.
The
sixth amendment was made on September 1, 1988.
The
seventh amendment was made on May 28, 1988.
The
eighth amendment was made on July 18, 1988.
The
ninth amendment was made on September 1, 1988.
The
tenth amendment was made on October 30, 1988.
The
eleventh amendment was made on November 24, 1988.
The
twelfth amendment was made on December 5, 1988.
The
thirteenth amendment was made on February 21, 1989.
The
fourteenth amendment was made on December 11, 1989.
The
fifteenth amendment was made on March 31, 1990.
The
sixteenth amendment was made on March 30, 1991.
The
seventeenth amendment was made on April 11, 1992.
The
eighteenth amendment was made on April 28, 1993.
The
nineteenth amendment was made on March 21, 1994.
The
twentieth amendment was made on March 21, 1995.
The
twenty-first amendment was made on April 8, 1996.
The
twenty-second amendment was made on April 12, 1997.
The
twenty-third amendment was made on March 21, 1998.
The
twenty-fourth amendment was made on June 9, 1999.
The
twenty-fifth amendment was made on 11 July 2000.
The
twenty-sixth amendment was made on June 1, 2001.
The
twenty-seventh amendment was made on June 21,
2002.
|
|
The
twenty-eighth amendment was made on June 21, 2002.
The
twenty-ninth amendment was made on June 19, 2003.
The
thirtieth amendment was made on June 19, 2003.
The
thirty-first amendment was made on June 15, 2004.
The
thirty-second amendment was made on June 30, 2005.
The
thirty-second amendment was made on June 21, 2006
The
thirty-fourth amendment was made on June 28, 2007
The
thirty-fifth amendment was made on June 19, 2008
|
|
|
- 8 -
Exhibit
4(j)
Equity
Interests Transfer Agreement
by
and among
NXP
B.V.
NXP
Semiconductors Suzhou Ltd.
and
J
& R Holding Limited
Dated August
6, 2007
Execution
copy August 6, 2007
Tabl
e of Con
tents
Page
A
RTICLE
I
DEFINITIONS
A
ND RULES OF
CONSTRUCTION
|
2
|
|
|
ARTICLE
II
TRANSFER OF EQUITY INTERESTS
|
6
|
|
|
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY A
ND
THE TRANSFEROR
|
7
|
|
|
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE
|
20
|
|
|
ARTICLE
V
COVENANTS AND AGREEMENTS
|
21
|
|
|
ARTICLE
VI
CONDITIONS TO CLOSING
|
27
|
|
|
ARTICLE
VII
TERMINATION
|
28
|
|
|
ARTICLE
VIII
INDEMNIFICATION
|
29
|
|
|
ARTICLE
IX
MISCELLANEOUS
|
30
|
|
|
SCHEDULE 3.22
(a)
|
36
|
Execution
copy August 6, 2007
|
|
|
Equity
Interests Transfer
Agreement
THIS
EQUITY INTERESTS TRANSFER AGREEMENT (this “
Agreement
”), made as of the
6
th
day of August, 2007 (the “Signing Date”), by and among
:
|
(1)
|
NXP
B.V., a company duly incorporated and validly existing under the laws of
the Netherlands and with its legal address at High Tech Campus 60, 5656 AG
Eindhoven, the Netherlands (the “
Transferor
”)
;
|
Authorized
Representative of the Transferor:
|
Name:
|
Ajit
Manocha
|
|
Position:
|
Executive VP & GM
Chief Manufacturing Officer
|
|
Nationality:
|
American
|
|
(2)
|
NXP
Semiconductors Suzhou Ltd., a limited liability company duly incorporated
and validly existing under the laws of the People’s Republic of China (the
“
PRC
”), with its
legal address at No. 188, Suhong Xi Road, Suzhou Industry Park, Suzhou,
PRC (the “
Company
”);
|
Legal
Representative of the Transferor:
|
Name:
|
Mike YEH
|
|
Position:
|
Chairman of
Board
|
|
Nationality:
|
Taiwan
|
and
|
(3)
|
J
& R Holding Limited., a company incorporated under the laws of Islands
of Bermuda, with its legal address at Canon's Court, 22 Victoria Street,
Hamilton HM12, Bermuda (the “
Transferee
”).
|
Authorized
Representative of the Company:
|
Name:
|
Tien Yue
Wu
|
|
Position:
|
ASE Group Chief
Operating Officer
|
|
Nationality:
|
America
|
Each of
the parties to this Agreement is hereinafter individually referred to as a
“
Party
” and collectively
referred to as the “
Parties
”
W I T N E S S E T H:
WHEREAS,
t
he Company is a wholly foreign
owned limited liability company duly organized and validly existing under the
laws of the People’s Republic of China (the “
PRC
”). The
Company’s Existing Business License number is Qi Du Su Zong Zi Di 020610
Hao. As of the date hereof, the registered capital of the Company and
the total investment amount of the Company are stated in its current and valid
business licence and approval certificate effective at the Signing
Date;
Execution
copy August 6, 2007
WHEREAS,
the Transferor is the sole shareholder of the Company and owns the equity
interests representing 100% of the registered capital in the
Company. As of the date hereof, the Transferor has already
contributed in cash
in the amount of US$
48,672,359.64 (the “Paid-up Registered Capital”) to the registered capital of
the Company and the remaining unpaid registered capital (the “Un-paid Registered
Capital”) of the Company as at the Signing Date is calculated as the Registered
Capital as stated in its current and valid business licence and approval
certificate effective at the Signing Date less the Paid-up Registered
Capital;
WHEREAS,
the Transferor intends to transfer to the Transferee, and the Transferee desires
to acquire from the Transferor, the equity interests representing 60 % of the
ownership interest in the Company upon the terms and subject to the conditions
set forth in this Agreement, and to change the name of the Company into Suzhou
ASEN Semiconductors Co., Ltd. (the “New Company Name”);
WHEREAS,
concurrently with the execution of this Agreement, the Transferor and the
Transferee are entering into a Shareholders’ Agreement (the “Shareholders’
Agreement”) in the form of Exhibit A attached hereto and revised and restated
Articles of Association of the Company (the “New Articles of Association”) in
the form of Exhibit B attached hereto;
WHEREAS,
u
pon the approval by the
Approval Authority
of this
Agreement,
the
Shareholders
’
Agreement
and the New Articles
of Association, on the Registration Date
,
the Transferee will become a
new shareholder of the Company ;
NOW,
THEREFORE, in consideration of the premises, and the mutual representations,
warranties, covenants and agreements herein set forth and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereto hereby agree as follows:
ARTICLE
I
DEFINITIONS AND RULES OF
CONSTRUCTION
Section
1.1
Definitions
.
As used in this Agreement, the following
terms sh
all have the
following meanings:
“
Affiliate
”
means, with respect to any Person, any
other Person that directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, such
Person. As used in this def
inition, the term “
control”
means the possession, directly or
indirec
tly, of the power to
direct or cause the direction of management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
“
Agreement
”
means
this Equity Interests Transfer
Agreement (including the Exhibits and Schedules hereto), as amended,
supplemented, modified or restated from time to time
.
“
Applicable
Law
”
means, with respect to any Person, any
statute, law, ordinance, rule, regulation, or
der, judgment, legal process or other
requirement of any Governmental Entity applicable to such Person or any of its
properties or assets.
Execution
copy August 6, 2007
“
Approval
Authority
”
means the Ministry of Commerce of the
PRC or other relevant Governmental Entity of the PRC autho
rized to approve the Transaction
Documents.
“
Benefit
Plans
”
has the meaning set forth in Section
3.2
1
.
“
Big Four
”
means any of Deloitte & Touche,
Ernst & Young, KPMG or PricewaterhouseCoopers
or their respective
associated accounting firms in the
PRC.
“
Co
mpany
”
has the meaning set forth in the
recitals hereto. For the avoidance of doubt, “
Company”
refers to the Company as a wholly
foreign owned enterprise with the Transferor as its sole shareholder prior to
the approval by the Approval Authority of, and t
he amendments registration with the
Registration Authority in connection with, the transactions contemplated by
Transactions Documents, and as a wholly foreign owned joint venture with both
the Transferor and the Transferee as its shareholders
thereafter.
“
Employees
”
has the meaning set forth in Section
3.21(a).
“
Encumbrance
”
means a lien, pledge, mortgage, claim,
encumbrance, security interest, option, charge or restriction of any kind and
shall always exclude Permitted Encumbrances.
“
Environmental
Claim
”
means any written or oral notice, claim,
demand, order, action, suit, complaint, proceeding or other communication by any
Person alleging liability or potential liability (including any liability or
potential liability for investigatory costs, cleanup cos
t
s, governmental response costs, natural
resource damages, property damage, personal injury, fines or penalties) on the
part of the Company arising out of, relating to, based on or resulting from (a)
the presence, discharge, emission, release or threatened
release of any Hazardous Substances at
any location, whether or not owned, leased or operated by the Company, or (b)
circumstances forming the basis of any violation or alleged violation of any
Environmental Law or Environmental Permit, or (c) otherwise r
e
lating to obligations or liabilities
under any Environmental Law.
“
Environmental
Law
”
means any and all statutes, laws,
ordinances, rules, regulations, orders, judgments or other requirement of any
Governmental Entity regulating, relating to or imposing li
ability or standards of conduct
concerning the protection of the environment, including laws relating to
Hazardous Substances.
“
Environmental
Permits
”
means any and all Permits required
under any Environmental Law.
“
Existing Articles of
Association
”
means
the articles of association of the
Company as of the date hereof and prior to the conversion of the Company into a
wholly foreign owned limited liability company with the Transferor and the
Transferee as its shareholders.
“
Existing Business
License”
means
the effective Enterprise Legal Person
Business License issued by the Registration Authority to the Company as of the
date hereof and prior to the conversion of the Company into a wholly foreign
owned limited liability
company with the Transferor and the
T
ransferee as its
shareholders.
“
Financial
Statements
”
has the meaning set forth in Section
3.12(a).
Execution
copy August 6, 2007
“
Governmental
Entity
”
means any governmental authority,
court, commission, tribunal or organization or any regulatory, administrative or
other agency, or
any
political or other subdivision, department or branch of any of the
foregoing.
“
Hazardous
Substance
”
means any
lead, cadmium, mercury, hexavalent,
chromium, polychlorinated biphenyls, polybrominated, diphenyl, ethers, asbestos,
pollutants,
contaminants,
radioactivity
and any other substances of any kind,
that are regulated pursuant to or could
give rise to
material
liability under any
Environmental Law.
“
IFRS
”
means the body of pronouncements issued
by the International Accounting Standards Board.
“
Int
ellectual
Property
”
means all intellectual property and
similar proprietary rights in any jurisdiction, whether owned, used or held for
use under license, whether registered or unregistered, including such rights in
and to (a) patents, inventions, discover
ies, processes, designs, techniques,
developments, technology and how-how; (b) trademarks, service marks, trade
dress, logos, trade names, domain names, corporate names and other source
indicators, including all goodwill associated therewith, (c)
copyrigh
t
s and works of authorship in any medium,
including computer programs, hardware, firmware, software, applications, files,
Internet site content, databases and compilations, documentation and related
items and (d) trade secrets, ways of doing business and c
o
nfidential
information.
“
Material Adverse
Effect
”
means a material adverse effect on the
business, operations or financial condition
of
the Company taken as a whole,
which would or could reasonably be expected to have an adverse effect on
the ability of the Company to perform or comply with any of its obligations
under this Agreement or to continue as a going concern
.
“
Material
Contract
”
has the meaning set forth in Section
3.11(b).
“
New Articles of
Association
”
has the meaning set forth in the
recitals h
ereto.
“
New
Approval
Certificates
”
means the new Certificate of Approval
issued by the relevant Approval Authority as evidence of their approval of the
Transaction Document
s
, on which the Transferee
’
s capacity as the shareholder of the
Company and its equ
ity
ownership percentage as specified in the Transaction Documents in the Company,
among others, have been duly recorded
.
“
New
Business
License
”
means the amended Enterprise Legal
Person Business License issued by the Registration Authority to the
Company
after approval by
the Approval Authority of the transactions contemplated by the Transaction
Documents.
“
Organizational
Documents
”
means, with respect to any Person, the
certificate of incorporation, charter, memorandum of association, articles of
associ
ation, by-laws,
partnership agreement, operating agreement, limited liability company agreement
or other organizational or constitutional documents of such
Person.
“
Payment
Date
”
has the meaning set forth in Section
2.
2
.
“
Permits
”
has the meaning set fort
h in Section 3.10.
Execution
copy August 6, 2007
“
Permitted
Encumbrance
”
has the meaning set forth in Section
3.
19
(a).
“
Person
”
means any individual,
partnership,
corporation, limited liability company,
joint venture, unincorporated organization or association, trust (including the
tru
stees thereof, in their
capacity as such), Governmental Entity or other entity.
“
PRC
”
means the People
’
s Republic of
China, other than
the Hong Kong Special Administrative Region, the Macau Special Administrative
Region and Taiwan.
“
PRC Business
Day
”
means
any day which is not a Saturday, Sunday
or other day on which banks in the PRC are required or authorized by Applicable
Law to be closed.
“
PRC
GAAP
”
means the generally accepted accounting
principles in the People
’
s Republic of
China
.
“
Properties
”
has the
meaning set forth in Section
3.
19
(a).
“
Purchase Price”
shall mean
the purchase price to be paid by the Transferee to the Transferor according to
Section 2.2.
“
Registration
Authority
”
means the State Administration of
Industry and Commerce of the PRC or it
s authorized local Administration of
Industry and Commerce, which issues the
New
Business License.
“
Registration
Date”
means the date on which all the
necessary amendments to the original business registration of the Company, as a
result of the transactio
ns
contemplated by the Transaction Documents, have been duly conducted
by
the Registration Authority pursuant to
Applicable Law and the Transaction Documents, including the registration of the
New Articles of Association, the Transferee as the new sharehol
der of the Company and its equity
ownership
percentage in the Company, and the new
name of the Company, which shall be evidenced by issuance of the New Business
License on such date.
“
Renminbi
”
or “
RMB
”
means the lawful currency of the
PRC.
“
Shareholders
’
Agreement
”
has the meaning set forth in the
recitals hereto.
“
Signing
Date”
means the date of
6
th
August, 2007
.
“
Subsidiary
”
means, with respect to any Person, any
corporation, limited liability company, partnership, joint venture or any other
entity of
which such Person
(either alone or through or together with any other Subsidiary), owns, directly
or indirectly, securities or other interests, the holders of which are generally
entitled to more than 50% of the vote for the election of the board of
dire
c
tors or other similar governing body of
such entity, or otherwise having the power to direct the business and policies
of that entity.
“
Taiwan
Business
Day
”
means any day which is not a Saturday,
Sunday or other day on which banks in
Taiwan
are required or
authorized by Applicable Law to be
closed.
Execution
copy August 6, 2007
“
Tax
”
or “
Taxes
”
means any tax, levy, impost, duty or
other charge or withholding of a similar nature levied, charged or imposed in
PRC (including any penalty or interest payable in connection with any failure
to
pay or any delay in
paying any of the same).
“
Tax
Return
”
means any return, report, information
return, schedule, certificate, statement or other document or amendment thereto
(including any related or supporting information) filed or required to be
filed
with a Governmental
Entity in connection with any Tax.
“
Transferee
”
has the meaning set forth in the
recitals hereto.
“
Transferor
”
has the meaning set forth in the
recitals hereto.
“
Transaction Documents
” means
this Agreement, the Shareholders’ Agreement and the New Articles of
Association.
“
U.S. Dollar
” or “
US$
” means the lawful
currency of the United States.
Section 1.2
Rules of
Construction.
(a)
Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
inclu
de the singular and
the plural, and pronouns stated in either the masculine or the neuter gender
shall include the masculine, the feminine and the neuter. The words
“
include”
, “
includes”
and “
including”
shall be deemed to be followed by the
phrase “
witho
u
t limitation.”
(b)
Any reference to any provision of a
statute, rule, regulation, order or similar authority shall be deemed to refer
to any successor or amendment to such provision.
ARTICLE
II
TRANSFER
OF EQUITY INTERESTS
Section
2.1
Equity Interests
Transfe
r
.
On the
terms and subject to the conditions set forth in this Agreement, the Transferor
hereby agrees to assign and transfer to the Transferee, and the Transferee
hereby agrees to acquire from the Transferor, the equity interests
representing
60 %
of the
ownership interest in the Company (the “Equity Interests”),
free and clear of any
and all Encumbrances
and with all rights
attached or accruing to the Equity Interests, for the consideration specified in
Section 2.2 (the “Equity Interests Transfer”)
.
Section
2.2
Pay
ment of Purchase
Price
.
Upon the
terms and subject to the conditions of this Agreement, within fifteen (15)
Taiwan Business Day following the Registration Date, or on such earlier date as
the Transferor and the Transferee may agree upon in writing (such date of
payment, the “Payment Date”), provided that if such date is not a Taiwan
Business Day, the Payment Date shall be the Taiwan Business Day
Execution
copy August 6, 2007
immediately
preceding such date, (i) the Company and the Transferor shall deliver or cause
to be delivered to the Transferee all such other certificates, documents and
instruments as the Transferee shall reasonably request in connection with the
transactions contemplated by this Agreement to be delivered on the Payment Date,
and (ii) the Transferee shall pay or cause to be paid to the Transferor in US
Dollars on the Payment Date by wire transfer of immediately available funds
of US$ 21,600,000 (the “Purchase Price”) to such account designated
by the Transferor in writing at least three (3) Taiwan Business Days prior to
the Payment Date.
Section
2.3
Resulting
Equity Ownership.
Upon (1)
the approval by the Approval Authority of the Transaction Documents, and (2) the
Registration Date and (3) the consummation of the Equity Interests Transfer
contemplated by this Agreement, the Transferee shall become a major shareholder
of the Company and enjoys all right, title and interest in the Equity Interests,
and the Parties’ respective equity interests in the registered capital of the
Company shall be as follows:
Party
|
Amount
of Paid-up Registered Capital (
USD
)
|
Equity
Interest (%)
|
Transferor
|
[19,468,943.86]
|
40%
|
Transferee
|
[29,203,415.78]
|
60%
|
Total
|
[48,672,359.64]
|
100%
|
Section
2.4
Contribution of the Un-paid
Registered Capital.
After the Payment Date and subject to approval by the
Approval Authority and the other applicable approval authority, the Transferor
and Transferee shall contribute to the Company as registered capital on a
pro-rata basis in accordance with their respective equity interest set forth in
Section 2.3, until the transferor has contributed up to a maximum amount of US
Dollars 21,600,000 (not including any Paid-up Registered Capital). Any further
capital contribution shall be made by the Transferee and shall be conditional on
the approval by the Approval Authority and the other applicable approval
authority of such further capital contribution. The Transferor shall cooperate
with the Transferee and the Company if the Transferee or the Company proposes to
reduce the Registered Capital and/or total investment amount of the Company
below the amount(s) stated in the then valid business licence and approval
certificate.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND THE
TRANSFEROR
The
Company and the Transferor, jointly and severally, hereby represent and
warrant to the Transferee as follows:
Section
3.1
Authorization.
On the
Signing Date and the Registration Date, (i) the execution, delivery and
performance by the Transferor and the Company of the Transaction Documents to
which it is a party and the consummation by the Transferor and the Company of
the transactions
Execution
copy August 6, 2007
contemplated
by the Transaction Documents are within the Transferor’s full power and legal
rights and the Company’s power and authority (corporate or other) and, in the
case of the Company, have been duly authorized by all necessary action
(corporate or other) on the part of the Company and (ii) each of the
Transaction Documents to which the Transferor and the Company is a party has
been duly authorized, executed and delivered by the Transferor and the Company,
and constitutes a valid and legally binding obligation of the Transferor and the
Company, enforceable against each of them in accordance with its terms, subject
as to enforceability, to bankruptcy, insolvency, reorganization and similar laws
of general applicability relating to or affecting creditors’ rights and to
general equity principles.
Section
3.2
No
Conflicts.
On the
Signing Date and the Registration Date, the execution, delivery and performance
of the Transaction Documents to which the Transferor or the Company is a party
and the consummation of the transactions contemplated by the Transaction
Documents will not (a) result in a violation of the provisions of the
Organizational Documents of the Transferor and the Company, (b) conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute (with or without the giving of notice, the lapse of time or both) a
default under, any agreement or instrument to which the Transferor or the
Company is a party or by which it is bound or to which any of its properties or
assets is subject, (c) result in a violation of any Applicable Law applicable to
the Transferor or the Company (d) result in the imposition or creation of any
Encumbrance on the equity interests of the Company, except in the case of
sub-clauses (b) and (c), to the extent that any such events could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Transferor and Company to perform their
obligations under the Transaction Documents or consummate the transactions
contemplated thereby.
Section
3.3
Absence
of Further Requirements.
On
the Signing Date and the Registration Date, no other consent, approval,
authorization, order, registration, filing or qualification of or with any third
party or Governmental Entity having jurisdiction over the Transferor or the
Company or any of their properties or assets is required for the consummation by
the Transferor or the Company of the transactions contemplated by the
Transaction Documents, except such consents, approvals, authorizations,
orders, registrations, filings or qualifications (a) identified in Section
6.1.(d) or (b) as have been duly obtained or made by the Transferor and the
Company on the Registration Date and are in full force and effect.
Section
3.4
Equity
Interests.
On
the Signing Date and the Registration Date, the Transferor is the record and
beneficial owner of the
Equity Interests free
and clear of any Encumbrances. Upon the consummation of the transactions
contemplated by this Agreement, the Transferor shall transfer good and valid
title to such Equity Interests, free and clear of any Encumbrances, to the
Transferee. Except for the transactions otherwise contemplated
hereunder, there is no outstanding option, warrant or other right to purchase or
subscribe to the equity interests of the Company, and no other contract,
commitment, agreement, understanding or arrangement of any kind relating to the
issuance or disposition of equity interests of the Company.
Section
3.5
No
Legal Proceedings.
On
the Signing Date and the Registration Date, there is no legal action,
dispute, claim, suit, investigation or other proceeding by or before any
Governmental Entity or arbitration pending, or to the knowledge of the
Transferor or the Company, threatened (a) seeking to restrain or prohibit the
execution, delivery and performance of the Transaction Documents or the
consummation of the transactions contemplated thereby or (b) that could
reasonably be expected to have a material adverse effect on the ability of
the Transferor and the
Execution
copy August 6, 2007
Company to
perform their respective obligations under the Transaction Documents or
consummate the transactions contemplated thereby.
Section
3.6
No
Brokers’ Fees.
On the
Signing Date and the Registration Date ,none of the Company, the Transferor
or any of their directors, officers, employees or Affiliates, has employed any
investment banker, broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders’ fees or any other
similar fees or commissions in connection with the transactions
contemplated by the Transaction Documents for which the Company, the Transferee
or their Affiliates has or could have any liability.
Section
3.7
Organization
and Standing of the Company.
On the Signing Date and the Registration Date, (i) the Company is a limited
liability company duly organized, validly existing and in good standing under
the laws of the PRC and has the full power and authority (corporate and
otherwise) to carry on its business as it is now being conducted and to own and
lease the properties and assets which it now owns or leases, and (ii) the
Company has passed all annual examinations with the Registration Authority, and
has not received any shut-down or suspension notice or order from any
Governmental Entity. No event has occurred that may in all likelihood
cause the existence of the Company or its legal person status to be questioned
or cancelled. The operations of the Company have at all times been
within the scope of its Existing Business License. To the knowledge
of the Transferor or the Company, neither the Company nor any of its
shareholder, directors, supervisors and senior management personnel has been a
subject of any criminal investigations. The Transferor and the Company have
provided to the Transferee true and complete copies of the Organizational
Documents of the Company.
Section
3.8
Capitalization
of the Company.
On the
Signing Date and the Registration Date,
(a)
|
The
entire registered capital of the Company as of the date hereof is stated
in its current and valid business licence and approval certificate of
which the Paid-up Registered Capital has been contributed by the
Transferor to the Company.
|
|
|
(b)
|
Except
as set forth in Section 3.8(a), there are no equity interests in the
Company or any warrant or other right to purchase or subscribe to the
equity interests of the Company. There are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
equity interests in the Company.
|
|
|
(c)
|
There
are no declared or accrued but unpaid dividends or distributions with
respect to any of the equity interests in the Company. Each
dividend or profit distribution of the Company was made in accordance with
Existing Articles of Association and Applicable Laws.
|
|
|
(d)
|
The
Company is not (or is not taken to be under Applicable Laws) insolvent or
unable to pay its debts and has not stopped or suspended the payment of
all or a class of its debts. There are no facts, matters or circumstances
which give any person the right to apply to liquidate or wind up the
Company and in all likelihood succeed in such exercise, and no receiver or
administrator has been
|
Execution
copy August 6, 2007
appointed to the Company or over any part of its
assets and no such appointment has been threatened to the knowledge
of the Transferor or the Company. The Company has not entered into
any arrangement, compromise or composition with or assignment for the benefit of
its creditors or a class of them.
Section
3.9
No
Investment.
On the
Signing Date and the Registration Date, the Company has no Subsidiaries and it
does not, either directly or indirectly, own legally or beneficially any shares
of or equity interests in, or any notes or bonds of, any company, partnership,
joint venture, trust or other entity.
Section
3.10
Compliance
with Applicable Laws.
On
the Signing Date and the Registration Date, the Company (a) is in compliance
with the provisions of its Organizational Documents and all Applicable Laws and
(b) has duly obtained and possesses all permits, concessions, grants,
franchises, licenses and other governmental authorizations, agreements and
approvals (collectively “Permits”) necessary for the conduct of its business in
all material respects as currently conducted. Each Permit is in full
force and effect, there are no proceedings pending or, to the knowledge of any
of the Transferor or the Company, threatened which would in all likelihood
result in the revocation, cancellation, suspension or modification of any
Permit.
Section
3.11
Material
Contracts.
(a)
|
On
the Signing Date and the Registration Date, the Company is not a party to
or not bound by:
|
|
|
(i)
|
any
agreement for the purchase or lease of materials (except wafer ),
supplies, goods, services, equipment or other assets that provides for
annual payments by the Company of US$1,000,000
or more
;
|
|
|
(ii)
|
any
sales, distribution or other similar agreement providing for the sale by
the Company of materials, supplies, goods, services, equipment or other
assets that provides for annual payments to the Company of
US$1,000,000
or more;
|
|
|
(iii)
|
any
collective bargaining agreement;
|
|
|
(iv)
|
any
partnership, joint venture or other similar
agreement;
|
|
|
(v)
|
any
contract relating to (x) the acquisition of any business or a substantial
portion of the assets of any business or (y) the disposition of all or a
substantial portion of the assets of the Company (whether by merger, sale
of equity interests, sale of capital stock, sale of assets or
otherwise);
|
|
|
(vi)
|
any
agreement relating to indebtedness for borrowed money, including any
pledge, guarantee, security agreement, mortgage or similar
Encumbrance;
|
|
|
(vii)
|
any
material license, franchise or other similar agreement relating to
Intellectual Property (save and except for Technology Transfer and
Assistance Agreement entered into as of the Signing Date by the Transferor
and Company );
|
Execution
copy August 6, 2007
(viii)
|
any
material agency, dealer, sales representative, marketing or other similar
agreement;
|
|
|
(ix)
|
any material
agreement with any director, officer or key employees of the Company
except for labor contract; and
|
|
|
(x)
|
any
material agreement between the Company, on the one hand, and the
Transferor or any Subsidiary or Affiliate of the Transferor or
other Person in which any of the foregoing has a direct or indirect
interest, on the other hand (except the General Service Agreement between
the Company and the Transferor, which will be terminated before the
Registration Date and any agreement otherwise agreed in the Transaction
Documents, including but not limited to the Technology Transfer and
Assistance Agreement and the Packaging and Testing Services Agreement to
be entered by the Company and the Transferor, and any agreement otherwise
agreed in the Transaction Documents).
|
A
Material Contract is any contract that is described in any of the above Section
3.11 (a) (i) to (x).
Section
3.12
Financial
Statements.
|
(a)
|
The
Transferor and the Company have delivered to the Transferee prior to
the Signing Date the audited balance sheet of the Company as at
December 31, 2006 and the related audited statements of income, cash flows
and changes in shareholders equity for the fiscal years ended December 31,
2006 and have showed to the Transferee the reviewed and un-audited balance
sheet of the Company as at June 30, 2007 and the related reviewed and
un-audited statements of income, cash flows and changes in shareholders
equity for the six-month period ended June 30, 2007 (collectively, the
“Financial Statements”
).
Except as
described in the notes thereto, the Financial Statements (x) were prepared
in accordance with PRC GAAP consistently applied; (y) present fairly, in
all material respects, the financial position, results of operation and
cash flows of the Company as of the dates thereof; (z) are in
all material respects consistent with the books and records of the
Company. All such books and records have in all material
respects been maintained accurately and in accordance with PRC GAAP and
Applicable Law.
|
|
(b)
|
On
the Signing Date, the Company maintains a system of internal accounting
controls that provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded in reasonable detail,
accurately and fairly reflect the transactions and dispositions of assets
of the Company as necessary to permit preparation of financial statements
in conformity with PRC GAAP, (iii) access to and use of assets is
permitted only in accordance with management’s general or specific
authorization, (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate actions are
taken with respect to any differences, and (v) the Company has made and
kept books, records and accounts which, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of assets of the
Company and provide a sufficient basis for the preparation of financial
statements of the Company in accordance with PRC
GAAP.
|
Execution
copy August 6, 2007
Section
3.13
Absence
of Undisclosed Liabilities.
On
the Signing Date and the Registration Date, to the best knowledge of the
Transferor, the Company (a) has no indebtedness, claims, commitments,
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise to any third party and Governmental Entity,
including but not limited to China-Singapore Suzhou Industrial Park Development
Co., Ltd., and whether due or to become due, asserted or unasserted, except
(i) to the extent disclosed or reserved against in the Financial Statements,
(ii) for liabilities and obligations that were incurred after
December 31, 2006
in the
ordinary course of business consistent (in amount and kind) with past practice
and that in the aggregate are not material, nor (b) is party to any earn-out or
other similar contingent pay-out arrangement or equity claim.
Section
3.14
Absence
of Changes.
During the
period commencing on the Signing Date and ending at the Registration Date,
the Company shall conduct its business in the ordinary course of business
consistent with the past practice and shall not have:
(a)
|
suffered
any Material Adverse Effect;
|
|
|
(b)
|
incurred,
assumed, guaranteed or discharged any indebtedness, Encumbrance, claim,
commitment, obligation or liability, absolute, accrued, contingent or
otherwise, to any third party and Governmental Entity, including but not
limited to China-Singapore Suzhou Industrial Park Development Co.,
Ltd., whether due or to become due, except for (i) current
liabilities for trade or business obligations incurred in connection with
the purchase of goods or services in the ordinary course of business
consistent (in amount and kind) with past practice and (ii) the payment of
such current liabilities;
|
|
|
(c)
|
sold,
transferred, leased or licensed to others or otherwise disposed of, or
purchased or acquired any material assets, property, business or assets,
tangible or intangible, except for products sold or acquired in the
ordinary course of business consistent with past practice, or canceled or
compromised any debt, claim, commitment, obligation or liability or waived
or released any right of substantial value, other than in the ordinary
course of business consistent (in amount and kind) with past practice, and
not material in the aggregate;
|
|
|
(d)
|
terminated,
cancelled, materially modified or received any notice of termination of
any Material Contract;
|
|
|
(e)
|
made
any material loans, advances or capital contributions to, or investments
in, any Person;
|
|
|
(f)
|
suffered
any damage, destruction or loss (which is not covered by
insurance) relating to the liabilities and obligations arisen
out of any products or services provided, manufactured or sold by Company
before the Registration Date such as warranty obligations and product
liabilities, due to (i) the Company’s performance of any agreement for the
purchase or lease of materials, supplies, goods, services, equipment or
other assets before the Registration Date, and (ii) the Company’s
performance of any sales, distribution or other similar agreement
providing for the sale by the Company of materials, supplies, goods,
services, equipment or other assets before the Registration Date, in any
case or in the aggregate in excess of
US$100,000;
|
Execution
copy August 6, 2007
(g)
|
(i)
assigned, transferred or granted any rights under, or entered into any
agreement or settlement regarding the substantial breach,
misappropriation, infringement or violation of, any Intellectual Property,
or substantially modified any existing rights with respect thereto or
(ii) settled or compromised any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
Intellectual Property, in any case or in the aggregate in excess of
US$200,000;
|
|
|
(h)
|
made
any increase in the rate of compensation, commission, bonus or other
direct or indirect remuneration payable, or paid or agreed or promised to
pay (in either case in writing or orally), conditionally or otherwise, any
bonus, incentive, retention or other compensation, retirement, welfare,
fringe or severance benefit or vacation pay, to or in respect of any
present or former director, officer, employee or consultant, of any of the
Company, except for any increase, payment or agreement or promise to pay
in the ordinary course of business consistent (in amount and kind) with
past practice;
|
|
|
(i)
|
made
any change in its accounting, auditing or tax methods, practices or
principles, except to the extent required by PRC GAAP or Applicable
Laws;
|
|
|
(j)
|
committed,
suffered, permitted or incurred any transaction or event which would
substantially increase its liability relating to Taxes other than in the
ordinary course of business and consistent with past
practice;
|
|
|
(k)
|
paid
or agreed to pay any substantial legal, accounting, brokerage, finder’s
fee, Taxes or other expenses in connection with, or incurred any severance
pay obligations by reason of the Transaction Documents or the transactions
contemplated thereby that have not been paid or will not be fully paid and
discharged at or prior to the Registration
Date;
|
|
|
(l)
|
deferred
or agreed to defer payment of any payables or accelerated or agreed to
accelerate the collection of any receivables in excess of
US$100,000;
|
|
|
(m)
|
made
any grant of credit to any customer or distributor on terms materially
more favorable than had been extended to that customer or distributor in
the past;
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(n)
|
amended
its Organizational Documents or merged with or into or consolidated with
any other Person, subdivided, combined or changed or agreed to change
in any manner the character of its business;
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(o)
|
declared,
promised or made any dividend or other distribution to the Transferor in
any materially different manner or made any substantial change whatsoever
in its capital structure other than that in the ordinary course of
business consistent (in amount and kind) with past
practice;
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(p)
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(i)
loaned or advanced substantial money or other property to any present or
former director, officer, employee or consultant of the Company, (ii)
established, adopted, entered into, substantially amended or terminated
any Benefit Plan, collective labor agreement (other than as may be
required by the terms of an existing Benefit Plan or collective labor
agreement, or as may be required by Applicable Law), or (iii) granted
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Execution copy August 6, 2007
any equity or equity-based awards to any present
or former director, officer, employee or consultant of the Company; or
(q)
|
taken
any action or omitted to take any action that would result in the
occurrence of any of the foregoing.
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Section
3.15
Product
Warranties.
On
the Signing Date and the Registration Date, except for warranties implied by
Applicable Law, there are no warranties furnished by the Company to customers
express or implied, written or oral, with respect to the products sold by the
Company.
Section
3.16 Effect of Transaction
(a) No
creditor, employee, consultant, customer, supplier or other Person having a
material business relationship with the Company has informed the
Company that such Person intends to change its relationship with the
Company because of the transactions contemplated by Transaction Documents, and
to the knowledge of the Transferor or the Company, no such Person has any such
intent.
(b) Transferor
will make reasonable efforts (but without guarantee) to help the Company not to
lose any benefits, rights, privileges or and preferential treatment, which the
Company is currently enjoying as of the Signing Date.
Section
3.17 Receivables
On
the Signing Date, the receivables of the Company that are reflected in the
Financial Statements, and all such receivables which have arisen since the date
of the Financial Statements, have arisen only from bona fide transactions in the
ordinary course of business consistent with past practice, and the Transferor
has no reason to believe that such receivables are not collectible in the
ordinary course of business consistent with past practice. There are
no facts or circumstances generally (other than general economic conditions)
which would result in any material increase in the uncollectability of such
receivables as a class in excess of the reserves therefore set forth in the
Financial Statements. There has not been any material adverse change in the
collectability of such receivables since December 31, 2006.
Section
3.18
Inventories
O
n the Signing Date,
e
xcept
for
net of reserves as reflected in
t
he Financial
Statements, the inventories of the Company are suitable for filling orders in
the ordinary course of business.
Section
3.19
Title to
Properties.
(a)
|
On
the Signing Date and the Registration Date, the Company has good and
marketable title to, or a valid and binding leasehold interest in, the
real property, personal property and assets used by the Company in their
business (collectively, the “Properties”), free and clear of all
Encumbrances, except for Permitted Encumbrance. Permitted Encumbrance
shall mean (i) any Encumbrances which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect; (ii)
any Encumbrances for taxes, assessments and other governmental charges not
yet due and payable, or due but not delinquent, or due and being contested
in good faith by appropriate proceedings, during which collection or
enforcement is stayed so long as
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Execution copy August 6, 2007
adequate security has been posted for the payment of such amounts;
(iii) any mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other
similar liens and encumbrances arising in the ordinary course of business
consistent with past practice for amounts not yet due and payable; or (iv) any
Encumbrance which arises in the ordinary course of business consistent with past
practice.
(b)
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On
the Signing Date, the Transferor and the Company have provided the
Transferee with a true and complete copy of each lease agreement in
respect of leased real property (a “
Lease
Agreement
”), including “CONTRACT FOR CUSTOMER-BUILT LEASE FACTORY”
dated on Mar 29, 2002, “CONTRACT FOR THE LEASE OF SUPPORTING
INFRASTRUCTURE” dated on Mar 29, 2002 and “ASSIGNMENT CONTRACT TO
CONSTRUCT SUPPORTING INFRASTRUCTURES’ dated on Mar 29, 2002. Each Lease
Agreement is the legal, valid, binding and enforceable obligation of the
respective parties thereto, and all rent and other material sums and
charges payable by the Company thereunder are current. The
Company is not in default under, nor has received a notice of default with
respect to, any Lease Agreement under which it is the lessee of real
property. The Company has not received any notice from the
other party to any Lease Agreement of the termination
thereof.
