FORM F-1
(Exact Name of Registrant as Specified in Its
Charter)
ADVANCED SEMICONDUCTOR ENGINEERING, INC.
Republic of China
3674
Not Applicable
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
26 Chin Third Road
Nantze Export Processing Zone
Nantze, Kaohsiung, Taiwan
Republic of China
(8867) 361-7131
(I.R.S. Employer
Identification Number)
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
CT Corporation System
With copies to:
James D. Phyfe, Esq.
Davis Polk & Wardwell
18th Floor, The Hong Kong Club Building
3A Chater Road
Hong Kong
John D. Young, Jr., Esq.
Sullivan & Cromwell
28th Floor
Nine Queens Road Central
Hong Kong
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. [ ]
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
|
||||||||||||||||
Title of Each Class | Amount to Be | Proposed Maximum | Proposed Maximum | Amount of | ||||||||||||
of Securities to be | Registered | Offering Price per | Aggregate | Registration Fee | ||||||||||||
Registered | Common Share(1) | Offering Price(1) | ||||||||||||||
|
||||||||||||||||
Common Shares, par value NT$10 per share(2) |
115,000,000
Common Shares |
US$1.97 | US$226,550,000 | US$59,809.20 | ||||||||||||
|
||||||||||||||||
|
(1) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 under the Securities Act. Includes shares initially offered outside the United States that may be resold in the United States. The shares are not being registered for purposes of sales outside the United States. |
(2) | A separate registration statement on Form F-6 will be filed to register American Depositary Shares issuable on deposit of the common shares registered hereby. Each American Depositary Share will represent five common shares. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary
prospectus is not complete and may be changed. These securities
may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to
buy these securities in any jurisdiction where the offer or sale
is not permitted.
|
Subject to Completion. Dated August 28, 2000.
Advanced Semiconductor Engineering, Inc. | |
20,000,000 | |
American Depositary Shares | |
Representing | |
100,000,000 Common Shares |
This is an initial public offering of American Depositary Shares of Advanced Semiconductor Engineering, Inc. All of the ADSs are being sold by ASE Inc. Each ADS represents five common shares of ASE Inc. For a period of three months following initial delivery to investors, owners of the ADSs offered by this prospectus will not be able to withdraw the underlying common shares from our ADS facility.
Before this offering, there has been no public market for the ADSs. The common shares are listed on the Taiwan Stock Exchange. On August 25, 2000, the closing price for the common shares on the Taiwan Stock Exchange was NT$59.00 per share, which was equivalent to US$9.50 per ADS. For more information relating to the other factors to be considered in determining the initial public offering price, see Underwriting. Concurrently with this offering, ASE Inc. will convert or exchange its outstanding global depositary shares into ADSs.
ASE Inc. intends to list the ADSs on the New York Stock Exchange under the symbol ASX. Until the expiration of the three-month period described above, the ADSs offered by this prospectus are expected to trade on the NYSE under the temporary symbol .
See Risk Factors on page 9 to read about factors you should consider before buying ADSs.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per ADS | Total | |||||||
|
|
|||||||
Initial public offering price | $ | $ | ||||||
Underwriting discount | $ | $ | ||||||
Proceeds, before expenses, to ASE Inc. | $ | $ |
We have granted the underwriters the option to purchase up to an additional 2,774,778 ADSs from a wholly-owned subsidiary of ASE Inc. at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the ADSs in New York, New York on September , 2000.
Goldman Sachs (Asia) L.L.C. | Morgan Stanley Dean Witter |
Deutsche Banc Alex. Brown
Prospectus dated September , 2000.
PROSPECTUS SUMMARY
This summary highlights information found in greater detail elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the discussion of the risks of investing in our ADSs under Risk Factors, before deciding to buy our ADSs.
Business
We believe we are one of the worlds largest independent providers of semiconductor packaging services and, together with our subsidiary ASE Test Limited, one of the worlds largest independent providers of semiconductor testing services, including front-end engineering testing, wafer probing and final testing services. Semiconductor packaging is the processing of bare semiconductors into finished semiconductors with enhanced electrical and thermal characteristics, and semiconductor testing is the use of sophisticated equipment and customized software programs to electrically test specified attributes of semiconductors. We offer packaging and testing services on both stand-alone and turnkey bases. Turnkey services consist of the integrated packaging, testing and direct shipment of semiconductors to end users designated by our customers.
We believe that 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 because of:
| our broad range of advanced semiconductor packaging and testing services; | |
| our expertise in product and process technology for the manufacture of increasingly advanced semiconductor packages; | |
| our expertise in interconnect materials and assembly of electronics boards; | |
| our financial position which enables us to make significant investments for future growth through both the expansion of existing capacity and the acquisition of new businesses, technologies and operations; | |
| our experience in integrating acquired operations and using the acquired operations to provide services to their former owners; | |
| our strategic geographic locations with experienced teams in key centers for outsourced semiconductor manufacturing; and | |
| our ability to expand the traditional scope of turnkey services to offer total semiconductor manufacturing services to our customers through our strategic alliance with Taiwan Semiconductor Manufacturing Company Limited, the worlds largest dedicated semiconductor foundry. |
We plan to continue to expand our business and operations through both internal growth and acquisitions in order to enhance our technological, processing and materials capabilities, broaden our geographic coverage and increase our production capacity, economies of scale and management resources. In 1999, in addition to the expansion of our existing facilities, we also acquired:
| the semiconductor packaging and testing facilities of Motorola, Inc. in Taiwan and Korea; | |
| a controlling 22.6% interest in Universal Scientific Industrial Co., Ltd., a leading contract provider of electronics board assembly services in Taiwan, which was subsequently increased to 23.3% following our purchase of additional shares in the open market in July and August of 2000; and |
1
| a 70% interest in ISE Labs, Inc., a front-end engineering testing service provider, which was subsequently increased to 75.3% following ASE Tests purchase of $30 million of additional shares of ISE Labs in April 2000. |
We have a global base of over 200 customers, including:
Advanced Micro Devices, Inc.
Altera Corporation
ATI Technologies Inc.
Cirrus Logic International Ltd.
Conexant Systems, Inc.
Delphi Automotive Systems Corp.
DSP Group
LSI Logic Corporation
Motorola, Inc.
Philips Electronics NV
Qualcomm Incorporated
ST Microelectronics Pte Ltd.
VIA Technologies, Inc.
Strategy
Our objective is to provide leading-edge semiconductor packaging and testing solutions which set industry standards and facilitate the industry trend to outsource semiconductor manufacturing requirements. The principal elements of our strategy are to:
| expand strategically our production capacity and product expertise through both internal growth and acquisitions; | |
| enhance our technological, processing and materials capabilities; | |
| develop strategic alliances with providers of complementary manufacturing services; | |
| better serve our customers through our diversified geographic presence in key centers for outsourced semiconductor manufacturing, including Taiwan, Malaysia, Singapore, Korea and Silicon Valley in California; and | |
| achieve economies of scale from our expanded production capacity. |
2
ASE Group Structure
The following chart illustrates our corporate structure and our effective equity interest in each of our principal operating subsidiaries and affiliates as of August 15, 2000. The following chart does not include wholly-owned intermediate holding companies.
(1) | Common shares of ASE Inc. and Universal Scientific are listed on the Taiwan Stock Exchange. |
(2) | Ordinary shares of ASE Test are quoted for trading on the Nasdaq National Market under the symbol ASTSF. |
(3) | The remaining shares of ISE Labs are owned primarily by the founders and employees of ISE Labs or its predecessors. |
(4) | Management and employees of the ASE Group own 50.8% of the shares of ASE Material, including 11.4% owned by Jason C.S. Chang, our Chairman. The supervisor and two of the five directors of ASE Material are representatives of ASE Inc., one director is a representative of ASE Test Taiwan and the remaining two directors of ASE Material are Jason C.S. Chang and Richard H.P. Chang, our Vice Chairman and Chief Executive Officer, serving in their individual capacities. Before October 1999, we held a majority equity interest in ASE Material. We plan to increase our current equity interest in ASE Material so as to regain a majority ownership interest before December 31, 2000. |
We are incorporated under the laws of the Republic of China. Our principal executive offices are located at 26 Chin Third Road, Nantze Export Processing Zone, Nantze, Kaohsiung, Taiwan, Republic of China and our telephone number at the above address is (8867) 361-7131.
3
The Offering
The following information assumes that the underwriters do not
exercise the over-allotment option granted by a wholly-owned
subsidiary of ASE Inc. to purchase additional ADSs in the
offering, unless otherwise indicated. Please see
Underwriting.
4
5
6
Table of Contents
ROC share issuance procedures
Under Republic of China, or ROC, share issuance
and temporary limitation on
procedures applicable to offerings of ADSs representing
withdrawal of common shares
newly-issued shares of ROC companies, we will initially
from the ADS facility
deliver to our ADS depositary one or more certificates of payment
that represent the irrevocable right to receive the common
shares of ASE Inc. that will be represented by the ADSs offered
by this prospectus. Upon completion of all required ROC share
issuance procedures, which typically takes no more than 60 days,
we will deliver common shares of ASE Inc. to our ADS depositary
in exchange for those certificates of payment. Until that
exchange has been completed, the ADSs offered by this prospectus
will represent interests in the certificates of payment held by
our ADS depositary. During this period, except as described under
Description of Common Shares Certificates of
Payment in this prospectus, holders of ADSs will be
entitled to the same rights as if the depositary were holding the
common shares that will be delivered by us in exchange for the
certificates of payment. Except where the context otherwise
requires, all references in this prospectus to the common shares
represented by our ADSs assume that we have completed the
exchange of common shares for certificates of payment, and during
the period before completion of this exchange those references
shall be deemed as references to the certificates of payment
initially delivered to our ADS depositary.
In addition, under ROC regulations applicable to offerings of
ADSs, newly-issued shares of ROC companies initially offered in
ADS form may not be withdrawn from the ADS facility until three
months following the initial delivery of the ADSs. Consequently,
for a period of three months following the closing of this
offering, owners of the ADSs offered by this prospectus will not
be able to withdraw the underlying common shares from our ADS
facility. Until the expiration of this three-month period, the
ADSs offered by this prospectus are expected to trade on the NYSE
under the temporary symbol . Although
the common shares that will be represented by the ADSs, if any,
purchased by the underwriters pursuant to the exercise of their
over-allotment option will not be newly-issued common shares,
those ADSs will not be distinguishable from the other ADSs being
offered in this offering and consequently will be subject to the
same restrictions on withdrawal of the underlying common shares
for this three-month period. See Description of American
Depositary Receipts Withdrawal of Common Shares Upon
Cancellation of ADSs.
Table of Contents
Conversion of and exchange for
Concurrently with this offering, we will convert or offer to
outstanding GDSs
exchange our outstanding GDSs into ADSs. The conversion of and
exchange for our GDSs into ADSs are conditional upon closing of
this offering. Until three months after their initial delivery to
investors in this offering, the ADSs offered by this prospectus
(which represent newly-issued common shares) will not be fungible
with, and will settle with a CUSIP identification number
distinct from, the ADSs issued upon conversion of and exchange
for our GDSs (which represent previously-issued common shares).
See Exchange Offer in this prospectus for more
information relating to our GDSs and these conversion and
exchange procedures.
Table of Contents
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary consolidated financial data
have been derived from our consolidated financial statements. Our
statements of income for the years ended December 31, 1997,
1998 and 1999 and our balance sheets as of December 31,
1998 and 1999 have been audited by T.N. Soong & Co.,
independent accountants and a member firm of Andersen Worldwide,
SC. Those financial statements, including the notes thereto, are
referred to in this prospectus as the Consolidated Financial
Statements. The report of T.N. Soong & Co. on those financial
statements is included in this prospectus, and the summary
consolidated financial information for those periods and as of
those dates are qualified by reference to those financial
statements and that report, and should be read in conjunction
with them and with Managements Discussion and
Analysis of Financial Condition and Results of Operations.
The summary consolidated statement of income data for the years
ended December 31, 1995 and 1996 and summary consolidated
balance sheet data as of December 31, 1995, 1996 and 1997
set forth below are derived from our audited consolidated
financial statements not included in this prospectus. These
financial statements have been audited by T.N. Soong & Co.
The Consolidated Financial Statements are prepared and presented
in accordance with generally accepted accounting principles in
the ROC, or ROC GAAP, which differ in material respects from
generally accepted accounting principles in the United States, or
US GAAP. Notes 27 and 28 of Notes to Consolidated Financial
Statements contain additional disclosures required under US GAAP
and provide descriptions of the significant differences between
ROC GAAP and US GAAP and reconciliations of net income and
shareholders equity to US GAAP as of and for the years
ended December 31, 1998 and 1999. The summary consolidated
balance sheet data as of and for the six months ended
June 30, 2000 and the summary consolidated income statement
data and segment and other data for each of the six months ended
June 30, 1999 and 2000 have been derived from our unaudited
consolidated financial statements included elsewhere in this
prospectus, which have been prepared on the same basis as our
audited consolidated financial statements and contain normal
recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for such
unaudited periods.
Year Ended and as of December 31,
1995
1996
1997
1998
1999
(in millions, except share, ADS and earnings per share and per ADS data)
NT$
NT$
NT$
NT$
NT$
Income Statement Data:
ROC GAAP:
Net revenues
16,231.7
17,833.9
19,088.2
20,762.4
32,609.6
Cost of revenues
(12,485.8
)
(13,956.7
)
(13,758.5
)
(15,468.1
)
(23,959.6
)
Gross profit
3,745.9
3,877.2
5,329.7
5,294.3
8,650.0
Operating expenses:
Selling
(407.4
)
(543.4
)
(733.5
)
(744.7
)
(924.3
)
General and
administrative (1)
(609.1
)
(529.3
)
(648.7
)
(909.4
)
(1,620.1
)
Goodwill amortization (2)
(53.2
)
(345.7
)
(542.7
)
Research and development
(262.1
)
(382.3
)
(372.9
)
(453.6
)
(714.3
)
Operating Income
2,467.3
2,422.2
3,521.4
2,840.9
4,848.6
Net non-operating income (expense):
Investment income (loss) on long-term investment(1)(3)
(1.2
)
(108.1
)
114.2
54.6
329.9
Goodwill amortization (4)
(4.5
)
(145.3
)
(155.1
)
(155.1
)
(279.3
)
Gain (loss) on sale of investment
4,870.9
606.9
5,544.2
Foreign exchange gain (loss)
113.8
113.5
(133.8
)
(935.5
)
(538.4
)
Interest income (expense)(5)
(201.0
)
(241.4
)
(85.9
)
(380.4
)
(1,046.6
)
Others(6)
(54.1
)
85.9
11.0
(50.1
)
204.0
Income before tax
2,320.3
2,126.8
8,142.7
1,981.3
9,062.4
Income tax benefit (expense)
104.3
(61.2
)
(374.9
)
150.8
(459.5
)
Income before minority interest
2,424.6
2,065.6
7,767.8
2,132.1
8,602.9
Income before acquisition
(65.1
)
Minority interest in net income of subsidiary
(91.9
)
(94.1
)
(364.3
)
(528.1
)
(743.1
)
Net income
2,332.7
1,971.5
7,403.5
1,604.0
7,794.7
Earnings per common share:
Primary
1.18
1.00
3.69
0.77
3.89
Fully diluted
1.18
1.00
3.69
0.77
3.89
Earnings per pro forma equivalent ADS:
Primary
5.89
4.98
18.45
3.85
19.45
Fully diluted
5.89
4.98
18.45
3.85
19.45
Number of common shares(7)
1,980,000,000
1,980,000,000
1,980,000,000
1,980,000,000
1,980,000,000
Number of pro forma equivalent ADSs
396,000,000
396,000,000
396,000,000
396,000,000
396,000,000
[Additional columns below]
[Continued from above table, first column(s) repeated]
Year
Ended and as of December 31,
Six
Months Ended and as of June 30,
1999
1999
2000
(in millions, except share, ADS and earnings per share and per ADS data)
US$
NT$
NT$
US$
(unaudited)
Income Statement Data:
ROC GAAP:
Net revenues
1,058.7
11,913.7
23,597.2
766.1
Cost of revenues
(777.9
)
(9,043.4
)
(16,276.7
)
(528.4
)
Gross profit
280.8
2,870.3
7,320.5
237.7
Operating expenses:
Selling
(30.0
)
(291.3
)
(458.3
)
(14.9
)
General and
administrative (1)
(52.6
)
(731.3
)
(1,287.3
)
(41.8
)
Goodwill amortization (2)
(17.6
)
(215.0
)
(308.3
)
(10.0
)
Research and development
(23.2
)
(353.6
)
(534.7
)
(17.4
)
Operating Income
157.4
1,279.1
4,731.9
153.6
Net non-operating income (expense):
Investment income (loss) on long-term investment(1)(3)
10.7
13.8
90.8
2.9
Goodwill amortization (4)
(9.1
)
(107.0
)
(176.9
)
(5.7
)
Gain (loss) on sale of investment
180.0
3,884.8
Foreign exchange gain (loss)
(17.4
)
210.0
183.8
6.0
Interest income (expense)(5)
(34.0
)
(365.8
)
(817.6
)
(26.6
)
Others(6)
6.6
52.5
12.1
0.4
Income before tax
294.2
4,967.4
4,024.1
130.6
Income tax benefit (expense)
(14.9
)
(164.0
)
(499.2
)
(16.2
)
Income before minority interest
279.3
4,803.4
3,524.9
114.4
Income before acquisition
(2.1
)
(65.1
)
Minority interest in net income of subsidiary
(24.1
)
(221.5
)
(604.1
)
(19.6
)
Net income
253.1
4,516.8
2,920.8
94.8
Earnings per common share:
Primary
0.13
2.26
1.46
0.05
Fully diluted
0.13
2.26
1.46
0.05
Earnings per pro forma equivalent ADS:
Primary
0.65
11.30
7.30
0.25
Fully diluted
0.65
11.30
7.30
0.25
Number of common shares(7)
1,980,000,000
1,980,000,000
1,980,234,123
1,980,234,123
Number of pro forma equivalent ADSs
396,000,000
396,000,000
396,046,825
396,046,825
7
Year Ended and as of December 31,
1995
1996
1997
1998
(in millions, except share, ADS and earnings per share and per ADS data)
NT$
NT$
NT$
NT$
US GAAP:
Net income
298.9
Earnings per common share:
Basic
0.15
Diluted
0.10
Earnings per pro forma equivalent ADS:
Basic
0.75
Diluted
0.51
Balance Sheet Data:
ROC GAAP:
Current assets:
Cash and cash equivalents
2,361.5
1,431.2
10,869.8
8,173.9
Short-term investments
19.4
1,187.7
4,008.0
647.2
Notes and accounts receivable
3,821.1
3,458.0
4,094.3
3,636.7
Inventories
2,263.7
1,838.7
2,059.0
1,744.8
Other
464.3
346.0
705.5
771.9
Total
8,930.0
8,261.6
21,736.6
14,974.5
Long-term investments
2,465.6
4,113.7
5,501.7
7,317.0
Properties
8,712.3
10,561.4
16,363.1
20,356.8
Other assets
270.6
379.6
1,557.7
4,363.2
Total assets
20,378.5
23,316.3
45,159.1
47,011.5
Short-term bank borrowing/loans
3,745.2
3,506.1
5,946.0
6,810.2
Long-term bank borrowing/loans
2,558.8
3,575.2
11,872.9
12,235.0
Other liabilities and minority interest
3,172.9
3,076.4
6,306.5
6,091.5
Total liabilities and minority interest
9,476.9
10,157.7
24,125.4
25,136.7
Shareholders equity
10,901.6
13,158.6
21,033.7
21,874.8
US GAAP:
Shareholders equity
17,675.2
Segment Data:
Net revenues:
Packaging
11,145.7
11,936.9
15,334.3
16,867.4
Testing
1,113.0
1,549.0
2,383.4
3,131.3
Other
3,973.0
4,348.0
1,370.5
763.7
Gross profit:
Packaging
2,876.9
2,795.2
3,990.5
3,693.8
Testing
491.0
669.0
1,148.7
1,484.6
Other
378.0
413.0
190.5
115.9
Other Data
:
Net cash outflow from acquisition of fixed assets
(4,834.8