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(c)
|
On
the Signing Date and the Registration Date, there is no pending or, to the
knowledge of any of the Transferor or the Company, threatened,
condemnation, expropriation, eminent domain or similar proceeding
affecting all or any part of the Properties, and the Company has not
received any written or oral notice of any of the
same.
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(d)
|
On
the Signing Date and the Registration Date, the buildings and other
structures on the Properties have been regularly maintained and are fit
for the purposes for which they are presently used. The Company
has rights of egress and ingress with respect to each of the Properties
that are sufficient for them to conduct their
business.
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(e)
|
On
the Signing Date and the Registration Date, all of the personal property
and assets required for the conduct of the business of the Company are in
good maintenance, operating condition and repair, other than normal wear
and tear and any such property and assets which are to be scrapped and/or
replaced in due course in the ordinary course of the Company’s
business.
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(f)
|
On
the Signing Date and the Registration Date, there shall not have
occurred any material payments or other disbursements to creditors of the
Company other than in the ordinary course of
business.
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Section
3.20
Intellectual
Property
.
On the Signing
Date and the Registration Date,
(a)
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The
Company owns all right, title and interest in and to, or possess a valid
and enforceable right to use, all material Intellectual Property used in
their respective business, including but not limited to Intellectual
Property as set
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Execution copy August 6, 2007
forth in the Technology Transfer and Assistance
Agreement during the term of this Technology Transfer and Assistance
Agreement.
(b)
|
The
Company has not taken any action or failed to take any action that could
reasonably be expected to result in the abandonment, cancellation,
forfeiture, relinquishment, invalidation or unenforceability of any of the
registered Intellectual Property material to their respective business
(including the failure to pay any filing, examination, issuance, post
registration and maintenance fees, annuities and the like and the
failure to disclose any known material prior art in connection with the
prosecution of patent applications). The Company has taken all
reasonable steps in accordance with standard industry practices to protect
its rights in its Intellectual Property and at all times has maintained
the confidentiality of all information that constitutes or constituted a
trade secret of the Company.
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(c)
|
(i)
The Company is not a party to any pending legal proceedings which involve
a claim of infringement, unauthorized use, or violation of any
intellectual property right by any Person against the Company or
challenging the ownership, use, validity or enforceability of, any
material Intellectual Property, used in their respective business,
owned by or exclusively or non-exclusively licensed to the Company,
including but not limited to Intellectual Property as set forth in the
Technology Transfer and Assistance Agreement, and (ii) the Company has not
received any notice or claim challenging its ownership of any material
Intellectual Property owned (in whole or in part), nor to the knowledge of
the Transferor or the Company is there a reasonable basis for any claim
that the Company does not so own any of such Intellectual
Property. All of rights of any of the Company in and to
material Intellectual Property owned by the Company are valid and
enforceable. No material Intellectual Property, used in their
respective business, owned by or licensed to the Company, including but
not limited to Intellectual Property as set forth in the Technology
Transfer and Assistance Agreement, is subject to any outstanding
order, judgment or decree restricting the use or licensing thereof by the
Company.
|
Section
3.21
Software
Before and
on the Registration Date, the Company (i) takes all appropriate
actions to protect the confidentiality, integrity and security of their
software, including but not limited to the Software as set forth in the
Technology Transfer and Assistance Agreement, databases, systems, networks, and
Internet sites, all users thereof, and all information (including transactions)
stored or contained therein or transmitted thereby from any unauthorized use,
access, interruption or modification, including by (x) using reliable measures
to ensure the security and integrity of transactions executed through its
software, (y) using reliable methods (including passwords) to ensure the correct
identity of its users and customers and (z) using all reasonable mechanisms to
ensure the enforceability of any transactions executed through its site, all of
the foregoing in the context of a commercially reasonable company doing business
in the PRC.
Section 3.22
Employee
and Labor Matters
.
Execution copy August 6, 2007
On the Signing Date and
the Registration Date,
(a)
|
The
Company has not violated any Applicable Laws relating to labor or labor
practices. The Company has at all times complied in every
material aspect with any Applicable Laws relating to social security
(including, without limitation, pension insurance, unemployment insurance,
medical insurance, workers’ compensation insurance, and birth insurance)
and housing welfare, including obtaining social security registration
certificates, timely payment of employer contributions and timely
withholding and payment, on behalf of employees, of employee
contributions.
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(b)
|
Schedule
3.22(a) contains a true, complete and accurate list of all employees
of the Company, indicating their respective employee number, name,
positions, current salaries as of the Signing Date.
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(c)
|
Except
for the benefits (“Benefit Plan”) provided in the employee handbook of the
Company, there is no other benefit plans established in the
Company.
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(d)
|
With
respect to any Benefit Plan and any other employment matter: (i) No
actions, suits, claims or any disputes between the Company, on one hand,
and any of their employees, on the other hand, are
pending or, to the
knowledge of any of the Transferor or the Company, threatened; (ii) no
facts or circumstances exist that could give rise to any such actions,
suits or claims; and (iii) no administrative investigation, audit or other
administrative proceeding by Governmental Entities are pending, threatened
or in progress.
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(e)
|
The
execution of the Transaction Documents and the consummation of the
transactions contemplated thereby shall not result in the material
increase, acceleration or provision of any payments, benefits or other
rights, including, but not limited to, any severance pay or payment
contingent upon a change in control or ownership of the Company to any
current or former employee or contractor of the
Company.
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(f)
|
Since
the establishment of the Company, no death or serious bodily injury of any
person has occurred as a direct result of such person’s employment or
other relationship with the Company or as a result of any negligent action
or omission of the Company, its management, its directors or its
shareholder. No current or former employee of the Company
suffered or is suffering from any occupational disease to the knowledge of
the Company and the Transferor.
|
Section
3.23
Prohibited
Payments
. On
the Signing Date and the Registration Date,
neither the Transferor
(with respect to the Company) nor the Company, nor any officer, director,
employee or agent of any of them (or any person acting on behalf of any of the
foregoing) have made or agreed to made, for the Company’s interests: (i) bribes,
rebate, kick backs or any other unlawful payment (in cash, property or
otherwise) to any customer, supplier, Governmental Entity (including any
governmental employee or official) or any other Person who is or may be in a
position to help or hinder any of them
Execution
copy August 6, 2007
in the
conduct of business; or (ii) any receipts or disbursements in violation
of any anti-bribery law in any jurisdiction where the
Company has business dealings.
Section
3.24
Environmenta
l, health and Safety
Matters
.
On the
Signing Date and the Registration Date,
(a)
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the
Company is in compliance with all applicable Environmental Laws and has
not violated in any material respect any such laws, and possesses and
complies in all material respects with all Environmental Permits required
under such laws and has not violated in any material respect any such
permits; to the knowledge of the Transferor and the Company, there are no
circumstances, conditions or events that could reasonably be expected to
prevent any of the Company from (or materially increase the burden on the
Company) complying with applicable Environmental Laws or obtaining,
renewing, or complying with all Environmental Permits required under such
laws;
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(b)
|
(A)
the Company has not received any Environmental Claim that has not been
fully and finally resolved; and (B) to the knowledge of the Transferor and
the Company, there is not any threatened Environmental Claim, or any
circumstances, conditions or events that could reasonably be expected to
result in an Environmental Claim, against the
Company;
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(c)
|
the
Company has not entered into any agreement or other arrangement with any
Governmental Entity under any Environmental Law, and the Company is not
subject to any outstanding judgment, ruling, order or similar requirement
relating to compliance with any Environmental Law or to Hazardous
Substances;
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(d)
|
there
are and have been no Hazardous Substances, or other conditions, at any
property currently or formerly owned, leased, operated, or otherwise used
(including any location used for the storage, disposal, recycling or other
handling of any Hazardous Substances) by the Company that could reasonably
be expected to give rise to any material liability of any of the
Company under any Environmental Law or result in material costs to the
Company arising out of any Environmental Law;
and
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(e)
|
(A)
the Company has not assumed or retained, by agreement, operation of law,
or otherwise, any obligation under any Environmental Law or concerning any
Hazardous Substance, that could reasonably be expected to be material to
the Company; and (B) each of the foregoing representations and warranties
also applies to any Person for which the Company has assumed or retained
responsibility, whether by contract, operation of law, or
otherwise.
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(f)
|
The Company
has been at all times in compliance with all Applicable Laws
relating to the protection of health and safety in connection with the
ownership, lease, operation and condition of its business and
Properties. No person has
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Execution copy August 6, 2007
directly suffered impaired health as the result of the negligent
acts or omissions of the Company.
Section
3.25
Taxes
. On
the Signing Date and the Registration Date,
(a)
|
The
Company has (i) timely filed or will timely file (taking into account all
applicable extensions of time for filing) all Tax Returns required to be
filed by or with respect to the Company prior to the Registration Date,
and all such Tax Returns are true, correct and complete in all material
respects and (ii) paid all Taxes due and payable with respect to any
taxable period or portion thereof ending on or before the Registration
Date.
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(b)
|
There
is no Tax deficiency asserted against the Company, and there is no unpaid
assessment, proposal for additional Taxes, deficiency or delinquency in
the payment of any Taxes of the Company. No audit or
investigation of any Tax Return is currently underway or pending, or to
the knowledge of any of the Transferor or the Company, threatened, with
respect to the Company.
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(c)
|
No
Encumbrances for Taxes exist with respect to any of the assets or
properties of the Company.
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(d)
|
The
Company has withheld or collected and timely paid over to the appropriate
Governmental Entities (or are properly holding for such payment) all Taxes
required by Applicable Law to be withheld or
collected.
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(e)
|
The
Company has no liability for the Taxes of another Person (other than the
Company) as a transferee or successor, by contract or
otherwise.
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(f)
|
The
Company has, in accordance with Applicable Laws, duly registered with the
relevant Governmental Entities, has obtained and maintained the validity
of all national and local tax registration certificates and has complied
with all requirements imposed by such Governmental
Entities. The Company has made and kept up-to-date full
and accurate records, invoices and documents (i) appropriate or required
for the purposes of payment of any Taxes or (ii) as otherwise required by
any Government Entities.
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(g)
|
The Company is not
subject to taxation in any jurisdiction other than the PRC, and nor
claim has been made in any jurisdiction other than the PRC with respect to
the foregoing.
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Section
3.26
Insurance
.
On
the Signing Date and the Registration Date
,
the Company is insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they
are engaged. All policies of insurance insuring the Company or its
businesses, assets, employees, officers and directors are in full force and
effect. The Company is in compliance with the terms of such policies and
instruments in all material respects. There are no claims by the Company under
any such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause. The
Company has not been refused any insurance coverage sought or applied for, and
the Transferor has
Execution copy August 6, 2007
no reason
to believe that the Company will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business.
Section
3.27
Litigation
.
On the
Signing Date and the Registration Date
,
(i) the
Company is not engaged
in, or a party to, or, to the knowledge of the Transferor or the Company,
threatened with, any legal action, dispute, claim, suit, investigation or other
proceeding by or before any Governmental Entity or arbitration, and (ii) there
are no outstanding orders, rulings, judgments, settlements, stipulations or
similar agreements by, with or subject to any Governmental Entity (other than
through general application) binding upon any of the Company or their respective
assets, properties or rights, and for both (i) and (ii), which is likely to have
a Material Adverse Effect.
Section
3.28
Sufficiency
.
To
the best knowledge of the Transferor or the Company, the Company’s assets as of
the Registration Date include all the assets of the Company used in and
necessary or advisable for the conduct of their respective business in the same
manner and to the same extent as heretofore conducted by the
Company.
Section
3.29
Disclosure
.
The
Transferor and the Company have made their reasonable efforts to provide the
Transferee with the necessary information that the Transferee has requested in
connection with the transactions contemplated by the Transaction Documents and
all information that a reasonable investor would likely deem important in
determining whether to consummate such transactions. No information or materials
provided by the Transferor or the Company to the Transferee in connection with
its due diligence investigation of the Company or the negotiation and execution
of the Transaction Documents knowingly contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statement therein, in light of the
circumstances in which they are made, not misleading.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE TRANSFEREE
The
Transferee hereby represents and warrants to the Transferor and the Company as
follows:
Section
4.1
Organization
and Standing.
On the
Signing Date and the Registration Date,
the Transferee has been
duly organized and is validly existing and in good standing under the laws
of Islands of Bermuda with power and authority (corporate and other) to
execute, deliver and perform the Transaction Documents to which it is a party
and consummate the transactions contemplated thereby.
Section
4.2
Authorization.
On the
Signing Date and the Registration Date,
the execution, delivery
and performance by the Transferee of the Transaction Documents to which it is a
party and the consummation by the Transferee of the transactions contemplated by
the Transaction Documents are within its power and authority (corporate or
other) and have been duly authorized by all necessary action (corporate or
other) on the part of the Transferee. Each of the Transaction
Documents to which the Transferee is a party has been duly authorized, executed
and delivered by the Transferee, and constitutes a valid and legally binding
obligation of the Transferee, enforceable against the Transferee in accordance
with its terms, subject as to enforceability, to bankruptcy, insolvency,
Execution
copy August 6, 2007
reorganization
and similar laws of general applicability relating to or affecting creditors’
rights and to general equity principles.
Section
4.3
No
Conflicts.
On the
Signing Date and the Registration Date
,
the execution, delivery and
performance by the Transferee with all of the provisions of the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated by the Transaction Documents will not (a) result in a violation of
the provisions of its Organizational Documents, (b) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute (with or
without the giving of notice, the lapse of time or both) a default under, any
agreement or instrument to which it is a party or by which it is bound or to
which any of its properties or assets is subject, or (c) result in a violation
of any Applicable Law, except in the case of sub-clauses (b) or (c), to the
extent that any such events could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of the
Transferee to perform its obligations under the Transaction Documents or
consummate the transactions contemplated thereby.
Section
4.4
Absence
of Further Requirements.
On the
Signing Date and the Registration Date, the Transferee has obtained all the
approvals for the transactions contemplated in the Transaction Documents from
any Person or Governmental Entity required by Applicable Law. No further
consent, approval, authorization, order, registration, filing or qualification
of or with any third party or Governmental Entity having jurisdiction over the
Transferee or any of its properties or assets is required for the consummation
by the Transferee of the transactions contemplated by the Transaction Documents,
except such consents, approvals, authorizations, orders, registrations, filings
or qualifications identified in Section 6.1.(d) as have been duly obtained or
made by the Transferee on or before the Registration Date and are in full force
and effect.
Section
4.5
No
Legal Proceedings.
On
the Signing Date and the Registration Date
,
there is no legal action,
dispute, claim, suit, investigation or other proceeding by or before any
Governmental Entity or arbitration pending, or to the knowledge of the
Transferee, threatened against the Transferee (a) seeking to restrain or
prohibit the execution, delivery and performance of the Transaction Documents or
the consummation of the transactions contemplated thereby by the Transferee or
(b) that could reasonably be expected to have a material adverse effect on the
ability of the Transferee to perform its obligations under or consummate the
transactions contemplated by the Transaction Documents.
ARTICLE
V
COVENANTS
AND AGREEMENTS
Section
5.1
Conduct
of Business.
(a)
The
Company and the Transferor covenant and agree that,
during the period
commencing on the Signing Date and ending at the Registration Date, except
with the prior written consent of the Transferee , or as explicitly
contemplated by the Transaction Documents or required by Applicable Law, the
Company shall not, and the Transferor shall not permit the Company to take any
of the following actions:
Execution
copy August 6, 2007
(i)
|
Substantially
amend its Organizational Documents;
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(ii)
|
commence
a voluntary case or proceeding under any applicable bankruptcy law or
consent to the entry of judgment, ruling or decision against it in an
involuntary case or proceeding under any bankruptcy law, or take any
action to dissolve or liquidate;
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(iii)
|
make
any material change in any of its
business;
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(iv)
|
sell,
transfer, lease, license or otherwise dispose of or encumber, purchase or
acquire any material, assets, property, business or assets, tangible or
intangible, other than in the ordinary course of business consistent with
past practice, or cancel or compromise any debt, claim, commitment,
obligation or liability or waive or release any right of substantial
value, other than in the ordinary course of business consistent (in amount
and kind) with past practice;
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(v)
|
enter
into, amend or modify in any material respect or terminate any Material
Contract or waive or assign any material right thereunder, in each case,
other than in the ordinary course of
business;
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(vi)
|
create
any Subsidiary or enter into any joint venture or partnership with any
other Person;
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(vii)
|
merge
with or into, or consolidate with or convert into, another
Person;
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(viii)
|
terminate,
amend or modify in any material respect, any material Permit, other than
(x) as required by any applicable Governmental Entity, (y) in connection
with the transactions contemplated by the Transaction Documents or (z) in
the ordinary course of business;
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(ix)
|
make
any capital expenditures or commitments that will create or result in
commitments on the
Company to make
capital expenditures other than capital expenditures made in the ordinary
course of business consistent with past practice
and otherwise
agreed by Transferee in writing;
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(x)
|
commence
or settle any litigation, arbitration;
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(xi)
|
enter
into any transaction or series of transactions, including any loan,
advance or capital contribution to or investments in, with
the
Transferor or any of its Subsidiaries or Affiliates (other than the
Company), other than in the ordinary course of business or other as
disclosed herein
;
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(xii)
|
make
any declaration of, or set aside or pay any dividend or other
distribution
in any manner
with respect to the
r
egistered
capital of the Company,
or make
any change whatsoever in such registered capital
;
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(xiii)
|
unless
in the ordinary course of business in accordance with its existing
policies
or
Benefit Plan
or as may be required by Applicable Law, (x) grant any
increases in wages, salaries
,
benefits
or
compensation
of any of the employees,
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Execution copy August 6, 2007
consultants, independent contractors or
directors of the Company, (y) establish, amend or terminate any Benefit Plan or
collective
bargaining
agreement
, and
(z)
unilaterally make any termination of employment of any of the key employees of
the Company;
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(xiv)
|
materially
change its policies, procedures, principles or methods of Tax or financial
accounting, other than as required by a change in PRC GAAP or other
Applicable Laws;
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(xv)
|
make
any change in arrangements on bank accounts or any grant of any powers of
attorney thereof;
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(xvi)
|
fail to pay timely
and accurately any Taxes due and payable,
or fail to file any
material Tax Return when due or fail to cause such Tax Returns when filed
to be complete and accurate in all material respects, in all the foregoing
cases resulting in a Material Adverse Effect;
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(xvii)
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incur,
assume or guarantee any material indebtedness other than in the ordinary
course of business;
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(xviii)
|
transfer
to any Person ownership of or otherwise grant any Person any exclusive or
material license to any Intellectual Property which is necessary for the
conduct of the Company’s business or permit any material Intellectual
Property to lapse, expire or become abandoned, in each case other than in
the ordinary course in a manner consistent with past practice, or settle
or agree any legal action, dispute, claim, suit, investigation or other
proceeding relating to Intellectual Property;
or
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(xix)
|
agree,
whether in writing or otherwise, to do any of the
foregoing.
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(b)
The
Company and the Transferor covenant and agree that, during the period commencing
on the Signing Date and ending at the
Registration
Date,
except with the prior written consent of the Transferee which shall not be
unreasonably withheld or delayed, or as explicitly contemplated by the
Transaction Documents or required by Applicable Law, the Company shall, and the
Transferor shall cause the Company to, do the following:
(i)
|
conduct
its operations in the ordinary course of business consistent with past
practice;
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(ii)
|
use
its best efforts to keep available the services of its present employees,
contract service providers and other suppliers, customers and others
having business relationships with it;
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(iii)
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preserve
substantially intact the present business organization of the
Company;
and
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(iv)
|
maintain
the operating assets and equipment of the Company, including Intellectual
Property owned or held under license by the Company, in normal operating
condition and repair
.
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Execution copy August 6, 2007
(c)
The
Company and the Transferor covenant and agree that, during the period commencing
on the Signing Date and ending at the
Registration
Date,
the Transferee shall have the right to have an observer present at any meeting
of the Company’s board of directors and the
Company
shall give
seven
(7) days
prior written notice of any such meeting to the Transferee.
Section
5.2
Access
to Information
.
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(a)
|
From
the Signing Date until the Registration Date, the Company and the
Transferor shall afford to the Transferee reasonable access at all
reasonable times to any senior management personnel and any other
Company-designated employees and advisors of the Company, and to the books
and records, agreements, assets and properties of the Company, and shall
furnish the Transferee such financial, operating and other data and
information as the Transferee may reasonably request. No such review,
examination or investigation by the Transferee shall affect or in any way
diminish the representations, warranties or covenants of the Company and
the Transferor hereunder.
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(b)
|
At
the reasonable request of the Transferee, the Company and the Transferor
shall furnish, or cause to be furnished, to the Transferee any relevant
information or copies of any document in their possession or
control.
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Section
5.3
Financial
Statements
.
The
Transferor and the Company shall have delivered to the Transferee, prior to
Registration Date, the un-audited report, including but not limited to
un-audited
balance
sheet of the Company and the related statements of income, cash flows and
changes in shareholders equity for the period commencing from
January 1, 2007
to the date
prior to thirty (30) days of Registration Date. The Transferee may conduct the
financial audit on Company after the Signing Date at the Transferee’s own
cost
Section
5.4
Further
Actions
.
Each of
the Parties hereto agrees to cooperate with each other Party and use their best
efforts to facilitate the consummation of the transactions contemplated under
the Transaction Documents as promptly as practicable. Without
limiting the foregoing, the Parties shall:
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(a)
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execute
or cause to be executed such further documents and take or cause to be
taken such further actions as may be reasonably necessary or proper to
carry out effectively the provisions of the Transaction Documents and the
transactions contemplated thereby;
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(b)
|
use
their best efforts to cause all conditions specified in Article VI to be
satisfied on or prior to the
Registration
Date;
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(c)
|
obtain
and cooperate with each other party in good faith in obtaining any
consent, approval, authorization or order of, or making any registration,
filing or qualification with, any third party or Governmental Entity, all
as may be required in connection with the execution, delivery or
performance of the Transaction Documents and the consummation of the
transactions contemplated
thereby.
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Execution copy August 6, 2007
Section
5.5
PRC
Government Approvals
.
|
(a)
|
As
soon as practicable after the execution of this Agreement, the Company
shall, and the Transferor shall cause the Company to, submit to the
Approval Authority the Transaction Documents and any other documents
necessary to obtain the
New
Approval
Certificates issued by such Approval Authority approving the Transaction
Documents and provide to the Transferee copies of all documents submitted
to the Approval Authority; provided that all documents submitted to the
Approval Authority shall first be reviewed by and agreed to in writing
and/or signed by the Transferee without undue delay, as the case may
be. Upon receipt of such
New
Approval
Certificates, the Company shall, and the Transferor shall cause the
Company to, deliver a copy of each such
New
Approval
Certificate to the Transferee.
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(b)
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Following receipt of
the
New
Approval
Certificates specified in
the above
clause (a), the
Company shall, and the Transferor shall cause the Company to, submit all
required documents to the
Registration Authority for all the
necessary amendment registration in connection with the transactions
contemplated by the Transaction Documents
and
the issuance
of the
New
Business License to
the Company
, which shall include the proper registration of the
Transferee as the new shareholder of the Company and its specific equity
ownership percentage in the Company as prescribed in the Transaction
Documents
. Upon
receipt of the
New
Business License by
the Company
and any other documents issued by the Registration
authority evidencing the completion of such amendment registration
(
“Registration
Documents”
)
, the Company shall,
and the Transferor shall cause the Company to, deliver a copy of the
New
Business License to
the Transferee.
The New Business License shall indicate the New
Company Name.
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Section
5.6
No
Encumbrances.
The
Transferor shall not create, incur or assume any Encumbrance on the Transferor’s
equity interests in the Company or enter into discussions or negotiations with
any Person in respect of the foregoing without the prior written consent of the
Transferee.
Section
5.7 Non-Solicitation.
Both Parties agree that
until the date that is two (2) years after the Registration Date, they will not,
directly or indirectly, (i) employ or attempt to employ or solicit for
employment any existing member of the management of the Company within twelve
(12) months after the termination of such member’s employment with
the Company or the other party or (ii) entice, induce or attempt to influence
any member of the management of the Company to terminate his or her employment
with the Company or the other party;
Section
5.8
Retention
of Books and Records.
The
Company shall, and the Transferor shall cause the Company to, retain
, in accordance with
Applicable Law and existing Company
’
s policies,
all
books, records and other documents pertaining to the Company that relate to the
period prior to the
Registration
Date
that are required to be retained under retention policies in effect as of or
after the Signing Date and to make the same available for inspection (at the
office of the Company) and copying by the Transferee or its agents at the
Execution copy August 6, 2007
Transferee’s
expense
upon
reasonable request. This Section
5
.
8
shall not limit
the obligation of the Company to, and the Transferor to, cause the Company to
include in its assets at the
Registration
Date
all books, records and confidential and proprietary information, relating
primarily to the business operations of the Company that are in the
possession of the Company. After the expiration of such period, no such books
and records shall be destroyed by the Company without first advising the
Transferee and Transferor in writing detailing the contents thereof and
providing the Transferee and Transferor with at least thirty (30) days of
reasonable opportunity to obtain possession thereof. The Transferee
and Transferor agree that such records will be kept strictly confidential.
Section
5.9
No
Other Transaction.
Prior to
the
Registration
Date, e
ither
the Company
or
the
Transferor shall not, and shall not permit any of its Affiliates,
shareholder
,
directors, officers, employees, representatives or agents to, and the Transferor
shall cause the Company not to, without the prior written consent of the
Transferee, (i) solicit, initiate, facilitate or encourage any inquiry, proposal
or offer with respect to the purchase or sale of, tender offer for or other
disposal of or investment in any of the registered capital of the Company or any
merger, consolidation or other business consolidation involving the Company
other than the transactions contemplated by the Transaction Documents (an “
Alternative Transaction
”),
(ii) enter into or participate or engage in any discussions or negotiations
concerning, or furnish or disclose any information with respect to the Company
in connection with, any Alternative Transaction or (iii) enter into any
agreement, arrangement or understanding, whether binding or non-binding, oral or
written, with respect to an Alternative Transaction.
Section
5.10
Notice
of Certain Events.
Each of
the Parties hereto shall promptly notify the other Parties hereto of (a) any
notice or other communication from any Person alleging that the consent,
approval, authorization, order, registration, filing or qualification of or with
such Person is or may be required in connection with the transactions
contemplated by this Agreement, (b) any notice or communication from any
Governmental Entity relating to or in connection with the transactions
contemplated by the Transaction Documents, (c) any legal action, dispute, claim,
suit, investigation or other proceeding by or before any Governmental Entity or
arbitration commenced or, to such Party’s knowledge, threatened relating to or
otherwise affecting the ability of the Transferee, the Company or the Transferor
to perform their respective obligations under the Transaction Documents or the
consummation of the transactions contemplated thereby and (d) any other events
that could reasonably be expected to have a material effect on the transactions
contemplated by the Transaction Documents.
Section
5.11
Sufficiency.
The
Company and the Transferor shall cause the Company’s assets as of the
Registration Date to include all the assets of the Company used in and
necessary or advisable for the conduct of its business in the same manner and to
the same extent as heretofore conducted by the Company, including all books,
records and confidential and proprietary information, relating primarily to the
business operations of the Company that are in the possession of the
Company.
Execution copy August 6, 2007
ARTICLE
VI
CONDITIONS
TO CLOSING
Section
6.1
Conditions
to Obligation of the Transferee
.
The
obligation of the Transferee to
pay the Purchase
Price
on the Payment Date is subject to the satisfaction or waiver by the
Transferee on and as of the Registration Date of each of the following
conditions:
(a)
|
Each
of the representations and warranties made by the Transferor and the
Company in the Transaction Documents to which it is a party (i) to the
extent qualified by materiality, shall be true and correct and (ii) to the
extent not so qualified, shall be true and correct in all material
respects, in each case on the Signing Date
and/
or
the
Registration
Date as such representations and warranties were made
according
to relevant clauses
in this Agreement
.
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(b)
|
The
Transferor and the Company shall have performed and complied in all
material respects with each of the agreements, covenants, conditions and
obligations required by the Transaction Documents to which it is a party
to be performed or complied with by it on or prior to the Registration
Date.
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(c)
|
There
shall be no legal action, dispute, claim, suit, investigation or other
proceeding by or before any Governmental Entity or arbitration pending, no
restraining order, injunction, cease and desist order or other legal
restraint or prohibition (whether temporary, preliminary or permanent) of
any Governmental Entity in effect, and no statute, rule, regulation or
order promulgated or enacted by any Governmental Entity, that would
restrain, prohibit, materially modify or invalidate the transactions
contemplated by the Transaction
Documents.
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(d)
|
Each
consent, approval, authorization, order, registration, filing or
qualification of or with any third party or Governmental Entity required
in connection with the consummation of the transactions contemplated by
the Transaction Documents shall have been duly obtained or made, as
applicable, and shall be in full force and effect, including the following
(copies of which shall have been received by the
Transferee):
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(i)
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Each
of the Transaction Documents shall have been approved by the relevant
Approval Authority in its entirety without materially varying the terms
and conditions thereof or imposing any material additional or different
obligations on the Company or any Party thereto unacceptable to such
Party, which approval shall be evidenced by the issuance of the approval
reply and the New Approval Certificates issued by the Approval
Authority;
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(ii)
|
The
Transferee shall have been registered as a shareholder of the Company
owning the equity interests representing 60 % of the ownership interest in
the Company;
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Execution copy August 6, 2007
(iii)
|
All
the necessary amendment registration in connection with the transactions
contemplated by the Transaction Documents
shall
have been duly conducted with the Registration
Authority;
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(iv)
|
The
Company shall have obtained the New Business License
without
materially
varying
the terms and conditions of the New Articles of Association and stating on
the face of the New Business License with the New Company
Name.
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(e)
|
T
he Company
shall have conducted its business in the ordinary course from the Signing
Date up to the Registration Date.
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ARTICLE
VII
TERMINATION
Section
7.1
Termination
.
This Agreement
may be terminated at any time prior to the Registration Date:
(a)
|
by
the mutual written consent of the Transferor and the
Transferee;
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(b)
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by
either the Transfero
r
or the
Transferee if the conditions set forth in Section
6
.1(d) have
not been satisfied on or before the date that is six (6) months
after the submission of the Transaction Documents to the Approval
Authorit
y
;
provided, however,
that
no Party may request termination pursuant to this Section
7
.1(b) if
such conditions have not been satisfied due to a breach of this Agreement
by such Party;
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(c)
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by
the Transferee if there has been a material misrepresentation or material
breach on the part of the Transferor or the Company in the
representations, warranties, covenants or agreements set forth in this
Agreement that would result in a failure to satisfy the closing conditions
set forth in Sections
6
.1, which is
not cured within
thirty (30)
PRC Business Days after the Transferor has been notified in writing
by the Transferee of its intent to terminate this Agreement pursuant to
this Section
7
.1(c);
or
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(d)
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by
either the Transferor or the Transferee if any statute, rule,
regulation
,
decision
or order by any Governmental Entity of competent
jurisdiction restraining, prohibiting or invalidating the consummation of
the transactions contemplated by the Transaction Documents ha
s been promulgated
and
become
effective,
final and non-appealable.
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Section
7.2
Liabilities
in the Event of Termination
.
In the event of
any termination of this Agreement in accordance with Section 7.1, this Agreement
(except for the provisions of this Section
Execution
copy August 6, 2007
7.2 and
Sections 8.1, 9.1, 9.2, 9.6, 9.9, 9.10, 9.11 and 9.12) shall become null and
void and of no further force and effect and there shall be no liability or
obligation hereunder on the part of any Party as a result of such termination;
provided, however,
that
notwithstanding any such termination, each Party shall be liable to the other
Parties for any Losses arising from any breach of this Agreement by such Party
prior to such termination.
ARTICLE
VIII
INDEMNIFICATION
Section
8.1
Survival
The
covenants and agreements set forth in this Agreement that are stated to be
performed or to be complied with on or prior to the Registration Date shall not
survive the Registration Date. All other covenants and agreements set
forth herein shall survive the Registration Date until fully discharged in
accordance with their terms. The Sections 8.1, 8.2, 8.3, and 8.4 shall survive
the Registration Date and remain in full force and effect.
Section
8.2
Indemnification
by the Transferor
and the Company
.
(a)
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All
representations, warranties, agreements, covenants and obligations made or
undertaken by the Company and the Transferor in this Agreement or in any
document delivered
by or on behalf of
the
Transferor
and the Company
in connection with
the consummation of the transactions contemplated by this Agreement
are material, have been relied upon by the Transferee, and shall not be
affected by any performance, event or matter whatsoever (including,
without limitation, any satisfaction and/or waiver of any condition set
out in Article VI), unless by a specific and duly authorized written
release by the Transferee on
indemnification.
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(b)
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The
Transferor and the Company shall, jointly and severally, indemnify and
hold harmless the Transferee, and its successors and permitted assigns
from, against and in respect of all direct losses, liabilities, taxes,
damages, judgments, settlements and expenses, including reasonable fees
and expenses of counsel (collectively, “Losses”), incurred or paid by the
Transferee in connection with and directly resulting from (a) the breach
of any representation or warranty of the Transferor or the Company set
forth in this Agreement, and (b) the breach of any covenant or agreement
on the part of the Transferor or the Company to be performed set forth in
this Agreement.
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(c)
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Because
after the Registration Date, the Company shall be jointly owned by the
Transferee and the Transferor, the Parties agree that (i) any claim by the
Transferee under this Section 8.2 after the Registration Date will be
solely against the Transferor, who will have no right of reimbursement or
contribution against the Company, and (ii) any Losses suffered or incurred
by the Company against which the Transferee is indemnified as provided in
Section 8.2 (b) above shall be deemed suffered by the Transferee, which
shall, either independently or jointly with the Company, be entitled to
enforce such indemnity against the Transferor.
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Execution copy August 6, 2007
(d)
|
Any
examination, inspection, review, or audit by the Transferee or its
appointed Big Four external auditors of the properties, financial
condition or other matters of the Company shall in no way limit, affect or
impair the ability of the Transferee to rely upon the representations,
warranties, agreements, covenants and obligations of the Company and the
Transferor made or undertaken in this Agreement or in any document
executed and delivered pursuant to this
Agreement.
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Section
8.3
Indemnification
by the Transferee
.
All representations,
warranties, agreements, covenants and obligations made or undertaken by
Transferee by this Agreement are material, have been relied upon by the Company
and the Transferor, and shall not be affected by any performance
, event or matter
whatsoever, unless by a specific and duly authorized written release by the
Transferor and Company upon indemnification
. T
he
Transferee shall indemnify, defend, protect and hold harmless
the
Transferor and
the Company and their respective successors and permitted assigns (each a “
Transferor Party
”) from,
against and in respect of all Losses incurred or paid by any Transferor Party in
connection with, resulting from or arising out of (a) the breach of any
representation or warranty of the Transferee set forth in this Agreement and (b)
the breach of any covenant or agreement on the part of the Transferee to be
performed set forth in this Agreement.
Section
8.4
No Consequential Loss and
Damage
.
Notwithstanding any
provisions to the contrary in this Agreement, no Party shall be liable for any
loss of profits, use, savings or business, or for any special, indirect or
consequential losses and damage, whether or not such Party had notice of
the same and regardless how such losses and damage arose, and such Party shall
incur no liabilities other than those specifically agreed herein SAVE AND EXCEPT
THAT such Party’s gross negligence or willful default causing any losses and
damage shall disentitle it to the benefit of this Section 8.4’s limitation of
liability to the extent of such Party’s contribution to the said losses and
damage.
ARTICLE
IX
MISCELLANEOUS
Section
9.1
Expenses,
Fees and Taxes
.
(a)
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Whether
or not the transactions contemplated by this Agreement are consummated,
all costs and expenses (including fees and expenses of counsel and
financial advisors, if any) incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Party incurring
such costs and expenses.
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(b)
|
Any corporate income
/ withholding tax levied on the gains from the equity transfer, if any,
shall be borne by Transferor.
Each Party shall pay any stamp duty
required to be paid by such Party with respect to this Agreement. All
other taxes arising in connection with the transactions contemplated by
this
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Execution copy August 6, 2007
Agreement shall be paid by each of the
Transferor and the Transferee in
accordance with the
Applicable Law
.
(c)
|
Any
transfer registration fees with respect to the Equity Interests shall be
paid by the Company.
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Section
9.2
Notices
.
(a)
|
All
notices, demands, requests, consents, waivers and other communications
required or permitted hereunder shall be in writing (including wire,
telefax, email or similar writing) and shall be sent, delivered or mailed,
addressed or telefaxed:
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(i)
if to the
Transferee, to:
J&R
Holding Limited.
Address:
No. 26, Chin 3
rd
Road,
Nantze Export Processing Zone,
Kaohsiung,
Taiwan
Attn:
Mr.
Tien Yue Wu
F
ax:
+
886 7 361 3094
Copy
To:
A
ddress
: No.
26, Chin 3
rd
Road,
Nantze Export Processing Zone,
Kaohsiung,
Taiwan
Attn:
Corporate Legal
Fax:
+886 7 361 3094
(ii)
if to the
Company, to:
NXP
Semiconductors Suzhou Ltd
Address:
No. 188, Su Hong Xi Road,
Suzhou
Industry Park, Suzhou, 512021, PRC
Attn: General
Manager
Fax: +86(0)512
67251895
(iii)
if to the
Transferor:
NXP.B.V.