)
(3,528.7
)
(8,030.1
)
(6,945.0
)
Depreciation and amortization
1,115.7
1,731.5
2,301.6
3,237.2
Net cash inflow (outflow) from operations
1,922.4
3,534.3
2,185.3
8,724.6
Net cash inflow (outflow) from sale of investments
5,495.0
290.5
Net cash inflow (outflow) from investing activities(8)
(6,602.9
)
(5,551.2
)
(5,067.7
)
(12,088.8
)
Net cash inflow (outflow) from financing activities
7,145.8
1,071.8
11,290.3
589.3
[Additional columns below]
[Continued from above table, first column(s) repeated]
8
Year
Ended and as of December 31,
Six Months Ended and as of June 30,
1999
1999
1999
2000
(in millions, except share, ADS and earnings per share and per ADS data)
NT$
US$
NT$
NT$
US$
(unaudited)
US GAAP:
Net income
4,641.3
150.7
3,717.4
2,053.5
66.7
Earnings per common share:
Basic
2.34
0.08
1.88
1.04
0.03
Diluted
2.30
0.07
1.86
1.00
0.03
Earnings per pro forma equivalent ADS:
Basic
11.72
0.38
9.39
5.18
0.17
Diluted
11.48
0.37
9.32
5.00
0.16
Balance Sheet Data:
ROC GAAP:
Current assets:
Cash and cash equivalents
11,809.1
383.4
6,239.9
202.6
Short-term investments
216.3
7.0
3,001.6
97.4
Notes and accounts receivable
7,463.4
242.3
8,712.0
282.9
Inventories
2,449.7
79.5
2,710.9
88.0
Other
1,411.8
45.9
2,317.7
75.3
Total
23,350.3
758.1
22,982.1
746.2
Long-term investments
9,674.4
314.1
11,034.0
358.2
Properties
38,107.5
1,237.3
48,904.4
1,587.8
Other assets
6,198.6
201.2
6,083.5
197.5
Total assets
77,330.8
2,510.7
89,004.0
2,889.7
Short-term bank borrowing/loans
9,868.2
320.4
13,782.4
447.5
Long-term bank borrowing/loans
24,551.5
797.1
24,978.1
811.0
Other liabilities and minority interest
12,854.1
417.3
17,438.1
566.1
Total liabilities and minority interest
47,273.8
1,534.8
56,198.6
1,824.6
Shareholders equity
30,057.0
975.9
32,805.4
1,065.1
US GAAP:
Shareholders equity
26,569.7
862.7
22,077.0
29,178.6
947.4
Segment Data:
Net revenues:
Packaging
24,523.0
796.2
8,942.9
17,725.5
575.5
Testing
7,793.2
253.0
2,772.7
5,789.5
188.0
Other
293.4
9.5
198.1
82.2
2.6
Gross profit:
Packaging
5,753.0
186.8
1,875.2
4,888.3
158.7
Testing
3,105.2
100.8
1,135.7
2,494.5
81.0
Other
(208.2
)
(6.8
)
(140.6
)
(62.3
)
(2.0
)
Other Data
:
Net cash outflow from acquisition of fixed assets
(9,869.2
)
(320.4
)
2,593.9
(13,140.6
)
(426.6
)
Depreciation and amortization
5,554.4
180.3
2,144.1
3,880.5
126.0
Net cash inflow (outflow) from operations
7,589.8
246.4
2,324.7
3,353.0
109.0
Net cash inflow (outflow) from sale of investments
7,889.3
256.1
4,505.5
Net cash inflow (outflow) from investing activities(8)
(12,351.8
)
(401.0
)
(4,535.8
)
(14,995.2
)
(486.9
)
Net cash inflow (outflow) from financing activities
8,565.5
278.1
9,044.3
6,242.0
202.7
(1)
Excludes goodwill amortization.
(2)
Included in general and administrative expenses in
the Consolidated Financial Statements.
(3)
Derived by netting investment income under
equity method net in non-operating income and
investment loss under equity method net
in non-operating expense in the Consolidated Financial
Statements.
(4)
Included in investment loss in the Consolidated
Financial Statements.
(5)
Derived by netting interest income and interest
expense in the Consolidated Financial Statements.
(6)
Derived by netting the others entry in
non-operating income and the others entry in
non-operating expenses in the Consolidated Financial Statements.
(7)
Represents the weighted average number of shares
after retroactive adjustments to give effect to stock dividends.
(8)
Derived by aggregating proceeds from sales of
shares of stock of ASE Inc. and ASE Test.
Table of Contents
RISK FACTORS
You should carefully consider the risks described below before making an investment decision. In particular, as we are a non-U.S. company, there are risks associated with investing in our ADSs that are not typical with investments in the shares of U.S. companies. Before making an investment decision, you should carefully consider all of the information contained in this prospectus, including the following risk factors.
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 earnings 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 earnings. From time to time, the semiconductor industry has experienced significant, and sometimes prolonged, downturns. Because 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, a worldwide slowdown in demand for semiconductor devices led to excess capacity and increased competition beginning in early 1998. As a result, price declines in 1998 accelerated more rapidly and adversely affected our operating results in 1998. With the upturn in the semiconductor industry in the second half of 1999 and the continued strong performance during the first half of 2000, prices for packaging and testing services improved. However, if the industry were to encounter another downturn, there may again be downward pressure on the average selling prices for our packaging and testing services. If we cannot reduce our costs to sufficiently offset any decline in average selling prices, our profitability will suffer.
Market conditions in the semiconductor industry depend to a large degree on conditions in the markets for the end use applications of the semiconductor products, such as personal computers, communications and consumer electronics. 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, in turn, would likely have a material adverse effect on our financial condition and results of operations. In 1999 and the first half of 2000, 77.6% and 72.6%, respectively, of our sales was attributable to the packaging and testing of semiconductors used in personal computer and communications applications. Both industries are subject to intense competition and significant shifts in demand which could put pricing pressure on the packaging and testing services provided by us and have a negative effect on our revenues and earnings.
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 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 which 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
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If we are unable to compete favorably in the highly competitive semiconductor packaging and testing markets, our profits 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 which offer turnkey packaging and testing services. We believe that the principal competitive factors in the markets for our products and services are:
| technological expertise; | |
| ability to work closely with customers at the product development stage; | |
| production yield; | |
| responsiveness and flexibility; | |
| cycle time; | |
| capacity; | |
| production time; | |
| range and quality of packaging types and testing platforms available; and | |
| price. |
We face increasing competition from other packaging and testing companies in Asia. In particular, most of our customers obtain packaging or testing services from more than one source. Furthermore, some of our competitors may have access to more advanced technologies and greater financial and other resources than we do. Many of our competitors have shown a willingness to quickly and sharply reduce prices, as they did in 1998, in order to maintain capacity utilization in their facilities during periods of reduced demand. Although prices have since stabilized, any renewed erosion in the prices for our packaging and testing services could cause our profits 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 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 on a given service, and our overall profitability, may decrease over time.
Our operating results are subject to significant fluctuations, which could negatively impact 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
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| 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; | |
| timing of capital expenditures in anticipation of future orders; | |
| changes in prices of our packaging and testing services; | |
| volume of orders relative to our packaging and testing capacity; | |
| our ability to obtain adequate packaging and testing equipment on a timely basis; and | |
| changes in costs and availability of raw materials, equipment and labor. |
Due to the factors listed above, it is possible that our future operating results or growth rates may be below the expectations of research analysts and investors. If so, the market price of our ADSs and common shares, and thus the market value of your investment, may fall.
Due to our high percentage of fixed costs, we will be unable to maintain our profitability at past levels if we are unable to achieve relatively high capacity utilization rates.
Our operations are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses in connection with the acquisition of new packaging and testing equipment and new 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 can 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. In the first half of 1999, we experienced lower than anticipated capacity utilization rates in our operations due to lower than expected growth in demand, which led to reduced margins during that period. Although our capacity utilization rates have improved recently, we cannot assure you that we will be able to maintain or surpass our past profitability 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. In particular, we intend to expand our operations geographically, 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.
We need to successfully integrate and manage our acquisitions to maintain profitability.
We intend to grow in part through the acquisition of semiconductor packaging and testing operations that complement our existing business. This strategy will involve reviewing and potentially reorganizing acquired business operations, corporate structures and systems and financial controls. The success of our acquisition strategy may be limited because of unforeseen expenses, difficulties, complications and delays encountered in connection with these acquisitions. We may not be able to acquire or manage profitably additional businesses or to
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In 1999, we acquired the packaging and testing operations of ISE Labs, ASE Chung Li and ASE Korea, as well as a controlling 22.6% interest in Universal Scientific. We continue to evaluate acquisition opportunities and plan to make additional acquisitions in the future if suitable opportunities arise. These acquisitions may dilute our earnings per share as a result of the specific scope of the businesses or condition of the operations being acquired. In particular, these acquisitions may involve risks, including:
| integration and management of the operations; | |
| retention of select management personnel; | |
| integration of purchasing operations and information systems; | |
| coordination of sales and marketing efforts; | |
| cost of any pending or potential litigation against the acquired businesses prior to our acquisition; | |
| management of an increasingly larger and more geographically disparate business; and | |
| diversion of managements attention from other ongoing business concerns. |
We depend on select management personnel from acquired businesses for the continued operation of these businesses. If we are unable to retain these management personnel, we may have difficulty achieving profitability in our recently acquired businesses. 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.
If we are unable to successfully integrate and manage our recent acquisitions, as well as any future acquisitions that we might pursue, our growth plans may not be met and our profitability may decline.
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 research and development activities in order to remain competitive. We believe that our current cash and cash equivalents, cash flow from operations and the proceeds from this offering will be sufficient to meet our anticipated needs at least through the end of 2000, including for working capital and capital expenditure requirements. However, future acquisitions 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.
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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. In particular, we will 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. 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 import of foreign workers were to become significantly more restrictive or if we are otherwise unable to attract or retain these workers at reasonable cost.
Criminal charges were brought in December 1998 by the district attorney for Taipei against Jason C.S. Chang, our Chairman, Richard H.P. Chang, our Vice Chairman and Chief Executive Officer, and Chang Yao Hung-ying, our director, and others. ASE Inc. is not a party to these proceedings and we do not expect that these charges will result in any liability to us. If convicted, they would have to resign from their respective positions in our company and in ASE Group companies. See Business Legal Proceedings.
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 business is capital intensive and requires 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 these equipment from a limited number of suppliers, including, in the case of testers, Credence Systems Corporation, Teradyne, Inc., Hewlett-Packard Asia Pacific Limited, Schlumberger Technologies, Advantest Corporation, Electroglas, Inc. and Megatest Corporation and, in the case of wire bonders, Kulicke & Soffa Industries Inc. and Shinkawa Limited. There is currently significant global demand for capital equipment, particularly testers, and the lead time for the delivery of capital equipment may be six months or more following the time when orders are placed. 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 requires us to operate sizeable facilities. We are currently constructing additional facilities in Malaysia and Taiwan to meet anticipated demand. See Business 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 negatively impact our growth prospects as well as financial condition and results of operations.
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 and NT dollars. Our costs of revenues and operating expenses associated with packaging and testing services, on the other hand, are incurred in several currencies, including NT dollars, U.S. dollars, Malaysian ringgit, Korean won, Philippine pesos, Singapore dollars and Hong Kong dollars. In addition, a substantial portion of our capital expenditures, primarily for the
13
The loss of a major customer or disruption of our strategic alliance with TSMC may result in a decline in our revenues and profitability.
Although we have over 200 customers, due in part to the concentration of market share in the semiconductor industry, 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. Our five largest customers together accounted for approximately 32.3%, 34.3%, 40.0% and 49.7% of our sales in 1997, 1998, 1999 and the six months ended June 30, 2000, respectively. Other than Motorola in 1999, no customer accounted for more than 10% of our net revenues in 1997, 1998 or 1999. For the six months ended June 30, 2000, no customer other than Motorola and VIA Technologies, Inc. accounted for more than 10% of our net revenues. In connection with our acquisition in July 1999 of Motorolas in-house packaging and testing operations in Chung Li and Korea, we entered into manufacturing services agreements which expire in 2004 for Motorolas continuing business at the Chung Li and Korea facilities. As a result, Motorola accounted for approximately 16% of our 1999 sales and approximately 25.6% of our sales for the first half of 2000. There has been significant variation in the composition of our largest five customers over time. This variation is due primarily to the high level of competition in the semiconductor industry in which our customers operate. The demand for our services from each customer is directly dependent upon that customers level of business activity, which could vary significantly from year to year. As a result, we have been less dependent on any particular customer over time.
Our strategic alliance with Taiwan Semiconductor Manufacturing Company Limited, the worlds largest dedicated semiconductor foundry, enables us to offer total semiconductor manufacturing services to our customers. This strategic alliance is terminable at will by either party. A termination of this strategic alliance, and our failure to enter into a substantially similar alliance, may adversely affect our competitiveness and our revenues and profitability.
All of our key customers operate in the cyclical semiconductor business and have in the past, and may in the future, vary order levels significantly from period to period. Moreover, over half of our customers are fabless semiconductor companies which outsource substantially all of their wafer fabrication and packaging requirements. Many 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 prior 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 reduce our 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. These price reductions would in turn be likely to reduce our margins and profitability.
14
We depend on our agents for sales and customer service in North America and Europe. Any serious interruption in our relationship with these agents, or substantial loss in their effectiveness, could significantly reduce our revenues and profitability.
We depend on non-exclusive agents for sales and customer service in North America and Europe. Our sales agents help us identify customers, monitor delivery acceptance and payment by customers and, within parameters set by us, help us negotiate price, delivery and other terms with our customers. Purchase orders are placed directly with us by our customers. Our customer service agents provide customer service and after-sales support to our customers.
Currently, our sales and customer service agents perform services only for us and ASE Test, our subsidiary, but they are not owned or controlled by us. These agents are free to perform sales and support services for others, including our competitors. In particular, we may not be able to find an adequate replacement for these agents or to develop sufficient capabilities internally on a timely basis. Any serious interruption in our relationship with these agents or substantial loss in their effectiveness in performing their sales and customer service functions could significantly reduce our revenues and profitability.
Our revenue 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 1997 and 1998, the industry experienced a shortage in the supply of advanced substrates used in ball grid array, or BGA, packaging. In 1997 we established ASE Material Inc., a company engaged in the development, production and sales of substrates and leadframes, to partially reduce this risk. However, ASE Material will not meet all of our raw materials requirements and consequently we will remain dependent on market supply and demand. We cannot assure you that we will be able to obtain adequate supplies of raw materials in a timely manner and at a reasonable price. Our revenues and earnings could decline if we were unable to obtain adequate supplies of high quality raw materials in a timely manner or if there were significant increases in the costs of raw materials that we could not pass on to our customers.
Any environmental claims or failure to comply with any present or future environmental regulations may require us to spend additional funds and may materially and adversely affect our financial condition and results of operations.
We are subject to a variety of laws and regulations relating to the use, storage, discharge and disposal of chemical by-products of, and water used in, our packaging process. 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. Any failure on our part to control the use of, 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.
After this offering, members of the Chang family will own, directly or indirectly, a controlling interest of approximately 26% of our outstanding common shares. Accordingly, these
15
| our management and policies; | |
| the timing and distribution of dividends; and | |
| the election of our directors and supervisors. |
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 interest.
We are an ROC company, and because the rights of shareholders under ROC law differ from those under U.S. law, 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. For example, directors and controlling shareholders of ROC companies do not owe fiduciary duties to minority shareholders. Therefore, public shareholders of ROC companies may have more difficulty in protecting their interest in connection with actions taken by management or members of the board of directors than they would as public shareholders of a U.S. corporation.
Risks Relating to Countries in Which We Conduct Operations
Risks Relating to Taiwan, Republic of China
Strained relations between the Republic of China and the Peoples Republic of China 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 72% and 75% of our net revenues in 1999 and the six months ended June 30, 2000, respectively, from packaging and testing services are derived from our operations in Taiwan. The Republic of China has a unique international political status. Both the Republic of China and the Peoples Republic of China assert sovereignty over all of China, including Taiwan. The Peoples Republic of China government does not recognize the legitimacy of the Republic of China government. Although significant economic and cultural relations have been established in recent years between the Republic of China and the Peoples Republic of China, relations have often been strained and the government of the Peoples Republic of China 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 Republic of China. Relations between the Republic of China and the Peoples Republic of China have been particularly strained in recent years. Following the results of the presidential elections for the Republic of China held on March 2000, the new President of the Republic of China was sworn in on May 20, 2000. We cannot predict how the election of the new President will affect relations between the two governments. Past developments in relations between the Republic of China and the Peoples Republic of China have on occasion depressed the market price of the shares and ADSs of Taiwanese companies. Relations between the Republic of China and the Peoples Republic of China 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 ADSs and common shares.
16
Because a substantial portion of our business and operations are located in Taiwan, a severe earthquake in the future could severely disrupt the normal operation of our business and adversely affect our earnings. |
Taiwan is susceptible to earthquakes. On September 21, October 22 and November 2, 1999, Taiwan experienced severe earthquakes which caused significant property damage and loss of life, particularly in the central part of Taiwan. These earthquakes damaged production facilities and adversely affected the operations of many companies involved in the semiconductor and other industries. We experienced no structural damage to our facilities and no damage to our machinery and equipment as a result of these earthquakes. There were, however, interruptions to our production schedule primarily as a result of power outage caused by the earthquakes. 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, it could result in a decline in the demand for our packaging and testing services. If our suppliers and providers of complementary semiconductor manufacturing services are affected, our production schedule could be interrupted or delayed. As a result, a major earthquake in Taiwan could severely disrupt the normal operation of business and have a material adverse effect on our financial condition and results of operations.
Risks Relating to Ownership of ADSs
If an active market for our ADSs fails to develop or be sustained, the price of our ADSs may fall.
Before this offering, there has been no market outside the ROC for our common shares and there has been no market for our ADSs anywhere. Following this offering, the Taiwan Stock Exchange will remain the only market for the common shares. Application has been made to list the ADSs on the New York Stock Exchange. We cannot predict the extent to which this offering will result in the development of an active, liquid public trading market for our ADSs or how liquid the market will be. 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.