A
ddress
: High Tech
Campus 60, 5656 AG Eindhoven, the Netherlands
Attn:
Mr Ajit
Manocha
Fax:
+31(0)
402723621
Copy
To:
Execution copy August 6, 2007
A
ddress
: F 30, Tower
1, Kerry Everbright City, No. 218 Tian Mu Xi
Road,
Shanghai, 200070, PRC
Attn:
General
Legal Counsel
Fax:
+86 (0)
21 2205 2646
(b)
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Each
such notice, request or other communication shall be given (i) by mail
(postage prepaid, registered or certified mail, return receipt requested),
(ii) by hand delivery, (iii) by internationally recognized courier service
(iv) by telefax, receipt confirmed (with a confirmation copy to be sent by
first class mail; provided that the failure to send such confirmation copy
shall not prevent such telefax notice from being effective), or (v) by
email.
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(c)
|
Each
such notice, request or communication shall be effective (i) if mailed,
three days after mailing at the address specified in Section
9
.2(a) (or in
accordance with the latest unrevoked written direction from such party),
(ii) if delivered by hand or by internationally recognized courier
service, when delivered at the address specified in Section
9
.2(a) (or in
accordance with the latest unrevoked written direction from such party),
(iii) if given by telefax, when such telefax is transmitted to the telefax
number specified in Section
9
.2(a) (or in
accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received, and (iv) if by email, when
transmitted to the email address specified in Section
9
.2(a).
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Section
9.3
Amendments
and Waivers
This
Agreement may not be amended except by an instrument in writing signed by the
Company, the Transferee and the Transferor. Any of the Parties hereto
may, by an instrument in writing signed on behalf of such Party, waive
compliance by any other Parties with any term or provision of this Agreement
that such other Parties were or are obligated to comply with or
perform. No delay or failure on the part of a Party in enforcing any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
Section
9.4
Successors
and Assigns
None
of the Parties may assign this Agreement or any of its rights or obligations
under this Agreement without the prior written consent of the other
Parties. Subject to the preceding sentence and save for an assignment
or merger by operation of law or the sale of a Party’s entire business, this
Agreement shall be binding upon and inure to the benefit of the Company, the
Transferor, the Transferee and their respective permitted successors and
assigns.
Section
9.5
Entire
Agreement
This
Agreement and the other Transaction Documents constitute the entire agreement
among the Parties with respect to the subject matter hereof and supersede any
prior agreement or understanding among or between them with respect to such
subject matter.
Section
9.6
No
Third-Party Beneficiaries
Nothing in
this Agreement shall be construed as giving any Person, other than the Parties
hereto, and their successors and permitted assigns, any right, remedy or
claim under or in respect of this Agreement or any provision
hereof.
Execution copy August 6, 2007
Section
9.7
Currency
All
payments in relation to the
Un-paid Registered
Capital
to be made hereunder shall be made in U.S. Dollars unless
otherwise required by Applicable Law.
Section
9.8
Specific
Performance
The
Parties agree that irreparable damage would occur in the event that the
provisions of this Agreement were not performed in accordance with their
specific terms. Accordingly, the Parties agree that each Party shall
be entitled to seek any applicable remedy from any court of competent
jurisdiction to enforce specifically the terms and provisions of this Agreement
in addition to any other remedy to which it is entitled
under Applicable
Law
.
Section
9.9
Governing
Law
This
Agreement shall be governed by and construed in accordance with the laws of the
Hong Kong Special
Administration
Region
.
Section
9.10
Settlement
of Disputes
In
the event that a dispute arises in connection with the interpretation or
implementation of this Agreement, the Parties shall attempt in the first
instance to resolve such dispute through friendly consultations. If
the dispute is not resolved through consultations within
thirty
(
3
0)
days after
any Party has served a written notice on the other Parties requesting the
commencement of consultations, then any Party may submit the dispute to
Hong Kong International
Arbitration Centre (“HKIAC”) for arbitration in accordance with HKIAC rules in
force at the time a particular dispute is submitted for arbitration, which rules
shall be deemed to have been incorporated by reference into this Section
9.10.
The English text of this
Agreement
shall be referred to in
the arbitration, and all proceedings in any such arbitration shall be conducted
in English.
The arbitration award
shall be final, binding
and non-appealable on the
Pa
rt
ies.
The costs of arbitration
shall be borne by the losing Party or Parties unless otherwise determined by the
arbitration award
. When any dispute occurs and when any
dispute is under arbitration, except for the matters under dispute, the Parties
shall continue to exercise their other respective rights and fulfill their other
respective obligations under this Agreement.
Section
9.11
Governing
Language
This
Agreement shall be executed in English and Chinese
,
and the
both versions
shall
have equal validity and legal effect.
Section
9.12
Confidentiality
Each Party
shall not, and shall cause its Affiliates,
shareholders
,
directors, officers, employees, representatives and agents not to, directly or
indirectly, disclose any information relating to the existence or subject matter
of the Transaction Documents (including any information obtained by any such
Party in connection with the negotiation and execution of the Transaction
Documents) unless (a) the prior written consent of the disclosing Party is
obtained or (b) such information is required to be disclosed pursuant to
Applicable Law and then only to the extent necessary to comply with such
Applicable Law; provided that the receiving Party shall give prompt written
notice of its need to disclose such that the disclosing party has, if
practicable under the circumstances, a reasonable opportunity to (i) obtain
protection against disclosure and (ii) comment on the language and content of
the disclosure.
Section
9.13
Severability
Each
provision of this Agreement shall be considered severable and if for any reason
any provision which is not essential to the effectuation of the basic purposes
of this Agreement is determined by a court of competent jurisdiction to be
invalid or unenforceable and contrary to existing or future Applicable Law, such
invalidity shall not impair the operation of or affect those provisions of this
Agreement which are valid. In that case, this Agreement shall be
construed so as to limit any term or provision so as to make it enforceable or
valid within the requirements of any
Execution
copy August 6, 2007
Applicable
Law, and in the event such term or provision cannot be so limited, this
Agreement shall be construed to omit such invalid or unenforceable
provisions.
Section
9.14
Headings,
Internal References
When a
reference is made in this Agreement to Articles, Sections, Schedules or
Exhibits, such reference shall be to an Article, Section, Schedule or Exhibit to
this Agreement unless otherwise indicated. The table of contents,
index of defined terms and headings contained in this Agreement are for
convenience and reference purposes only and shall not be deemed to alter or
affect in any way the meaning or interpretation of any provisions of this
Agreement. The words “hereof”, “herein” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
Section
9.15
Counterparts
This
Agreement may be executed in five (5) originals in both English and Chinese, all
of which shall constitute one and the same instrument, subject always to Section
9.11. Each Party to the Agreement shall keep one original, the others
shall be submitted to the relevant authorities.
[
signature page
follows
]
Execution copy
August 6, 2007
IN WITNESS
WHEREOF, the Parties hereto have caused this Agreement to be executed as of the
Signing Date.
NXP
B.V.
|
|
|
|
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By:
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/s/ Mr. Ajit
Manocha
|
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Name:
|
Mr. Ajit
Manocha
|
Title:
|
Executive Vice
President
|
Nationality:
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American
|
NXP
Semiconductors Suzhou
Ltd.
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By:
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/s/ Mike
Yeh
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Name:
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Mike YEH
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Title:
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Chairman of
Board
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Nationality:
|
Taiwan
|
Name:
|
Mr.
Tien Yue Wu
|
Title:
|
ASE
Group Chief Operating Officer
|
Nationality:
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American
|
Execution copy
August 6, 2007
Exhibit
4(l)
【English
Translation
】
SYNDICATED
LOAN AGREEMENT
BORROWER:
ADVANCED
SEMICONDUCTOR ENGINEERING INC.
AGENT:
CITIBANK,
N.A., TAIPEI BRANCH
AMOUNT:
NT$24,750,000,000
Date:
March 3, 2008
TABLE OF
CONTENTS
ARTICLE
I.
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DEFINITIONS
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II.
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FACILITY
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2.1
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Facility
and Loan Purposes
|
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2.2
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Term
of Facility, Availability Period and Repayment
Availability
Period and Repayment
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2.3
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Drawdown
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2.4
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Repayment,
Reduction and Cancellation
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III.
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LOANS/ADVANCES
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3.1
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Loan
Commitment
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3.2
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Each
Drawdown
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IV.
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INTEREST,
FEES, PAYMENT AND YIELD PROTECTION
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4.1
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Commitment
Fee
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4.2
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Loan
Interest
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4.3
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Others
and Fee Adjustment
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4.4
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Payment
and Default Interest
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4.5
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Cost
Increase, Taxes and Change of Law
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4.6
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Application
of Payments
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4.7
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Facility
Records
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4.8
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Liability
Limitation
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V.
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PARTIES
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5.1
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Several
Obligations of the Banks
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5.2
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Joint
and Several Claims of the Banks
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VI.
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CONDITIONS
PRECEDENT TO DRAWDOWN
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6.1
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Initial
Drawdown
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6.2
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Each
Drawdown
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VII.
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REPRESENTATIONS
AND WARRANTIES
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VIII.
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COVENANTS
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IX.
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DEFAULT
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9.1
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Event
of Default
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9.2
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Determination
of Default
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9.3
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Consequences
of Default
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X.
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ARRANGERS,
AGENT AND BANKS
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XI.
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SET-OFF
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XII.
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EXPENSES
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XIII.
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NOTICES
AND PAYMENTS BY AGENT
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XIV.
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NON-WAIVER
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XV.
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AMENDMENT
AND ASSIGNMENT
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XVI.
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GOVERNING
LAW
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XVII.
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JURISDICTION
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SIGNATURES
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SCHEDULES
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SCHEDULE
I
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THE
BANKS, COMMITMENT AND COMMITMENTS
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SCHEDULE
II
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ACQUISITION
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EXHIBITS
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EXHIBIT
I
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DRAWDOWN
REQUEST
|
EXHIBIT
II
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AGENT
NOTICE TO BANKS
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EXHIBIT
III
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PROMISSORY
NOTE
|
EXHIBIT
IV
|
NOTE
AUTHORIZATION
|
EXHIBIT
V
|
CERTIFICATE
|
EXHIBIT
VI
|
TRANSFER
NOTICE
|
SYNDICATED LOAN
AGREEMENT
THIS SYNDICATED LOAN AGREEMENT
(the "
Agreement
") is made
and entered into as of March 3, 2008 by and among:
|
(1)
|
ADVANCED SEMICONDUCTOR
ENGINEERING INC.
, a company organized and incorporated under the
laws of the Republic of China (the "
ROC
" or “
R.O.C.
”) (the
“
Borrower
”);
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(2)
|
The
banks and banking institutions listed in
SCHEDULE I
attached
hereto (collectively, the "
Banks
" and
severally, a "
Bank
");
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(3)
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CITIBANK, N.A., TAIPEI BRANCH
and THE BANKS IDENTIFIED IN THE SIGNATURE PAGES HEREOF
, acting as
the coordinating arrangers of the Banks hereunder (collectively the "
Arrangers
");
and
|
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(4)
|
CITIBANK, N.A., TAIPEI BRANCH,
acting as the facility agent for the Banks hereunder (the "
Agent
").
|
WITNESSETH:
WHEREAS
, to facilitate the
Borrower’s funding needs in respect of the Acquisition (defined below), the
Borrower has requested the Arrangers to arrange, and the Banks to extend to the
Borrower, a term loan facility in an aggregate principal amount of
NT$24,750,000,000 as more detailed described below (the “
Facility
”);
and
WHEREAS
, subject to the terms
and conditions of this Agreement, the Arrangers have arranged, and the Banks
have agreed to extend to the Borrower, the loan facility so requested by the
Borrower accordingly.
NOW, THEREFORE
, the parties
hereto agree as follows:
ARTICLE
I
.
DEFINITIONS
.
Unless otherwise
defined elsewhere in this Agreement, as used herein, the following terms shall
have
the
meanings set forth below:
1.01
.
“
Total
Commitment
” shall mean the total amount of the Facility which the Banks
commit to provide to the Borrower pursuant to this Agreement in an aggregate
principal amount of NT$24,750,000,000, as may be cancelled or reduced from time
to time pursuant to this Agreement.
1.02
.
“
Commitment
”
shall mean, with respect to each Bank, the amount such Bank commits to provide
to the Borrower, as shown in
SCHEDULE I
hereto, as may be
cancelled or reduced in accordance with the applicable provisions
hereof.
1.03
.
“
ASE Test
”
shall mean ASE Test Limited, a Singapore Subsidiary of the
Borrower.
1.04
.
“
Acquisition
Contract
” shall mean the Scheme Implementation Agreement, dated September
4, 2007, by and between the Borrower and ASE Test together with any amendments
and supplements thereto.
1.05
.
“
Acquisition
”
shall mean acquisition of the ordinary shares of ASE Test by the Borrower
pursuant to the Acquisition Contract by way of a Scheme of Arrangement under
Article 210 of Singapore Company Law, as described in more details in
Schedule II
hereto (the public
announcement made by the Borrower on September 4, 2007).
1.06
.
“
Majority
Banks
” shall mean Banks whose then aggregate outstanding Loans to the
Borrower hereunder exceed 2/3 of the then aggregate outstanding Loans to the
Borrower by all the Banks under this Agreement or, if the Borrower has not drawn
any of the Commitment yet, Banks whose aggregate Commitment exceeds 2/3 of the
Total Commitment under this Agreement.
1.07
.
“
Commitment
Ratio
” shall mean, with respect to each Bank, the ratio of the Commitment
of such Bank hereunder to the Total Commitment, in each case as shown on
Schedule I
hereto.
1.08
.
“
Loan
Commitment
” shall mean the commitment of the Banks to advance Loans to
the Borrower up to its respective Commitment.
1.09
.
“
Business
Day
” shall mean a banking business day in Taipei City, Kaohsiung City,
New York, Singapore and Hong Kong; excluding a half–day Business
Day.
1.10
.
“
Loan
” or
“
Advance
” shall
mean each NTD loan drawn by the Borrower under the Commitment pursuant to the
applicable provisions of this Agreement.
1.11
.
“
Interest
Period
” shall mean, with respect to each Advance, the period commencing
on the Drawdown Date and having a duration 30, 60 or 90 days as elected by the
Borrower in the
Drawdown
Request and each period thereafter commencing on the last day of the then
current Interest Period and having a duration of 30, 60 or 90 days as elected by
the Borrower by written notice to the Agent not later than the date falling two
(2) Business Days prior to the first day of the relevant Interest Period or,
failing such election, 90 days;
provided
, that (i)
the Interest Period commencing prior to any Repayment Date shall end on such
Repayment Date, (ii) if any Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day falls in
another calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day, and (iii) with respect to amounts on which
interest is payable at the Default Interest Rate, the relevant Interest Period
shall be determined by the Agent.
1.12.
“
Reference
Rate
” shall mean, with respect to each Advance, (a) the primary market
commercial paper fixing rate for a tenor equal to (or, if such tenor does not
appear, the tenor which is the next longer tenor than) the tenor of such
Interest Period as shown, in all cases, on Reuters, screen page PRMCP at
approximately 11:30 A.M. on the date falling one (1) Business Day prior to the
first day of such Interest Period (“
Determination Date
”);
or (b) if the rate under (a) above is not available on the Determination Date,
the Reference Rate shall mean the average (rounded upward, if
necessary, to the fourth decimal place, as notified by the Agent, of the fixing
rates for a tenor equal to the tenor of the relevant Interest Period (or if
rates are not being quoted for such tenor the next longer tenor for which rates
are quoted) on the Determination Date by each of China Bills Finance
Corporation, International Bills Finance Corporation and Mega Bills Finance
Corporation; or (c) if the rate under (b) above is not available on the
Determination Date, the Reference Rate shall mean the average of the base rates
of Huan Nan Commercial Bank, First Commercial Bank and Chang Hwa Commercial Bank
(the “
Reference
Banks
”) (“
Reference Banks Base
Rate
”).
1.13
.
“
Interest
Rate
” shall mean, with respect to each Advance, the
per
annum
interest rate
which is calculated by the Agent to be the Reference Rate plus the
Margin. The Interest Rate for each Advance, once determined, shall be
fixed during the same Interest Period thereof and, notwithstanding the change of
the Reference Rate, shall not change until the first day of the next succeeding
Interest Period.
1.14
.
“
Margin
” shall
mean 0.6% p.a. However, if at the beginning of any Interest Period, (a) the
Borrower according to its most recent annual or semi-annual audited consolidated
financial report records a net income ratio (post tax net profit (not including
minority shareholders profit) divided by operating income) (the “Net Income”) of
greater than or equal
to 0% and
less than 5%, then the Margin p.a. will be calculated as 0.5% p.a., or (b) if
the Borrower according to the most recent annual or semi-annual audited
consolidated financial report records a net income ratio greater or equal to 5%,
the Margin p.a. will be calculated as 0.4% p.a. Business tax and
stamp duty on the interest payments are to be borne by the
Borrower.
1.15
.
“
Interest Payment
Date
” shall mean each of the dates on which interest on the Loans under
this Agreement are payable by the Borrower, i.e., the last day of each Interest
Period.
1.16
.
“
Drawdown
Date
” shall mean any date that the Borrower draws the
Commitment pursuant to this Agreement, which shall be a Business Day;
“
Drawdown
”
shall mean the Borrower’s drawing of the Commitment pursuant to this Agreement;
and “
Initial Drawdown
Date
” shall mean the date of the initial Drawdown under this
Agreement.
1.17
.
“
Default
Rate
” shall mean upon the occurrence of a circumstance to which the
Default Rate is applicable pursuant to this Agreement, the per annum interest
rate which is the Reference Banks Base Rate plus 2% p.a. Such rate
shall change accordingly if the Reference Banks Base Rate changes.
1.18
.
“
Subsidiary
” shall
mean a local and/or offshore company with a paid-in capital of not less than
NT$1,300,000,000 or equivalent thereof in any other currency that is 50% owned,
directly and/or directly, by the Borrower.
1.19
.
“
Commitment
Termination Date
” shall mean the date falling 3 months after the date
hereof.
1.20
.
“
Note
”
and “
Note
Authorization
” shall have meanings set forth in Section 8.1
hereto.
1.21
.
“
Event of
Default
” shall mean any event as listed in Section 9.1 hereof; and “
Prospective Event of
Default
” shall mean any event which with the giving of notice or passage
of time or both would become an Event of Default.
ARTICLE II
.
FACILITY.
2.1
.
Facility and Loan
Purposes
.
This
Facility is in an aggregate principal amount of NT$ 24,750,000,000 for purposes
of financing the Borrower’s funding needs to effect the
Acquisition.
2.2
.
Term of Facility,
Availability Period and Repayment
.
The
Facility has a five-year term, commencing on the date hereof (if the day falling
five years after the date hereof is not a Business Day, the Facility shall
expire on preceding
Business
Day thereof);
provided
,
that:
(1)
Each Bank is entitled to an option (the “
Option
”) to terminate
its Commitment in its entirety on the date falling three years after the date
hereof. A Bank that intends to exercise the Option shall serve a
written notice to the Borrower and the Agent no later than the date falling 30
months after the date hereof (the consent of the Borrower, the Agent or any
other Bank shall not be not required). The Option is available for
one time exercise only and shall expire and no longer be available if not
exercised by such date. Following the exercise by the Banks of the
Options or the expiration thereof, the Agent shall notify the Borrower and all
Banks in writing of the remaining Commitment available under the
Agreement.
(2)
The Commitment is not a revolving commitment, but may be drawn in one
or more (but not more than three) installments in accordance with the terms of
this Agreement not later than the Commitment Termination Date. Any
portion of the Commitment that have not been drawn down prior to the Commitment
Termination Date shall be cancelled automatically.
(3)
The Loans shall be repaid in 8 repayment installments semi-annually, starting
from the date falling 18 months after the date hereof (each a “
Repayment Date
”), in
such amount as follows:
|
Date of
Repayment
|
|
|
Ratio
of total
|
|
|
|
|
Advance to be
repaid
|
|
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|
|
|
|
the
date falling 18 months
|
|
|
6.5%
|
|
after
the date hereof
|
|
|
|
|
|
|
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|
|
the
date falling 24 months
|
|
|
6.5%
|
|
after
the date hereof
|
|
|
|
|
|
|
|
|
|
the
date falling 30 months
|
|
|
14.5%
|
|
after
the date hereof
|
|
|
|
|
|
|
|
|
|
the
date falling 36 months
|
|
|
14.5%
|
|
after
the date hereof
|
|
|
|
|
|
|
|
|
|
the
date falling 42 months
|
|
|
14.5%
|
|
after
the date hereof
|
|
|
|
|
|
|
|
|
|
the
date falling 48 months
|
|
|
14.5%
|
|
after
the date hereof
|
|
|
|
|
|
|
|
|
|
the
date falling 54 months
|
|
|
14.5%
|
|
after
the date hereof
|
|
|
|
|
|
|
|
|
|
the
date falling 60 months
|
|
|
14.5%
|
|
after
the date hereof
|
|
|
|
If any
Repayment Date does not fall on a Business Day, such repayment shall take place
on the next preceding Business Day but the repayment schedule shall not
otherwise be affected, and all outstanding Loans and interests thereon shall be
paid in full on the last Repayment Date;
provided
, that if any
Bank exercises the Option to early terminate its Commitment hereunder, all
outstanding Loans and interest in respect of such Commitment shall be paid in
full on the date falling 3 years after the date hereof.
(4)
Except otherwise specified herein, with respect to each Bank’s Commitment
to be reduced as a result of repayment by the Borrower under the Agreement, each
such Commitment shall be reduced on a pro-rata basis in accordance with the
Commitment Ratio. If it is technically impossible for each such
Commitment to be reduced strictly in accordance with the Commitment Ration, the
Agent may determine the actual reduction with respect to each Bank’s Commitment
based on its reasonable judgment, and no objection from the Borrower or any Bank
shall be made. The Borrower may not draw down any Commitment so
reduced.
(5)
The Borrower shall make all necessary payments on such dates and in
such amounts to ensure that the Commitment shall be repaid and reduced in such
amounts and schedules as provided for hereunder.
With
respect to Drawdown, the Borrower shall effect such Drawdown pro-rata to the
Commitment Ratio of each Bank;
provided
, that if it
is technically impossible to have such Drawdown strictly in accordance with the
Commitment Ratio, the Agent may determine the actual allocation amongst the
Banks of such Drawdown amount based on its reasonable judgment, and no objection
from the Borrower or any Bank shall be made.
2.4
.
Repayment, Reduction and
Cancellation
.
2.4.1
.
The Commitment under this Agreement shall be repaid, reduced or cancelled in
accordance with the applicable provisions of this Agreement.
2.4.2
.
Each Bank shall perform its Commitment and obligations under this Agreement to
provide the Loans based on its then valid/available Commitment;
provided
, that a Bank
shall not be required to maintain or perform the Commitment under this Agreement
if it discovers prior to performing such Commitment that the maintenance or
performance of the same will result in its violation of laws or regulations, or
if such Bank is precluded by other applicable laws or regulations from
maintaining or performing such obligations under this Agreement (in which case,
the Bank shall immediately notify the Borrower and Agent). If a Bank
discovers after performing
its
Commitment that its maintenance of the same constitutes or will constitute a
violation of law or regulation on its part, such Bank shall immediately notify
the Borrower and the Agent. The Borrower shall then make repayment
with respect to such Commitment or otherwise resolve to relieve such Bank of the
relevant obligation(s) within 5 Business Days (or a longer period permitted by
laws and regulations for cure) of its receipt of the notice from such Bank, and
such Bank's Commitment shall immediately be cancelled or reduced to the extent
permitted by laws and regulations. If the Bank is responsible for
such violation of laws or regulations mentioned above, such Bank shall make
other arrangements for the Borrower for substitute financing under terms
comparable to those offered by this Agreement. If the above-mentioned
violation of laws or regulations is not attributable to such Bank, such Bank
shall negotiate with the Borrower and use reasonable efforts to, arrange for, or
assist the Borrower in obtaining other financing to the extent permissible by
laws and regulations;
provided
, that
neither the Agent nor any such Bank shall guarantee that such other financing
may be procured.
2.4.3
. The
Borrower may at any time, with not less than 15 days prior written notice,
prepay its outstanding Loans in whole or in part without premium or penalty;
provided that:
(a)
With respect to each such prepayment, the amount to be prepaid shall be in the
minimum amount of NT$500,000,000, and any portion of such prepayment in excess
of NT$500,000,000 shall be in multiples of NT$300,000,000 (unless the entire
outstanding balance of the Borrower’s Loan is less than NT$500,000,000, or the
portion of the Borrower’s outstanding Loan in excess of NT$500,000,000 is not a
multiple of NT$300,000,000, in which case the Borrower must prepay the entire
outstanding balance of its Loan).
(b)
Prepayment may be made only on the last day of an Interest
Period. All sums (principal, interest or fee, if any), payable in
connection with the Loans to be repaid shall be paid in full upon such
prepayment.
(c)
If the Borrower prepays any Loan in violation of the above, the Borrower shall
indemnify the Banks for and against any and all funding costs or losses, if any,
arising therefrom (the Banks making such claims shall provide evidence
therefor).
2.4.4
.
The Commitment, once prepaid, may not be drawn down again. Following
each prepayment, each Bank’s Commitment shall be reduced on a pro-rata
basis, based on the ratio of each Bank's outstanding Loan to the Borrower to the
sum of all the Banks' outstanding Loans to the Borrower. If it is
technically impossible for each Bank’s Commitmnt to be reduced in accordance
with the aforesaid ratio, the Agent may determine the actual allocation of such
reduction of
Commitment
amongst the Banks based on its reasonable judgment, and no objection from the
Borrower or any of the Banks shall be made.
2.4.5
.
The amounts prepaid shall be applied to prepayment of the Loans pro-rata to each
of the remaining Repayment Installments to reduce the amount of each remaining
Repayment Installment (without affecting the schedule and dates of the repayment
hereunder).
2.4.6
.
Unless otherwise provided by this Agreement, no Commitment under this Agreement
may be cancelled absent the prior consent of all the Banks.
2.4.7
. In
cases where a Bank exercises the Option, once the Commitment of such Bank is
repaid in full, such Bank shall no longer be a Bank as defined
herein.
ARTICLE
III
.
LOANS/ADVANCES
.
3.1
.
Loan
Commitment
.
3.1.1
.
Subject to the Borrower having complied with the conditions precedent set out in
this Agreement, the Borrower may, within the availability period and up to the
Total Commitment, drawdown the Loans/Advances pursuant to this
Agreement. Each Drawdown shall be effected pro-rata to the
Commitment Ratio of each Bank.
3.1.2
.
The Commitment is not a revolving commitment but may be drawn in one or more
(but in any event, not more than three) installments.
3.1.3
.
Each Bank agrees to advance the Loans to the Borrower pursuant to the terms and
conditions of this Agreement.
3.1.4
.
Unless otherwise agreed by the Agent, the amount of each Loan to be drawn shall
be in the minimum amount of NT$1,000,000,000;
provided
, unless
otherwise provided by the Agreement, if the balance of the undrawn Commitment is
less than such minimum, the amount to be drawn shall be the then entire balance
of such undrawn Commitment.
3.2
.
Each
Drawdown
.
3.2.1
.
Subject to the Borrower having fully complied with or performed the conditions
precedent to Drawdown as set out in this Agreement, the Borrower may, at any
time, with at least three Business Day prior written notice to the Agent in the
form of
EXHIBIT I
hereto
("
Drawdown
Request
"), request a Drawdown of the Loans in accordance with the terms
and conditions set out in this Agreement. Each Bank shall, upon such
request and to the extent of its respective Commitment, make such Loans to the
Borrower in accordance with its
Commitment
Ratio;
provided
, that its
obligation to make such Loans is subject to the condition that none of the
following circumstances shall have occurred prior to such request for drawdown:
(a) such Drawdown will cause the total Loan outstanding hereunder to exceed the
total available Commitment; (b) the Drawdown will cause the Loan outstanding
with respect to any Bank hereunder to exceed its then available Commitment or to
exceed its Commitment Ratio; (c) the Drawdown Date will be later than the
Commitment Termination Date; or (d) the Drawdown otherwise does not comply with
the terms and conditions of this Agreement.
3.2.2
.
Provided that the conditions described above have been met with respect to the
requested Drawdown, the Agent shall immediately accept the Drawdown Request on
behalf of the Banks. Each Drawdown Request, once accepted by the
Agent, shall be irrevocable and binding on the Borrower. Following
the acceptance of such Drawdown Request, if the Borrower is unable to satisfy
the conditions precedent to drawdown as specified in Section VI hereof,
resulting in the Banks unable to advance in whole or in part the requested
drawdown, the Borrower shall, at the demand of the Agent, reimburse the Banks
for all reasonable and necessary expenses and direct losses (the Banks making
such claims shall provide evidence therefor) in connection
therewith.
3.2.3
.
Upon its receipt by fax of a Drawdown Request from the Borrower, the Agent shall
notify each Bank in writing (in form of
Exhibit II
hereto), stating
the date on which each Bank is to make available its Loan and the amount to be
advanced by each Bank in accordance with its respective Commitment
Ratio. Each Bank shall, pursuant to such notice and this Agreement,
make available such Loans in immediately available funds not later than 12:00
noon time on the Drawdown Date as specified in the Drawdown Request and to the
account designated by the Agent. Unless notified prior to the
Drawdown Date, the Agent may assume that each Bank is capable of advancing
payment pursuant to this Agreement and, on the basis of such assumption, may
(but is not obligated to) timely make available the funds to the Borrower,
unless the Agent has received a written notice from any of the Banks prior to
the Drawdown Date stating that such Bank is unable to make such
Advance. Notwithstanding the above, the Agent is under no obligation
to make available or advance any sum to the Borrower on behalf of the Banks
unless and until the Agent actually receives the funds made available by the
Banks pursuant to this Agreement. If the Agent makes available to the
Borrower the funds required under the Agreement to be advanced by any Bank, and
such Bank shall fail to actually make available to the Agent such funds, the
Borrower shall at any time, upon the Agent's demand, refund such funds to the
Agent together with interest thereon, which interest shall be based on the
highest interest rate for overnight funding as shown on the PIBC page of Reuters
Screen (“
PIBC
Overnight Rate
”), calculated for the period from the Drawdown Date to
the date
of the Agent's actual receipt of the refunds thereof (the Agent shall issue to
the Borrower receipt for any such interest payment).
3.2.4
.
Failure by any Bank to make available its Advance pursuant to this Agreement
shall not relieve other Banks of their obligations to make Advances pursuant to
this Agreement and shall not relieve the Borrower of its obligations under this
Agreement. The Banks or the Agent shall not be liable for the failure
of any other Bank to make the required Advances. Any Bank which fails
to make such Advances shall reimburse and indemnify the Borrower for and against
(a) any and all overnight interest paid to the Agent and (b) any loss or
additional funding cost incurred by the Borrower arising therefrom (subject to
relevant supporting documents or evidence presented by the Borrower to
substantiate its claim).
ARTICLE
IV
.
INTEREST, FEES, PAYMENT AND
YIELD PROTECTION
.
4.1
.
Commitment
Fee
. No Commitment fee is payable in respect of this
Facility.
4.2
.
Loan
Interest
.
4.2.1
.
The Borrower shall pay the Agent interest on the Loan outstanding in NT Dollars
at the applicable Interest Rate, calculated on the basis of a 365-day year and
the actual number of days elapsed. The applicable Interest Rate for
each Interest Period, once determined, shall be fixed and shall not change until
the first day of the next Interest Period (i.e., the Interest Rate will not
change during the same Interest Period). The Borrower shall pay all
such interest to the Agent, on each Interest Payment Date, for distribution by
the Agent to the Banks pursuant to the applicable provisions of this
Agreement.
4.2.2
.
The Agent shall calculate interest at the applicable Interest Rate periodically
and notify the Borrower in written notice of such interest at least three
Business Days prior to the relevant Interest Payment Date. The
Borrower shall make such interest payments to the Agent in immediately available
funds in NT Dollars on each Interest Payment Date, for distribution by the Agent
to the Banks.
4.2.3
.
The business tax and stamp duty (“
GBRT
”) arising out of
the above interest payments shall be grossed up and borne by the
Borrower.
4.2.4
.
The business tax under the VAT and non-VAT Tax Regulation is 2%, however in
accordance with related provisions of the regulation, banks also need to set
aside 3% of its revenue to allow for overdue debt and offset bad debt; therefore
under this agreement, the business tax to be borne
and paid
by the Borrower is 5%. In the event the business tax
rate changes, the changed rate will be utilized; however the Borrower will
still bear the full costs for the provision for bad debt. If the
Banks’ overdue loan ratio decreases and no longer need to provide the 3%
provision for bad debt, the Banks should notify the Agent. Upon
receipt of such notice, at the next payment period, the Agent should calculate
business tax at the rate of 2%. The Agent, however is not obligated
to verify the Banks’ business tax and may continue to calculate the business tax
at 5%.
4.3
.
Others and Fee
Adjustment
.
4.3.1
The Borrower shall pay the Arrangers and the Agent fees for the Arrangers'
formation of the Banks and the Agent's management of affairs pertaining to this
Agreement. The terms and conditions of such payment will be
separately agreed upon in writing between the Borrower and the
Agent.
4.3.2
If the Borrower records changes in its net income ratio according to its most
recent consolidated financial statements required to be delivered to the Agent
and the Banks, resulting in decreases in its Margin p.a., the Borrower shall
inform the Agent in writing of such decrease, and the Agent will in turn notify
the Banks. If the Banks do not dispute the accuracy of such changes
in Borrower’s net income ratio to the Agent within five days of receipt of
notice, the Margin p.a. of the Loans under the Facility, starting from the next
Interest Payment Period shall be decreased accordingly. However, if
subsequently, the Borrower’s net income ratio changes again, resulting in
increases in its Margin p.a., the Borrower or the Banks should inform the Agent
in writing, and the Agent will in turn notify the Banks and the Borrower. If the
Borrower and the Banks do not dispute the accuracy of such changes in Borrower’s
net income ratio to the Agent within five days of receipt of notice, the Margin
p.a. of the Loan under the Facility, starting at the next Interest Payment
Period shall be increased accordingly. The calculation of the net
income ratio should be based on the most recent consolidated financial
statements submitted by the Borrower in accordance with the provisions of this
Agreement.
4.4
.
Payment
Terms and Default Interest
.
4.4.1
.
The Borrower shall pay to the Agent in accordance with applicable provisions of
this Agreement, all sums (such as principal, interests or fees) which it is
required to pay by this Agreement or related documents, in immediately available
funds and in NT Dollars before 1:00 pm (Taipei time) on the due
date.
4.4.2
.
Any sum payable hereunder may be paid on the next Business Day if the due date
thereof is not a Business Day, unless such Business Day falls in another
calendar month, in which case the payment shall be made on the Business
Day
immediately
preceding the due day.
4.4.3
. If
any of the payments required under this Agreement is not paid when due, the
Borrower shall immediate cure such nonpayment pursuant to the Agreement, and pay
interests thereon to the Banks and/or the Agent at the Default Rate, calculated
on the basis of a 365-day year and the actual number of days elapsed, for the
period from the due date to the date of actual receipt by the Banks and/or the
Agent of such payment. If any such nonpayment pertains to interest
payments, a penalty equal to 10% of the overdue nonpayment shall be levied
against the Borrower for the first 6 months, and a penalty equal to 20% of the
overdue amount shall be levied against the Borrower if such nonpayment remains
outstanding for more than six months.
4.4.4
.
All payments to the Banks from the Borrower under this Agreement shall be paid
to the Agent for its distribution to the Banks. Payments made
directly to the Banks by the Borrower will not relieve Borrower of its
obligations under the Agreement. Save for payments payable solely to
the Arrangers or the Agent, the Agent shall, upon its receipt from the Borrower
of payments due to the Banks, distribute and forward such payments to each Bank
for repayment. Each Bank, the Arrangers and the Agent shall issue and
deliver a receipt directly to the Borrower for payment received.
4.5
.
Cost Increase, Taxes
and Change of Law
.
4.5.1
. In
the event of a change in laws or regulations or the interpretations by the
competent authorities thereof, or a request by the relevant authority, which
result in: (a) the Banks having to pay taxes for transactions hereunder, or a
change in the rate or bases of the taxes payable by the Borrower to the Banks
pursuant to this Agreement (except for changes in the mandatory tax rate imposed
on the net income of the Banks by the R.O.C. government or the jurisdiction of
the incorporation of the Banks), (b) an increase or change in application of any
reserve, special deposit or similar regulations with respect to the Facility, or
(c) an increase in the costs for the Banks to perform or maintain Commitments
hereunder, or a decrease in the amounts otherwise receivable by the Banks under
this Agreement, and to the extent deemed material by the Majority Banks, the
Borrower shall, upon demand of the Banks, pay such additional sums to the Banks
as indemnity for the increase in costs or decease in revenue to the
Banks. The impact of the above change of law shall be determined
based upon the relevant documentary evidence so presented by the affected
Bank(s).
4.5.2
.
Unless otherwise expressly provided by this Agreement, any and all other present
and future taxes and fees payable or arising from this Agreement or this
Facility shall be borne by the Borrower. If any Bank or the Agent
pay(s) such taxes on the Borrower’s behalf, the Borrower shall reimburse such
amount
immediately upon demand, otherwise, the Borrower shall also pay interest at the
Default Rate (on a floating rate basis) on such sums for the period from the
date such Bank or the Agent makes such payment to the date the Borrower actually
makes such reimbursement in full.
4.5.3
.