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 and, if a significant number of withdrawals are effected, to reduce the liquidity of the ADSs. 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 with respect to our common shares.
As a holder of ADSs, your voting rights are limited by the terms of the deposit agreement. You will not be able to exercise your voting rights on an individual basis.
As a holder of ADRs evidencing ADSs, you will not be able to exercise voting rights on an individual basis. You may exercise your voting rights with respect to the underlying common shares only in accordance with the provisions of the deposit agreement. In particular, for any resolution to be proposed at a shareholders meeting, only holders who (1) have provided voting instructions in a timely manner in accordance with the provisions of the deposit agreement, and (2) together own at least 51% of the outstanding ADSs voting in the same manner, will be able to vote the common shares representing their ADSs in the manner set forth in their voting
17
During any period in which your ADSs represent the irrevocable right to receive our common shares evidenced by certificates of payment deposited with the custodian, you may exercise your voting rights in the same manner as if your ADSs represented our common shares.
You may not be able to participate in rights offerings and may experience dilution of your holdings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act of 1933 with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. We can give no assurances that we can establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. In addition, if the depositary is unable to obtain the requisite approval from the Central Bank of China for the conversion of the subscription payments into NT dollars or if the depositary determines that it is unlikely to obtain the required approval, we may decide with the depositary not to make the rights available to holders of ADSs. See Risks Relating to Ownership of ADSs 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 and Annex B Foreign Investment and Exchange Controls in the ROC in this prospectus. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.
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 you will receive no value for these rights.
The value of your investment may be reduced by possible future sales of common shares by us or our shareholders.
Except for the sale of additional ADSs to the underwriters, we and some of our shareholders have agreed with the underwriters not to dispose of any of our common shares or securities convertible into or exchangeable for common shares, including ADSs, during the period beginning from the date of this prospectus continuing through the date 90 days after the date of this prospectus, except with the prior written consent of the representatives of the underwriters. Approximately 555.6 million common shares are subject to the lock-up agreement. The representatives may, in their discretion, waive or terminate these restrictions. See Common Shares Available for Future Sale for a discussion of restrictions that may apply to future sales of our ADSs or common shares by us and our affiliates.
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 will not dispose of significant numbers of common shares. In addition, following completion of this offering, several of our subsidiaries and affiliates will continue to hold common shares, depositary shares representing common shares and options to purchase common shares. We or they may decide to sell those securities in the future. See Principal Shareholders for a description of our significant shareholders and ASE Group companies that hold our common shares. We cannot predict the effect, if any, that future sales of ADSs or common shares, or the availability of ADSs or common shares for future sale, will have on the market price of ADSs or common shares
18
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 further approvals from the Central Bank of China or any other governmental authority or agency of the ROC, may convert NT dollars into other currencies, including U.S. dollars, for:
| the proceeds of the sale of common shares represented by ADSs or received as stock dividends from the common shares; and | |
| any cash dividends or distributions received from the common shares. |
In addition, the depositary may also convert into NT dollars incoming payments for purchases of common shares for deposit in the depositary receipt facility against the creation of additional ADSs. The depositary is required to obtain approval from the Central Bank of China on a payment-by-payment basis for conversion into NT dollars of subscription payments for rights offerings. The depositary may also be required to obtain foreign exchange approval from the Central Bank of China on a payment-by-payment basis for conversion from NT dollars into foreign currencies of the proceeds from the sale of subscription rights of new common shares. Although it is expected that the Central Bank of China 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, without obtaining further approval from the Central Bank of China, may convert from NT dollars into other currencies, including U.S. dollars, the following:
| the proceeds of the sale of any underlying common shares withdrawn from the depositary receipt facility or received as a stock dividend; and | |
| any cash dividends or distribution received. |
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 others, 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 market value of your investment may fluctuate due to the volatility of the ROC securities market.
The ROC securities market is smaller and more volatile than the securities markets in the United States and in other 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. In the past ten years, 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 August 25, 2000, the Taiwan Stock Exchange Index closed at 8,026.32. The Taiwan Stock Exchange has experienced problems such as market manipulation, insider trading and payment defaults. The recurrence of these or similar problems could have a material adverse effect on the market price and liquidity of the securities of ROC companies, including our ADSs and common shares, in both the domestic and the international markets.
You will not be able to withdraw the underlying common shares of our ADSs for a period of three months after the initial delivery of the ADSs.
Under ROC regulations applicable to offerings of ADSs, newly-issued shares of ROC companies initially offered in ADS form may not be withdrawn from the ADS facility until three months following the initial delivery of the ADSs. As a result, for a period of three months following closing of this offering, owners of the ADSs offered by this prospectus will not be able to withdraw the underlying common shares from our ADS facility or sell the underlying common shares on the Taiwan Stock Exchange. Although the common shares that will be represented by
19
You may have difficulty enforcing any judgment obtained in the United States against us or our directors and supervisors or executive officers.
Our company is incorporated under the laws of the ROC. Substantially all of our directors, supervisors and executive officers reside in the ROC. In addition, a substantial portion of our assets and the assets of those persons are located in the ROC. As a result, it may not be possible for investors to effect service of process upon us or those persons within the United States, or it may be difficult to enforce against us or them judgments obtained in the U.S. courts, including those based upon the civil liability provisions of the federal securities laws of the United States. In addition, we have been advised by Lee and Li, our ROC counsel, that there is doubt as to whether ROC courts will enter judgments in original actions brought in ROC courts based solely upon the civil liability provisions of the federal securities laws of the United States. See Enforceability of Civil Liabilities.
Purchasers of ADSs may incur dilution as a result of the practice among ROC technology companies of issuing stock bonuses to employees.
Similar to other ROC technology companies, we issue from time to time bonuses in the form of common shares valued at par under our employee stock bonus plan. Because these shares are issued at par value, the issuance of these shares may have a dilutive effect on your ADSs.
FORWARD-LOOKING STATEMENTS
This prospectus and information incorporated by reference includes forward-looking statements. These statements are generally indicated by the use of forward-looking terminology such as believe, expect, anticipate, estimate, plan, project, may, will or other similar words that express an indication of actions or results of actions that may or are expected to occur in the future. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. These forward-looking statements are based on our own information and on information from other sources we believe to be reliable. Some of these forward-looking statements are derived from projections made and published by Dataquest and Electronic Trend Publications. We were not involved in the preparation of these projections. Our actual results may be materially less favorable than those expressed or implied by these forward-looking statements as a result of risks and other factors noted throughout this prospectus which could depress the market price of our ADSs and common shares.
20
USE OF PROCEEDS
The net proceeds of this offering will be approximately US$180.9 million (assuming an initial offering price of US$9.50 per ADS, which is based on the U.S. dollar equivalent of the closing price of the common shares on the Taiwan Stock Exchange on August 25, 2000 multiplied by five), after we deduct underwriting and estimated offering expenses, or US$206.2 million if the underwriters over-allotment option is exercised in full.
We intend to use the net proceeds in the following manner:
| US$140.0 million for the purchase of new machinery and equipment; | |
| US$40.0 million for the construction of new facilities in connection with the expansion of our facilities in Kaohsiung (not including those of our subsidiaries); and | |
| the remainder for working capital and general corporate purposes. |
Pending these uses, we expect to invest the net proceeds in short-term, interest-bearing securities or may use a portion of the funds temporarily for working capital or general corporate purposes.
21
MARKET PRICE INFORMATION FOR OUR COMMON SHARES
Our common shares were first issued in March 1984 and have
been listed on the Taiwan Stock Exchange since July 1989.
The Taiwan Stock Exchange is an auction market where the
securities traded are priced according to supply and demand
through announced bid and ask prices. As of August 15, 2000,
there were an aggregate of 1,980,355,086 of our common shares
outstanding, which does not include the 671,644,914 common shares
to be issued for the stock dividend to shareholders of record on
August 13, 2000 and employee bonus shares to be distributed
in October of 2000. The following table sets forth, for the
periods indicated, the high and low closing prices and the
average daily volume of trading activity on the Taiwan Stock
Exchange for the common shares and the high and low of the daily
closing values of the Taiwan Stock Exchange Index.
Adjusted
Closing Price
Closing Price
Taiwan Stock
per Share
per Share(1)
Average Daily
Exchange Index
Trading
High
Low
High
Low
Volume
High
Low
(in thousands
of shares)
1995
First Quarter
NT$
102.00
NT$
77.00
NT$
11.49
NT$
8.33
2,962.1
7,051.5
6,167.8
Second Quarter
107.50
68.50
12.79
10.27
7,316.4
6,575.7
5,199.9
Third Quarter
78.00
52.00
12.02
7.37
4,623.0
5,624.7
4,503.4
Fourth Quarter
66.00
54.00
10.2
8.14
1,786.2
5,260.8
4,565.7
1996
First Quarter
66.50
52.50
10.35
7.76
2,138.2
5,146.0
4,690.2
Second Quarter
87.00
45.40
14.95
8.98
7,950.6
6,560.4
5,127.5
Third Quarter
45.90
37.10
12.81
10.13
6,791.6
6,535.6
5,955.5
Fourth Quarter
53.50
39.70
15.22
10.88
12,606.9
6,982.8
6,359.7
1997
First Quarter
100.00
52.00
28.23
14.25
18,870.9
8,526.2
6,820.4
Second Quarter
124.50
75.00
42.8
27.95
32,453.6
9,030.3
7,952.1
Third Quarter
158.00
98.50
62.47
37.6
44,718.6
10,116.8
8,708.8
Fourth Quarter
145.50
90.00
56.3
33.55
32,431.0
8,695.0
7,089.6
1998
First Quarter
187.00
105.00
73.27
40.49
27,057.7
9,277.1
7,375.1
Second Quarter
191.00
58.50
76.48
39.42
38,342.3
9,266.7
7,117.1
Third Quarter
67.50
47.00
46.83
31
21,600.1
8,047.7
6,251.4
Fourth Quarter
71.00
49.90
48.52
32.75
21,908.4
7,435.8
6,436.0
1999
First Quarter
85.00
51.00
58.29
33.36
25,332.9
7,043.2
5,474.8
Second Quarter
110.00
74.50
76.82
49.19
32,461.4
8,608.9
7,018.7
Third Quarter
117.00
74.00
81.54
51.7
29,658.6
8,593.4
6,823.5
Fourth Quarter
112.00
86.50
85.41
64.43
19,186.3
8,448.8
7,362.7
2000
First Quarter
123.00
91.00
94.03
65.18
26,613.1
10,202.2
8,448.8
Second Quarter
119.50
89.50
91.4
66.68
16,766.1
10,186.2
8,921.2
Third Quarter (through August 25)
95.00
53.50
73.05
51.7
12,014.1
9,115.5
7,716.0
(1) | As adjusted retroactively by the Taiwan Stock Exchange to give effect to stock dividends paid in the periods indicated. See Dividends and Dividend Policy. |
Source: Statistical Data of Taiwan Stock Exchange, 1995-1999, Taiwan Stock Exchange.