The Borrower shall neither make any withholdings or deductions on any payment
which is payable under this Agreement, nor offset any payment payable by it
against its indebtedness with any Bank. If the Borrower shall be
required by law to make any such withholding or deduction from any payment under
this Agreement, the sum payable by the Borrower shall be increased so that after
all required withholdings or deductions, (including additional withholdings or
deductions in response to the increase in the sum paid hereunder), the Banks,
the Agent and/or the Arrangers will receive an amount equal to the sum they
would have received had no such withholdings or deductions been made, and the
Borrower shall provide the original (or copy certified by the Borrower) of the
evidence for such payment to the Banks, the Agent and/or the Arrangers within 30
days after such payment.
4.5.4
.
Unless otherwise expressly provided by this Agreement, any and all other present
and future taxes and fees payable or arising from the execution or registration
of this Agreement or other related documents shall be borne by the
Borrower. If any Bank or the Agent pay(s) such taxes on the
Borrower’s behalf, the Borrower shall reimburse such amount upon demand,
otherwise, the Borrower shall also pay interest at the Default Rate (on floating
rate basis) on such sums for the period from the date such Bank or the Agent
makes such payment to the date the Borrower actually makes such reimbursement in
full.
4.6
.
Application of
Payments
.
4.6.1
.
All sums received by the Agent under this Agreement and all other related
documents shall be applied in the following order of priority: (a) first, to all
expenses and fees payable to or incurred by the Agent under this Agreement and
all other related documents, and which are not reimbursed or paid by the
Borrower or any Bank (including the agency fee payable to the Agent); (b) then
to all outstanding fees and interests (including penalties or default interests
payable at the Default Rate) payable by the Borrower to the Agent and the Banks
under this Agreement; and (c) then to the distributions by the Agent to each
Bank pursuant to the provisions of this Agreement (or in the absence of an
express agreement, at the discretion of the Agent), in accordance with the ratio
of each Bank's outstanding Loan under the Facility to the sum of all the Banks'
outstanding Loans under the Facility (the “Risk Sharing Ratio”).
4.6.2
.
Unless otherwise provided for in this Agreement, the Agent shall forward to the
Banks all sums received from the Borrower and payable to the Banks, upon its
actual receipt of
such sums,
for the Banks to apply towards the indebtedness due from the Borrower to the
Banks in the order of priority prescribed by this Agreement or laws and
regulations. In the event that the sums actually received by the
Agent are insufficient to pay all sums in a specific category to the relevant
Banks in the same order of priority, the Agent shall distribute such sums to
each Bank on a pro-rata basis in accordance with the Risk Sharing
Ratio.
4.7
.
Facility
Records
. The Agent shall maintain records relevant to the
Facility and shall document the Drawdowns of the Commitment by the Borrower and
the payments made by the Borrower to each Bank. Details of the
outstanding sums due from the Borrower under this Agreement shall be evidenced
by such records, unless the Borrower can present specific evidence of manifest
errors in such records. The Borrower further agrees to issue such new
negotiable instruments or certificate of claims to the Agent according to the
Agent's records if any negotiable instrument or certificate of claims provided
by the Borrower to the Agent pursuant to the Agreement is lost, damaged or
destroyed, and the Borrower shall at all times unconditionally cooperate with
the Agent in the event the Agent is required by laws or regulations to report
loss and/or proceed with other relevant formalities due to the loss, damage or
destruction of any negotiable instrument or other certificate of
claims. In respect of the Agent’s payment to each Bank, so long as
the fund is remitted by the Agent to the bank account designated by each Bank in
accordance with this Agreement, the Agent shall have no further obligation with
respect to such payment.
4.8
.
Liability
Limitation
. Notwithstanding any provision herein, absent
willful misconduct or gross negligence, no Bank or any of its employees or
affiliates shall be liable to the Borrower under this Agreement; and under no
circumstances would any of them be liable for any indirect damages, loss of
profit or punitive damages.
ARTICLE
V
.
PARTIES
.
5.1
.
Several
Obligations of the Banks
. The commitments to lend and relevant
obligations of the Banks under this Agreement are separate and
independent. Each Bank shall perform its own Commitment to extend the
Loans in accordance with this Agreement. No action or inaction on the
part of any Bank will result in any right or obligation on the part of another
Bank. The Banks are not jointly liable with one another for the
obligations under this Agreement.
5.2
.
Joint and Several
Claims of the Banks
.
5.2.1
.
Notwithstanding the separate and independent obligations of the Banks to perform
their respective Commitment hereunder, all rights and claims of the Banks and
the Agent under this
Agreement
and the related documents against the Borrower are joint and several claims
under Article 283 of the ROC Civil Code. Each of the Banks and the
Agent are entitled by law to claim performance in whole or in part of the above
rights and claims against the Borrower;
provided
, that all
the Banks and the Agent hereby agree to share their rights and interests
hereunder, and all their rights and claims under this Agreement shall be
exercised in accordance with the applicable provisions of this
Agreement. Specifically, except for exercise of the set-off right as
provided for in this Agreement, absent the written concurrence of the Majority
Banks, no Bank may take any action with respect to any matter under this
Agreement or take any action or inaction that conflicts or is inconsistent with
the decisions of the Majority Banks.
5.2.2
.
All of the Borrower, the Banks and the Agent agree that the Agent shall be the
payee of the Notes issued by the Borrower pursuant to this Agreement, and if the
Borrower subsequently grants security interests in relation to this Facility or
purchases insurance for the collaterals under such security interests, the Agent
shall be the holder of such security interests or beneficiary of such insurance,
as applicable, and the Agent shall act in its capacity as a joint and several
creditor with respect to these interests pursuant to this
Agreement. All such rights and interest shall be held and exercised
by the Agent in accordance with this Agreement for the benefits of all the Banks
and the Agent hereunder.
5.2.3
.
Each of the Banks and the Agent shall, pursuant to this Agreement, share the
risks as well as the interests and benefits under this Facility, in accordance
the Risk Sharing Ratio.
ARTICLE
VI
.
CONDITIONS PRECEDENT TO
DRAWDOWN
.
6.1
.
Initial
Drawdown
. The Borrower’s initial Drawdown of the Facility
under this Agreement is subject to the conditions precedent that, at least three
Business Days (at 10:00 am) prior to the requested date for such Drawdown, the
Agent shall have received all of the following documents in form and substance
satisfactory to the Agent (in this regard, photocopies presented must have been
certified by the document provider as true, accurate and complete
copies):
(1)
Evidence, including, without limitation, resolutions and minutes of board of
directors' meetings, that the Borrower has completed all necessary internal
corporate acts and is duly authorized to enter into, deliver and perform the
Acquisition Contract, this Agreement and other related documents, as well as
evidence that the person(s) signing this Agreement and other related documents
on behalf of the Borrower have been duly authorized by the
Borrower;
(2)
Copies of the corporate documents of the Borrower, including the Articles of
Incorporation, business license, company registration card (including roster of
directors and supervisors), and I.D of the Chairman of the
Borrower;
(3)
The Note and Note Authorization issued by the Borrower in accordance with this
Agreement;
(4)
A copy of the Acquisition Contract;
(5)
Evidence that ASE Test has been duly authorized by its shareholders and board of
directors to enter into the Acquisition Contract and to proceed with the
Acquisition;
(6)
The applications submitted by the Borrower to the competent authority of
Singapore law in respect of the Acquisition in accordance with applicable
Singapore;
(7)
Copies of the various government approvals, reportings and/or filings required
for the Acquisition, including:
(a)
Copies of the ROC Investment Commission approval letter in respect of the
Borrower’s investment in ASE Test and the Acquisition;
(b)
Approval of the Singapore competent authority (court) in respect of the
Borrower’s and ASE Test’s effecting the Acquisition in accordance with the
Acquisition Contract and applicable Singapore laws; and
(c)
Evidence that the Borrower and ASE Test have submitted all such reports and
filings to the Securities and Exchange Commission of the United Stated (the
“SEC”) as required under applicable U.S. laws and have obtained the consent of
the SEC;
(8)
Evidence that the Borrower does have sufficient funds (including the Loans to be
extended under this Facility) to effect the entire payments of the
Acquisition;
(9)
All third party consents (if any) in respect of the Acquisition have been
obtained;
(10)
Evidence that all conditions for closing of the Acquisition, except for the
Borrower’s payments, have been met;
(11)
Favorable written legal opinions of the Banks' counsel on ROC law related
matters under this Facility; and
(12)
Such other documents or evidences as may be reasonably required by the Agent in
advance.
6.2
.
Each
Drawdown
. With respect to each Drawdown (including the Initial
Drawdown) of the Facility by the Borrower, the
obligations
of the Banks to perform their Commitments pursuant to this Agreement are also
subject to the following conditions precedent:
(1)
The Agent shall have received, on or before at least 3 Business Days (at 10:00
am) prior to the requested date for each such Drawdown, the Drawdown Request
duly executed by the Borrower; and
(2)
As of each Drawdown Date, no event which restricts or prevents proceeding of the
Acquisition has occurred.
ARTICLE
VII
.
REPRESENTATIONS
AND WARRANTIES
.
The Borrower
hereby represents and warrants as follows:
7.1
.
The Borrower is a duly incorporated and legally existing company under the laws
of the ROC with all lawful power and authority to own its assets and conduct its
business.
7.2
. The
Borrower has obtained all necessary authorizations in accordance with all its
internal procedures to effect the Acquisition and to execute, deliver and
perform the Acquisition Contract, this Agreement, the Note and all other
documents relevant to this Agreement, as well as to borrow the
Loans.
7.3
.
The Acquisition and the execution, delivery and performance by the Borrower of
the Acquisition Contract, this Agreement, the Note and all other relevant
documents will not violate any law or regulation, its articles of
incorporation or other internal rules and guidelines, will have no
material adverse effect on the obligations of the Borrower under any other
contract, and will not result in any breach by the Borrower under any other
contract.
7.4
.
The Acquisition Contract, this Agreement, the Note and all other relevant
documents each constitutes a legal, valid and binding obligations of the
Borrower.
7.5
.
The Borrower has procured all approvals, permits, licenses required (a)
for the Acquisition and (b) for the operation of its current business pursuant
to the applicable laws and regulations, and such approvals, permits, licenses
all continue to be in force and effect and nothing has occurred which may result
in a revocation or cancellation of the above approvals, permits, licenses by the
competent authority. Further, with respect to the Acquisition, except
for those approvals or consents of the competent authorities of the R.O.C.,
Singapore and the U.S.A. (which have been obtained and remain current and
valid), it is not necessary for the Borrower to obtain any consent from any
third party.
7.6
.
The Borrower has sufficient capital and operation ability to conduct its
business, with assets more than its
total
liabilities and is capable of performing all its obligations on a timely
basis.
7.7
.
All statements and information in connection with the Acquisition, the Borrower
and major shareholders of the Borrower as contained in the Information
Memorandum (“IM”) furnished by the Borrower to the Arrangers in September 2007
with respect to the Facility (a copy of which was forwarded by the Arrangers to
each Bank) appropriately reflect the Borrower’s condition. The
Borrower has not omitted any material fact relating to the Acquisition, the
Borrower or the Facility;
provided
, that the
Borrower’s financial projections and explanations, investment plan, current
market condition and prospects and all relevant opinions, are made on the basis
of facts as understood by the Borrower and in reasonable judgment of the
Borrower.
7.8
.
Except as disclosed in writing to the Arrangers and the Banks prior to the
execution hereof, there is no suit, litigious or non-litigious proceeding,
arbitration, enforcement, administrative dispute proceeding or other dispute
(including but not limited to environmental, pollution, waste disposal or
security exchange, etc.) involving the Borrower which (a) is reasonably expected
to have or will have a material adverse effect on the Acquisition, or on the
financial business operation or prospect of the Borrower or of the Borrower and
its Subsidiaries as a whole, or (b) may impair the exercise or performance of
any rights or obligations by the Borrower under the Acquisition Contract or this
Agreement.
7.9
.
(a) There is no violation of law by the Borrower and no Event of Default has
occurred, (b) neither the Acquisition, this Agreement nor the Facility will
result in an Event of Default or Prospective Event of Default, (c) the Borrower
is not in default of any other contract where such default may affect the
Acquisition or this Facility, and (d) there is no other event which may have a
material adverse effect on the Acquisition, this Facility or the financial
business operation or prospect of the Borrower.
7.10
.
There is no petition by or against the Borrower for windup, dissolution
and liquidation, bankruptcy, corporate reorganization, relief or other similar
legal proceeding; nor is any of the above-mentioned proceedings underway or
pending with respect to the Borrower.
7.11
.
Unless otherwise disclosed by the Borrower in the financial statements furnished
to the Agent, or otherwise disclosed by the Borrower to the Banks and Agent in
writing prior to the execution of this Agreement, the claims of each Bank
against the Borrower under this Agreement rank at least
pari
passu
in priority of payment with all claims of any other person against the Borrower
(except for claims mandatorily preferred by law).
7.12
.
The audited financial statements of the Borrower as at and for the period ended
June 30, 2007, are correct in all material respects and have been prepared in
accordance with generally accepted accounting principles in the ROC and fairly
present the financial condition and operations of the Borrower as of the date
thereof and for the period then ended. Except for those which have
been otherwise disclosed to the Banks and the Agent in writing, there are no
material liabilities, direct or indirect, fixed or contingent, of the Borrower
as of the date of such financial statements that are not reflected therein or in
the footnotes thereto. Since the date of such financial statements, there has
been no material adverse change in the business operations, management, business
prospects or condition (financial or otherwise) of the Borrower or of the
Borrower and its Subsidiaries as a whole.
7.13
.
All written information delivered to the Agent, the Arrangers and the
Banks pursuant to this Agreement are true, complete and correct; and at such
time the written information was so delivered there were no material mistake or
omission which may negatively impact the Agent, or the Banks.
7.14
.
The foregoing representations and warranties of the Borrower will be true,
accurate and complete throughout the term of this Agreement.
ARTICLE
VIII
.
COVENANTS
.
In addition to
other undertakings made under this Agreement, the Borrower undertakes and agrees
that, as of the date of this Agreement and until such time that all of its
liabilities and obligations under this Agreement and all other relevant
documents have been fully discharged and performed, it shall duly perform the
following obligations:
8.1
.
After execution of this Agreement and prior to the Initial Drawdown, the
Borrower shall issue and deliver to the Agent a Note in an amount of the Total
Commitment payable to the Agent (in the form and substance of
EXHIBIT III
hereto) and a Note
Authorization (in the form and substance of
EXHIBIT IV
hereto). The Borrower hereby unconditionally and irrevocably
authorizes the Agent, subject to occurrence of an Event of Default, to insert
the maturity date, interest rate (being the Default Rate) and the commencement
date of the interest period of such Note in accordance with relevant provisions
of this Agreement and to exercise all rights under the Note. With
respect to the Note (and any Note issued in substitution therefor), the Borrower
shall, on or before the date falling 2 years from the date of issuance thereof,
issue and deliver to the Agent another Note identical in all substantive
respects with the existing Note (save that the face amount may be reduced in
accordance with the then Total Commitment) to replace the existing
Note. The Agent and the Banks agree that the Note and the Note
Authorization held by the Agent shall be immediately and unconditionally
returned to
the
Borrower upon discharge of the Borrower’s obligations hereunder in
full.
8.2
.
The Borrower shall at all times: (a) maintain the existence, nature of business
and scope of business of its company or other reasonable extended business
within the scope of this Agreement, and maintain all approvals, licenses and
permits necessary or desirable for the conduct of its business and operations or
the ownership of its properties (including but not limited to environmental,
pollution, waste disposal or security exchange, etc.) and for the timely
performance of this Agreement; (b) conduct its business in a regular manner; (c)
comply with all laws, regulations and requirements issued by all
government authorities with jurisdiction over such matters; (d) keep and
maintain proper books and records; and (e) pay and discharge all
taxes, assessments and governmental charges or levies imposed
upon it, its income, profits or properties.
8.3
.
The Borrower shall ensure at all times that the Agent’s and the Banks’ claims
against the Borrower under this Agreement shall rank at least
pari
passu
in priority of
payment with all unsecured claims of any other person against the Borrower
(except for those preferred by operation of law or those required during the
ordinary course of business).
8.4
.
In the event of any of the following, the Borrower shall promptly notify
the Agent in writing thereof and inform the Agent the measures that it has
adopted: (a) any substantive or material change to the Borrower’s
business operations, (b) any material change to the major
shareholders, directors, supervisors (excluding replacement of proxies appointed
by corporate shareholders), major management, financial conditions or major
assets of the Borrower; (c) occurrence of any Event of Default or Prospective
Event of Default; or (d) occurrence of any other event which could affect this
Facility, the Borrower’s creditworthiness or ability to perform.
8.5
.
During the term of this Facility and until such time that the Borrower has
completely discharged all its liabilities under this Agreement, the Borrower
shall not, without prior written consent of the Majority Banks (which consent
shall not be unreasonably withheld): (a) except for those asset transfers or
disposals between the Borrower and its Subsidiaries on an arms length basis,
sell, lease, transfer or otherwise dispose of its business or assets in amounts
equal to 20% or more of its then total assets, whether in a single transaction
or on an aggregate basis; (b) make any material change to the scope or nature of
its business; (c) conduct any transaction which is not at arms length basis; (d)
create, incur, increase or suffer or permit to exist any security interest or
encumbrances in favor of any third party on any of its currently exiting and/or
future assets or revenue, except for (A) security interests which are existing
and have been
disclosed
to the Agent and the Banks in writing prior to the date hereof or security
interests required to be provided during the ordinary course of business, (B)
security interests over any future machinery acquired pursuant to a government
sponsored program after the date hereof in favor of banks securing the financing
of the purchase price or cost thereof; (e) except for those provided in
accordance with its articles of incorporation or other internal rules governing
the extension of loans, provide loans to any other parties; or (f) enter into
liquidation or dissolution.
8.6
.
During the term of this Facility, the Borrower shall not, without prior written
consent of the Majority Banks, (a) enter into any merger or consolidation with
others, (b) effecting any spin-off or capital reduction, (c) except for the
Acquisition, commencing from the date hereof, make any investment in any other
companies in an accumulative aggregate amount of more than NT$10, 000,000,000,
or (d) acquire material assets of any other companies;
provided
, that no
Majority Banks consent shall be required for the following: (i) investment in
any Subsidiary existing prior to the date hereof, (ii) entering into a merger
under which the Borrower is the surviving entity, (iii) merger or consolidation
with its Subsidiary(ies), or (iv) effecting a spin-off under which the assignee
of the assets is a Subsidiary and would not cause a violation to Section 8.5 (a)
hererof; so long as any of the above shall not cause any material adverse impact
on the Borrower’s business operation, financial condition or ability to perform
hererunder.
8.7
.
The Borrower shall from time to time upon request by the Agent provide
information, records and documents in respect of the Acquisition Contract, this
Agreement and its ability to perform same, to the extent it does not interfere
with the normal operations of the Borrower, and shall permit the representatives
or agents of the Agent to enter the premises of the Borrower to review (or make
copies or extracts of) the various accounts, records or documents that are
relevant to the Borrower’s ability to perform under the Acquisition Contract,
this Agreement or other related agreements. To the extent deemed to
be necessary by the Majority Banks, the Agent may retain outside persons to
conduct such inspection provided that such persons shall be subject to
confidentiality obligations.
8.8
.
(a) Throughout the term hereof, within 30
days after the end of each first and third fiscal quarter of the Borrower, the
Borrower shall provide to the Agent and the Banks with
copies of its quarterly report for such quarter, prepared and reviewed on an
unconsolidated (and consolidated, if available) basis, including therein its
balance sheet as of the end of such fiscal quarter, statement of its
income and cash flow statement. Each of such reports shall be
prepared by the Borrower, reviewed by a creditable independent public accounting
firm in accordance with applicable generally accepted audit standards, and the
information
contained therein shall also be presented in accordance with applicable
generally accepted accounting principles consistently applied.
(b)
Throughout the term hereof, within 90 calendar days after the end of each first
fiscal half-year of the Borrower, the Borrower shall provide to the Agent and
the Banks with copies of its semi-annual report (including footnotes) for such
half-year, prepared on an audited consolidated and unconsolidated basis,
including therein its balance sheet as of the end of such fiscal half-year,
balance sheet, statement of its income and cash flow statement. Each
of such audited reports shall be prepared and certified by a creditable
independent public accounting firm in accordance with applicable generally
accepted audit standards and the information contained therein shall be
presented in accordance with applicable generally accepted accounting principles
consistently applied.
(c)
Throughout the term hereof, within 120 calendar days after the end of each
fiscal year of the Borrower, the Borrower shall provide to the Agent and the
Banks copies of its annual report (including footnotes) for such year, prepared
on an audited consolidated and unconsolidated basis, including therein its
balance sheet as of the end of such fiscal year, statement of its income,
statement of changes in shareholders' equity and cash flow
statement. Each of such audited reports shall be prepared and
certified by a creditable independent public accounting firm in accordance with
applicable generally accepted audit standards and the information contained
therein shall be presented in accordance with applicable generally accepted
accounting principles consistently applied.
(d)
Each of the annual and semi-annual financial statements provided by the Borrower
in accordance with the above shall be accompanied by a certificate (in the form
of
EXHIBIT V
hereto),
stating and certifying that no breach to relevant financial ratios under this
Agreement has occurred.
(e)
At the request of the Agent from time to time, the Borrower shall provide all
relevant information relating to the finances, business, operations, major
shareholder structure and assets of the Borrower to the Agent. Upon
providing the various financial statements, the Borrower shall provide
sufficient copies to enable the Agent to distribute a copy to each
Bank. The Borrower hereby authorize the Agent to provide each Bank
with the various financial statements and information provided by the
Borrower.
(f)
The Borrower shall ensure that the contents of the financial statements prepared
by the Borrower are in compliance with the laws of the ROC and generally
accepted accounting principles, and that the substantive contents of the
documents and information relating to the Borrower are true, correct and
complete in all material respects.
8.9
.
The Borrower shall, commencing from the date hereof and throughout the term
hereof, maintain the following financial ratios (to be tested semi-annually
based on the annual audited and semi-annual audited consolidated financial
statements):
(a)
Its ratio of Current Assets to Current Liabilities shall not be less than
100%.
(b) Its
ratio of Total Liabilities to Tangible Net Worth shall not exceed
150%.
(c) Its
Interest Coverage Ratio shall not be less than 280%. For purposes
hereof,
Interest
Coverage Ratio
=
Pre-tax Income + Interest
Expense + Depreciation + Amortization
Interest
Expense
(d) Its
Tangible Net Worth shall not be less than NT$45,000,000,000.
For
purposes of the calculation above, “
Tangible Net Worth”
shall mean shareholders equity plus minority shareholdings minus intangible
assets (such as patents, trade names); “
Total Liabilities
”
shall mean Total Debts including Contingent Liabilities but excluding minority
shareholdings; and “
Contingent
Liabilities
” shall mean the outstanding obligations in respect of
endorsements guarantees provided by the Borrower. In addition,
unless otherwise expressly specified herein, all accounting terms
used herein shall be defined in accordance with the ROC generally accepted
accounting principles.
8.10
.
The Borrower shall keep its general properties and business insured with
financially sound and reputable insurance companies in the manner and with such
coverage and amount to the extent customary for companies of a size comparable
to it engaging in businesses of a like character.
8.11
.
Commencing from the completion of the Acquisition, the Borrower shall ensure
that, at any time during the term hereof, the Borrower shall from time to time
and at all times maintain at least 51% of the total shareholding of ASE Test and
the effective control over the management of ASE Test.
8.12
.
All proceeds of the Loans under this Facility shall be used for the purposes as
specified in this Agreement and shall not be used for any other purpose;
provided
, that
neither the Agent nor the Banks shall have any obligation to monitor the
Borrower’s actual application thereof.
8.13
. The
Borrower does not enjoy any right of sovereign immunity or privilege from any
judgment, attachment or other
legal
procedures and hereby agrees to waive the same even if it were entitled to any
of such right.
8.14
. All
representations and warranties made by the Borrower in this Agreement shall
remain correct, true and complete throughout the term hereof.
ARTICLE
IX
.
DEFAULT
.
9.1
.
Event of
Default
. The occurrence of any of the following shall
constitute an Event of Default under this Agreement:
(1) The
Borrower shall fail to make any payment, when due, of principal or interest
under this Agreement or make any other payment due to any Bank, any Arranger or
the Agent under this Agreement or any other related agreement (regardless of
whether or not such payment becomes due by acceleration or
otherwise).
(2) The
Borrower shall fail to perform or violate any condition, covenant, undertaking
or obligation towards any Bank, any Arranger or the Agent stipulated under this
Agreement, or performance of any such condition, undertaking, covenant or
obligation hereunder shall become invalid or illegal, and such default is not
cured within 14 days after the occurrence thereof.
(3) (a)
The Borrower or any Subsidiary, whether as a primary obligor or a guarantor,
shall default in making payment of any sums under any other agreement (with any
Bank, any Arranger, the Agent or any third party); or (b) there shall occur any
event which accelerates or permits acceleration of the maturity of any debt
obligations of the Borrower or any Subsidiary with any such creditors in an
accumulated amount of NT$350,000,000 or more.
(4) Any
representation or warranty made by the Borrower under this Agreement
is found to be false or untrue when made or is reasonably deemed by the Majority
Banks as having become false or untrue.
(5) The
Borrower shall cease doing business as an ongoing concern; admit in writing its
inability to pay its debts as they become due; file a petition in bankruptcy (or
has any such petition filed against it); be adjudicated bankrupt
or insolvent; file a petition (or has any such petition filed against
it) seeking any reorganization, composition, liquidation, dissolution, delisting
of shares of stock, suspension of trading or similar arrangement under any
statute, law or regulation for the relief of debts; file an answer admitting the
material allegations of a petition filed against it in any such proceeding; and
cause material adverse changes to its financial conditions.
(6)
The Borrower shall fail to maintain any of the financial ratios stipulated in
Section 8.9 hereof.
(7) The
Borrower or any Subsidiary shall fail to pay any tax in accordance with
applicable laws and regulation, causing material impact on it business operation
or financial condition, except if the Borrower or such Subsidiary has filed a
petition therefor in accordance with applicable laws and
regulations.
(8) The
Borrower shall fail to provide such financial, business or accounting
information as may be requested by the Agent pursuant to this Agreement, or
shall fail to cooperate in respect to the review or inspection of records by the
Agent as requested.
(9) The
Borrower or any Subsidiary shall cease its operations permanently or is ordered
to cease its operations permanently, or its checks are dishonored, or has been
blacklisted by the bills clearing house, which could adversely affect its
ability to perform hereunder.
(10)
Any government consent, licenses or approval required in connection with the
operations of the Borrower or any Subsidiary is revoked or becomes expired which
could adversely affect its ability to perform hereunder.
(11)
Any agreement, conversant, undertaking or obligation of the Borrower hereunder
may become invalid or unenforceable which could adversely affect its ability to
perform hereunder.
(12)
Any government or governmental authority shall nationalize, take custody or
control over or otherwise expropriate all or a substantial part of the property
or assets of the Borrower or any Subsidiary which, in the reasonable judgment of
the Majority Banks, will cause material adverse impact on the operation of the
Borrower or any Subsidiary.
(13)
Any attachment, compulsory execution, disposal restriction or similar legal
process shall be initiated against any assets of the Borrower or any Subsidiary,
which will cause material impact on its business operation of financial
condition and is not discharged within 14 days upon occurrence
thereof.
(14)
Any final judgement is rendered against the Borrower or any Subsidiary and the
Borrower or such Subsidiary shall fail to pay the same accordingly.
(15)
The Borrower or any Subsidiary is subject to any material litigation,
arbitration, or other disputes, or is subject to any ruling or order issued by
the court or competent authority against it which could adversely affect its
ability to perform hereunder.
(16)
There occurs a material adverse change in the business operations, financial
condition or ability to perform of the Borrower or of the Borrower and the
Subsidiaries as a whole, or any material adverse change in the major
shareholding or assets structure of the Borrower, which in the professional
judgment of the Majority Banks, gives reasonable grounds for belief that the
Borrower’s ability to perform the obligations hereunder or under any related
agreement would be affected.
9.2
.
Determination of
Default
. In the event of any dispute between the Banks and the
Borrower or amongst the individual Banks, as to whether an Event of Default has
occurred, any disputing party may request the Agent in writing to seek
clarification from the Banks and obtain the determination of the Majority
Banks.
9.3
.
Consequences of
Default
.
9.3.1
. Where
an Event of Default has occurred, the Commitments shall immediately be
suspended, and may not be further utilized unless otherwise permitted by the
Majority Banks (at which time the Agent shall notify the
Borrowers). Should the Majority Banks decide to take actions and so
instruct the Agent in writing, the Agent shall, upon the instruction of the
Majority Banks, (a) by written notice to the Borrower,
declare the
entire unpaid principal amount of all the outstanding Loans, all unpaid
interest, fees and all other sums payable hereunder to be immediately due and
payable, whereupon the Borrower shall immediately repay such amounts; and/or (b)
present the Note for payment; and/or (c) take all such other actions as may be
permitted by law or contract. Demand, protest or notice of any kind,
other than the notice specifically required by this Section, are hereby waived
by the Borrower to the extent permitted by law.
9.3.2
. Where
an Event of Default occurs, the Borrower shall also make payment of interest to
the Banks and/or the Agent in respect of any amounts due and outstanding,
calculated from the date that such amounts becomes due until such time that the
amounts are actually paid; and if any Bank and/or the Agent incurs any other
costs or direct losses as a result of such default, the Borrower shall also
indemnify such Bank and/or Agent for and against such costs or losses (such Bank
or Agent shall provide relevant evidence). Unless otherwise provided
herein, the Borrower shall not be liable to the Bank or its employees or
affiliates for any indirect damages, loss of profit or punitive
damages.
9.3.3
. The
costs and expenses incurred by the Agent in relation to the exercise of the
various rights and actions taken pursuant to the Agreement shall be shared by
the Banks on a pro-rata basis (by the Risk Sharing Ratio), except where such
costs have been paid by the Borrower. If the Borrower fails to pay
such costs or expenses, the Agent is not obliged to make
such
payments, and may require the Banks to advance such payments in accordance with
the Risk Sharing Ratio.
ARTICLE
X
.
AGENT, ARRANGERS AND
BANKS
.
10.1
. Each
Bank hereby appoints the Agent to act as agent hereunder and irrevocably
authorizes the Agent to take such action on its behalf under the provisions of
this Agreement and any other agreements and instruments referred to herein and
therein. In performing its functions and duties hereunder, the Agent
shall act solely on behalf of the Banks and not in the capacity as trustee of
the Banks or the Borrower or in the capacity as agent of the Borrower. The Agent
(a) shall have no duties or responsibilities except those expressly set forth in
this Agreement; (b) shall not be responsible to the Banks for any failure by the
Borrowers or any other person to perform any of its obligations under this
Agreement or any other document referred to herein; (c) shall not be required to
initiate or conduct any litigation or collection proceedings hereunder; and (d)
shall not be required to take any action that the Agent deems in good faith to
be contrary to any applicable law. The Agent may employ agents,
consultants and accountants and shall not be responsible for the negligence or
misconduct of any such person selected by the Agent in good faith save for its
gross negligence or willful misconduct in such selection.
10.2
. Each
Bank acknowledges and agrees that it shall independently assess, inspect and be
responsible for the credit worthiness or records of the Borrower and other
relevant information. Relevant risks applicable to each Bank as a
result of making available the Loans shall be independently borne by such
Bank. The Agent and the Arrangers do not make any representations or
warranties regarding, and shall not be responsible for, the credit worthiness,
ability to perform of the Borrower or any other matters relating to this
Agreement.
10.3
. The
Agent may not take any action that is contrary to the written instructions of
the Majority Banks, and shall take the legal actions in accordance with this
Agreement, based on the written instructions of the Majority
Banks. Except as instructed in writing by Majority Banks, the Agent
may refuse to take any actions. The Agent may, but is not obligated
to, seek approval of the Majority Banks for actions taken by it pursuant to the
Agreement. Absent willful misconduct or gross negligence, the Agent
shall not be responsible in any way to the Borrower or any Bank in respect of
actions taken in accordance with the written instructions of the Majority Banks,
or actions subsequently approved by the Majority Banks. Unless the
Majority Banks have issued a written instruction to the Agent to take a specific
action, the Agent shall not be held responsible in any way for failing to take
such action. Irrespective of any other provisions to the contrary in
this
Agreement,
the Agent may refuse to take any action on behalf of the Banks if the legitimacy
of the instructions from the Banks are in doubt or until it has received
confirmation that it will be satisfactorily reimbursed for the related
costs. In addition, except for exercising the set-off right
hereunder, no Bank may take any action individually without the written consent
of the Majority Banks, nor take any action or make any omission that would
conflict or be inconsistent with the decisions of the Majority Banks (decisions
made by the Majority Banks pursuant to relevant provisions of this Agreement
shall be binding on all of the Banks).
10.4
. The
Agent shall handle matters relating to this Agreement (including but not limited
to obtaining the Reference Rate) in accordance with the provisions of this
Agreement, and shall handle matters relating to the Commitment and exercise the
rights under this Agreement in accordance with relevant provisions of this
Agreement. In handling such matters, the Agent shall act in
accordance with the provisions of this Agreement and/or the written instructions
of the Majority Banks, and may (but is not obliged to) exercise the same degree
of care as if it were handling facilities granted by the Agent
alone.
10.5
. In
respect of documents submitted to the Agent by the Banks and the Borrower in
accordance with this Agreement, the Agent shall verify the signatures and chops
in accordance with normal procedures, but is not required to further examine the
contents or any other aspect of such documents. In executing matters
in relation to this Agreement, the Agent may rely on the validity, authenticity
and correctness of the signatures and contents of relevant documents received
and may rely on the advice received from its legal counsel. The Agent
shall not be liable for any actions taken based on such reliance. In
addition, in making remittances to the Banks, the Agent may rely upon the
correctness of the addresses and remittance accounts stipulated in respect of
each Bank in
SCHEDULE I
of this Agreement.
10.6
. In
handling matters relating to the Commitment (such as advance, repayment,
reduction, etc.), the Agent shall allocate the Commitment in accordance with the
proportions stipulated in this Agreement;
provided
, that where
actual calculations do not permit allocation to be made in such a manner/ratio,
the Agent may use its reasonable judgment in making the allocation, and no Bank
shall raise any objection thereto.
10.7
. Unless
otherwise stipulated in this Agreement, communications by the Agent in relation
to this Agreement may be carried out by fax, and the Agent may rely upon the
authenticity and correctness of the contents of the faxed documents it
receives. The Agent shall not be responsible in any way for the
disruption or delay of any transmissions or receptions of communication (by
telephone, fax or courier) or for any defect, error or consequences in the
transmission or
reception
process, except where such is caused by the willful misconduct or gross
negligence of the Agent.
10.8
. Upon
receiving any notices from the Borrower, the Agent shall notify each of the
Banks. Except for notices, reports, financial statements and other
documents required to be delivered by the Agent to each of the Banks under this
Agreement, the Agent is not obliged to provide the Banks with any other
information in its possession concerning the credit record, general business and
financial status of the Borrower.
10.9
. During
the term of this Agreement, the Agent, the Arrangers or any of the Banks may
enter into other transactions unrelated to the Facility with the Borrower in
capacities other than as the Agent, an Arranger or a Bank. Such transactions
shall not be affected by the Agreement.
10.10
. The
Agent may notify the Borrower and each of the Banks in writing at any time that
it shall resign from the position of the Agent (as soon as a new Agent takes
office). The Majority Banks are also entitled to replace the Agent at
any time. Upon the resignation or replacement of an Agent, the
Majority Banks are entitled to elect a new Agent. If within 30 days
after the resignation of the Agent or the replacement of the Agent by the
Majority Banks, the Majority Banks fails to elect a new Agent or the newly
elected Agent does not agree to take the office, the original resigning Agent
may select a financial institution as its successor. If the successor is not
successfully selected by the Agent during another 30-day period, the Agent may
still resign. During such period (before the successor agent in
selected), all the Banks shall jointly perform the duties of the Agent until the
successor agent is selected, but if the Majority Banks resolve to exercise the
rights under the Note during such period, the Agent shall perform relevant acts
in accordance with this Agreement. The resigning Agent may continue
to collect any sums falling due but uncollected during the period of its office
and this provision shall remain applicable to any acts taken by the resigning
Agent prior to its duties being terminated.
10.11
. All
the payments received by the Agent from the Borrower for the common interest of
the Banks and payments from the Banks to be distributed to the Borrower, shall
after being applied for payment of various fees and expenses in accordance with
this Agreement, be distributed or allocated in accordance with this Agreement
(for payments to be distributed amongst the Banks, the distribution shall be
made in accordance with the Risk Sharing Ratio), and shall deliver such payments
to each Bank by the Business Day following actual receipt
thereof. The Agent’s obligation to distribute the said payments shall
be limited to the amounts that it actually receives, and the Agent is not
obliged to advance any amounts therefor. The Agent may assume that
the relevant persons with obligation to pay will make the relevant payments to
the Agent in accordance with the Agreement, and may (but is not
obliged
to)
distribute or pay such amounts to each of the Banks on the basis of such
assumption and in the aforementioned manner. However, where the Agent
relies on such assumption in making the payment, but subsequently finds that it
has not actually received the relevant payment, the Bank or the Borrower which
receives the said amount from the Agent shall refund the payment immediately
upon receiving the notice from the Agent, and shall pay interest to the Agent
from the date that it receives the payment and until the date that refund is
actually made to the Agent, calculated at the PIBC overnight Rate.