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. See Annex A The Securities Markets of the ROC The Taiwan Stock Exchange.
Based on records maintained on behalf of our share registrar by the central depositary organization for the clearance and settlement of securities traded on the Taiwan Stock Exchange, and information provided to us by brokers, dealers and banks or their nominees in the ROC, including the custodian of shares underlying depositary receipts, whose customers hold our common shares, we believe that, as of August 15, 2000, fewer than 300 of our shareholders were resident in the United States.
22
MARKET PRICE INFORMATION FOR OUR GLOBAL DEPOSITARY SHARES
We offered and sold 8,600,000 GDSs in July 1995 comprising of
GDSs sold in the United States under Rule 144A and GDSs sold
outside the United States pursuant to Regulation S. Each
GDS represents five common shares of ASE Inc. The GDSs sold
under Rule 144A have been designated as eligible for trading
in the PORTAL System of the National Association of Securities
Dealers, Inc. in the United States. The GDSs sold pursuant to
Regulation S are listed on the Stock Exchange of Singapore
and the Luxembourg Stock Exchange and quoted on SEAQ
International. Some of our affiliates offered and sold an
additional 10,489,902 GDSs in December 1999. As of
August 24, 2000, there were an aggregate of 18,412,858 GDSs
outstanding comprising 10,497,527 GDSs sold pursuant to
Regulation S, 5,805,233 GDSs sold under Rule 144A and
2,110,098 GDSs held by our affiliates, which do not include
the 5.8 million GDSs to be distributed as stock dividends to
GDS holders of record on August 13, 2000. Concurrently with
this offering, we are offering to exchange one ADS for each GDS
sold under Rule 144A. We are also arranging for the
automatic conversion of each of the outstanding GDSs sold
pursuant to Regulation S into one ADS. The conversion of and
exchange for the GDSs into ADSs are conditional upon closing of
this offering. Upon completion of the conversion of the GDSs sold
pursuant to Regulation S into ADSs, we intend to delist
these GDSs from the Stock Exchange of Singapore and the
Luxembourg Stock Exchange. See Exchange Offer for
more information on these procedures. The following table sets
forth, for the periods indicated, the high and low closing prices
of our outstanding GDSs as quoted on SEAQ International.
Closing Price
of GDSs(1)
High
Low
1995
First Quarter
US$
US$
Second Quarter
Third Quarter
2.67
2.13
Fourth Quarter
2.23
1.72
1996
First Quarter
2.23
1.50
Second Quarter
2.97
1.84
Third Quarter
2.55
1.96
Fourth Quarter
2.84
2.06
1997
First Quarter
5.21
2.79
Second Quarter
8.12
5.54
Third Quarter
11.65
7.39
Fourth Quarter
10.23
5.51
1998
First Quarter
14.78
6.45
Second Quarter
14.03
5.99
Third Quarter
7.30
4.88
Fourth Quarter
11.85
5.53
1999
First Quarter
10.27
6.27
Second Quarter
15.46
9.77
Third Quarter
16.16
11.20
Fourth Quarter
17.79
13.81
2000
First Quarter
19.20
14.52
Second Quarter
16.35
12.17
Third Quarter (through August 25)
19.20
8.56
(1) | As adjusted retroactively to give effect to stock dividends paid in the periods indicated. |
Source: Factset.
The GDSs have in the past been quoted in PORTAL and on SEAQ International at a premium to the per GDS equivalent price of the common shares. There is no assurance that the ADSs will trade at any premium, or that they will not trade at a significant discount, to the per ADS equivalent price of the common shares.
23
DIVIDENDS AND DIVIDEND POLICY
To date we have not paid cash dividends on our common shares and do not expect to pay any cash dividends for the foreseeable future. We have paid annual stock dividends on our common shares since 1989.
The following table sets forth the aggregate number of
outstanding common shares entitled to dividends, as well as the
stock dividends paid during each of the years indicated. The
stock dividends per common share represent dividends paid in the
fiscal year for common shares outstanding on the record date
applicable to the payment of these dividends.
Percentage of
Outstanding
Outstanding
Common
Total Common
Common Shares
Shares
Stock Dividends
Shares Issued as
on Record
Represented by
per Common Share(1)
Stock Dividends
Date(2)
Stock Dividend
1995
NT$
3.60
US$
0.14
93,600,000
260,000,000
36.0
%
1996
8.00
0.29
319,840,000
399,800,000
(3)
80.0
1997
3.80
0.14
277,020,000
729,000,000
38.0
1998
7.20
0.21
732,240,000
1,017,000,000
72.0
1999
1.07
0.03
190,460,000
1,780,000,000
10.7
2000
3.15
0.10
623,811,852
1,980,355,086
31.5
(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. |
(3) | Includes 43,000,000 common shares issued in connection with an offering of GDSs in July 1995. |
We have historically paid stock dividends on our common shares with respect to the preceding year after approval by our shareholders at the annual general meeting of shareholders. Our most recent stock dividend of NT$3.15 per common share will be distributed in October 2000 to shareholders of record on August 13, 2000. The form, frequency and amount of future cash or stock dividends on our common shares and ADSs will depend upon our earnings, cash flow, financial condition and other factors. See Description of Common Shares Dividends and Distributions and Note 15 of Notes to Consolidated Financial Statements.
In general, we are not permitted to distribute dividends or make other distributions to shareholders for any year in which we did not record net income. The ROC Company Law also requires that 10% of annual net income (less prior years losses, 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 any gains on the disposal of fixed assets, prior years losses and additions to legal and special reserves, if any) should be paid to our directors and supervisors as compensation; and | |
| between 5% and 7% of the annual net income (less any gains on the disposal of fixed assets, prior years losses and legal and special reserves, if any) should be paid to our employees as bonuses. The 5% portion is to be distributed to all employees in the form of stock bonuses in accordance with our employee stock bonus plan, while any portion |
24
exceeding 5% 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. |
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 described under Description of American Depositary Receipts Dividends and Distributions Distributions of Cash, 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 described under Description of American Depositary Receipts Dividends and Distributions Distributions of Shares, 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, purchasers of ADSs holding outstanding ADSs on the relevant dividend record date will, subject to the terms of the deposit agreement, be entitled to the full amount of any dividend declared at our next general meeting of the shareholders.
For information relating to ROC withholding taxes payable on dividends, see Taxation ROC Taxation Dividends. For information relating to ROC foreign exchange approvals required for the conversion by the depositary of dividends on common shares from NT dollars into U.S. dollars for the payment to holders of ADSs, see Annex B Foreign Investment and Exchange Controls in the ROC Depositary Receipts.
25
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 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.
The following table sets forth, for the fiscal years 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
Average
High
Low
Period-End
1995
NT$
27.31
NT$
27.55
NT$
25.17
NT$
27.29
1996
27.47
27.95
27.15
27.52
1997
29.06
33.25
27.34
32.80
1998
33.54
35.00
32.05
32.27
1999
32.28
33.40
31.39
31.39
2000 (through August 25)
31.05
31.15
30.83
31.10
Source: | Federal Reserve Bulletin, 1995-1996, Board of Governors of the Federal Reserve System; Federal Reserve Statistical Release H.10(512), 1997-2000, Board of Governors of the Federal Reserve System. |
For information relating to ROC foreign exchange approvals required for the conversion by the depositary of dividends on common shares or proceeds from the sale of common shares from NT dollars into U.S. dollars and the payment to holders of ADSs, see Annex B Foreign Investment and Exchange Controls in the ROC Depositary Receipts.
We publish our financial statements in NT dollars, the lawful currency of the ROC. This prospectus contains translations of NT dollar amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise noted, all translations from NT dollars to U.S. dollars and from U.S. dollars to NT 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 June 30, 2000, which was NT$30.80 to US$1.00 on that date. No representation is made that the NT dollar or U.S. dollar amounts referred to in this prospectus 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 August 25, 2000, the noon buying rate was NT$31.10 to US$1.00.
26
CAPITALIZATION
The following table sets forth our consolidated short-term debt
and capitalization as of June 30, 2000 and as adjusted to
give effect to this offering (assuming an initial offering price
of US$9.50 per ADS, which is based on the U.S. dollar equivalent
of the closing price of the common shares on the Taiwan Stock
Exchange on August 25, 2000 multiplied by five) after
deducting underwriting discounts but before deducting the
estimated expenses of the offering and the application of
proceeds from the offering. The table assumes no exercise of the
underwriters over-allotment option. Except as set forth
below, there has been no material change in our consolidated
short-term debt and capitalization since June 30, 2000. This
table should be read in conjunction with the Consolidated
Financial Statements.