10.12
. Unless
the Agent has received the notice from any Bank or the Borrower concerning the
occurrence of an Event of Default, which notice expressly states that it is a
“notice of Event of Default”, the Agent shall not be deemed to have known or has
been informed as to the occurrence of an Event of Default. Upon
receiving the said notice, the Agent shall notify each of the Banks as soon as
possible.
10.13
. The
Agent shall be treated as an independent business unit of Citibank,
N.A. Any notice to be sent to the Agent shall not be deemed duly sent
if it were sent to other business department of Citibank N.A.
10.14
. Any
damage, if any, caused to the Borrower as a result of any act or omission to act
of a Bank shall be the responsibility of that relevant Bank, and the Arrangers,
the Agent or any other Banks shall not be responsible therefor.
10.15
. In
the event of any damage or loss to the Agent or a Bank in the course of
performance of this Agreement by the Borrower or its agent or employee, as a
result of causes attributable to the Borrower or its agent or employee, the
Borrower shall be liable for full indemnification against such damage or
loss.
10.16
. Unless
otherwise provided hereunder, in respect of their performance hereunder, neither
the Agent nor its agents or employees shall be held liable in whatever respect
to the Banks except for those as a result of its willful misconduct or gross
negligence.
10.17.
The
Agent may outsource the matters to be handled by it under this Agreement to
others in accordance with applicable laws and regulation.
ARTICLE
XI
.
SET-OFF
.
11.1
. In
the event that the Borrower fails to perform its obligations under this
Agreement or any other relevant agreement in connection with the Facility, each
of the Banks and the Agent, in addition to exercising the various rights of
claim under this Agreement, shall also be entitled to (but are
not
obliged to) offset any sums in accounts (irrespective of whether such sum is of
the same currency and, in case of different currencies, such Bank or the Agent
may convert same to the same currency as the Borrower’s obligations hereunder)
held by the Borrower at the said Banks or the Agent (including their
headquarters and all branches) and all claims of the Borrower against the Bank
or the Agent, against the obligations of the Borrower to the Banks and/or the
Agent under this Agreement (the Borrowers further agrees that such accounts or
other claims shall be deemed to mature automatically upon such time that the
offset is exercised by the relevant Bank or the Agent). Where an
account held by the Borrower is a time deposit account, the relevant Bank or the
Agent may directly terminate the time deposit account agreement prematurely and
offset funds in the said account against the obligations under this Agreement,
notwithstanding that the deposit term has not expired; where such an account is
a checking account, the Borrower agrees that an announcement by the Banks of the
acceleration of the obligations under this Facility shall be a condition for
termination of the checking account agreements and upon such announcement, the
checking account agreement shall cease to be effective, and the Banks or the
Agent may directly exercise its right of offset and notify the Borrower
thereof. To the greatest extent permitted by law, the exercise of
such setoff right shall be deemed to take effect at the time that such offset is
recorded on the books of the relevant Bank. Where the offset amount
is insufficient to satisfy the full amount of the outstanding obligations of the
Borrower hereunder, the Borrower shall remain liable for repaying the
insufficiency thereof.
11.2
. In
order to maintain the pro-rata repayments to each Bank, where any payments
received by a Bank in respect of the Facility (whether as a result of voluntary
or involuntary offset or otherwise) exceeds the pro-rata amount due to that Bank
in accordance with this Agreement, such Bank shall (a) forward such sums to the
Agent for distribution to all Banks in accordance with this Agreement or (b) if
necessary and to the extent required by law, purchase from the other Banks a
right of claim equivalent to the amount of the excess, so that such Bank may, in
substance, share with the other Banks the proceeds of the additional
repayment. However, if the benefiting Bank is subsequently required
to return all or part of such repayment, the aforementioned purchase of claim
shall be unwind immediately, and the consideration paid for such purchase shall
also be refunded without interest. The Borrower further agrees that
the Banks may exercise all rights (including the right of offset), in the same
manner as for other rights hereunder, in respect of the claims so
purchased.
11.3
. If
any other creditor of the Borrower effects a compulsory execution against any
account of the Borrower with a Bank or the Agent, and the executing court issues
an attachment order, collection order, or transfer order to the
Bank or
the Agent in respect of such account, the said Bank or the Agent shall be
entitled to declare that the Borrower’s obligations under this Agreement in an
amount equal to the amount of such deposit to be subject to compulsory execution
shall become due and payable immediately, and to offset same against such
deposit in the account;
provided
, that so
long as such attachment shall not constitute an Event of Default, the
availability of the Commitment shall not be affected.
ARTICLE
XII
.
EXPENSES
.
12.1
. All
reasonable legal costs and other costs and expenses incurred by the Arrangers in
arranging for the Banks and preparing this Agreement, or any other related
documents, as well as costs and expenses to be incurred for any subsequent
amendments or modification to this Agreement, shall be borne by the
Borrower.
12.2
. All
reasonable fees and legal costs incurred by a Bank and/or the Agent arising from
occurrence of an Event of Default in exercising the rights under this Agreement
and other relevant agreements, shall be borne by the Borrower.
12.3
. If
the Borrower fails to pay the costs and expenses in accordance with this
Agreement, the Agent has no obligation to advance same and may require each of
the Banks to advance same in accordance with the Risk Sharing Ratio (or if the
Borrower has not yet made any Drawdown at such time, in accordance with the
Commitment Ratio), and the Agent may take the relevant action only upon receipt
of such payments in full from the Banks. If the Agent has advanced
such payment, the Banks shall reimburse the Agent immediately upon demand, and
if any Bank fails to make such reimbursement timely, the Agent may directly
deduct such payment against sums to be paid to the Banks under this
Agreement. The Banks reimbursement obligations hereunder shall not be
affected by any assignment of such Bank’s right or obligation hereunder, and to
the extent such payment is not paid, the assignee bank shall assume same
accordingly.
12.4
. Neither
the Banks, the Arrangers nor the Agent is obliged to advance any payment(s) on
behalf of the Borrower. However, if a Bank, an Arranger or the Agent
has done so, the Borrower shall reimburse them for same immediately upon demand,
failing which interest at the Default Rate (on a floating rate basis) shall be
payable on such payment commencing from the date of advance by the Bank(s), the
Arranger(s) or the Agent until such reimbursement is actually made by the
Borrower.
ARTICLE
XIII
.
NOTICES AND PAYMENTS BY
AGENT
.
13.1
. Notices
made under this Agreement shall be made in
writing
(by letter or fax) in accordance with relevant provisions of this Agreement; in
addition: (a) notices made to the Borrower or the Agent shall be delivered to
the address or fax number set out below in this Agreement (or such other address
or fax number subsequently notified in writing); (b) notices made to a Bank
shall be delivered to the address or fax number of the relevant Bank as set out
in
SCHEDULE I
of this
Agreement (or such other address or fax number subsequently notified); (c)
monies payable by the Borrower/the Agent to the Agent/the Banks under this
Agreement, if made by electronic transfer, shall be remitted to the relevant
Banks/the Agent by the inter-bank remittance system to the account detailed in
SCHEDULE I
of this
Agreement or detailed below (or such other account subsequently notified in
writing). Notices delivered in person shall be deemed duly delivered
when so delivered; notices sent by prepaid registered post shall be deemed duly
delivered five (5) days after posting; notices sent by fax shall be confirmed by
delivering written confirmations and such notices shall be deemed delivered when
the written confirmations thereto have been received:
(a)
|
To
Borrower:
|
ADVANCED SEMICONDUCTOR
ENGINEERING INC.
|
|
|
|
|
Address:
|
_________________________________________
|
|
|
_________________________________________
|
|
|
_________________________________________
|
|
TEL
No:
|
_____________________________
|
|
Fax
No:
|
_____________________________
|
|
Contact:
|
_____________________________
|
|
A/C
Name:
|
_____________________________
|
|
A/C
No.:
|
_____________________________
|
(b)
|
To
Agent:
|
CITIBANK, N.A., TAIPEI
BRANCH
|
|
|
|
|
Address:
|
_________________________________________
|
|
|
_________________________________________
|
|
|
_________________________________________
|
|
TEL
No:
|
_____________________________
|
|
Fax
No:
|
_____________________________
|
|
Contact:
|
_____________________________
|
13.2
. Any
party that changes its address, telephone number, fax number or remittance
account shall immediately notify the Agent and other parties under this
Agreement in writing. In the absence of such notice, the change shall
not be binding as against the Agent or the other parties of this
Agreement.
ARTICLE
XIV
.
NON-WAIVER
.
The rights and
remedies of the Agent, the Arrangers and the Banks under this Agreement and the
related agreements shall be in addition to, and not exclusive of, any rights or
remedies which the Agent, any Arranger or any Bank has under the law, and no
delay by the
Agent, any
Arranger or any Bank in exercising any power, privilege or right shall operate
as a waiver thereof, nor shall any single or partial exercise of any power,
privilege or right preclude other or further exercise thereof or the exercise of
any other power, privilege or right.
ARTICLE
XV
.
AMENDMENT AND
ASSIGNMENT
.
15.1
.
An amendment or modification to this Agreement shall be made in writing and
shall be agreed to by the Borrower, the Arrangers, the Agent and the
Banks;
provided
, that,
amendments relating to those matters which are not directly related to the
Borrower shall require only the consent of the Agent and the Majority Banks and
shall be made in writing without the consent of the Borrower (although the
Borrower shall be notified of such amendment in writing).
15.2
. The
Banks, the Arrangers and the Agent agree that: for those matters
otherwise provided for in this Agreement, or those matters which have been
expressly stipulated hereunder, the relevant provisions or stipulations will
apply separate such provisions or stipulations, as well as all matters
relating to: (a) amendment to the validity period, availability or Commitment
Termination Date of this Facility, (b) amendment to the amount, the interest/fee
rate or due date of a payment, (c) increase of the Total Commitment under this
Agreement, (d) amendment to the definition of “Majority”, (e) amendment to
Sections 15.1, 15.2 or 15.3 of this Agreement, or (f) the removal of all or part
of the financial ratios (not including the amendments thereof) which shall be
subject to the written consent of all of the Banks, all other amendments or
modifications to the Agreement, waiver of an Event of Default, or modification
to other matters relating to this Agreement may be amended, waived or revised
based on the written consent of the Majority Banks (a decision by the Majority
Banks in accordance with such provision shall be binding on all of the Banks and
the Arrangers).
15.3
. In
respect of a waiver, amendment or modification to be made by the written consent
of all of the Banks or the Majority Banks, each of the Banks, the Arrangers and
the Agent hereby agree and unconditionally authorize the Agent to execute the
relevant documents, for and on behalf of all of the Banks, the Arrangers and the
Agent, in accordance with the written consent of all of the Banks or the
Majority Banks, as applicable (acts of the Agent in accordance with this
provision shall be binding on all of the Banks and the Arrangers).
15.4
. This
Agreement shall be binding on the assignees or successors of each party to this
Agreement, or any other person who assumes or succeeds to the rights or
obligations of such party according to law;
provided
, that the
Borrower may not assign its rights or obligations under this Agreement without
the prior written consent of the Agent and all of the Banks.
15.5
. A
Bank may at any time with notice to (but without the consent of) the Borrower,
the Agent or any other Bank change its lending office for this Facility, and
may, by no less than 5 Business Days prior written notice (in form of
EXHIBIT VI
hereto) to the
Agent and the Borrower, assign or transfer its rights and/or obligations
hereunder without the consent of the Agent or any other Banks;
provided
, that except
as agreed by the Borrower or after occurrence of an event under Section 9.3 of
this Agreement, (a) such shall not cause any additional cost to the Borrower and
(b) the assignee shall agree in writing to the Agent to be bound by this
Agreement. In respect of each such assignment, the Bank proposing to
assign its rights and/or obligations shall pay (or cause the assignee to pay)
the Agent a processing fee of NT$50,000 for each assignment.
15.6
. A
Bank may enter into a risk participation agreement with other person(s) in
respect of its claim under this Agreement, without being required to notify the
Borrower the Agent or any other Bank;
provided
, that such
other party may not assert any right of claim against the Borrower or any other
party under this Agreement.
15.7
. In
addition to disclosure of information according to relevant laws and
regulations, the Agent and the Bank may from time to time provide contents of
this Agreement, or information held by it concerning the Borrower or the parties
related to this Agreement, to its head office, parent, affiliate or an assignee
of the rights under this Facility or a person sharing the risks (including
potential assignee or participant), the Joint Credit Information Center, a
credit assessment institution, a trustee for asset securitization program, a
credit rating institution, or other institutions that provides outsourcing
services to the Agent or the Banks without consent of the Borrowers or the
relevant parties.
15.8
. Compliance
with applicable “know your customer” anti-money laundering laws and regulations
(collectively, “
AML
Compliance
”) is the responsibility of each Bank, and the Agent shall not
be responsible for any Bank's AML Compliance. The Borrower shall
promptly upon the request of the Agent or any Bank supply such documentation and
other evidence as is reasonably requested by the Agent or any Bank in
order for the Agent, such Bank or any prospective assignee or sub participant to
carry out and be satisfied with the results of all AML Compliance or other
checks in relation to any person that it is required (under any applicable law
or regulation) to carry out in respect of the transactions contemplated
hereby. The Agent and the Banks may disclose to any relevant tax
authority the information or materials of the Borrower in respect of this
Agreement or make any other necessary disclosure after giving notice to the
Borrower.
15.9
. The
Borrower acknowledges that communications made by
the Agent
may be made by email, fax or other electronic means which may not be secure or
reliable. The Agent will not be liable to the Borrower for any such
security or reliability issues. Also, the Agent may, if it deems
necessary to do so, monitor, record or retain communications between the Agent
and the Borrower.
15.10
. Each
Bank shall inform the Agent of any merger or change of its name or organization
structure and, if required by the Agent, shall provide the Agent such legal
opinion acceptable to the Agent to prove that its legal capacity
remain unchanged. Otherwise, the Bank shall, upon request by Agent,
execute and deliver to the Agent, at its own costs, such assignment document
transferring rights and obligations to the entity surviving the name change,
reorganization or merger.
15.11
. The
Borrower agrees that, each of the Banks may outsource the debt collection with
respect to this Facility to a third party in accordance with “Rules Governing
the Internal Operational System and Procedures for Outsourcing Services By the
Financial Institutions” promulgated by the competent authority and other
relevant laws and regulations.
ARTICLE
XVI
.
GOVERNING
LAW
. This Agreement shall be governed by the laws of the
ROC. Any matters not fully stipulated within this Agreement shall be
in accordance with relevant laws of the ROC.
ARTICLE
XVII
.
JURISDICTION
.
All of the
parties hereto agree that with respect to litigation in connection with this
Agreement, the Taipei District Court of Taiwan shall have jurisdiction as the
court in the first instance;
provided
, that this
article does not preclude any rights of the Agent or the Banks to undertake any
other legal proceedings against the Borrower in any other courts or any other
jurisdiction in pursuit of repayment.
BORROWER:
|
ADVANCED
SEMICONDUCTOR ENGINEERING INC.
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER,
AGENT
|
CITIBANK,
N.A., TAIPEI BRANCH
|
|
&
BANK:
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK:
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK
:
|
CATHY
UNITED BANK
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK
:
|
CHINATRUST
COMMERCIAL BANK, LTD.
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK
:
|
DBS
BANK LTD., TAIPEI BRANCH
|
|
|
|
|
|
|
By:
|
|
|
ARRANGER
&
BANK
:
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK
:
|
THE
HONGKONG AND SHANGHAI BANKING CORPORATION LTD., TAIPEI
BRANCH
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK
:
|
HUA
NAN COMMERCIAL BANK
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK:
|
ING
BANK N.V., TAIPEI BRANCH
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK:
|
KBC
BANK N.V TAIWAN, KAOHSIUNG BRANCH
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK:
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK:
|
MEGA
INTERNATIONAL COMMERCIAL BANK
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK:
|
SUMITOMO
MITSUI BANKING CORPORATION, TAIPEI BRANCH
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
&
BANK:
|
TAIPEI
FUBON COMMERCIAL BANK CO., LTD.
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAIWAN
COOPERATIVE BANK
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHANG
HWA COMMERCIAL BANK
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
TAISHIN
INTERNATIONAL BANK LTD.
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OVERSEA
CHINESE BANKING CORPORATION LIMITED, TAIPEI BRANCH
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
E.
SUN COMMERCIAL BANK
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
MIZUHO
CORPORATE BANK LTD., KAOHSIUNG BRANCH
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAIWAN
BUSINESS BANK
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
UNITED
OVERSEAS BANK, TAIPEI BRANCH
|
|
|
|
|
|
|
By:
|
|
|
THE BANKS, COMMITMENT
AND COMMITMENTS
|
SCHEDULE
I
|
SYNDICATE BANKS
|
|
|
|
PROPORTIONAL COMMITMENTS
|
|
|
|
|
|
|
|
|
|
|
CITIBANK,
N.A., TAIPEI BRANCH
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALYON,
TAIPEI BRANCH
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CATHAY
UNITED BANK
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHINATRUST
COMMERCIAL BANK, LTD.
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DBS
BANK LTD., TAIPEI BRANCH
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
COMMERCIAL BANK
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE
HONGKONG AND SHANGHAI BANKING
|
|
NT$1,300,000,000
|
|
|
CORPORATION
LTD., TAIPEI BRANCH
|
|
|
|
|
HUA
NAN COMMERCIAL BANK
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ING
BANK N.V., TAIPEI BRANCH
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KBC
BANK N.V TAIWAN, KAOHSIUNG BRANCH
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LAND
BANK OF TAIWAN
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEGA
INTERNATIONAL COMMERCIAL BANK
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUMITOMO
MITSUI BANKING CORPORATION,
|
|
NT$1,300,000,000
|
|
|
TAIPEI
BRANCH
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAIPEI
FUBON COMMERCIAL BANK CO., LTD.
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK
OF TAIWAN
|
|
NT$1,300,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAIWAN
COOPERATIVE BANK
|
|
NT$1,300,000,000
|
|
|
CHANG
HWA COMMERCIAL BANK
|
|
NT$750,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAISHIN
INTERNATIONAL BANK LTD.
|
|
NT$750,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OVERSEA
CHINESE BANKING
|
|
NT$650,000,000
|
|
|
CORPORATION
LIMITED,
TAIPEI
BRANCH
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E.
SUN COMMERCIAL BANK
|
|
NT$450,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MIZUHO
CORPORATE BANK LTD.,
|
|
NT$450,000,000
|
|
|
KAOHSIUNG
BRANCH
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAIWAN
BUSINESS BANK
|
|
NT$450,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED
OVERSEAS BANK,
TAIPEI
BRANCH
|
|
NT$450,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Commitment:
|
|
|
|
|
SCHEDULE
II
Acquisition
-
translation omitted -
-
SCHEDULE II -
EXHIBIT
I
Drawdown
Request/Loan Application
-translation
omitted-
EXHIBIT
I-1
Borrower
Notice to Agent
-translation
omitted-
EXHIBIT
II
Agent
Notice to Banks
-translation
omitted-
EXHIBIT
III
PROMISSORY
NOTE
Issuing Date:
____________
Payable In: Taipei,
Taiwan
Amount:
NT$24,750,000,000
FOR VALUE
RECEIVED, the undersigned hereby unconditionally promises to pay to the order of
Citibank, N.A., Taipei Branch on _____________________ at the office of
Citibank, N.A., Taipei Branch in Taipei, Taiwan, ____________New Taiwan Dollars
(NT$24,750,000,000) and interest thereon from _______________ to the date of
actual payment hereon at the rate of _______% per annum.
Demand,
protest and/or other notice of any kind being hereby expressly
waived.
MAKER:
ADVANCED
SEMICONDUCTOR ENGINEERING INC.
EXHIBIT
IV
NOTE
AUTHORIZATION
To:
CITIBANK,
N.A., TAIPEI BRANCH
(the
"Agent")
Date:
______________
With regard to the
Syndicated Loan Agreement dated [ ], 2008
(the "Loan Agreement"), entered into by and among the undersigned as borrower
and the banks named therein (the “Banks”), under which you act as the Agent, the
undersigned has delivered or will deliver to the Agent a promissory note issued
by the undersigned in favor of the Agent in accordance with the Loan Agreement
(the “Note”) as evidence of the undersigne’s obligations to the Banks under the
Loan Agreement.
The
undersigned agrees that, the Agent shall have the right to exercise the various
rights under the Note delivered by the undersigned according to the Loan
Agreement and any note hereafter delivered to the Agent in replacement thereof
or substitution therefor (the "Replacement Note") for the benefit of the Agent
and all the Banks in the capacity of a joint and several creditor in the manner
contemplated by the Loan Agreement, including but not limited to presentation
for payment.
The
undersigned hereby expressly and irrevocably authorizes the Agent and any of the
Agent’s agent or employees, with full rights of substitution, at any time after
the occurrence of an Event of Default as defined in the Loan Agreement and in
the discretion of the Agent, to fill in the maturity date, the date from which
interest thereon is to accrue and interest rate (based on the Default Rate
provided for in the Loan Agreement) on the Note or Replacement
Note.
The
undersigned acknowledges and agrees that any action taken by the Agent pursuant
to this Authorization shall be absolutely binding on the
undersigned.
This
authorization is irrevocable and may not be limited in any manner
whatsoever. This authorization shall remain effective until the date
that all sums owing to or which shall
become
owing to the Banks under the Loan Agreement have been fully paid.
The
undersigned (maker):
ADVANCED
SEMICONDUCTOR ENGINEERING INC.
EXHIBIT
V
CERTIFICATE
-translation
omitted-
EXHIBIT
VI
TRANSFER
NOTICE
(
SAMPLE
)
TO:
ADVANCED
SEMICONDUCTOR
ENGINEERING
INC. (the “Borrower”)
CITIBANK, N.A.,
TAIPEI BRANCH
(the
“Agent”)
|
Subject:
|
Syndicated
Loan Agreement dated as of ________, 2008 (the "Loan Agreement"), entered
into by and among the Borrower, the Agent and the Banks for the facility
in an aggregate amount of NT$
________________.
|
Explanation:
1.
|
*
【
__________
and _____________ are Banks as defined in and under the Loan
Agreement
】
【
________
is a Bank as defined in and under the Loan Agreement but __________ is not
the original Bank as defined to and under the Loan Agreement
】
.
|
2.
|
Pursuant
to an assignment agreement, dated ____________, entered into by and
between _______________ and _______________, _______________ has assigned
to _______________, and _______________ has agreed to assume from
_______________, a portion of its Commitment in the amount of
_______________ as well as the rights and obligations in connection
therewith. Such assignment has become effective as of
___________.
|
3.
|
After
and as a result of such assignment, the Commitments of _______________ and
_______________ shall become as
follows:
|
|
(1)
|
_______________:
in an aggregate principal amount of
_________.
|
|
(2)
|
_______________:
in an aggregate principal amount of
_________.
|
4.
|
All
notices to be made to __________ in relation to the aforementioned
Facility and Loan Agreement shall, in accordance with Article _____ of the
Loan Agreement, be delivered to the address or fax number of ________ as
set out below and all funds payable to __________ shall, by the inter-bank
remittance system, be remitted to the account number of __________ listed
below.
|
【
Full
Name of the Assignee Bank
】
Address:
TEL
No:
Fax
No:
Contact:
Account
No:
5.
|
We
hereby notify you pursuant to Section ____ of the Loan
Agreement.
|
|
Authorized
Signatory:
|
|
|
|
|
|
|
Authorized
Signatory:
|
|
|
|
|
|
Date:
|
|
*
*
*
*
*
*
*
*
* *
Confirm
receipt of the aforementioned Notice.
Borrowers:
ADVANCED SEMICONDUCTOR ENGINEERING INC.
Agent:
CITIBANK,
N.A., TAIPEI BRANCH
Date:
___________________
(
*
choose applicable one)
(
*
adjust the content according to the situation)
Exhibit
4(m)
EQUITY
PURCHASE AGREEMENT
between
Aimhigh
Global Corp.
TCC
STEEL
and
J&R
Holding Limited
in
respect of
Weihai
Aimhigh Electronic Co. Ltd.
2008.3.17
TABLE
OF CONTENTS
1.
|
PARTIES
|
2
|
|
|
|
2.
|
INTERPRETATION
|
3
|
|
|
|
3.
|
EQUITY TRANSFER
|
5
|
|
|
|
4.
|
EQUITY PURCHASE PRICE, TIME AND FORM OF
PAYMENT
|
6
|
|
|
|
5.
|
THE PARTIES' OBLIGATION
|
7
|
|
|
|
6.
|
REPRESENTATIONS, UNDERTAKINGS AND
WARRANTIES
|
8
|
|
|
|
7.
|
CONFIDENTIALITY
|
14
|
|
|
|
8.
|
TAXATION
|
15
|
|
|
|
9.
|
TERMINATION
|
16
|
|
|
|
10.
|
LIABILITY FOR BREACH AND
INDEMNIFICATION
|
16
|
|
|
|
11.
|
FORCE MAJEURE
|
17
|
|
|
|
12
.
|
APPLICABLE LAWS AND DISPUTE
RESOLUTION
|
18
|
|
|
|
13.
|
EFFECTIVENESS AND
MISCELLANEOUS
|
18
|
WHEREAS
: Weihai Aimhigh
Electronic Co. Ltd. (hereinafter referred to as "Aimhigh") is a foreign invested
enterprise duly incorporated and registered in Weihai, China in accordance with
the laws of China, which engages in producing and selling of electronic
appliances (e.g., transistors, etc), with registered capital of US$ 16,200,000
and paid in capital of US$ 14,200,000. Aimhigh's only shareholders are the
Aimhigh Global Corp. (hereinafter referred to as "Aimhigh Global") and TCC
STEEL, with 75.31% and 24.69% of shareholding, respectively;
WHEREAS
: J&R Holding
Limited is an exempted company duly incorporated and validly existing under the
laws of Bermuda with its registered office in Bermuda;
WHEREAS
: The Aimhigh Global
and TCC STEEL propose to transfer their entire equity holdings in Aimhigh to
J&R Holding Limited, and J&R Holding Limited agrees to purchase such
equities;
J&R Holding
Limited, Aimhigh Global and TCC STEEL hereinafter are collectively referred to
as the "Parties" or individually referred to as the "Party"
NOW THEREFORE
, based on the
principles of fairness and mutual benefit, and after friendly consultation, the
Parties hereto conclude the following agreement in respect of the equity
transfer in accordance with the applicable laws and regulations of the People's
Republic of China (the "PRC").
Seller I: Aimhigh
Global Corp.
Address: KeunYoung
B/D 12F, 464-4 Samsan-Dong, Bupyoung-Gu
Incheon, 403-090,
Korea.
Seller II: TCC
STEEL
Address: DongYang
Tower 20F, 93, Dangsan-Dong 4 Ga,
Yeongdeungpo-Gu,
Seoul, 150-722, Korea.
|
J&R
Holding Limited
|
|
Address:
Canon's Court, 22 Victoria Street,
Hamilton HM12,
Bermuda
|
Unless otherwise
provided herein, the definitions and rules of interpretation in this clause
apply in this agreement:
“Confidential
Information”
|
means any
confidential information disclosed, directly or indirectly, in writing,
orally or by any other means by one party (the provider) to the other
party (the receiver) for the purpose of concluding this agreement prior to
the execution, or after the execution, including without limitation, all
the materials with respect to the business operations, assets, financial
conditions, business secrets, business opportunities,
etc.
|
“Senior
Management Personnel”
|
means senior
staff of Aimhigh, including the chief executive officer, deputy executive
officer, chief financial supervisor and any other person performing the
same or similar functions.
|
|
|
"Affiliates"
|
means any
enterprise controlled, directly or indirectly, by the controlling
shareholder, actual controller, director, supervisor, senior manager of
Aimhigh, or other enterprise or natural person who can cause the transfer
of the equity interest of Aimhigh.
|
|
|
"Equity
Purchase Price"
|
means,
pursuant to this agreement, the price (US$ 7,000,000) which shall be paid
by Buyer to Sellers.
|
|
|
"Examination
and Approval Authorities"
|
means the
Economic Development Bureau of the Weihai Eco-Tech Development
Zone.
|
|
|
"Aimhigh"
|
means the
Weihai Aimhigh Electronic Co. Ltd. established by Korea S.Tech (the
predecessor of Aimhigh Global Corp.) in the Weihai Eco-Tech Development
Zone on December 27, 2001. Its Enterprise Business License is
371000400001162.
|
|
|
"New
Aimhigh"
|
means the new
Aimhigh which obtained the approval of the Economic Development Bureau of
the Weihai Eco-Tech Development Zone and a new Enterprise Business
License.
|
|
|
"Serious
Impact"
|
means any
impact of an event which may cause any of the following results: (1) the
accounting firm would issue a reservation to Aimhigh when auditing; (2)
the accounting firm would make a provision equivalent to or exceeding US$
10,000 when issuing the auditing report; or (3) cause a loss equivalent to
or exceeding US$ 10,000 to Aimhigh or its shareholder during the course of
business operation.
|
|
|
"Equity
to Be Transferred"
|
means all of
the equity holdings in Aimhigh held by
Sellers.
|
3.1
|
Sellers agree
to sell and Buyer agrees to purchase 100% of the equities of Aimhigh, in
which:
|
Seller I will sell
75.31% of equities in Aimhigh to Buyer;
Seller II will sell
24.69% of equities in Aimhigh to Buyer.
4.
|
EQUITY
PURCHASE PRICE, TIME AND FORM OF PAYMENT
|
|
|
4.1
|
The Parties
agree that, based on the net worth as prescribed in the audit report of
Aimhigh produced by the accounting firm jointly appointed by the Parties,
the Equity Purchase Price as provided hereof shall be seven million US
dollars (US$ 7,000,000). In line with the actual investment proportion of
each Seller in Aimhigh, Buyer shall pay US$ 5,028,169.01 of the Equity
Purchase Price to Seller I and the balance, US$ 1,971,830.99, to Seller
II.
|
|
|
4.2
|
Buyer agrees
that, within 10 business days after obtaining an approval from the
Economic Development Bureau of the Weihai Eco-Tech Development Zone and a
new Legal Person Enterprise Business License, it shall pay three million
US dollars (US$ 3,000,000) to Seller I , Seller I shall, in turn, use
these funds to return any and all outstanding guarantee deposits
previously provided by ASE Korea Inc. within 10 business days after
receipt of the above mentioned payment. After ASE Korea Inc. confirms its
receipt of this returned guarantee deposit amount, Buyer shall remit in
full the respective outstanding balances of the Equity Purchase Price
within 10 business days to seller I for the amount of US$2,028,169.01 and
to Seller II for the amount of US$1,971,830.99 to the respective accounts
designated by Seller I and Seller II.
|
|
|
4.3
|
Upon the issue
date of the new Legal Person Enterprise Business License, the Sellers will
no longer be entitled to execute their shareholder rights in Aimhigh; the
Buyer shall be entitled to execute the shareholder's right in Aimhigh and
shall assume the corresponding obligations in accordance with the laws and
regulations of the PRC and the articles of association of the New
Aimhigh.
|
5.
|
THE
PARTIES' OBLIGATION
|
|
|
5.1
|
Save for the
other obligations provided herein, Sellers I and Seller II shall be
jointly and severally liable for completing the following
items:
|
|
|
|
(1)
|
Assist in
dealing with any and all work in connection with the government
authorities and cooperate to submit all relevant documents, including but
not limited to assisting Aimhigh in obtaining the reply to equity transfer
application, recertifying the foreign invested enterprise approval
certificate and the Legal Person Enterprise Business License, all
registration matters relating to customs, taxation and foreign exchange,
etc.;
|
|
|
|
|
(2)
|
During the
transition period, which starts from the execution of this agreement and
continues until the issuance of the Legal Person Enterprise Business
License, normally and prudently operate Aimhigh (including the management
and maintenance of all assets [including the clients' equipment and
appliances deposited in Aimhigh]), not take any actions that would have a
Serious Impact on Aimhigh's business operation and
finances.
|
5.2
|
Save for the
otherwise obligation provided herein, Buyer shall bear the obligations
regarding the following items:
|
|
|
|
(1)
|
Pay the equity
purchase price to Sellers according to the terms of this
agreement;
|
|
(2)
|
For the
purpose of effecting the legal change of entity from Aimhigh to the New
Aimhigh, submit all relevant documents, which shall be submitted by
foreign investors, to the examination and approval
authorities.
|
6.
|
REPRESENTATIONS,
UNDERTAKINGS AND WARRANTIES
|
|
|
6.1
|
Sellers hereby
undertake as follows:
|
|
|
|
(1)
|
Aimhigh is a
legal person enterprise duly incorporated and validly existing under the
laws and regulations of PRC and has obtained and validly holds all the
necessary authorizations, approvals, permits for conducting its business
operation, it has full power and right to execute and perform all manner
of contracts or agreements relating to its business operation;
|
|
(2)
|
The execution
of this agreement and any relevant documents shall have obtained all
necessary resolutions of the Sellers or any other lawful authorizations
which shall be adopted, including without limitation, the approval
resolution of the board of directors of the Sellers;
|
|
(3)
|
The board of
directors of Aimhigh has irrevocably and unconditionally ratified this
agreement;
|
|
(4)
|
Sellers
lawfully hold all of the equity in Aimhigh, which shall be free from any
pledge or any forms of guaranty, and not subject to any controversies,
disputes, judicial preservation and enforcement measures;
|
|
(5)
|
All the debts
and contingent liabilities of Aimhigh, as well as any and all undertakings
made to any third party other than the Buyer by Aimhigh, shall have been
disclosed truly and completely to Buyer, should any debts, contingent
liabilities or undertakings with Serious Impact not be disclosed to Buyer,
Sellers shall be held liable for all damages; if Aimhigh or the New
Aimhigh has prepaid such foregoing debt or liabilities, upon the
instruction of Buyer, Sellers shall indemnify Aimhigh or the New Aimhigh,
or Buyer directly as soon as reasonably practicable. It shall not be
deemed as breach of this Article 6 herein if Sellers have provided the
whole indemnity or compensation thereto;
|
|
(6)
|
Aimhigh shall
lawfully own the proprietary right or use right of all the assets stated
in the latest audited balance sheet, fixed asset list, intangible asset
list (including the land use right and the intellectual propriety rights)
or any other lists, and shall have obtained and hold all certificates with
respect thereto. Except for those have been disclosed within the financial
report, no mortgage, pledge, lien, etc. or any third party's right have
been set up thereupon, and no seizure, detainment or freeze has been
imposed thereupon by judicial authority or administrative agencies, or
under such threat, and there is no suit, action, claim, arbitration,
proceeding or investigation with Serious Impact pending or, threatened
against, relating to or involving Aimhigh. Should the foregoing occur and
cause any damage or loss to the asset of the Aimhigh or the New Aimhigh,
Sellers shall indemnify Aimhigh or the New Aimhigh, or Buyer directly
against such loss or damage as soon as reasonably practicable. It shall
not be deemed as breach of this article if Sellers has provided the whole
indemnity or compensation;
|
|
(7)
|
No non-payment
of wages, social welfare and insurance which has Serious Impact shall
exist in Aimhigh; nor any penalty which has Serious Impact or such threat
imposed by the labor management authority for any labor problem against
Aimhigh. Meanwhile, no labor suit, action, claim, proceeding or
arbitration which has not been disclosed to Buyer as of the date of
execution and which has Serious Impact, pending or threatened against,
relating to or involving Aimhigh. Should the foregoing occur and cause any
loss or damage to Aimhigh or the New Aimhigh, Sellers shall ensure that
under the instruction of Buyer, indemnify Aimhigh or the New Aimhigh, or
Buyer directly, against such loss or damage as soon as reasonably
practicable. It shall not be deemed as breach of this Article 6 herein if
Sellers have provided the whole indemnity or compensation
thereto;
|
|
(8)
|
Ensure that
all the exercise of intellectual property rights ("IPRs"), except those of
which Aimhigh has the exclusive right, by Aimhigh now shall have been duly
authorized and the authorization shall be still valid. If the
authorization has expired or will expire within six months from the
execution of this agreement, Sellers shall proactively procure the
execution of any contract or agreement concerning the extension of
exercising of the relevant IPRs. Sellers shall undertake that, under no
circumstance, Aimhigh or the New Aimhigh will be not able to conduct
business operation due to failure of exercising the relevant IPRs. Should
the foregoing occur and cause any loss or damage to Aimhigh or the New
Aimhigh, Sellers shall ensure that, under the instruction of Buyer,
indemnify Aimhigh or the New Aimhigh, or Buyer directly, against such loss
or damage promptly. It shall not to be deemed as breach of this
Article 6 herein if Sellers have provided the whole indemnity or
compensation thereto;
|
|
(9)
|
As of the date
of the execution of this agreement, there is no suit, action, claim,
arbitration, proceeding or investigation with Serious Impact pending or,
threatened against, relating to or involving Aimhigh, nor shall it be
subject to any serious existing or potential administrative punishment or
sanction with Serious Impact from PRC taxation authorities, Bureau for
Industry and Commerce and labor protection authorities, etc. If the
foregoing circumstances occur and Aimhigh or the New Aimhigh has paid any
overdue fine, compensation or penalty therefore, Sellers shall indemnify
Aimhigh or the New Aimhigh, or Buyer directly. It shall not be deemed as
breach of this Article 6 herein if Sellers have provided the whole
indemnity or compensation thereto;
|
|
(10)
|
Ensure that
Aimhigh shall not waive any credit or interest;
|
|
(11)
|
All the
materials and documents provided by Sellers to Buyer with respect to,
including but not limited to the operation permit, operation
qualification, business condition, information of managing officers and
staff, financial status, shall be true and effective, and all the
statements thereof shall be authentic without omission, the duplicates
shall be identical with the original files;
|
|
(12)
|
As of the
execution of this agreement, where Sellers find any fact or event which
may cause the representations, warranties or undertakings herein to become
untrue, inaccurate, incomplete or misleading in any respect, it shall
notify Buyer in writing within 3 business days after learning of such fact
or event.