As of June 30, 2000
Actual
As Adjusted
(in millions)
Short-term debt (including current portions of long-term debt and
long-term payable for investments)
NT$
13,782.4
US$
447.5
NT$
13,782.4
US$
447.5
Long-term debt (excluding current portion of long-term debt)
NT$
10,116.4
US$
328.5
NT$
10,116.4
US$
328.5
Long-term bonds payable
10,960.9
355.9
10,960.9
355.9
Long-term payable for investments(1)
3,900.8
126.6
3,900.8
126.6
Shareholders equity:
Capital stock, par value NT$10, 2,400 million shares
authorized, 1,980 million shares issued and outstanding,
2,080 million shares as adjusted to give effect to this
offering
19,803.6
643.0
27,520.0
(3)
893.5
(3)
Capital surplus
773.2
25.1
5,391.1
175.0
Retained earnings(2)
12,081.0
392.2
4,734.4
153.7
Cumulative translation adjustments
147.6
4.8
147.6
4.8
Total shareholders equity
NT$
32,805.4
US$
1,065.1
NT$
37,793.1
US$
1,227.0
Total capitalization
NT$
57,783.5
US$
1,876.1
NT$
62,771.2
US$
2,038.0
(1) | Represents the balance of the purchase price of Motorolas Semiconductor Products Sector Businesses in Chung Li, Taiwan, which is payable subject to target sales volumes being met over three to five years through July 2002 to 2004. See Note 26 of Notes to Consolidated Financial Statements. |
(2) | Retained earnings reflect the declaration of stock dividends in the amount of NT$6,238.1 million and bonus shares to employees, directors and supervisors in the amount of NT$1,108.5 million. |
(3) | Includes the net proceeds of this offering and gives effect to the issuance of 671,644,914 common shares for the stock dividend to shareholders and bonus shares to employees to be distributed in October 2000. |
27
DILUTION
As of June 30, 2000, we had a net tangible book value of
US$0.40 per common share. Net tangible book value per common
share is determined by dividing our net tangible book value
determined in accordance with ROC GAAP (total tangible assets
less total liabilities) by the total number of outstanding common
shares issued as of June 30, 2000 and stock dividend shares
and employee bonus shares to be issued in October 2000, and
using an exchange rate of NT$30.80 per US$1.00. Our net tangible
book value per ADS on that date was US$2.01 per ADS. This is
calculated by multiplying our net tangible book value per common
share by five, which is the number of common shares represented
by each ADS. After giving effect to the sale by ASE Inc. of
20,000,000 ADSs at an assumed initial offering price of US$9.5
per ADS (which is based on the U.S. dollar equivalent of the
closing price of the common shares on the Taiwan Stock Exchange
on August 25, 2000 multiplied by five), and after deducting
estimated underwriting discounts and estimated expenses to be
paid by us, our pro forma net tangible book value per ADS as of
June 30, 2000 would have been US$2.27 per ADS. This
represents an immediate dilution of US$7.23 per ADS to new
investors purchasing ADSs in this offering and an immediate
increase in pro forma net tangible book value of US$0.26 per ADS
to our existing shareholders. The following table illustrates
this per ADS dilution:
Assumed initial offering price per ADS
US$9.50
Net tangible book value per ADS equivalent at June 30, 2000
US$2.01
Increase per ADS attributable to new investors
US$0.26
Net tangible book value per ADS after the offering
US$2.27
Dilution per ADS to new investors
US$7.23
The following table sets forth, as of June 30, 2000, on a pro forma basis after giving effect to this offering:
(1) | the total number of ADS equivalents, or units of five common shares, held by our current shareholders and the total consideration and the average price per ADS equivalent paid for ADS equivalents to be issued by us in this offering; | |
(2) | the total consideration for the ADSs to be issued by ASE Inc. and the price to be paid by you and the other purchasers of ADSs in this offering (assuming an initial offering price of US$9.50 per ADS); and |
(3) | the percentage of ADSs purchased and the percentage of total consideration paid by our current shareholders and the new investors, using an exchange rate of NT$30.80 per US$1.00: |
ADSs or ADS | |||||||||||||||||||||
Equivalents Purchased | Total Consideration | Average Price | |||||||||||||||||||
|
|
per ADS or ADS | |||||||||||||||||||
Number | Percent | Amount | Percent | Equivalent | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||
Existing shareholders | 530,400,000 | 96.4 | % | US$ | 780,550,543.4 | 81.1 | % | US$ | 1.47 | ||||||||||||
New investors in the offering | 20,000,000 | 3.6 | 182,400,000.0 | 18.9 | 9.12 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||
Total | 550,400,000 | 100.0 | % | US$ | 962,950,543.4 | 100.0 | % | US$ | 10.59 | ||||||||||||
|
|
|
|
|
The above tables assume no exercise of the underwriters over-allotment option.
28
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial data
have been derived from the Consolidated Financial Statements.
Our statements of income for the years ended December 31,
1997, 1998 and 1999 and our balance sheets as of
December 31, 1998 and 1999 have been audited by T.N. Soong
& Co., independent accountants and a member firm of Andersen
Worldwide, SC. The Consolidated Financial Statements, and the
report of T.N. Soong & Co. on those financial statements, are
included in this prospectus. The selected consolidated financial
information for those periods and as of those dates are
qualified by reference to those financial statements and that
report, and should be read in conjunction with them and with
Managements Discussion and Analysis of Financial
Condition and Results of Operations. The selected
consolidated statement of income data for the years ended
December 31, 1995 and 1996 and selected consolidated balance
sheet data as of December 31, 1995, 1996 and 1997 set forth
below are derived from our audited consolidated financial
statements not included in this prospectus. These financial
statements have been audited by T.N. Soong & Co. The
Consolidated Financial Statements are prepared and presented in
accordance with generally accepted accounting principles in the
ROC, or ROC GAAP, which differ in material respects from
generally accepted accounting principles in the United States, or
US GAAP. Notes 27 and 28 of Notes to Consolidated Financial
Statements contain additional disclosures required under
US GAAP and provide descriptions of the significant
differences between ROC GAAP and US GAAP and reconciliations
of net income and shareholders equity to US GAAP as
of and for the years ended December 31, 1998 and 1999. The
selected consolidated balance sheet data as of and for the six
months ended June 30, 2000 and the selected consolidated
income statement data and segment and other data for each of the
six months ended June 30, 1999 and 2000 have been derived
from our unaudited consolidated financial statements included
elsewhere in this prospectus, which have been prepared on the
same basis as our audited consolidated financial statements and
contain normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for
such unaudited periods.
Year Ended and as of December 31,
1995
1996
1997
1998
1999
(in millions, except share, ADS and earnings per share and per ADS data)
NT$
NT$
NT$
NT$
NT$
Income Statement Data:
ROC GAAP:
Net revenues
16,231.7
17,833.9
19,088.2
20,762.4
32,609.6
Cost of revenues
(12,485.8
)
(13,956.7
)
(13,758.5
)
(15,468.1
)
(23,959.6
)
Gross profit
3,745.9
3,877.2
5,329.7
5,294.3
8,650.0
Operating expenses:
Selling
(407.4
)
(543.4
)
(733.5
)
(744.7
)
(924.3
)
General and
administrative (1)
(609.1
)
(529.3
)
(648.7
)
(909.4
)
(1,620.1
)
Goodwill amortization (2)
(53.2
)
(345.7
)
(542.7
)
Research and development
(262.1
)
(382.3
)
(372.9
)
(453.6
)
(714.3
)
Operating Income
2,467.3
2,422.2
3,521.4
2,840.9
4,848.6
Net non-operating income (expense):
Investment income (loss) on long-term investment(1)(3)
(1.2
)
(108.1
)
114.2
54.6
329.9
Goodwill amortization (4)
(4.5
)
(145.3
)
(155.1
)
(155.1
)
(279.3
)
Gain (loss) on sale of investment
4,870.9
606.9
5,544.2
Foreign exchange gain (loss)
113.8
113.5
(133.8
)
(935.5
)
(538.4
)
Interest income (expense)(5)
(201.0
)
(241.4
)
(85.9
)
(380.4
)
(1,046.6
)
Others(6)
(54.1
)
85.9
11.0
(50.1
)
204.0
Income before tax
2,320.3
2,126.8
8,142.7
1,981.3
9,062.4
Income tax benefit (expense)
104.3
(61.2
)
(374.9
)
150.8
(459.5
)
Income before minority interest
2,424.6
2,065.6
7,767.8
2,132.1
8,602.9
Income before acquisition
(65.1
)
Minority interest in net income of subsidiary
(91.9
)
(94.1
)
(364.3
)
(528.1
)
(743.1
)
Net income
2,332.7
1,971.5
7,403.5
1,604.0
7,794.7
Earnings per common share:
Primary
1.18
1.00
3.69
0.77
3.89
Fully diluted
1.18
1.00
3.69
0.77
3.89
Earnings per pro forma equivalent ADS:
Primary
5.89
4.98
18.45
3.85
19.45
Fully diluted
5.89
4.98
18.45
3.85
19.45
Number of common shares(7)
1,980,000,000
1,980,000,000
1,980,000,000
1,980,000,000
1,980,000,000
Number of pro forma equivalent ADSs
396,000,000
396,000,000
396,000,000
396,000,000
396,000,000
[Additional columns below]
[Continued from above table, first column(s) repeated]
Year Ended and as
Six Months Ended
of December 31,
as of June 30,
1999
1999
2000
(in millions, except share, ADS and earnings per share and per ADS data)