|
|
(13)
|
During the
transition period from the execution date of this agreement to the
recertification of the Legal Person Enterprise Business License, Sellers
undertake that, without the prior written agreement of Buyer, Aimhigh
shall not be allowed to conduct the following activities:
|
|
(a)
|
Sign any
contract or agreement with a value exceeding US$ 10,000, including without
limitation, any share purchase agreement, equity joint venture contract,
cooperative joint venture contract, production and sales contract,
guarantee contract, warranty contract, loan contract, lease contract,
intellectual property rights transfer contract or licensing contract; or
conduct any activity which may result in an undertaking or intent to sign
the foregoing contract or agreement (including but not limited to overseas
investment, capital increase, share transfer, share pledge or option,
etc). Any and all contracts executed shall be delivered to Buyer by Seller
and/or Aimhigh for archiving within 3 business days after
execution.
|
|
(b)
|
conduct any
activities which may cause Serious Impact to the financial condition of
the Aimhigh;
|
|
(c)
|
revise the
articles of association of the Aimhigh or other organizational
documents;
|
|
(d)
|
c
onduct any
activities which may cause severe consequences to the daily management and
operation of Aimhigh;
|
|
(e)
|
deliberately
make insurance contracts out of date, or deliberately make any insurance
contracts invalid or revocable;
|
|
(f)
|
deliberately
violate any important contractual obligations or laws and regulations,
which may cause Serious Impact;
|
|
(g)
|
change the
Aimhigh’s current accounting and financial measures;
|
|
(h)
|
amend or
revise the employment contracts of current senior management
personnel;
|
|
(i)
|
entice senior
management personnel and staff of Aimhigh to terminate their employment
relationship; or,
|
|
(j)
|
Declare and
distribute dividends to any shareholder or persons who are not
shareholders.
|
|
(14)
|
During the
ordinary course of the New Aimhigh's business operation, Sellers shall
not:
|
|
(a)
|
Without the
prior written consent of Buyer, in order to engage in any business
operation which shall compete with the business operation of the New
Aimhigh, directly or indirectly, own, manage or control any other company,
enterprise, institution or entity, or participate in shareholding,
management or control of any other company, enterprise institution or
entity;
|
|
(b)
|
Employ or
assist in employing the current or former employees of the New Aimhigh or
any person who will be employed by the New Aimhigh, or engage in business
operations jointly with such persons which shall compete with the New
Aimhigh;
|
|
(c)
|
Entice the
senior managers or employees of the new Aimhigh to terminate the labor
relationship with the New Aimhigh.
|
|
(15)
|
In the event
that the products produced and delivered to the warehouse by Aimhigh prior
to execution of this agreement cause any loss or damage equivalent to or
exceeding US$10,000 for each accident to Aimhigh or Buyer or the New
Aimhigh, Sellers shall bear all the indemnity or compensation
thereto.
|
6.2
|
Buyer hereby
undertakes to Sellers as follows:
|
|
|
|
(1)
|
Buyer is an
exempted company duly incorporated and validly existing under the Bermuda
laws and regulations and is in good standing;
|
|
(2)
|
To pay the
Equity Purchase Price to Sellers in accordance with this agreement;
and,
|
|
(3)
|
To observe and
fully perform all the obligations herein.
|
6.3
|
The Parties
hereby represent collaterally as
follows:
|
|
(1)
|
From the
execution date of this agreement, the respective business operation,
financial condition or financial prospect of the party shall not have any
change which would cause any material adverse effect to: (a) any
information or estimate provided to the other party prior to the
execution; (b) the capacity for performing the obligations under this
agreement of this party;
|
|
(2)
|
Unless agreed
by the other parties in writing, as of the execution date of this
agreement, the Sellers shall not negotiate or execute any letter of
intent, record, memorandum, contract or agreement with the same or similar
content as provided herein with any person or entity who is not the party
hereto or establish any investment cooperation relationship in any form
with the same or similar content as provided herein.
|
6.4
|
Regardless of
whether it is wilful or negligent, in the event that any undertaking,
warranty or representation hereof of either party hereto is untrue in any
material respect, it shall be deemed as a material breach of this
agreement. The Party who makes such undertaking, warranty or
representation shall be deemed as the breaching party and the other Party
shall have right to terminate this agreement pursuant to the Article 9
herein or require the breaching party to bear the liability as described
in Article 10 herein.
|
|
|
7.1
|
Unless
otherwise provided for or required by the laws and regulations of the PRC,
during the term of this agreement or subject to the Article 7.2 hereunder,
the Parties and their respective affiliates shall not disclose, divulge,
or discuss any confidential information obtained due to execution of this
agreement to any third party. The Parties shall require and procure their
employees or proxy to treat the abovementioned information as important as
their own assets and confidential information, and also, undertake that
they, their employees or proxy shall not use the abovementioned
confidential information for any other purpose other than the performance
of the obligations under this
agreement.
|
7.2
|
The obligation
as mentioned in Article 7.1 shall not apply to any of the following
conditions:
|
|
(1)
|
Any
information disclosed to the public without breaching this
contract;
|
|
(2)
|
Any
information disclosed by the third party who is not a party
hereto;
|
|
(3)
|
Any
information which has been disclosed by the Parties prior to the execution
of this agreement
|
|
(4)
|
Any
information which is required to be disclosed pursuant to relevant laws,
regulations and provisions of competent government authorities (including
Bermuda and Korea).
|
|
(5)
|
For the
purpose of implementing this agreement, the Parties may, as necessary and
appropriate, disclose certain confidential information to the directors,
chief executive officer, deputy executive officer, chief financial
supervisor, and legal counsel; provided that the Parties shall ensure that
the abovementioned person or proxy shall observe the obligation of
confidentiality provided herein.
|
8.1
|
The taxation
as mentioned herein means: (1) any and all current or pending taxes levied
or imposed by the PRC taxation authorities; (2) any and all taxes levied
additionally or repeatedly, no matter whether the foregoing arises due to
the insufficiency of taxes which has been levied or withheld, or
impropriety or unlawfulness of the given or enjoyed relief or exemption;
(3) any and all fines, interests or other dues in connection with the
taxes, including any and all litigation and arbitration fees, indemnity,
losses, compensation, payment, costs and expenses, or any other relevant
fees relating to taxes.
|
8.2
|
All taxes
arising due to the transfer of equity shall be borne respectively by the
Parties in accordance with the relevant provisions as stipulated in the
PRC laws, administrative regulations and sector rules or requirements of
the government authority.
|
|
|
8.3
|
In the event
that any tax or other relevant fees paid by the Buyer exceeds the scope as
provided in the article 8.2 herein, the Sellers shall provide full
compensation to the Buyer.
|
|
|
9.1
|
In the event
that either Party hereof commits a breach of the obligations,
representations, warranties and undertakings under this agreement which is
not remedied within 60 business days, upon receipt of the notice of breach
from the other Party, the non-breaching party shall have right to
terminate this agreement after notifying the breaching party and other
party in writing and require the breaching party to bear the liability for
breach and claim for losses and damages caused thereto.
|
|
|
10.
|
LIABILITY
FOR BREACH AND INDEMNIFICATION
|
10.1
|
The Sellers
shall be jointly and severally liable for any loss or damage suffered by
the Buyer on account of a breach of the terms of this agreement by one or
both of the Sellers. But when the Seller breaches the article 6.1 (1), 6.1
(5)-6.1 (10), 6.1 (13) and 6.1 (15) hereof, if the event as mentioned in
the foregoing articles occurred between the establishment date of Aimhigh
and December 31, 2005, the Seller II shall be responsible for all the
compensation, if such event occurred after January 1, 2006, the Seller I
shall be responsible for all the
compensation.
|
10.2
|
In the event
that one or both of the Sellers defaults or commits the following conduct,
the Buyer shall be compensated or indemnified for no less than 100% of the
Equity Purchase Price:
|
|
|
|
(1)
|
As of the
execution date of this agreement, (a) the Seller I delays in performing or
violating Article 6.1(6) herein; or (b) carry out similar cooperation as
described hereof with any other person or entity who is not the party
hereto;
|
|
(2)
|
After
recertification of the Legal Person Enterprise Business License, either
Seller violates the article 6.1(7) herein.
|
10.3
|
In the event
that Buyer fails to pay the Equity Purchase Price within the time limit as
stipulated in Article 4 hereof, it shall pay an aggregate penalty equal to
0.1% of the total amount due and payable for each day overdue to
Sellers.
|
10.4
|
The liability
for breach shall not be revoked due to the termination of this
contract.
|
|
|
11.1
|
In the event
that the occurrence of a Force Majeure event, such as earthquake, typhoon,
flood, war or any other event which is unforeseeable, unavoidable and
insurmountable and directly affects or impairs the performance of this
agreement or causes the failure of performance of the agreed terms and
conditions hereof, the Party who endures the Force Majeure event shall
notify the other Party by facsimile or other reasonable method promptly,
and shall provide the detailed information regarding the event and issue
effective supporting documents with respect to failure of performance,
partial failure of performance or the performance shall be delayed within
15 days after the abovementioned notification. Such supporting documents
shall be issued by the relevant notary public where the event occurred.
The Parties shall negotiate on whether this agreement shall be revoked
with reference to the impact on the performance of this agreement by the
event. None of the Parties shall have the right to claim for damages
caused by the Force Majeure event. Normal business risks, such as
inflation, change of foreign exchange rate, etc., shall not be deemed as
Force Majeure events.
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12.
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APPLICABLE
LAWS AND DISPUTE RESOLUTION
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12.1
|
The execution,
effectiveness, interpretation and performance of this contract shall be
governed by the current applicable laws and regulations of the
PRC.
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12.2
|
Any disputes
arising out of or in connection with this agreement shall be settled
through friendly consultation by the Parties. Should no settlement be
reached with respect thereto within 60 business days after notifying the
other party in writing, any of the Parties may file a suit with the courts
of the People’s Republic of China with competent jurisdiction where New
Aimhigh is located.
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13.
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EFFECTIVENESS
AND MISCELLANEOUS
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13.1
|
This agreement
shall be executed by the duly authorized representatives and its
effectiveness shall be subject to the approval of the examination and
approval authority.
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13.2
|
The unstated
items in this agreement can be arranged as supplements by both Parties.
The supplements shall have the same binding effect as this
agreement.
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13.3
|
This agreement
shall be written in English and Chinese language, both of which shall have
the same meaning and be authentic and equally valid. Should there be any
discrepancy between these two versions, the Chinese version shall
prevail.
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13.4
|
This agreement
(both the Chinese version and English version) shall have six originals
with each Party holding one original, the New Aimhigh holding one original
and the examination and approval authority holding two
original.
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13.5
|
The schedules
attached hereto shall constitute an integral part of the agreement with
the same effectiveness and
validity.
|
IN WITNESS WHEREOF
, the
Parties have caused this Agreement to be duly executed, as of 17 Mar
2008.
(NO
CONTENT IN THIS PAGE)
(FOR
SIGNATURE ONLY, NO CONTENT IN THIS PAGE)
Aimhigh Global
Corp.
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By:
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|
Legal
representative (authorized person):
/s/ Young Hon
Oh
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Title:
CEO
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TCC
STEEL
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By:
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Legal
representative (authorized person): /s/ Jun Won Sohn
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Title:
CEO
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J&R
Holding Limited
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By
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/s/ Joseph
Tung
|
Name:
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Title:
CFO
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Exhibit
4(n)
SYNDICATED
LOAN AGREEMENT
【
English
Translation
】
BORROWER:
ADVANCED
SEMICONDUCTOR ENGINEERING INC.
AGENT:
CITIBANK,
N.A., TAIPEI BRANCH
AMOUNT:
US$200,000,000
Date:
May 29, 2008
TABLE OF
CONTENTS
ARTICLE
I.
|
DEFINITIONS
|
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II.
|
FACILITY
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2.1
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Facility
and Loan Purposes
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2.2
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Term
of Facility, Availability Period and Repayment
Availability
Period and Repayment
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2.3
|
Drawdown
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2.4
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Repayment,
Reduction and Cancellation
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III.
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LOANS/ADVANCES
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3.1
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Loan
Commitment
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3.2
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Drawdown
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IV.
|
INTEREST,
FEES, PAYMENT AND YIELD PROTECTION
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4.1
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Commitment
Fee
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4.2
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Loan
Interest
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4.3
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Fee
Adjustment and Others
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4.4
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Payment
and Default Interest
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4.5
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Cost
Increase, Taxes and Change of Law
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4.6
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Application
of Payments
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4.7
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Facility
Records
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4.8
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Liability
Limitation
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V.
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PARTIES
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5.1
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Several
Obligations of the Banks
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5.2
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Joint
and Several Claims of the Banks
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VI.
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CONDITIONS
PRECEDENT TO DRAWDOWN
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6.1
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Conditions
Precedent
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6.2
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Other
Conditions
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VII.
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REPRESENTATIONS
AND WARRANTIES
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VIII.
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COVENANTS
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IX
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DEFAULT
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9.1
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Event
of Default
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9.2
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Determination
of Default
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9.3
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Consequences
of Default
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X
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ARRANGERS,
AGENT AND BANKS
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XI
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SET-OFF
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XII
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EXPENSES
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XIII
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NOTICES
AND PAYMENTS BY AGENT
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XIV
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NON-WAIVER
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XV
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AMENDMENT
AND ASSIGNMENT
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XVI
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GOVERNING
LAW
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XVII
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JURISDICTION
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SIGNATURES
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SCHEDULES
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SCHEDULE
I
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THE
BANKS, COMMITMENT AND COMMITMENTS
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SCHEDULE
II
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ACQUISITION
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EXHIBITS
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EXHIBIT
I
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DRAWDOWN
REQUEST
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EXHIBIT
I-1
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NOTICE
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EXHIBIT
II
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AGENT
NOTICE TO BANKS
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EXHIBIT
III
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PROMISSORY
NOTE
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EXHIBIT
IV
|
NOTE
AUTHORIZATION
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EXHIBIT
V
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CERTIFICATE
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EXHIBIT
VI
|
LETTER
OF UNDERTAKING
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EXHIBIT
VII
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CONFIRMATION
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EXHIBIT
VIII
|
TRANSFER
NOTICE
|
SYNDICATED LOAN
AGREEMENT
THIS SYNDICATED LOAN AGREEMENT
(the “
Agreement”
) is made
and entered into as of May 29, 2008 by and among:
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(1)
|
ADVANCED SEMICONDUCTOR
ENGINEERING INC.
, a company organized and incorporated under the
laws of the Republic of China (the “
ROC
” or “
R.O.C.
”) (the
“
Borrower
”);
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(2)
|
The
banks and banking institutions listed in
SCHEDULE I
attached
hereto (collectively, the “
Banks
” and
severally, a “
Bank
”);
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(3)
|
CITIBANK, N.A., TAIPEI BRANCH
and THE BANKS IDENTIFIED IN THE SIGNATURE PAGES HEREOF
, acting as
the coordinating arrangers of the Banks hereunder (collectively the “
Arrangers
”);
and
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(4)
|
CITIBANK, N.A., TAIPEI BRANCH,
acting as the facility agent for the Banks hereunder (the “
Agent
”).
|
WITNESSTH:
WHEREAS
, to facilitate the
Borrower’s partial funding needs in respect of the Acquisition
(defined below), the Borrower has requested the Arrangers to arrange, and the
Banks to extend to the Borrower, a term loan facility in an aggregate principal
amount of US$200,000,000 as described in more detail below
(the “
Facility
”);
and
WHEREAS
, subject to the terms
and conditions of this Agreement, the Arrangers have arranged, and the Banks
have agreed to extend to the Borrower, the loan facility so requested by the
Borrower accordingly.
NOW, THEREFORE
, the parties
hereto agree as follows:
ARTICLE
I
.
DEFINITIONS
.
Unless otherwise
defined elsewhere in
this
Agreement, as used herein, the following terms shall have the meanings set forth
below:
1.01
. “
Total Commitment
”
shall mean the total amount of the Facility which the Banks commit to provide to
the Borrower pursuant to this Agreement, as may be cancelled or reduced from
time to time pursuant to this Agreement.
1.02
. “
Commitment
” shall
mean, with respect to each Bank, the amount each Bank commits
to provide to the Borrower, as shown in
SCHEDULE I
hereto, as may be
cancelled or reduced in accordance with the applicable provisions
hereof.
1.03
. “
ASE Test
” shall mean
ASE Test Limited, a Singapore Subsidiary of the Borrower.
1.04
. “
Acquisition Contract
”
shall mean the Scheme Implementation Agreement, dated September 4, 2007, by and
between the Borrower and ASE Test together with any amendments and supplements
thereto.
1.05
. “
Acquisition
” shall
mean acquisition of the ordinary shares of ASE Test by the Borrower pursuant to
the Acquisition Contract by way of a Scheme of Arrangement
under Article 210 of Singapore Company Law, as described in more details in
Schedule II
hereto (the
public announcement made by the Borrower on September 4,
2007).
1.06
. “
Majority Banks
” shall
mean the Banks whose then aggregate principal outstanding to the Borrower
hereunder exceeds 2/3 of the then aggregate principal outstanding to the
Borrower by all the Banks under this Agreement or, if the Borrower has not drawn
any of the Commitment yet, the Banks whose aggregate Commitment exceeds 2/3 of
the Total Commitment under this Agreement.
1.07
. “
Commitment Ratio
”
shall mean, with respect to each Bank, the ratio of the Commitment of such Bank
hereunder to the Total Commitment, in each case as shown in
Schedule I
hereto.
1.08
. “
Loan Commitment
”
shall mean the commitment of the Banks to advance Loans to the Borrower up to
its respective Commitment.
1.09
. “
Business Day
” shall
mean a full-day banking business day in Taipei City, Kaohsiung City, Singapore
and Hong Kong; and (i) if on that day the Reference Rate is to be determined, in
London, and (ii) if on that day a drawdown or payment in USD is to be made under
this Agreement, in New York.
1.10
. “
Loan
” or “
Advance
” shall mean
the USD loan drawn by the Borrower under
the Commitment pursuant to the applicable provisions of
this Agreement.
1.1
1
. “
Interest Period
”
shall mean, with respect to the Loan under this Agreement, the period commencing
on the Drawdown Date and having a duration of one month, and each period of one,
three or six months
thereafter;
provided
, that (i)
for the first Interest Period that commences on the Drawdown Date, the borrower
must choose a period of one month, (ii) if any Interest
Period would otherwise end on a day which is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless such next succeeding Business Day falls in another calendar
month, in which case such Interest Period shall
end on the immediately preceding Business Day, (iii) the last Interest Period to
commence prior to the Expiry Date shall end on the Expiry Date, and (iv) with
respect to amounts on which interest is payable at the Default Rate, the
relevant Interest Period shall be determined by the Agent. Except for
the first Interest Period, the Interest Period may be elected by the Borrower to
be one, three, or six months, by written notice (in the form of
Exhibit I-1
hereto) to the
Agent not later than three Business Days prior to the first day of the relevant
Interest Period, and should the Borrower fail to elect accordingly, such
Interest Period shall be three months.
1.12
.
“Reference Rate” or
“LIBOR”
shall mean, with respect to each Interest Period, the London
Interbank Offered Rate as recognized by the Agent for the corresponding period
appearing on Reuters Screen LIBOR01 at 11:00 am (London time) two Business Days
prior to the first day of such Interest Period (the “
Determination
Date
”). If there is no rate for the corresponding period, the
rate shall be for the next longest period, or for six months if the next longest
period exceeds six months. If the Agent cannot obtain this
information for the Determination Date, the London Offices of Citibank N.A.,
Standard Chartered Bank and Hong Kong Shanghai Bank shall provide this
information as reported by major banks, as well as the US dollar deposit rate
for the relevant Interest Period. The Borrower and the Banks agree
not to dispute the reported terms obtained by the Agent. Lastly, the
Interest Rate shall be calculated to the fourth decimal place, rounded
up.
1.13
.
“Interest Rate”
shall
mean, with respect to each Advance, the
per
annum
interest rate
which is calculated by the Agent to be the Reference Rate plus the
Margin. The Interest Rate for each Advance, once determined, shall be
fixed during the same Interest Period thereof and, notwithstanding the change of
the Reference Rate, shall not change until the first day of the next succeeding
Interest Period.
1.14
.
“Margin”
shall mean
0.9%
p.a. However, if at the beginning of any
Interest Period, (a) the Borrower according to its most
recent annual or semi-annual audited consolidated financial report records a net
income ratio (post tax net profit (not
including minority shareholders profit) divided by operating income)
(the “
Net Income
”) of greater
than or equal to 0% and less than 5%, then the Margin p.a. will
be calculated as 0.8% p.a., or (b) if the
Borrower according to
the most recent annual or semi-annual audited consolidated
financial report records a net income ratio greater or equal to 5%, the Margin
p.a. will be calculated as 0.7% p.a. Business tax
and stamp duty on the
interest payments are
born by the Borrower.
1.15
. “
Interest Payment
Date
” shall mean each of the dates on which interest on
the Loans under this Agreement are payable by the Borrower, i.e., the
last day of each Interest Period.
1.16
. “
Drawdown Date
” shall
mean the date that the Borrower draws down the Commitment pursuant to
this Agreement, which shall be a Business Day, and not a half Business
Day. “
Drawdown
” shall mean
the Borrower’s drawing of the Commitment pursuant to this
Agreement.
1.17
. “
Default Rate
” shall
mean the then applicable Interest Rate plus 2% p.a., whenever referenced under
this Agreement.
1.18
. “
Subsidiary
” shall
mean a local and/or offshore company with a paid
-
in capital of not less than
NT$1,300,000,000 or equivalent thereof in any other currency that is 50% owned,
directly and/or indirectly, by the Borrower.
1.19
. “
Commitment Termination
Date
” shall mean the date falling ten Business Days after the date
hereof.
1.20
. “
Note
” and “
Note
Authorization
” shall have meanings set forth in Section 8.1
hereto.
1.21
. “
NTD Syndication
” shall
mean the NTD loan syndication under the NTD 24.75 Billion
Syndicated Loan Agreement dated March 3, 2008
entered into by the Borrower and the banks named therein
with Citibank N.A., Taipei Branch acting as agent for the banks.
1.22
. “
Letter of
Undertaking
” shall mean the letter of undertaking issued by the Borrower
in respect of the NTD Syndication, in the form of
Exhibit VI
hereto.
1.23
. “
Event of Default
”
shall mean any event as listed in Section 9.1 hereof; and “
Prospective Event
of Default
” shall mean any event which with the
giving of notice or passage of time or both would become an Event of
Default.
ARTICLE
II
. FACILITY.
2.1
.
Facility and Loan
Purposes
.
This Facility is in
an aggregate principal amount of
US$
200,000,000 for purposes of
financing the Borrower’s partial funding needs to effect
the Acquisition.
2.2
.
Term of Facility,
Availability Period and Repayment
.
2.2.1
. The
Facility has a three year term, commencing on the date hereof (if the day
falling three years after the date hereof is
not a
Business Day, the Facility shall expire on the preceding Business Day thereof)
(the “
Expiry
Date
”).
2.2.2
. The
Commitment is not a revolving commitment,
and may only be drawn in a
single lump sum in full, not later than the Commitment Termination
Date. Any portion of the Commitment that has not been drawn down
prior to the Commitment Termination Date shall be cancelled
automatically.
2.2.3
. The
loan under this Agreement shall be repaid in full in one lump sum payment on the
Expiry Date. The Borrower shall timely repay the principal and all
related payments in such amount as provided for hereunder.
The
Borrower shall effect the Drawdown pro rata to the Commitment Ratio of each
Bank;
provided
,
that if it is technically impossible to have such Drawdown strictly in
accordance with the Commitment Ratio, the Agent may determine the actual
allocation amongst the Banks of such Drawdown amount based on its reasonable
judgment, and no objection from the Borrower or any Bank shall be
made.
2.4
.
Repayment and
Cancellation
.
2.4.1
. The
Commitment under this Agreement shall be repaid or cancelled in accordance with
the applicable provisions of this Agreement.
2.4.2
. Each
Bank shall meet its effective Commitment, by fulfilling relevant obligations
under this Agreement and providing the promised portion of the Loan;
provided
, that a Bank
shall not be required to maintain or perform the Commitment under this Agreement
if it discovers prior to performing such Commitment that the maintenance or
performance of the same will result in its violation of laws or regulations, or
if such Bank is precluded by other applicable laws or regulations
from maintaining or performing such obligations under this Agreement
(in which case, the Bank shall immediately notify the Borrower and
Agent). If a Bank discovers after performing its Commitment that its
maintenance of the same constitutes or will constitute a violation of law or
regulation on its part, such Bank shall immediately notify the Borrower and the
Agent. The Borrower shall then make repayment with respect to such
Commitment or otherwise resolve to relieve such Bank of the relevant
obligation(s) within 5 Business Days (or a longer period permitted by laws and
regulations for cure) of its receipt of the notice from such Bank, and such
Bank's Commitment shall immediately be cancelled or reduced to the
extent permitted by laws and regulations. If the Bank is responsible
for such violation of laws or regulations mentioned above, such Bank shall make
other arrangements for the Borrower for substitute financing under terms
comparable to those offered by this Agreement. If the above-mentioned
violation of laws or regulations is not attributable to such Bank, such Bank
shall negotiate with the Borrower
and use
reasonable efforts to arrange for or assist the Borrower in obtaining other
financing to the extent permissible by laws and regulations; provided, that
neither the Agent nor any such Bank shall guarantee that
such other financing may be procured.
2.4.3
. The
Borrower may at any time, with not less than 15 days prior written
notice to the Agent, prepay the outstanding
Loan in whole or in part without charge or penalty;
provided
that:
(a) With
respect to each such prepayment, the amount to be prepaid shall be in the
minimum amount of US$20,000,000, and any portion of such prepayment in excess of
NT$20,000,000 shall be in multiples of US$5,000,000 (unless the entire
outstanding balance of the Loan is less than US$20,000,000, or the portion of
the outstanding Loan in excess of US$20,000,000 is not a multiple of
US$5,000,000, in which case the Borrower must prepay the entire outstanding
balance of the Loan).
(b) Prepayment may
be made only on the last day of an Interest Period. All
sums (principal, interest or fee, if any), payable in connection with the Loan
to be prepaid shall be paid in full upon such prepayment.
(c) If
the Borrower prepays any Loan in violation of the above, the Borrower shall
indemnify the Banks for and against any and all funding costs or losses, if any,
arising therefrom (the Banks making such claims shall provide evidence
therefor).
2.4.4
. The
Commitment, once prepaid, may not be reinstated. Following
each prepayment, each Bank’s Commitment shall be reduced on a pro rata basis,
based on the ratio of each Bank’s outstanding principal amount to that of all
the Banks. If it is technically impossible for each Bank’s Commitment
to be reduced in accordance with the aforesaid ratio, the Agent may determine
the actual allocation of such reduction of Commitment amongst the Banks based on
its reasonable judgment, and no objection from the Borrower or any of the Banks
shall be made.
2.4.5
. Unless
otherwise provided by this Agreement, no Commitment under this Agreement may be
cancelled absent the prior consent of all the Banks.
ARTICLE
III
.
LOANS/ADVANCES
.
3.1
.
Loan
Commitment
.
3.1.1
. Subject
to the Borrower having complied with the conditions precedent set out in this
Agreement, the Borrower may, within the availability period and up to the Total
Commitment, draw down the Loan in a single lump sum pursuant to this
Agreement. The Drawdown shall be effected pro rata to the Commitment
Ratio of each Bank.
3.1.2
. The
Commitment is not a revolving commitment, and may only be drawn down in a single
lump sum payment.
3.1.3
. Each
Bank agrees to advance the Loan to the Borrower pursuant to the terms and
conditions of this Agreement.
3.2
.
Drawdown
.
3.2.1
. Subject to
the Borrower having fully complied with or performed the conditions precedent to
Drawdown as set out in this Agreement, the Borrower may, at any time,
with at least three Business Day prior written notice to the Agent by 10:00 AM
(Taipei time) in the form of
EXHIBIT I
hereto (“Drawdown
Request”), request a Drawdown of the Loans in accordance with the terms and
conditions set out in this Agreement. Each Bank shall, upon such
request and to the extent of its respective Commitment, make such Loans to the
Borrower in accordance with its Commitment Ratio; provided, that its obligation
to make such Loans is subject to the condition that none of the following
circumstances shall have occurred prior to such request for drawdown: (a) such
Drawdown will cause the total Loan outstanding hereunder to
exceed the total available Commitment; (b) the Drawdown will cause the Loan
outstanding with respect to any Bank hereunder to exceed
its then available Commitment or to exceed its Commitment Ratio; (c) the
Drawdown Date will be later than the Commitment Termination Date; or
(d) the Drawdown otherwise does not comply with the terms and conditions of this
Agreement.
3.2.2
. Provided
that the conditions described above have been met with respect to the requested
Drawdown, the Agent shall immediately accept the Drawdown Request on behalf of
the Banks. Each Drawdown Request, once
accepted by the Agent, shall be irrevocable and binding on
the Borrower. Following the acceptance of such
Drawdown Request, if the Borrower is unable to satisfy the
conditions precedent to drawdown as specified in Section VI hereof, resulting in
the Banks unable to advance in whole or in part the requested Drawdown, the
Borrower shall, at the demand of the Agent, reimburse the Banks for
all reasonable and necessary expenses and direct losses (the Banks
making such claims shall provide evidence therefor) in
connection therewith.
3.2.3
. Upon
its receipt by fax of a Drawdown Request from the
Borrower, the Agent shall notify each Bank in writing (in form of
Exhibit II
hereto), stating
the date on which each Bank is to make available its Loan and the amount to be
advanced by each Bank in accordance with its respective Commitment
Ratio. Each Bank shall, pursuant to such notice and this Agreement,
make available such Loans in immediately available funds not later than 12:00
noon (Taipei time) on the Drawdown Date as specified in the Drawdown Request and
to the account designated by the Agent. Unless notified
prior to the Drawdown Date, the Agent may assume that each Bank is capable of
advancing payment pursuant to this Agreement and, on the basis of such
assumption, may (but is not obligated to) timely make available
the funds
to the Borrower, unless the Agent has received a written notice from any of the
Banks prior to the Drawdown Date stating that such Bank
is unable to make such Advance. Notwithstanding the above,
the Agent is under no obligation to make available or advance any sum to the
Borrower on behalf of the Banks unless and until the Agent
actually receives the funds made available by the Banks pursuant to
this Agreement. If the Agent makes available to the
Borrower the funds required under the Agreement to be advanced by any
Bank, and such Bank shall fail to actually make available to the Agent such
funds, the Borrower shall at any time, upon the Agent
’
s demand, refund
such funds to the Agent together with interest thereon, calculated at the
Agent’s actual cost of funding, as of that date, for the period from the
Drawdown Date to the date of the Agent’s actual receipt of the refunds thereof
(the Agent shall issue to the Borrower a receipt for any such interest
payment).
3.2.4
. Failure
by any Bank to make available its Advance pursuant to
this Agreement shall not relieve other Banks of their
obligations to make Advances pursuant to this Agreement and shall not relieve
the Borrower of its obligations under this Agreement. The Banks or
the Agent shall not be liable for the failure of any other Bank to make the
required Advances. Any Bank which fails to make such Advances shall
reimburse and indemnify the Borrower for and against (a) any and all interest
paid to the Agent as provided for in the above and (b) any
loss or additional funding cost incurred by the Borrower arising
therefrom (subject to relevant supporting documents or evidence presented by the
Borrower to substantiate its claim).
ARTICLE
IV
.
INTEREST, FEES, PAYMENT AND
YIELD PROTECTION
.
4.1
.
Commitment
Fee
. No Commitment fee is payable in respect of this
Facility.
4.2
.
Loan
Interest
.
4.2.1
. The
Borrower shall pay the Agent interest on the Loan outstanding in
US Dollars at the applicable Interest Rate, calculated on the basis
of a 360-day year and the actual number of days elapsed. The
applicable Interest Rate for each Interest Period, once determined, shall be
fixed and shall not change until the first day of the next Interest Period
(i.e., the Interest Rate will not change during the same Interest
Period). The Borrower shall pay all such interest to the Agent, on
each Interest Payment Date, for distribution by the Agent to the Banks pursuant
to the applicable provisions of this Agreement.
4.2.2
. The
Agent shall calculate interest at the applicable Interest Rate
periodically and notify the Borrower in written notice of
such interest at least three Business Days prior to the
relevant Interest Payment Date. The Borrower shall make such interest
payments to the Agent in immediately available funds in
US Dollars
on each Interest Payment Date, for distribution by the Agent to the
Banks.
4.2.3
. The
business tax and stamp duty (“
GBRT
”) arising out of
the above interest payments shall be grossed up and borne by the
Borrower.
4.2.4
. The
business tax under the VAT and non-VAT Tax Regulation is 2%, however,
in accordance with related provisions of the regulation, banks also
need to set aside 3% of its revenue to allow for overdue debt and
offset bad debt; therefore, under this Agreement, the business tax to
be borne and paid by the Borrower is 5%. In the event the business
tax rate changes, the changed rate will be utilized;
however the Borrower will still bear the full costs for
the provision for bad debt. If the Banks’ overdue loan ratio
decreases and no longer need to provide the 3% provision for bad debt, the Banks
shall notify the Agent. Upon receipt of such notice, at the next
payment period, the Agent shall calculate
business tax at the rate of 2%. The Agent, however, is not obligated
to verify the Banks’ business tax status and may continue to
calculate the business tax at 5%.
4.2.5
. If on or before the
first day of any Interest Period (a) the Agent can not obtain the
LIBOR or (b) the Agent
has been notified by the Majority Banks that
LIBOR can no longer reflect such Majority Banks’ funding cost or the relevant
Interest
Rate does not yield to such Banks a spread
of at least the relevant Margin during
the relevant period and provided evidence of their
funding costs to the
Agent, the Agent shall promptly give
notice of such fact to the Borrower and each Bank.
The Agent
shall, after giving such notice, consult with the relevant
Banks and negotiate with the Borrower in good faith to identify a
substitute basis of borrowing (“
Substitute Basis of
Borrowing
”) which is acceptable to both
parties. If at the expiry of twenty (20)
calendar days from the date of the Agent's notice pursuant to the
above, the Borrower has agreed to
accept such Substitute Basis of Borrowing, it
shall be retroactive to and
take effect from the beginning of the then
current Interest Period. If the Agent and the Borrower can not reach
agreement on the rates with all of the relevant Banks (but can reach agreement
with some of the relevant Banks) during the 20 days period, the Borrower shall
be entitled to notify the Agent of its decision to prepay those Banks the
entirety (but not part) of the Loans which they have failed to reach agreement
and to enter into agreement with the remaining Banks. The
Borrower shall then on the day falling 45 days after the
Agent’s giving of notice, (a) prepay the outstanding to those Banks
in accordance with the above or (b) if then have not yet reached agreement with
any other Banks, prepay the entire outstandings to such other Banks,
without any charge or penalty, but the Borrower shall indemnify against such
Banks for any and all funding costs arising from such
prepayments. With respect to the Loans so
prepaid, the interest thereon for such 45 days shall be paid at the rate which
equal to the Banks’ actual
funding
cost plus the then applicable Margin. In the event of any such
prepayment, the Commitment Ratio of each Bank shall adjust
accordingly.
4.3
.
Others and Fee
Adjustment
.
4.3.1
The
Borrower shall pay the Arrangers and the Agent fees for the Arrangers’ formation
of the Banks and the Agent’s management of affairs pertaining to this
Agreement. The terms and conditions of such payment will be
separately agreed upon in writing between the Borrower and the
Agent.
4.3.2
If
the Borrower records changes in its net income ratio according to its most
recent consolidated financial statements required to be delivered to the Agent
and the Banks, resulting in decreases in its Margin p.a., the Borrower shall
inform the Agent in writing of such decrease, and the Agent will in turn notify
the Banks. If the Banks do not dispute the accuracy of such changes
in Borrower’s net income ratio to the Agent within five days of receipt of
notice, the Margin p.a. of the
Loans under the Facility, starting from the next Interest
Payment Period, shall be decreased accordingly. However, if
subsequently the Borrower’s net income ratio changes again, resulting in
increases in its Margin p.a., the Borrower or the Banks shall inform the Agent
in writing, and the Agent will in turn notify the Banks and the Borrower. If the
Borrower and the Banks do not dispute the
accuracy of such changes in Borrower’s net income ratio to the Agent
within five days of receipt of notice, the Margin p.a. of the Loan under the
Facility, starting at the next Interest Payment Period shall be increased
accordingly. The calculation of the net income ratio shall
be based on the most recent consolidated financial
statements submitted by the Borrower in accordance with
the provisions of this Agreement.
4.4
.
Payment Terms and Default
Interest
.
4.4.1
. The
Borrower shall pay to the Agent in accordance with
applicable provisions of this Agreement to its account
with Citibank N.A. in New York or as otherwise designated by the Agent, all sums
(such as principal, interests or fees) which it is required to pay by this
Agreement or related documents, in immediately available funds and in US Dollars
before 12:00 noon time (Taipei time) on the due date.
4.4.2
. If
the Borrower makes payment in a currency other than the currency required
hereunder (“
Payment
Currency
”), the payment or repayment so made will not relieve the
Borrower of its liability unless
such
other
currency has been fully converted into the Payment Currency and have been
remitted to the account or place designated by the Agent. The
Borrower
shall assume
all
the
relevant foreign exchange
risk in this
respect. The Borrower
shall also
be responsible for securing in a timely fashion all approvals (including foreign
exchange approvals) necessary for
making all
relevant
payments
in the
Payment Currency, and shall make no defense based on its default on payment
pursuant to the Agreement due to its failure to obtain the relevant
approvals.
4.4.3
. Any
sum payable hereunder may be paid on the next Business Day if the
due date thereof is not a Business Day, unless such
Business Day falls in another calendar month, in which case the payment shall be
made on the Business Day immediately preceding the due day.
4.4.4
. If
any of the payments required under this Agreement is not paid when due, the
Borrower shall immediate cure such nonpayment pursuant to the Agreement, and pay
interests thereon to the Banks and/or the Agent at the Default Rate, calculated
on the basis of a 360-day year and the actual number of days elapsed, for the
period from the due date to the date of actual receipt by the Banks and/or the
Agent of such payment. If any such nonpayment pertains to interest
payments, a penalty equal to 10% of the overdue
nonpayment shall be levied against the Borrower for the first 6 months, and a
penalty equal to 20% of the overdue amount shall be levied against the Borrower
if such nonpayment remains outstanding for more
than six months.
4.4.5
. All
payments to the Banks from the Borrower under this Agreement shall be paid to
the Agent for its distribution to the Banks. Payments made directly
to the Banks by the Borrower will not relieve Borrower of its obligations under
the Agreement. Save for payments payable
solely to the Arrangers or the Agent, the Agent shall, upon its
receipt from the Borrower of payments due to the Banks, distribute and forward
such payments to each Bank for repayment. Each Bank, the Arrangers
and the Agent shall issue and deliver a receipt directly
to the Borrower for payment received.
4.5
.
Cost Increase, Taxes and
Change of Law
.
4.5.1
. In
the event of a change in laws or regulations or the interpretations by the
competent authorities thereof, or a request by the relevant authority, which
result in: (a) the Banks having to pay taxes for transactions hereunder, or a
change in the rate or bases of the taxes payable by the Borrower to the Banks
pursuant to this Agreement (except for changes in the mandatory tax rate imposed
on the net income of the Banks by the R.O.C. government or the jurisdiction of
the incorporation of the Banks), (b) an increase or change in
application of any reserve, special deposit or similar regulations with
respect to the Facility, or (c) an increase in the costs for the
Banks to perform or maintain Commitments hereunder, or a decrease in
the amounts otherwise receivable by the Banks under this Agreement, and to the
extent deemed material by the Majority Banks, the Borrower shall, upon demand of
the Banks, pay such additional sums to the Banks as indemnity for the
increase in costs or decease in revenue to the Banks. The impact of
the above change of law shall be determined
based upon
the relevant documentary evidence so presented by the affected
Bank(s).
4.5.2
. Unless
otherwise expressly provided by this Agreement, any and all other present and
future taxes and fees payable or arising from this Agreement or this Facility
shall be borne by the Borrower. If any Bank or the Agent pay(s) such
taxes on the Borrower’s behalf, the Borrower shall reimburse such amount
immediately upon demand, otherwise, the Borrower shall also pay interest at the
Default Rate (on a floating rate basis) on such sums for the period from the
date such Bank or the Agent makes such payment to the date
the Borrower actually makes such reimbursement in full.
4.5.3
. The
Borrower shall neither make any withholdings or deductions on any payment which
is payable under this Agreement, nor offset any payment payable by it against
its indebtedness with any Bank. If the Borrower shall be
required by law to make any such withholding or
deduction from any payment under this Agreement, the sum payable by the Borrower
shall be increased so that after all required withholdings or deductions
(including additional withholdings or deductions in response to the increase in
the sum paid hereunder), the Banks, the Agent and/or the Arrangers will receive
an amount equal to the sum they would have received had no such withholdings or
deductions been made, and the Borrower shall provide the
original (or copy certified by the Borrower) of the evidence for such payment to
the Banks, the Agent and/or the Arrangers within 30 days after such
payment.
4.5.4
. Unless
otherwise expressly provided by this Agreement, any and all other present and
future taxes and fees payable or arising from the execution
or registration of this Agreement or other related documents shall be
borne by the Borrower. If any Bank or the Agent pay(s) such taxes on
the Borrower’s behalf, the Borrower shall reimburse such amount upon demand,
otherwise, the Borrower shall also pay interest at the Default Rate (on floating
rate basis) on such sums for the period from the date such Bank or the Agent
makes such payment to the date the Borrower actually makes such reimbursement in
full.
4.6
.
Application of
Payments
.
4.6.1
. All
sums received by the Agent under this Agreement and all other related documents
shall be applied in the following order of priority: (a) first,
to all expenses and fees payable to or incurred by the Agent under
this Agreement and all other related documents, and which are not reimbursed or
paid by the Borrower or any Bank (including the agency fee payable to the
Agent); (b) then to all outstanding fees and interests (including penalties or
default interests payable at the Default Rate) payable by the Borrower to the
Agent and the Banks under this Agreement; and (c) then to the distributions by
the Agent to each Bank pursuant to the provisions of this Agreement (or in the
absence of an express agreement, at the discretion of the Agent), in accordance
with the
ratio of
each Bank’s outstanding Loan under the Facility to the sum of all the Banks’
outstanding Loans under the Facility (the “
Risk Sharing
Ratio
”).
4.6.2
. Unless
otherwise provided for in this Agreement, the Agent shall forward to the Banks
all sums received from the Borrower and payable to the Banks, upon its actual
receipt of such sums, for the Banks to apply towards the indebtedness due from
the Borrower to the Banks in the order of priority prescribed by this Agreement
or laws and regulations. In the event that the sums
actually received by the Agent are insufficient to pay all sums in a specific
category to the relevant Banks in the same order of priority, the Agent shall
distribute such sums to each Bank on a pro-rata basis in accordance with the
Risk Sharing Ratio.
4.7
.
Facility
Records
. The Agent shall maintain records relevant to the
Facility
and shall
document the Drawdowns of the Commitment by the Borrower and the payments made
by the Borrower to each Bank. Details of the outstanding sums due
from the Borrower under this Agreement shall be evidenced by such records,
unless the Borrower can present specific evidence of manifest errors in such
records. The Borrower further agrees to issue
such new negotiable instruments or certificate of
claims to the Agent according to the Agent's records if any
negotiable instrument or certificate of claims provided by the Borrower to the
Agent pursuant to the Agreement is lost, damaged or destroyed, and the Borrower
shall at all times unconditionally cooperate with the Agent in the event the
Agent is required by laws or regulations to report loss and/or proceed with
other relevant formalities due to the loss, damage or destruction of any
negotiable instrument or other certificate of claims. In respect of
the Agent’s payment to each Bank, so long as the fund is remitted by the Agent
to the bank account designated by each Bank in accordance with this Agreement,
the Agent shall have no further obligation with respect to such
payment.
4.8
.
Liability
Limitation
. Notwithstanding any provision herein,
absent willful misconduct or gross negligence, no Bank or any of its employees
or affiliates shall be liable to the Borrower under this Agreement; and under no
circumstances would any of them be liable for any indirect damages,
loss of profit or punitive damages.
ARTICLE
V
.
PARTIES
.
5.1
.
Several Obligations of the
Banks
. The commitments to lend and relevant obligations of the
Banks under this Agreement are separate and independent. Each
Bank shall perform its own Commitment to extend the Loans in
accordance with this Agreement. No action or inaction on the part of
any Bank will result in any right or obligation on the part of another
Bank. The Banks are not jointly liable with one another for the
obligations under this Agreement.
5.2
.
Joint and Several Claims of
the Banks
.
5.2.1
. Notwithstanding
the separate and independent obligations of the Banks to perform their
respective Commitment hereunder, all rights and claims of the Banks and the
Agent under this Agreement and the related documents against the Borrower are
joint and several claims under Article 283 of the ROC Civil
Code. Each of the Banks and the Agent are entitled by law to claim
performance in whole or in part of the above rights and claims against the
Borrower;
provided
, that all
the Banks and the Agent hereby agree to share their rights and interests
hereunder, and all their rights and claims under this
Agreement shall be exercised in accordance with the applicable provisions of
this Agreement. Specifically, except for exercise of the
set-off right as provided for in this Agreement, absent the written concurrence
of the Majority Banks, no Bank may take any action with respect to any matter
under this Agreement or take any action or inaction that conflicts or is
inconsistent with the decisions of the Majority Banks.
5.2.2
. All
of the Borrower, the Banks and the Agent agree that the Agent shall be the payee
of the Notes issued by the Borrower pursuant to
this Agreement, and if the Borrower subsequently grants security interests in
relation to this Facility or purchases insurance for the collaterals under such
security interests, the Agent shall be the holder of such security interests or
beneficiary of such insurance, as applicable, and the Agent shall act in its
capacity as a joint and several creditor with respect to these interests
pursuant to this Agreement. All such rights and interest shall be
held and exercised by the Agent in accordance with this Agreement for the
benefits of all the Banks and the Agent hereunder.
5.2.3
. Each
of the Banks and the Agent shall, pursuant to this Agreement, share the risks as
well as the interests and benefits under this Facility, in accordance the Risk
Sharing Ratio.
ARTICLE
VI
.
CONDITIONS PRECEDENT TO
DRAWDOWN
.
6.1
.
Conditions
Precedent
. The Borrower’s Drawdown of the Facility under this
Agreement is subject to the conditions precedent that, at
least two Business Days (at 10:00 am) prior to the
requested date for such Drawdown, the Agent shall have received all
of the following documents in form and substance satisfactory to the Agent (in
this regard, photocopies presented must have been certified by the document
provider as true, accurate and complete copies):
(1) evidence,
including, without limitation, resolutions and minutes of board of directors’
meetings, that the Borrower has completed all necessary internal corporate acts
and is duly authorized to enter into, deliver and perform the Acquisition
Contract, this Agreement and other related documents, as well as
evidence
that the person(s) signing this Agreement and other
related documents on behalf of the Borrower have been duly
authorized by the Borrower;
(2) copies
of the corporate documents of the Borrower, including the Articles of
Incorporation, business license, company registration card (including roster of
directors and supervisors), and identification documents of the Chairman of the
Borrower;
(3) the
Note and Note Authorization issued by the Borrower in accordance with this
Agreement;
(4) a
copy of the Acquisition Contract;
(5) evidence
that ASE Test has been duly authorized by its shareholders and board of
directors to enter into the Acquisition Contract and to proceed with the
Acquisition;
(6) the
applications submitted by the Borrower to the competent authority of Singapore
law in respect of the Acquisition in accordance with applicable
Singapore;
(7) copies
of the various approvals, reportings and/or filings required for the
Acquisition, including:
(a) copies
of the ROC Investment Commission approval letter in respect of the Borrower’s
investment in ASE Test and the Acquisition (permitting part of
the Acquisition payment be made with the proceeds of this
Facility);
(b)
approval of the Singapore competent authority (court) in respect
of the Borrower’s and ASE Test’s effecting the Acquisition in
accordance with the Acquisition Contract and applicable Singapore laws;
and
(c)
evidence that the Borrower and ASE Test have submitted all such reports
and filings to the Securities and Exchange Commission of the United
Stated (the “SEC”) as required under applicable U.S. laws and have obtained the
consent of the SEC;
(d) the
Letter of Confirmation issued by the Borrower in form of
Exhibit VII
hereto;
(8)
evidence that the Borrower does have sufficient funds (including the Loans to be
extended under this Facility) to effect the entire payments of the
Acquisition;
(9) all
third party consents (if any) in respect of the Acquisition have been
obtained;
(10)
evidence that all conditions for closing of the Acquisition, except for the
Borrower’s payments, have been met;
(11)
favorable written legal opinions of the Banks’ counsel on ROC law related
matters under this Facility; and
(12) such
other documents or evidences as may be reasonably required by the Agent in
advance.
6.2
.
Other
Conditions
. The obligations of the Banks to perform their
Commitments pursuant to this Agreement are also subject to the following
conditions precedent:
(1) the
Agent shall have received, on or before at least three Business Days (at 10:00
am) prior to the requested date for such Drawdown, the Drawdown Request duly
executed by the Borrower;
(2) the
Letter of Undertaking executed by the Borrower in form of
Exhibit VI
hereto;
and
(3) as of
the Drawdown Date, no event which restricts or prevents
proceeding of the Acquisition has occurred.
ARTICLE
VII
.
REPRESENTATIONS AND
WARRANTIES
.
The Borrower
hereby represents and warrants as follows:
7.1
. The
Borrower is a duly incorporated and legally existing company
under the laws of the ROC with all lawful power
and authority to own its assets and conduct its business.
7.2
. The
Borrower has obtained all necessary authorizations in accordance with all its
internal procedures to effect the Acquisition and to execute, deliver
and perform the Acquisition Contract, this Agreement, the Note and all other
documents relevant to this Agreement, as well as to borrow the
Loans.
7.3
. The
Acquisition and the execution, delivery and performance by the Borrower of the
Acquisition Contract, this Agreement, the Note and all other relevant documents
will not violate any law or regulation, its articles of
incorporation or other internal rules and guidelines, will have no
material adverse effect on the obligations of the Borrower under any other
contract, and will not result in any breach by the Borrower under any other
contract.
7.4
. The
Acquisition Contract, this Agreement, the Note and all other relevant
documents each constitutes a legal, valid and binding
obligations of the Borrower.
7.5
. The
Borrower has procured all approvals, permits, licenses required (a) for the
Acquisition and (b) for the operation of its current business pursuant to the
applicable laws and regulations, and such approvals, permits, licenses all
continue to be in force and effect and nothing has occurred which may result in
a revocation or cancellation of the above approvals, permits, licenses by the
competent authority. Further, with respect to the
Acquisition,
except for
those approvals or consents of the competent authorities
of the R.O.C., Singapore and the U.S.A. (which, except for the ROC Investment
Commission approval will be obtained soon, have been obtained
and remain current and valid), it is not necessary for the
Borrower to obtain any consent from any third party; and except for those
approvals obtained or filings made prior to the
date hereof, no further approval or filing in advance is required as the result
of entering into this Agreement.
7.6
. The
Borrower has sufficient capital and operation ability to conduct its business,
with assets more than its total liabilities and is capable
of performing all its obligations on a timely basis.
7.7
. All
statements and information in connection with the Acquisition, the Borrower and
major shareholders of the Borrower which were furnished
by the Borrower to the Banks via the
Arrangers appropriately reflect the Borrower’s
condition. The Borrower has not omitted any material fact
relating to the Acquisition, the Borrower or the Facility;
provided
, that the
Borrower’s financial projections and explanations,
investment plan, current market condition and prospects and all relevant
opinions, are made on the basis of facts as understood by
the Borrower and in reasonable judgment of the Borrower.
7.8
. Except
as disclosed in writing to the Arrangers and the Banks prior to the execution
hereof, there is no suit, litigious or non-litigious proceeding, arbitration,
enforcement, administrative dispute proceeding or other dispute
(including but not limited to environmental, pollution,
waste disposal or security exchange, etc.) involving the Borrower which (a) is
reasonably expected to have or will have a material adverse effect on the
Acquisition, or on the financial business operation or prospect of
the Borrower or of the Borrower and its Subsidiaries as a whole, or (b) may
impair the exercise or performance of any rights or obligations
by the Borrower under the Acquisition Contract or this
Agreement.
7.9
. The
Borrower (a) has not violated any laws, (b) nor violated any terms of this
Agreement, and the Acquisition, this Agreement or the Facility will
not result in an Event of Default or prospective Event of Default, (c) nor is in
default of any other contract where such default may affect the
progress of the Acquisition or this Facility, (d) nor has there been any other
event which may have a material adverse effect on the Acquisition, this Facility
or the financial business operations or prospects of the Borrower.
7.10
. There
is no petition by or against the Borrower for windup, dissolution and
liquidation, bankruptcy, corporate reorganization, relief or other similar legal
proceeding; nor is any of the above-mentioned proceedings underway or pending
with respect to the Borrower.
7.11
. Unless
otherwise disclosed by the Borrower in the financial statements furnished to the
Agent, or otherwise disclosed by the Borrower to the Banks and Agent in writing
prior to the execution of this Agreement, the claims of each Bank against the
Borrower under this Agreement rank at least
pari
passu
in priority of payment with all claims of any other person against the Borrower
(except for claims mandatorily preferred by law).
7.12
. The
CPA reviewed financial statements of the Borrower as at and for the period ended
March 31, 2008, are correct in all material respects and have
been prepared in accordance with generally accepted accounting
principles in the ROC and fairly present the financial condition and operations
of the Borrower as of the date thereof and for the
period then ended. Except for those which have been
otherwise disclosed to the Banks and the Agent
in writing, there are no material liabilities, direct or indirect,
fixed or contingent, of the Borrower as of the
date of such financial statements that are not reflected therein
or in the footnotes thereto. Since the date of such financial
statements, there has been no material adverse change in
the business operations, management, business prospects or
condition (financial or otherwise) of the Borrower or of the Borrower and its
Subsidiaries as a whole.
7.13
. All
written information delivered to the Agent, the Arrangers
and the Banks pursuant to this Agreement are true,
complete and correct; and at such time the written information was so delivered
there were no material mistake or omission which may negatively impact the
Agent, or the Banks.
7.14
. The
foregoing representations and warranties of the Borrower
will be true, accurate and complete throughout the term of this
Agreement.
ARTICLE
VIII
.
COVENANTS
.
In addition to
other undertakings made under this Agreement, the Borrower undertakes and agrees
that, as of the date of this Agreement and until such time that all of its
liabilities and obligations under this Agreement and all other relevant
documents have been fully discharged and performed, it shall duly perform the
following obligations:
8.1
. After
execution of this Agreement and prior to the Initial Drawdown, the Borrower
shall issue and deliver to the Agent a Note in an amount of the Total Commitment
payable to the Agent (in the form and substance of
EXHIBIT III
hereto) and a Note
Authorization (in the form and substance of
EXHIBIT IV
hereto). The Borrower hereby unconditionally and
irrevocably authorizes the Agent, subject to occurrence of an Event of Default,
to insert the maturity date, interest rate (being the Default Rate) and the
commencement date of the interest period of such Note
in accordance with relevant provisions of this
Agreement and to exercise all rights under the Note. With respect to
the Note (and any Note issued in
substitution
therefor), the Borrower shall, on or before the date falling two
years from the date of issuance thereof, issue
and deliver to the Agent another Note identical in all
substantive respects with the existing Note (save that the face amount may be
reduced in accordance with the then Total Commitment) to
replace the existing Note. The Agent and the Banks agree that the
Note and the Note Authorization held by the Agent shall be immediately and
unconditionally returned to the Borrower upon discharge of the Borrower’s
obligations hereunder in full.
8.2
. The
Borrower shall at all times:
(a) maintain the existence, nature of business
and scope of business of its company or other reasonable extended business
within the scope of this Agreement, and maintain all approvals, licenses and
permits necessary or desirable for the conduct of
its business and operations or the ownership of its properties
(including but not limited to the environment, pollution, waste disposal, and
securities exchange, etc.) and for the
timely performance of this Agreement;
(b) conduct its business in a regular manner;
(c) comply with all laws, regulations and requirements issued by all
government authorities with jurisdiction over such matters; (d) keep and
maintain proper books and records; and (e)
pay and discharge all taxes,
assessments and governmental charges or levies imposed
upon it, its income, profits or properties.
8.3
. The
Borrower shall ensure at all times that the Agent’s and the Banks’ claims
against the Borrower under this Agreement shall rank at least
pari
passu
in priority of
payment with all unsecured claims of any other person against the Borrower
(except for those preferred by operation of law
or
those required during the ordinary course of
business).
8.4
. In
the event of any of the following, the Borrower shall promptly notify the Agent
in writing thereof and inform the Agent of countermeasures that it has adopted:
(a) any substantive or material change to the Borrower’s business operations;
(b) any material change to the primary shareholders, directors, supervisors,
primary managers (general manager level and above), financial condition, or
major assets (but excluding replacement of proxies appointed by corporate
shareholders) of the Borrower; (c) occurrence of any Event of Default or
prospective Event of Default; or (d) occurrence of any other event which could
affect this Facility, the Borrower’s creditworthiness or ability to
perform.
8.5
. During
the term of this Facility and until such time that the Borrower has completely
discharged all its liabilities under this Agreement, the Borrower
shall not, without prior written consent of the Majority Banks (which
consent shall not be unreasonably withheld): (a) except for
those asset transfers or disposals between the
Borrower and its Subsidiaries on an arms length basis, sell, lease,
transfer or otherwise dispose of its business or assets in
amounts equal to 20% or more of its then total assets, whether in a single
transaction or on an aggregate basis;
(b) make
any material change to the scope or nature of its business; (c) conduct any
transaction which is not at arms length basis; (d) create,
incur, increase or suffer or permit to exist any security
interest or encumbrances in favor of any third party on any of its currently
exiting and/or future assets or revenue, except for (A) security
interests which are existing and have been disclosed to
the Agent and the Banks in writing prior to the date
hereof or security interests required to be provided during the ordinary course
of business, (B) security interests over any future machinery acquired pursuant
to a government sponsored program after the date hereof in
favor of banks securing the financing of the purchase price or
cost thereof; (e) except for those provided in accordance with its
articles of incorporation or its internal rules governing the extension of
loans, provide loans to any other parties; or (f) enter into liquidation or
dissolution.
8.6
. During
the term of this Facility, the Borrower shall not,
without prior written consent of the Majority Banks, (a)
enter into any merger or consolidation with others, (b) effecting any spin-off
or capital reduction, (c) except for the Acquisition, commencing from the
date hereof, make any investment in
any other companies
in an accumulative aggregate amount of
more than NT$ 10,000,000,000, or (d) acquire
material assets of any other companies;
provided
, that the
consent of the Majority Banks shall not be required for
the following: (i) investment in any Subsidiary
existing prior to the date hereof, (ii) entering into a
merger under which the Borrower is the surviving entity, (iii) merger or
consolidation with its Subsidiary(ies), or (iv) effecting a spin-off
under which the assignee of the assets is a Subsidiary and would not cause a
violation to Section 8.5(a) hereof; so long as any of the above shall not cause
any material adverse impact on the Borrower’s business operation, financial
condition or ability to perform hereunder.
8.7
. The
Borrower shall from time to time upon request by the Agent provide information,
records and documents in respect of the Acquisition Contract, this Agreement and
its ability to perform same, to the extent it does not interfere with the normal
operations of the Borrower, and shall permit the representatives or agents of
the Agent to enter the premises of the Borrower to review (or make copies or
extracts of) the various accounts, records or documents that are
relevant to the Borrower’s ability to perform under the Acquisition Contract,
this Agreement or other related agreements. To the extent deemed to
be necessary by the Majority Banks, the Agent may retain outside persons to
conduct such inspection;
provided
, that all
such persons participating in the inspection shall be subject to confidentiality
obligations.
8.8
. (a) Throughout
the term hereof, within 30 days after the end of each first and third
fiscal quarter of the Borrower, the Borrower shall provide to the
Agent and the Banks with copies of its quarterly report for such
quarter, prepared and reviewed on an unconsolidated
(and consolidated, if available) basis,
including
therein its balance sheet as of the end of such fiscal quarter,
statement of its income and cash flow statement. Each of such reports
shall be prepared by the Borrower, reviewed by a creditable independent public
accounting firm in accordance with applicable generally accepted audit
standards, and the information contained therein shall also be presented in
accordance with applicable generally accepted accounting principles consistently
applied.
(b) Throughout
the term hereof, within 90 calendar days after the end of each first
fiscal half-year of the Borrower, the Borrower shall provide to the Agent and
the Banks with copies of its semi-annual report (including footnotes)
for such half-year, prepared on an audited consolidated and unconsolidated
basis, including therein its balance sheet as of the end of such fiscal
half-year, balance sheet, statement of its income and cash flow
statement. Each of such audited reports shall be prepared and
certified by a creditable independent public accounting firm in accordance with
applicable generally accepted audit standards and the information
contained therein shall be presented in
accordance with applicable generally accepted accounting principles
consistently applied.
(c) Throughout
the term hereof, within 120 calendar days after the end of each fiscal year of
the Borrower, the Borrower shall provide to the Agent and the Banks copies of
its annual report (including footnotes) for such year, prepared on an audited
consolidated and unconsolidated basis, including therein its balance
sheet as of the end of such fiscal year, statement of its income, statement of
changes in shareholders’ equity and cash flow statement. Each of such
audited reports shall be prepared and certified by a creditable independent
public accounting firm in accordance with applicable generally accepted audit
standards and the information contained therein
shall be presented in accordance with applicable generally
accepted accounting principles consistently applied.
(d) Each
of the annual and semi-annual financial statements provided by the Borrower in
accordance with the above shall be accompanied by a certificate (in the form of
EXHIBIT V
hereto),
stating and certifying that no breach to relevant financial ratios under this
Agreement has occurred.
(e) At
the request of the Agent from time to time, the Borrower shall
provide all relevant information relating to the finances, business, operations,
major shareholder structure and assets of the Borrower to the
Agent. Upon providing the various financial statements, the Borrower
shall provide sufficient copies to enable the Agent to distribute a copy to each
Bank. The Borrower hereby authorizes the Agent to provide each
Bank with the various financial statements and
information provided by the Borrower.
(f) The
Borrower shall ensure that the contents of the
financial
statements prepared by the Borrower are in compliance with the laws of the
ROC and generally accepted accounting principles, and
that the substantive contents of the documents and
information relating to the Borrower are true, correct and complete in all
material respects.
8.9
. The
Borrower shall, commencing from the date hereof and throughout the term hereof,
maintain the following financial ratios (to be tested
semi-annually based on the annual audited and semi-annual audited consolidated
financial statements):
(a) Its
ratio of Current Assets to Current Liabilities shall not
be less than 100%.
(b) Its
ratio of Total Liabilities to Tangible Net Worth shall not exceed
150%.
(c) Its
Interest Coverage Ratio shall not be less than 280%. For purposes
hereof,
|
Interest Coverage
Ratio
|
=
|
Pre-tax
Income + Interest Expense + Depreciation +
Amortization
|
|
|
Interest
Expense
|
|
(d) Its
Tangible Net Worth shall not be less than NT$45,000,000,000.
For
purposes of the calculation above, “
Tangible Net Worth”
shall mean shareholders equity plus minority shareholdings minus intangible
assets (such as patents, trade names); “
Total Liabilities
”
shall mean Total Debts including Contingent Liabilities but excluding
minority shareholdings; and “
Contingent
Liabilities
” shall mean the outstanding obligations in respect of
endorsements and/or guarantees provided by the Borrower. In addition,
unless otherwise expressly specified herein, all accounting terms
used herein shall be defined in accordance with the ROC generally accepted
accounting principles.
8.10
. The
Borrower shall keep its general properties and business insured with financially
sound and reputable insurance companies in the manner
and with such
coverage and amount to the extent customary for companies of a size comparable
to it engaging in businesses of a like character.
8.11
. Commencing
from the completion of the Acquisition, the Borrower shall ensure that, at any
time during the term hereof, the Borrower shall from time to time and
at all times maintain, directly and/or indirectly, at least 51% of the total
shareholding of ASE Test and the effective control over the management of ASE
Test.
8.12
. All
proceeds of the Loans under this Facility shall be used for the purposes as
specified in this Agreement and shall not be used for any other purpose;
provided
, that
neither the Agent nor the Banks shall have any
obligation to monitor the Borrower’s actual application
thereof.
8.13
. The
Borrower does not enjoy any right of sovereign immunity or privilege from any
judgment, attachment or other legal procedures and hereby
agrees to waive the same even if it were entitled to any of such
right.
8.14
. All
representations and warranties made by the Borrower in this Agreement shall
remain correct, true and complete throughout the term hereof.
ARTICLE
IX
.
DEFAULT
.
9.1
.
Event of
Default
. The occurrence of any of the following shall
constitute an Event of Default under this Agreement:
(1) The
Borrower fails to make any payment, when due, of principal or interest under
this Agreement or make any other payment due to any Bank, any Arranger or the
Agent under this Agreement or any other related agreement (regardless of whether
such payment becomes due by acceleration or otherwise).
(2) The
Borrower fails to perform or violate any condition, covenant, undertaking or
obligation towards any Bank, any Arranger or the Agent stipulated under this
Agreement, or performance of any such condition, undertaking, covenant or
obligation hereunder shall become invalid or illegal, and such default is not
cured within 14 days after the occurrence thereof.
(3) The
Borrower or any Subsidiary defaults in making payment of any sums
under any other agreement with any Bank, any Arranger, the Agent or any third
party; or the Borrower or any Subsidiary (whether as primary obligor or
guarantor) encounters any event which accelerates or permits acceleration of the
maturity of any debt obligations of the Borrower or any
Subsidiary with any such creditors in an accumulated amount of
NT$350,000,000 or more, or the equivalent thereof in another
currency.
(4) Any
representation or warranty made by the Borrower under this Agreement
is found to be false or untrue when made or is reasonably deemed by
the Majority Banks as having become false or untrue.
(5) The
Borrower shall cease doing business as an ongoing concern;
admit in writing its inability to pay its debts as they become due; file a
petition in bankruptcy (or has any such petition filed against it); be
adjudicated bankrupt or insolvent; file a petition (or has any such
petition filed against it) seeking any
reorganization,
composition, liquidation, dissolution, delisting of shares of stock, suspension
of trading or similar arrangement under any statute, law or regulation for the
relief of debts; file an answer admitting the material allegations of a petition
filed against it in any such proceeding; and
cause material adverse changes to its financial
conditions.
(6) The
Borrower shall fail to maintain any of the financial ratios stipulated in
Section 8.9 hereof.
(7) The
Borrower or any Subsidiary shall fail to pay any tax in accordance with
applicable laws and regulation, causing material impact on it business operation
or financial condition, except if the Borrower or such Subsidiary has filed a
petition therefor in accordance with applicable laws and
regulations.
(8) The
Borrower shall fail to provide such financial, business or accounting
information as may be requested by the Agent pursuant to this Agreement, or
shall fail to cooperate in respect to the review or inspection of records by the
Agent as requested.
(9) The
Borrower or any Subsidiary shall cease its operations permanently or is ordered
to cease its operations permanently, or its checks are dishonored, or has been
blacklisted by the bills clearing house, which could adversely affect its
ability to perform hereunder.
(10) Any
government consent, licenses or approval required in connection with the
operations of the Borrower or any Subsidiary is revoked or
becomes expired which could adversely affect its ability
to perform hereunder.
(11) Any
engagement, covenant, or obligation of the Borrower hereunder may become invalid
or unenforceable which could adversely affect its ability to perform
hereunder.
(12) Any
government or governmental authority nationalizes, takes custody or control over
or otherwise expropriates all or a substantial part of the
property or assets of the Borrower or any Subsidiary which, in the
reasonable judgment of the Majority Banks, will cause material adverse impact on
the operation of the Borrower or any Subsidiary.
(13) Any
attachment, compulsory execution, disposal restriction or similar legal process
is initiated against any assets of the Borrower or any Subsidiary, which will
cause material impact on its business operation of financial condition and is
not discharged within 14 days upon occurrence thereof.
(14) Any
final judgement is rendered against the Borrower or any Subsidiary and the
Borrower or such Subsidiary shall fail to pay the same accordingly.
(15) The
Borrower or any Subsidiary is subject to any material litigation, arbitration,
or other disputes, or is subject to any ruling or order issued by the court or
competent authority against it which could adversely affect its ability to
perform hereunder.
(16) There
occurs a material adverse change in the business operations,
financial condition or ability to perform of the Borrower or of the
Borrower and the Subsidiaries as a whole, or any material adverse change in the
major shareholding or assets structure of the Borrower, which in the
professional judgment of the Majority Banks, gives reasonable grounds for belief
that the Borrower’s ability to perform the obligations hereunder or under any
related agreement would be affected.
9.2
.
Determination of
Default
. In the event of any dispute between the Banks and the
Borrower or amongst the individual Banks, as to whether an Event of Default has
occurred, any disputing party may request the Agent in writing to seek
clarification from the Banks and obtain the determination of the Majority
Banks.
9.3
.
Consequences of
Default
.
9.3.1
. Where
an Event of Default has occurred, the Commitments shall immediately be
suspended, and may not be further utilized unless otherwise permitted by the
Majority Banks (at which time the Agent shall notify the
Borrowers). Should the Majority Banks decide to take actions and so
instruct the Agent in writing, the Agent shall, upon the instruction of the
Majority Banks, (a) by written notice to the Borrower, declare the entire unpaid
principal amount of all the outstanding Loans, all unpaid interest, fees and all
other sums payable hereunder to be immediately due and payable, whereupon the
Borrower shall immediately repay such amounts; and/or (b) present the Note for
payment; and/or (c) take all such other actions as may be permitted by law or
contract. Demand, protest or notice of any kind,
other than the notice specifically required by this
Section, are hereby waived by the Borrower to the
extent permitted by
law.
9.3.2
. Where
an Event of Default occurs, the Borrower shall also make payment of interest to
the Banks and/or the Agent in respect of any amounts due and outstanding,
calculated from the date that such amounts becomes due until such
time that the amounts are actually paid; and if any Bank and/or the Agent incurs
any other costs or direct losses as a result of such default, the Borrower shall
also indemnify such Bank and/or Agent for and against such costs or losses
(such Bank or Agent shall provide relevant
evidence). Unless otherwise provided herein, the Borrower shall not
be liable to the Bank or its employees or affiliates for any indirect damages,
loss of profit or punitive damages.
9.3.3
. The
costs and expenses incurred by the Agent in relation to the exercise of the
various rights and actions taken pursuant to the Agreement shall be shared by
the Banks on a pro-rata basis
(by
the Risk
Sharing Ratio), except where such costs have been paid by the
Borrower. If the Borrower fails to pay such
costs or expenses, the Agent is not obliged to make such payments, and may
require the Banks to advance such payments in accordance with the Risk Sharing
Ratio.
ARTICLE
X
.
AGENT, ARRANGERS AND
BANKS
.
10.1
. Each
Bank hereby appoints the Agent to act as agent hereunder and irrevocably
authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and any other agreements and instruments referred
to herein and therein. In performing its functions and duties
hereunder, the Agent shall act solely on behalf of the Banks and not in the
capacity as trustee of the Banks or the Borrower or in the capacity as agent of
the Borrower. The Agent (a) shall have no duties or responsibilities except
those expressly set forth in this Agreement; (b) shall not be responsible to the
Banks for any failure by the Borrowers or any other person to perform
any of its obligations under this Agreement or any other document
referred to herein; (c) shall not be required to initiate or conduct any
litigation or collection proceedings hereunder except as expressly specified
herein and so required by the Majority Banks in writing; and (d) shall not be
required to take any action that the Agent deems in good faith to be contrary to
any applicable law. The Agent may employ agents, consultants and
accountants and shall not be responsible for the negligence or misconduct of any
such person selected by the Agent in good faith save for its gross negligence or
willful misconduct in such selection.
10.2
. Each Bank
acknowledges and agrees that it shall independently assess, inspect and be
responsible for the creditworthiness or records of the Borrower and other
relevant information. Relevant risks applicable to each
Bank as a result of making available the Loans shall be independently borne by
such Bank. The Agent and the Arrangers do not make
any representations or warranties regarding, and shall not be
responsible for, the creditworthiness, ability to perform of the Borrower or any
other matters relating to this Agreement.
10.3
. The
Agent may not take any action that is contrary to the
written instructions of the Majority Banks, and shall take
the legal actions in accordance with this Agreement, based
on the written instructions of the Majority Banks. Except as
instructed in writing by Majority Banks, the Agent may
refuse to take any actions. The Agent may, but is not obligated to,
seek approval of the Majority Banks for actions taken
by it pursuant to the Agreement. Absent willful misconduct
or gross negligence, the Agent shall not be responsible in any way to the
Borrower or any Bank in respect of actions taken in accordance with the written
instructions of the Majority Banks, or actions subsequently approved
by the Majority Banks. Unless the Majority Banks have
issued a
written instruction to the Agent to take a
specific action, the Agent shall not be held responsible
in any way for failing to take such action. Irrespective of any other
provisions to the contrary in this Agreement, the Agent may refuse to take any
action on behalf of the Banks if the legitimacy of the instructions
from the Banks are in doubt or until it has received confirmation that it will
be satisfactorily reimbursed for the related costs. In addition,
except for exercising the set-off right hereunder, no Bank may take any action
individually without the written consent of the Majority Banks, nor take any
action or make any omission that would conflict or be
inconsistent with the decisions of the Majority Banks (decisions made
by the Majority Banks pursuant to relevant provisions of this
Agreement shall be binding on all of the Banks).
10.4
. The
Agent shall handle matters relating to this Agreement (including but not limited
to obtaining the Reference Rate) in accordance with the provisions of this
Agreement, and shall handle matters relating to the Commitment and exercise the
rights under this Agreement in accordance with relevant provisions of this
Agreement. In handling such matters, the Agent shall act in
accordance with the provisions of this Agreement and/or
the written instructions of the Majority Banks, and may (but is not obliged to)
exercise the same degree of care as if
it were handling facilities
granted by the Agent alone.
10.5
. In
respect of documents submitted to the Agent by the Banks and the Borrower in
accordance with this Agreement, the Agent shall verify the signatures and chops
in accordance with normal procedures, but is not required to further examine the
contents or any other aspect of such
documents. In executing matters in relation to
this Agreement, the Agent may rely on the validity, authenticity and correctness
of the signatures and contents of relevant documents received and may rely on
the advice received from its legal counsel. The Agent shall not be
liable for any actions taken based on such reliance. In addition,
in making remittances to the Banks, the Agent may
rely upon the correctness of the addresses and
remittance accounts stipulated in respect of each Bank in
SCHEDULE I
of this Agreement
or as otherwise designated in writing.
10.6
. In
handling matters relating to the Commitment (such as advance,
repayment, etc.), the Agent shall allocate the Commitment in accordance with the
proportions stipulated in this Agreement;
provided
, that where
actual calculations do not permit allocation to be made in such a manner/ratio,
the Agent may use its reasonable judgment in making the allocation, and no Bank
shall raise any objection thereto.
10.7
. Unless
otherwise stipulated in this Agreement, communications by the Agent in relation
to this Agreement may be carried out by fax, and the Agent may rely upon the
authenticity and correctness of the contents of the faxed documents it
receives. The Agent shall not be responsible in any way for the
disruption
or delay
of any transmissions or receptions of communication (by telephone, fax or
courier) or for any defect, error or consequences in
the transmission or reception process, except where such
is caused by the willful misconduct or gross negligence of the
Agent.
10.8
. Upon
receiving any notices from the Borrower, the Agent shall notify each of the
Banks. Except for notices, reports, financial statements and other
documents required to be delivered by the Agent to each of the Banks under this
Agreement, the Agent is not obliged to provide the Banks with any other
information in its possession concerning the credit record,
general business and financial status of the
Borrower.
10.9
. During
the term of this Agreement, the Agent, the Arrangers or any of the Banks may
enter into other transactions unrelated to the Facility with the Borrower in
capacities other than as the Agent, an Arranger or a Bank.
Such transactions shall not be affected by the Agreement.
10.10
. The
Agent may notify the Borrower and each of the Banks in writing at any time that
it shall resign from the position of the Agent (as soon as a new Agent takes
office). The Majority Banks are also entitled to replace the Agent at
any time. Upon the resignation or replacement of an Agent, the
Majority Banks are entitled to elect a new
Agent. If within 30 days after the resignation of the
Agent or the replacement of the Agent by the Majority Banks, the Majority Bank
fails to elect a new Agent or the newly elected Agent does not agree
to take the office, the original resigning Agent may select a financial
institution as its successor. If the successor is not successfully selected by
the Agent during another 30-day period, the Agent may
still resign. During such period (before the
successor agent in selected), all the Banks shall jointly perform the
duties of the Agent until the successor agent
is selected, but if the Majority Banks resolve to exercise
the rights under the Note during such period, the Agent shall perform relevant
acts in accordance with this Agreement. The resigning Agent may
continue to collect any sums falling due but uncollected during the period of
its office and this provision shall remain applicable to any acts taken by the
resigning Agent prior to its duties being terminated.
10.11
. All
the payments received by the Agent from the Borrower for the common interest of
the Banks and payments from the Banks to be distributed
to the Borrower, shall after being applied for payment of
various fees and expenses in accordance with this Agreement, be
distributed or allocated in accordance with this Agreement (for payments to
be distributed amongst the Banks, the distribution shall
be made in accordance with the Risk Sharing
Ratio), and shall deliver such payments to each Bank by the Business
Day following actual receipt thereof. The Agent’s obligation to
distribute the said payments shall be limited to the amounts that it actually
receives, and the Agent is not obliged to advance any amounts
therefor. The Agent may assume that the relevant persons
with
obligation to pay will make the relevant payments to the Agent in accordance
with the Agreement, and may (but is not obliged to) distribute or pay such
amounts to each of the Banks on the basis of such assumption and in
the aforementioned manner. However, where the Agent relies
on such assumption in making the payment, but subsequently finds
that it has not actually received the relevant payment, the Bank or
the Borrower which receives the said amount from the Agent shall refund the
payment immediately upon receiving the notice from the Agent, and shall pay
interest to the Agent from the date that it receives the payment and until the
date that refund is actually made to the Agent,
calculated based on the Agent’s actual cost of funding, as
of that date.
10.12
. Unless
the Agent has received the notice from any Bank or the
Borrower concerning the occurrence of an Event of Default,
which notice expressly states that it is a “notice of Event of
Default”, the Agent shall not be deemed to have known or has been informed as to
the occurrence of an Event of Default. Upon receiving the said
notice, the Agent shall notify each of the Banks as soon as
possible.
10.13
. The
Agent shall be treated as an independent business unit of Citibank,
N.A. Any notice to be sent to the Agent shall not be deemed duly sent
if it were sent to other business department of Citibank N.A.
10.14
. Any
damage, if any, caused to the Borrower as a result of any act or omission to act
of a Bank shall be the responsibility of that relevant Bank, and the Arrangers,
the Agent or any other Banks shall not be responsible therefor.
10.15
. In
the event of any damage or loss to the Agent or a Bank in the course of
performance of this Agreement by the Borrower or its agent or employee, as a
result of causes attributable to the Borrower or its agent or employee, the
Borrower shall be liable for full indemnification against such damage or
loss.
10.16
. Unless
otherwise provided hereunder, in respect of their performance hereunder,
neither the Agent nor its agents or employees shall be
held liable in whatever respect to the Banks except for those as a result of its
willful misconduct or gross negligence.
10.17.
The
Agent may outsource the matters to be handled by it under this Agreement to
others in accordance with applicable laws and regulation.
ARTICLE
XI
.
SET-OFF
.
11.1
. In
the event that the Borrower fails to perform its obligations under
this Agreement or any other relevant agreement in connection with the Facility,
each of the Banks and the Agent,
in
addition to exercising the various rights of claim under this Agreement, shall
also be entitled to (but are not obliged to) offset any sums in accounts
(irrespective of whether such sum is of the same currency and, in case of
different currencies, such Bank or the Agent may convert same to the same
currency as the Borrower’s obligations hereunder) held by the Borrower at the
said Banks or the Agent (including their headquarters and all branches) and all
claims of the Borrower against the Bank or the Agent, against the obligations of
the Borrower to the Banks and/or the Agent under this Agreement (the Borrowers
further agrees that such accounts or other claims shall be deemed to mature
automatically upon such time that the offset
is exercised by the relevant Bank or the
Agent). Where an account held by the Borrower is a time deposit
account, the relevant Bank or the Agent may directly terminate the time deposit
account agreement prematurely and offset funds in the said account against the
obligations under this Agreement, notwithstanding that the deposit term has not
expired; where such an account is a checking account, the Borrower agrees that
an announcement by the Banks of the acceleration of the obligations under this
Facility shall be a condition for termination of the checking account
agreements and upon such announcement, the checking account agreement
shall cease to be effective, and the Banks or the Agent may directly exercise
its right of offset and notify the Borrower thereof. To the greatest
extent permitted by law, the exercise of such setoff right
shall be deemed to take effect at the time that such offset is
recorded on the books of the relevant Bank. Where the
offset amount is insufficient to satisfy the full amount of
the outstanding obligations of the Borrower hereunder, the Borrower
shall remain liable for repaying the insufficiency thereof.
11.2
. In
order to maintain the prorata repayments to each Bank, where any payments
received by a Bank in respect of the Facility (whether as a
result of voluntary or involuntary offset or otherwise)
exceeds the prorata amount due to that Bank in accordance
with this Agreement, such Bank shall (a) forward such sums to the Agent for
distribution to all Banks in accordance with this Agreement or (b) if necessary
and to the extent required by law, purchase from the other Banks a right of
claim equivalent to the amount of the excess, so that such Bank may, in
substance, share with the other Banks the proceeds of the additional
repayment. However, if the benefiting Bank is subsequently required
to return all or part of such repayment, the
aforementioned purchase of claim shall be unwind immediately, and the
consideration paid for such purchase shall also be refunded without
interest. The Borrower further agrees that the Banks may exercise all
rights (including the right of offset), in the same manner
as for other rights hereunder, in respect of the claims so
purchased.
11.3
. If
any other creditor of the Borrower effects a compulsory execution against any
account of the Borrower with a Bank or the Agent, and the executing court issues
an attachment order, collection order, or transfer order to the Bank
or the Agent in
respect of
such account, the said Bank or the Agent shall
be entitled to declare that the Borrower’s obligations under this Agreement in
an amount equal to the amount of such deposit to be subject to compulsory
execution shall become due and payable immediately, and to offset same against
such deposit in the account;
provided
, that so
long as such attachment shall not constitute an Event of Default, the
availability of the Commitment shall not be affected.
ARTICLE
XII
.
EXPENSES
.
12.1
. All
reasonable legal costs and other costs and expenses incurred by the Arrangers in
arranging for the Banks and preparing this Agreement, or any other related
documents, as well as costs and expenses to be incurred for any subsequent
amendments or modification to this Agreement, shall be borne by the
Borrower.
12.2
. All
reasonable fees and legal costs incurred by a Bank and/or the Agent arising
from occurrence of an Event of Default in exercising the rights under
this Agreement and other relevant agreements, shall be borne by the
Borrower.
12.3
. If
the Borrower fails to pay the costs and expenses in accordance with
this Agreement, the Agent has no obligation to advance same and may
require each of the Banks to advance same in accordance with the Risk Sharing
Ratio (or if the Borrower has not yet made any
Drawdown at such time, in accordance with the Commitment
Ratio), and the Agent may take the
relevant action only upon receipt of such payments in full from the
Banks. If the Agent has advanced such payment, the Banks shall
reimburse the Agent immediately upon demand, and if any Bank fails to make such
reimbursement timely, the Agent may directly deduct such payment
against sums to be paid to the Banks under this
Agreement. The Banks reimbursement obligations hereunder shall not be
affected by any assignment of such Bank’s right or obligation hereunder, and to
the extent such payment is not paid, the assignee bank shall assume same
accordingly.
12.4
. Neither
the Banks, the Arrangers nor the Agent is obliged to advance any payment(s) on
behalf of the Borrower. However, if a Bank, an Arranger or the Agent
has done so, the Borrower shall reimburse them for same immediately upon demand,
failing which interest at the Default Rate (on a floating rate basis) shall be
payable on such payment commencing from the date of advance by the Bank(s), the
Arranger(s) or the Agent until such reimbursement is actually made by the
Borrower.
ARTICLE
XIII
.
NOTICES AND PAYMENTS BY
AGENT
.
13.1
. Notices
made under this Agreement shall be made in writing (by letter or fax) in
accordance with relevant provisions of this
Agreement;
in addition: (a) notices made to the Borrower or the Agent shall be delivered to
the address or fax number set out below in this Agreement (or such other address
or fax number subsequently notified in writing); (b) notices made to a Bank
shall be delivered to the address or fax number of the relevant Bank as set out
in
SCHEDULE I
of this
Agreement (or such other address or fax number subsequently notified in
writing); (c) monies payable by the Borrower/the Agent to the Agent/the Banks
under this Agreement, if made by electronic transfer, shall be remitted to the
relevant Banks/the Agent by the inter-bank remittance system to the account
detailed in
SCHEDULE I
of this Agreement or detailed below (or such other account
subsequently notified in writing). Notices delivered in
person shall be deemed duly delivered when so delivered;
notices sent by prepaid registered post shall be deemed duly delivered five (5)
days after posting; notices sent by fax shall be confirmed by delivering written
confirmations and such notices shall be deemed delivered when the written
confirmations thereto have been received:
(a)
|
To
Borrower:
|
ADVANCED SEMICONDUCTOR
ENGINEERING INC.
|
|
Address:
|
_________________________________________
|
|
|
_________________________________________
|
|
|
_________________________________________
|
|
TEL
No:
|
_____________________________
|
|
Fax
No:
|
_____________________________
|
|
Contact:
|
_____________________________
|
|
A/C
Name:
|
_____________________________
|
|
A/C
No.:
|
_____________________________
|
(b)
|
To
Agent:
|
CITIBANK, N.A., TAIPEI
BRANCH
|
|
Address:
|
_________________________________________
|
|
|
_________________________________________
|
|
|
_________________________________________
|
|
TEL
No:
|
_____________________________
|
|
Fax
No:
|
_____________________________
|
|
Contact:
|
_____________________________
|
13.2
. Any
party that changes its address, telephone number, fax number or remittance
account shall immediately notify the Agent and other parties under this
Agreement in writing. In the absence of such notice, the change shall
not be binding as against the Agent or the other parties of this
Agreement.
ARTICLE
XIV
.
NON-WAIVER
.
The rights and
remedies of the Agent, the Arrangers and the Banks under this Agreement and the
related agreements shall be in addition to,
and not exclusive of, any rights or remedies
which the Agent, any Arranger or any Bank has under the law, and no delay by the
Agent, any Arranger or any Bank in exercising any power, privilege or right
shall operate as a waiver thereof, nor shall any single or
partial exercise of any power, privilege or right preclude other or further
exercise thereof or the exercise of any other power, privilege or
right.
ARTICLE
XV
.
AMENDMENT AND
ASSIGNMENT
.
15.1
. An
amendment or modification to this Agreement shall be made in writing and shall
be agreed to by the Borrower, the Arrangers, the Agent and the Banks;
provided
, that,
amendments relating to those matters which
are not directly related to the Borrower shall require
only the consent of the Agent and the Majority Banks and shall be made in
writing without the consent of the Borrower (although the Borrower
shall be notified of such amendment in writing).
15.2
. The
Banks, the Arrangers and the Agent agree that for those matters which
are otherwise provided for in this Agreement or those
matters which have been expressly stipulated hereunder, the
relevant
provisions or stipulations shall apply. Separate from such provisions
or stipulations, all matters relating to: (a) amendment to the validity period,
availability or Commitment Termination Date of this Facility, (b)
amendment to the currency, amount, the interest/fee rate or due date of a
payment, (c) increase of the Total Commitment under this Agreement, (d)
amendment to the definition of “Majority Banks”, (e)
amendment to Sections 15.1, 15.2 or 15.3 of this Agreement, or (f) the removal
of all or part of the financial ratios (but not including the amendments
thereof) which shall be subject to the written consent of all of the Banks, all
other amendments or modifications to the Agreement, waiver of an Event of
Default, or modification to other matters relating to this Agreement may be
amended, waived or revised based on the written consent of
the Majority Banks (a decision by the Majority Banks in accordance with such
provision shall be binding on all of the Banks and the Arrangers).
15.3
. In
respect of a waiver, amendment or modification to be made by the written consent
of all of the Banks or the Majority Banks, each of the Banks, the Arrangers and
the Agent hereby agree and unconditionally authorize the Agent to execute the
relevant documents, for and on behalf of all of the Banks, the Arrangers and the
Agent, in accordance with the written consent of all of the Banks or the
Majority Banks, as applicable (acts of the Agent in accordance with this
provision shall be binding on all of the Banks and the Arrangers).
15.4
. This
Agreement shall be binding on the assignees or successors of each party to this
Agreement, or any other person who assumes or succeeds to the rights or
obligations of such party according to law;
provided
, that the
Borrower may not assign its rights or obligations under this Agreement without
the prior written consent of the Agent and all of the Banks.
15.5
. A
Bank may at any time with notice to (but
without the consent of) the Borrower, the Agent or any other Bank change its
lending office for this Facility, and may, by no less than 5 Business Days prior
written notice (in form of
EXHIBIT VIII
hereto) to the
Agent and the Borrower, assign
or transfer its rights and/or
obligations hereunder without the consent of
the Agent or any other Banks;
provided
, that except
as agreed by the Borrower or after occurrence of an event under Section 9.1 of
this Agreement, (a) such shall not cause any additional cost to the Borrower and
(b) the assignee shall agree in writing to the Agent to be bound by this
Agreement. In respect of each such assignment, the Bank proposing to
assign its rights and/or obligations shall pay (or cause the assignee to pay)
the Agent a processing fee of US$2,000 for each assignment;
provided
, that each
party hereto acknowledges and agrees that, to facilitate the Borrower’s timing
requirements, the Loans will be advanced by the Banks executing this
Agreement. To
complete the syndication arrangement as
contemplated, each Bank may, within the coming one month period, transfer its
rights and obligations hereunder to other financial
institutions. In
this
regard:
(a) The
Borrower hereby agrees to such transfers and
agrees that it shall, if required by the Agent, further execute such
document as necessary to accommodate such transfers.
(b) To accommodate such
transfers and allocation, the first Interest Period shall be a 1-month
period.
(c) No processing fee for
such transfers shall be payable.
15.6
. A
Bank may enter into a risk participation agreement with other person(s) in
respect of its claim under this Agreement, without being
required to notify the Borrower the Agent or any other Bank;
provided
, that such
other party may not assert any right of claim against the Borrower or any other
party under this Agreement.
15.7
. In
addition to disclosure of information according to relevant laws and
regulations, the Agent and the Bank may from time to time
provide contents of this Agreement, or information held by it concerning the
Borrower or the parties related to this Agreement, to its head office, parent,
affiliate or an assignee of the rights under this Facility or a
person sharing the risks (including potential assignee or participant), the
Joint Credit Information Center, a credit assessment institution, a trustee for
asset securitization program, a credit rating institution,
or other institutions that provides outsourcing services
to the Agent or the Banks
without consent of the Borrowers or the
relevant parties.
15.8
. Compliance
with applicable “know your customer” anti-money laundering laws and regulations
(collectively, “
AML
Compliance
”) is the responsibility of each Bank, and the Agent shall not
be responsible for any Bank’s AML Compliance. The Borrower shall
promptly upon the request of the Agent or any Bank supply such documentation and
other evidence as is reasonably requested by the Agent or any Bank in
order for the Agent, such Bank or any prospective assignee or sub participant to
carry out and be satisfied with the results of all AML Compliance or other
checks in relation to any person that it is required (under any applicable law
or regulation) to carry out in respect of the transactions contemplated
hereby. The Agent and the Banks may disclose to any relevant tax
authority the information or materials of the Borrower in respect of this
Agreement or make any other necessary disclosure after
giving notice to the Borrower.
15.9
. The
Borrower acknowledges that communications made by the Agent may be made by
email, fax or other electronic means which may not be secure or
reliable. The Agent will not be liable to the Borrower for any such
security or reliability issues. Also, the Agent may, if
it deems necessary to do so, monitor, record or
retain communications between the Agent and the Borrower.
15.10
. Each
Bank shall inform the Agent of any merger or change of its name or organization
structure and, if required by the Agent, shall provide the Agent such legal
opinion acceptable to the Agent to prove that its legal
capacity remain unchanged. Otherwise, the Bank shall, upon
request by Agent, execute and deliver to the Agent, at its own costs,
such assignment document transferring rights and obligations to
the entity surviving the name change, reorganization or
merger.
15.11
. The
Borrower agrees that, each of the Banks may outsource the debt collection with
respect to this Facility to a third party in accordance with
“Rules Governing the Internal Operational System and
Procedures for Outsourcing Services By the Financial Institutions” promulgated
by the competent authority and other relevant laws and regulations.
ARTICLE
XVI
.
GOVERNING
LAW
. This Agreement shall be governed by the laws of the
ROC. Any matters not fully stipulated within this Agreement shall be
in accordance with relevant laws of the ROC.
ARTICLE
XVII
.
JURISDICTION
.
All of the
parties hereto agree that with respect to litigation in connection with this
Agreement, the Taipei District Court of Taiwan shall have jurisdiction as the
court in the first instance;
provided
, that this
article does not preclude any rights of the Agent or the Banks to undertake any
other legal proceedings against the Borrower in any other courts or any other
jurisdiction in pursuit of repayment.
BORROWER:
|
ADVANCED
SEMICONDUCTOR ENGINEERING INC.
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER
|
CITIBANK,
N.A., TAIPEI BRANCH
|
|
AND
AGENT:
|
|
|
|
|
By:
|
|
|
ARRANGER:
|
THE
SHANGHAI COMMERCIAL & SAVINGS BANK, LTD.
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER:
|
CHINATRUST
COMMERCIAL BANK, LTD.
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER:
|
TAISHIN
INTERNATIONAL BANK LTD.
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER:
|
CALYON,
TAIPEI BRANCH
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER:
|
STANDARD
CHARTERED BANK (TAIWAN) LIMITED
|
|
|
|
|
|
|
By:
|
|
|
ARRANGER:
|
THE
HONGKONG AND SHANGHAI BANKING CORPORATION
LTD., TAIPEI BRANCH
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER:
|
HUA
NAN COMMERCIAL BANK
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRANGER:
|
BANK
OF TAIWAN
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK:
|
CITIBANK,
N.A., TAIPEI BRANCH
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK:
|
THE
SHANGHAI COMMERCIAL & SAVINGS BANK, LTD.
|
|
|
By:
|
|
|
BANK:
|
CHINATRUST
COMMERCIAL BANK, LTD.
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK:
|
TAISHIN
INTERNATIONAL BANK LTD.
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK:
|
CALYON,
TAIPEI BRANCH
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK:
|
STANDARD
CHARTERED BANK, TAIPEI BRANCH
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK:
|
THE
HONGKONG AND SHANGHAI BANKING CORPORATION LTD., TAIPEI
BRANCH
|
|
|
|
|
|
By:
|
|
|
BANK:
|
HUA
NAN COMMERCIAL BANK
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK:
|
BANK
OF TAIWAN
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK:
|
MEGA
INTERNATIONAL COMMERCIAL BANK
|
|
|
|
|
|
|
By:
|
|
|
|
THE BANKS, COMMITMENT
AND COMMITMENTS
|
SCHEDULE
I
|
SYNDICATE
BANKS
|
COMMITMENT
(NTD)
|
PROPORTIONAL
COMMITMENTS
|
|
|
|
|
|
|
CITIBANK,
N.A., TAIPEI BRANCH
|
US$21,500,000
|
|
|
|
|
|
|
|
|
|
|
THE
SHANGHAI COMMERCIAL
|
US$21,500,000
|
|
&
SAVINGS BANK, LTD.
|
|
|
|
|
|
|
|
|
|
|
|
CHINATRUST
COMMERCIAL BANK, LTD.
|
US$21,500,000
|
|
|
|
|
|
|
|
|
|
|
TAISHIN
INTERNATIONAL BANK LTD.
|
US$21,500,000
|
|
|
|
|
|
|
|
|
|
|
CALYON,
TAIPEI BRANCH
|
US$21,500,000
|
|
|
|
|
|
|
|
|
|
|
STANDARD
CHARTERED BANK,
|
US$21,500,000
|
|
TAIPEI
BRANCH
|
|
|
|
|
|
|
|
|
|
|
|
THE
HONGKONG AND SHANGHAI BANKING
|
US$21,500,000
|
|
CORPORATION
LTD., TAIPEI BRANCH
|
|
|
|
US$21,500,000
|
|
|
|
|
|
|
|
|
|
|
|
US$21,500,000
|
|
|
|
|
|
|
|
|
|
|
MEGA
INTERNATIONAL COMMERCIAL BANK
|
US$6,500,000
|
|
Total
Commitment:
US$
200,000,000
SCHEDULE
II
Acquisition
- translation omitted
-
- SCHEDULE II
-
EXHIBIT
I
Drawdown
Request/Loan Application
-translation
omitted-
EXHIBIT
I-1
Borrower
Notice
to
Agent
-translation
omitted-
EXHIBIT
II
Agent
Notice to Banks
-translation
omitted-
EXHIBIT
III
PROMISSORY
NOTE
|
Issuing
Date:
____________
|
|
Payable
In Taipei, Taiwan
|
Amount:
US$200,000,000
FOR
VALUE RECEIVED, the undersigned hereby unconditionally promises to pay to the
order of Citibank, N.A., Taipei Branch on _____________________ at
the
office of Citibank, N.A., Taipei Branch
in
Taipei, Taiwan, Two Hundred Million US Dollars (US$200,000,000) and interest
thereon from _______________ to the date of actual payment hereon at the rate of
_______% per annum.
Demand,
protest and/or other notice of
any
kind being hereby expressly waived.
MAKER:
ADVANCED
SEMICONDUCTOR ENGINEERING INC.
By:
______________________
EXHIBIT
IV
NOTE
AUTHORIZATION
To:
CITIBANK,
N.A., TAIPEI BRANCH
(the
"Agent")
With
regard to the
US$200,000,000
Syndicated
Loan Agreement dated [ ], 2008 (the “Loan
Agreement”), entered into by and among the undersigned as borrower and the banks
named therein (the “Banks”), under which you act as the Agent, the undersigned
has delivered or will deliver to the Agent a promissory note issued by the
undersigned in favor of the Agent in accordance with the Loan Agreement (the
“Note”) as evidence of the undersigned’s obligations to the Banks under the Loan
Agreement.
The
undersigned agrees that, the Agent shall have the right to exercise the various
rights under the Note delivered by the undersigned according to the Loan
Agreement and any note hereafter delivered to the Agent in replacement thereof
or substitution therefor (the
“
Replacement Note”)
for the benefit of the Agent and all the Banks in the capacity of a joint and
several creditor in the manner contemplated by the Loan Agreement, including but
not limited to presentation for payment.
The
undersigned hereby expressly and irrevocably authorizes the Agent and any of the
Agent’s agent or employees, with full rights of substitution, at any time after
the occurrence of an Event of Default as defined in the Loan Agreement and in
the discretion of the Agent, to fill in the maturity date, the date from which
interest thereon is to accrue and interest rate (based on the Default Rate
provided for in the Loan Agreement) on the Note or Replacement
Note.
The
undersigned acknowledges and agrees that any action taken by the Agent pursuant
to this Authorization shall be absolutely binding on the
undersigned.
This
authorization is irrevocable and may not be limited in any manner
whatsoever. This authorization shall remain effective until the date
that all sums owing to or which shall
become
owing to the Banks under the Loan Agreement have been fully paid.
The
undersigned (maker):
ADVANCED
SEMICONDUCTOR ENGINEERING INC.
By:
______________________
EXHIBIT
V
CERTIFICATE
-translation
omitted-
EXHIBIT
VI
LETTER OF
UNDERTAKING
To:
Citibank, N.A., Taipei Branch
(the
“Agent”)
To meet
the funding necessary for the Acquisition, the undersigned entered into a
NT$24,750,000,000 Syndicated Loan Agreement dated March 3, 2008 (the “NTD
Syndicated Loan Agreement”) with certain banks for which Citibank, N.A., Taipei
Branch acts as agent therefor, under which the banks
named therein offered a credit line in NT Dollars to the
undersigned (the “NTD Facility”).
As
the banks under this Agreement
have separately agreed to provide a loan in US Dollars
to the undersigned to replace part of the NTD Facility to
finance the Acquisition, the undersigned states, confirms and undertakes
that:
1. As of
the issuance of this Letter of Undertaking, NT$[ ] have been
drawn down from the NTD Facility, with NT$[ ] remaining
undrawn.
2. The
undersigned has applied for changes to the conditions (the loan purposes and
availability period) of the NTD Facility, but has
not yet received a reply from all
the banks. If the undersigned’s application for
changes to the conditions of the NTD Facility is approved such that the
undersigned may continue utilizing the NTD Facility, the undersigned shall
ensure that an amount under the NTD Facility equal to at least US$200,000,000
will not be drawn to finance the Acquisition.
3. If the
undersigned’s application for changes to the conditions of the NTD
Facility is not accepted, the undrawn amount under the NTD Facility
shall automatically terminate and the undersigned shall not further apply for
any changes, extension or drawdown in respect of the NTD
Facility.
The
undersigned:
ADVANCED
SEMICONDUCTOR ENGINEERING INC.
By:
Date:
______________
EXHIBIT
VII
LETTER
OF UNDERTAKING
-translation
omitted-
EXHIBIT
VIII
TRANSFER
NOTICE
(
SAMPLE
)
TO:
|
ADVANCED
SEMICONDUCTOR
|
|
ENGINEERING
INC. (the “Borrower”)
|
|
CITIBANK,
N.A., TAIPEI BRANCH
|
|
(the
“Agent”)
|
|
Subject:
|
Syndicated
Loan Agreement dated as of ________, 2008 (the “Loan Agreement
”
), entered into by and among
the Borrower, the Agent and the Banks for the facility in an aggregate
amount of US$200,000,000
|
Explanation:
1.
|
*
【
__________
and _____________ are Banks as defined in and under the Loan
Agreement
】
【
________
is a Bank as defined in and under the Loan Agreement but __________ is not
the original Bank as defined in and under the Loan Agreement
】
.
|
2.
|
Pursuant
to an assignment agreement, dated ____________, entered into by and
between _______________ and _______________, _______________ has agreed to
assign to _______________, and _______________ has agreed to assume from
_______________, a portion of its Commitment in the amount of
_______________ as well as the rights and obligations in connection
therewith. Such assignment shall become effective as of
___________.
|
3.
|
After
and as a result of such assignment, the Commitments of _______________ and
_______________ shall become as
follows:
|
|
(1)
|
_______________:
in an aggregate principal amount of _________.
|
|
|
|
|
(2)
|
_______________:
in an aggregate principal amount of
_________.
|
4.
|
All
notices to be made to __________ in relation to the aforementioned
Facility and Loan Agreement shall, in accordance with Article _____ of the
Loan Agreement, be
|
|
delivered
to the address or fax number of ________ as set out below and all funds
payable to __________ shall, by the inter-bank remittance system, be
remitted to the account number of __________ listed
below.
|
|
|
|
【Full
Name of the Assignee Bank】
Address:
TEL
No:
Fax
No:
Contact:
Account
No:
|
5.
|
We
hereby notify you pursuant to Section ____ of the Loan Agreement,
【
and
enclose herewith a check in the amount of US$2,000 for payment of
processing fee for such transfer
】
.
|
________________________
Authorized
Signatory:
_________________
________________________
Authorized
Signatory:
_________________
Date:
_________________
* * * * * * * * * *
Confirm
receipt of the aforementioned Notice, and confirm that such assignment shall
become effective from ___________.
Borrower:
ADVANCED SEMICONDUCTOR ENGINEERING INC.
Agent:
CITIBANK,
N.A., TAIPEI BRANCH
Date:
___________________
(
*
choose applicable one)
(
*
adjust the content according to the situation)
Exhibit
8
ADVANCED
SEMICONDUCTOR ENGINEERING, INC.
LIST OF
SUBSIDIARIES
A.
|
ASE
Holding Limited, a corporation organized under the laws of Bermuda, and
its subsidiaries:
|
|
(1)
|
ASEP
Realty Corporation, a corporation organized under the laws of the
Philippines (in the process of being
liquidated);
|
|
(2)
|
ASE
Holding Electronics (Philippines) Inc., a corporation organized under the
laws of the Philippines (in the process of being liquidated);
and
|
|
(3)
|
ASE
Investment (Labuan) Inc., a holding company organized under the laws of
Malaysia, and its wholly-owned subsidiary, ASE (Korea) Inc., a corporation
organized under the laws of Korea.
|
|
|
|
B.
|
ASE Marketing and
Service Japan Co., Ltd., a corporation organized under the laws of
Japan.
|
C.
|
ASE
Network Inc., a corporation organized under the laws of the Republic of
China.
|
D.
|
|
Omniquest
Industrial Limited, a holding company organized under the laws of the
British Virgin Islands, and its wholly-owned subsidiary, ASE Corporation,
a holding company organized under the laws of the Cayman Islands, and its
subsidiaries:
|
|
(1)
|
ASE
Mauritius Inc., a holding company organized under the laws of Mauritius,
and its subsidiaries:
|
|
(a)
|
ASE
(Shanghai) Inc., a corporation organized under the laws of the People's
Republic of China, and its subsidiaries, Shanghai Ding Hui Real Estate
Development Co., Ltd., a corporation organized under the laws of the
People’s Republic of China, and Advanced Semiconductor Engineering (HK)
Limited, a corporation organized under the laws of Hong
Kong;
|
|
(b)
|
ASE
Hi-Tech (Shanghai) Inc., a corporation organized under the laws of the
People’s Republic of China; and
|
|
(c)
|
ASE
(KunShan) Inc., a corporation organized under the laws of the People's
Republic of China.
|
|
(2)
|
ASE
Labuan Inc., a holding company organized under the laws of Malaysia, and
its subsidiary, ASE Electronics Inc, a corporation organized under the
laws of the Republic of China.
|
E.
|
Innosource
Limited, a holding company organized under the laws of the British Virgin
Islands, and its wholly-owned subsidiary, ASE Module (Shanghai) Inc., a
corporation organized under the laws of the People's Republic of
China.
|
F.
|
ASE
Technologies, Inc., a corporation organized under the laws of the Republic
of China (in the process of being
liquidated);
|
G.
|
J&R
Holding Limited, a holding company organized under the laws of Bermuda,
and its subsidiaries:
|
|
(1)
|
J&R
Industrial Inc., a corporation organized under the laws of the Republic of
China;
|
|
(2)
|
ASE
Japan Co., Ltd., a corporation organized under the laws of
Japan;
|
|
(3)
|
ASE
(U.S.) Inc., a corporation organized under the laws of the State of
California, U.S.A.;
|
|
(4)
|
PowerASE
Technology Inc., a corporation organized under the laws of the Republic of
China;
|
|
(5)
|
Global
Advanced Packaging Technology Limited, a holding company organized under
the laws of the Cayman Islands, and its
subsidiaries:
|
|
(a)
|
ASE
Assembly & Test (H.K.) Limited, a corporation organized under the laws
of Hong
Kong,
and its subsidiary, Global Advanced Packaging Technology North America
Inc., a
corporation
organized under the laws of the State of California, U.S.A. (in the
process of being liquidated);
and
|
|
(b)
|
ASE
Assembly & Test (Shanghai) Limited, a corporation incorporated under
the laws of the
People’s
Republic of China, and its subsidiary, Wei Yu Hong Xin Semiconductors
Inc., a
corporation
incorporated under the laws of the People’s Republic of
China;
|
|
(6)
|
Suzhou
ASEN Semiconductors Co., Ltd., a corporation organized under the laws of
the People’s Republic of China; and
|
|
(7)
|
ASE
Weihai Inc., a corporation organized under the laws of the People’s
Republic of China;
|
H.
|
ASE
Test Limited, a holding company organized under the laws of Singapore,
which has one 99.99%-owned and three wholly-owned
subsidiaries:
|
|
(1)
|
ASE
Test, Inc., a corporation organized under the laws of the Republic of
China (99.99% owned by ASE Test
Limited);
|
|
(2)
|
ASE
Test Holdings, Ltd., a holding company organized under the laws of Cayman
Islands and its wholly-owned subsidiary, ISE Labs, Inc., a corporation
organized under the laws of the State of California, U.S.A. and its
subsidiary, ASE Singapore Pte Ltd, a corporation organized under the laws
of Singapore;
|
|
(3)
|
ASE
Test Finance Limited, a holding company organized under the laws of
Mauritius; and
|
|
(4)
|
ASE
Holdings (Singapore) PTE Ltd., a holding company organized under the laws
of Singapore and its wholly-owned subsidiary, ASE Electronics (M) SDN, BHD
(Malaysia), Inc., a corporation organized under the laws of
Malaysia;
|
I.
|
Advanced
Semiconductor Engineering, Inc. has a controlling interest in the
following companies:
|
|
(1)
|
Universal
Scientific Industrial Co., Ltd., a corporation organized under the laws of
the Republic of China;
|
|
(2)
|
Hung
Ching Development & Construction Co. Ltd., a corporation organized
under the laws of the Republic of
China;
|
|
(3)
|
Hung
Ching Kwan Co., a corporation organized under the laws of the Republic of
China; and
|
|
(4)
|
InProComm
Inc., a corporation organized under the laws of the Republic of China (in
the process of being
liquidated);
|
Exhibit
12(a)
Executive
Officers’ Certification Pursuant to
Section
302 of the Sarbanes-Oxley Act
I, Jason
C.S. Chang, the Chief Executive Officer of Advanced Semiconductor Engineering,
Inc., certify that:
1.
|
I
have reviewed this annual report on Form 20-F of Advanced Semiconductor
Engineering, Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company
as of, and for, the periods presented in this
report;
|
4.
|
The
company’s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the company and have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the company’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the company’s internal control over financial
reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially
affect, the company’s internal control over financial reporting;
and
|
5.
|
The
company’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
company’s auditors and the audit committee of the company’s board of
directors (or persons performing the equivalent
functions):
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the company’s internal control
over financial reporting.
|
Date: June
30, 2008
|
|
By:
|
/s/
Jason C.S. Chang
|
|
|
Name:
|
Jason
C.S. Chang
|
|
|
Title:
|
Chief
Executive Officer
|
|
Exhibit
12(b)
Executive
Officers’ Certification Pursuant to
Section
302 of the Sarbanes-Oxley Act
I, Joseph
Tung, the Chief Financial Officer of Advanced Semiconductor Engineering, Inc.,
certify that:
1.
|
I
have reviewed this annual report on Form 20-F of Advanced Semiconductor
Engineering, Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company
as of, and for, the periods presented in this
report;
|
4.
|
The
company’s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the company and have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the company’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the company’s internal control over financial
reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially
affect, the company’s internal control over financial reporting;
and
|
5.
|
The
company’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
company’s auditors and the audit committee of the company’s board of
directors (or persons performing the equivalent
functions):
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the company’s internal control
over financial reporting.
|
Date: June
30, 2008
|
|
By:
|
/s/
Joseph Tung
|
|
|
Name:
|
Joseph
Tung
|
|
|
Title:
|
Chief
Financial Officer
|
|
Exhibit
13
906
Certification
The
certification set forth below is being submitted in connection with the Annual
Report on Form 20-F for the year ended December 31, 2007 (the “Report”) for the
purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of
Title 18 of the United States Code.
This
certification is not to be deemed filed pursuant to the Exchange Act and does
not constitute a part of the Report accompanying this
letter.
Jason C.S.
Chang, the Chief Executive Officer and Joseph Tung, the Chief Financial Officer
of Advanced Semiconductor Engineering, Inc., each certifies that, to the best of
his knowledge:
1. the
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Exchange Act; and
2. the
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of Advanced Semiconductor
Engineering, Inc.
Date: June
30, 2008
|
|
By:
|
/s/
Jason C.S. Chang
|
|
|
Name:
|
Jason
C.S. Chang
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
|
By:
|
/s/
Joseph Tung
|
|
|
Name:
|
Joseph
Tung
|
|
|
Title:
|
Chief
Financial Officer
|
|