US$
NT$
NT$
US$
(unaudited)
Income Statement Data:
ROC GAAP:
Net revenues
1,058.7
11,913.7
23,597.2
766.1
Cost of revenues
(777.9
)
(9,043.4
)
(16,276.7
)
(528.4
)
Gross profit
280.8
2,870.3
7,320.5
237.7
Operating expenses:
Selling
(30.0
)
(291.3
)
(458.3
)
(14.9
)
General and
administrative (1)
(52.6
)
(731.3
)
(1,287.3
)
(41.8
)
Goodwill amortization (2)
(17.6
)
(215.0
)
(308.3
)
(10.0
)
Research and development
(23.2
)
(353.6
)
(534.7
)
(17.4
)
Operating Income
157.4
1,279.1
4,731.9
153.6
Net non-operating income (expense):
Investment income (loss) on long-term investment(1)(3)
10.7
13.8
90.8
2.9
Goodwill amortization (4)
(9.1
)
(107.0
)
(176.9
)
(5.7
)
Gain (loss) on sale of investment
180.0
3,884.8
Foreign exchange gain (loss)
(17.4
)
210.0
183.8
6.0
Interest income (expense)(5)
(34.0
)
(365.8
)
(817.6
)
(26.6
)
Others(6)
6.6
52.5
12.1
0.4
Income before tax
294.2
4,967.4
4,024.1
130.6
Income tax benefit (expense)
(14.9
)
(164.0
)
(499.2
)
(16.2
)
Income before minority interest
279.3
4,803.4
3,524.9
114.4
Income before acquisition
(2.1
)
(65.1
)
Minority interest in net income of subsidiary
(24.1
)
(221.5
)
(604.1
)
(19.6
)
Net income
253.1
4,516.8
2,920.8
94.8
Earnings per common share:
Primary
0.13
2.26
1.46
0.05
Fully diluted
0.13
2.26
1.46
0.05
Earnings per pro forma equivalent ADS:
Primary
0.65
11.30
7.30
0.25
Fully diluted
0.65
11.30
7.30
0.25
Number of common shares(7)
1,980,000,000
1,980,000,000
1,980,234,123
1,980,234,123
Number of pro forma equivalent ADSs
396,000,000
396,000,000
396,046,825
396,046,825
29
[Additional columns below]
[Continued from above table, first column(s) repeated]
30
Six Months Ended
Year Ended and as of December 31,
and as of June 30,
1999
1999
1999
2000
(in millions, except share, ADS and earnings per share and per ADS data)
NT$
US$
NT$
NT$
US$
(unaudited)
US GAAP:
Net income
4,641.3
150.7
3,717.4
2,053.5
66.7
Earnings per common share:
Basic
2.34
0.08
1.88
1.04
0.03
Diluted
2.30
0.07
1.86
1.00
0.03
Earnings per pro forma equivalent ADS:
Basic
11.72
0.38
9.39
5.18
0.17
Diluted
11.48
0.37
9.32
5.00
0.16
Balance Sheet Data:
ROC GAAP:
Current assets:
Cash and cash equivalents
11,809.1
383.4
6,239.9
202.6
Short-term investments
216.3
7.0
3,001.6
97.4
Notes and accounts receivable
7,463.4
242.3
8,712.0
282.9
Inventories
2,449.7
79.5
2,710.9
88.0
Other
1,411.8
45.9
2,317.7
75.3
Total
23,350.3
758.1
22,982.1
746.2
Long-term investments
9,674.4
314.1
11,034.0
358.2
Properties
38,107.5
1,237.3
48,904.4
1,587.8
Other assets
6,198.6
201.2
6,083.5
197.5
Total assets
77,330.8
2,510.7
89,004.0
2,889.7
Short-term bank borrowing/loans
9,868.2
320.4
13,782.4
447.5
Long-term bank borrowing/loans
24,551.5
797.1
24,978.1
811.0
Other liabilities and minority interest
12,854.1
417.3
17,438.1
566.1
Total liabilities and minority interest
47,273.8
1,534.8
56,198.6
1,824.6
Shareholders equity
30,057.0
975.9
32,805.4
1,065.1
US GAAP:
Shareholders equity
26,569.7
862.7
22,077.0
29,178.6
947.4
Segment Data:
Net revenues:
Packaging
24,523.0
796.2
8,942.9
17,725.5
575.5
Testing
7,793.2
253.0
2,772.7
5,789.5
188.0
Other
293.4
9.5
198.1
82.2
2.6
Gross profit:
Packaging
5,753.0
186.8
1,875.2
4,888.3
158.7
Testing
3,105.2
100.8
1,135.7
2,494.5
81.0
Other
(208.2
)
(6.8
)
(140.6
)
(62.3
)
(2.0
)
Other Data
:
Net cash outflow from acquisition of fixed assets
(9,869.2
)
(320.4
)
2,593.9
(13,140.6
)
(426.6
)
Depreciation and amortization
5,554.4
180.3
2,144.1
3,880.5
126.0
Net cash inflow (outflow) from operations
7,589.8
246.4
2,324.7
3,353.0
109.0
Net cash inflow (outflow) from sale of investments
7,889.3
256.1
4,505.5
Net cash inflow (outflow) from investing activities(8)
(12,351.8
)
(401.0
)
(4,535.8
)
(14,995.2
)
(486.9
)
Net cash inflow (outflow) from financing activities
8,565.5
278.1
9,044.3
6,242.0
202.7
Pro Forma Data(9):
ROC GAAP:
Net income
7,539,214
244,779.7
Weighted average shares outstanding:
Primary
1,980,000,000
1,980,000,000
Fully diluted
1,980,000,000
1,980,000,000
Earnings per share:
Primary
3.76
0.12
Fully diluted
3.76
0.12
Earnings per pro forma equivalent ADS:
Primary
18.81
0.60
Fully diluted
18.79
0.60
(1)
Excludes goodwill amortization.
(2)
Included in general and administrative expenses in
the Consolidated Financial Statements.
(3)
Derived by netting investment income under
equity method net in non-operating income and
the investment loss under equity method
net in non-operating expense in the Consolidated Financial
Statements.
(4)
Included in investment loss in the Consolidated
Financial Statements.
(5)
Derived by netting interest income and the
interest expense in the Consolidated Financial Statements.
(6)
Derived by netting the others entry in
non-operating income and the others entry in
non-operating expenses in the Consolidated Financial Statements.
(7)
Represents the weighted average number of shares
after retroactive adjustments to give effect to stock dividends.
(8)
Derived by aggregating proceeds from sales of
shares of stock of ASE Inc. and ASE Test.
(9)
Reflects the acquisition in July 1999 of the ASE
Chung Li and ASE Korea, formerly Motorolas Semiconductor
Products Sector Businesses in Taiwan and Korea,
respectively, as if the acquisition had occurred on
January 1, 1999. The pro forma data, which is presented in
ROC GAAP, should be read in conjunction with the combined
financial statements of Motorolas Semiconductor Products
Sector Businesses in Taiwan and Korea included in this
prospectus.
Table of Contents
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following discussion of our business, financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements, the combined financial statements of Motorolas Semiconductor Products Sector Businesses in Taiwan and Korea and the unaudited pro forma financial statements, all of which are included elsewhere in this prospectus. 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 Risk Factors and elsewhere in this prospectus.
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 is the integrated packaging, testing and direct shipment of semiconductors to end users designated by our customers. Our net revenues have increased significantly from NT$19,088.2 million in 1997 to NT$32,609.6 million (US$1,058.7 million) in 1999. After eliminating the results of the operations we acquired in 1999 for comparative purposes, our net revenues were NT$25,147.9 million (US$816.5 million) in 1999. For the six months ended June 30, 2000, our net revenues were NT$23,597.2 million (US$766.1 million) compared to NT$11,913.7 million for the same period in 1999. After eliminating the results of the operations we acquired in 1999 for comparative purposes, our net revenues for the six months ended June 30, 2000 were NT$17,744.0 million (US$576.1 million). Following an industry downturn in 1998, we are currently enjoying strong revenue growth and improved profitability with the recent upturn in the semiconductor industry. Our growth is increasingly diversified across a broad range of end user applications and clients. We are experiencing strong growth in communications and consumer-related sectors while maintaining our strong market position in personal computer-related sectors. Our volume growth is increasingly concentrated in the packaging of higher priced package types and the testing of more complex semiconductor devices.
We price our services based primarily on a cost-plus calculation of the costs involved in providing these services, and with reference to market prices. The majority of our prices are denominated in U.S. dollars. The majority (approximately 55%) of our revenues are denominated in U.S. dollars. However, as more than 54% of our costs, including all 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. The average realized selling price for packaging a semiconductor device is higher than the average realized selling price for the final testing of the same device. Over the last three years, our testing revenues have grown faster than our packaging sales. In 1997, 1998, 1999 and the six months ended June 30, 2000, our packaging sales accounted for 80.3%, 81.2%, 75.2% and 75.1%, while testing revenues accounted for 12.5%, 15.1%, 23.9% and 24.5%, respectively, of our net revenues. After eliminating the results of the operations we acquired in 1999 for comparative purposes, testing revenues as a percentage of net revenues in 1999 and the six months ended June 30, 2000, at 16.1% and 17.0%, respectively, were still higher than the corresponding levels in 1999. We expect this trend to continue as industry trends suggest a higher growth rate for testing compared to packaging services. The portion of the semiconductor testing market currently accounted for by independent testing service providers is smaller than that for packaging, which we believe will facilitate outsourced testing to grow at a faster rate than packaging. In addition, the high capital expenditures needed for increasingly complex testing equipment, as compared to less expensive packaging equipment, is leading to further outsourcing of testing services by integrated device manufacturers. We also expect to provide increasingly more turnkey services to our clients.
31
Our results of operations have been affected by a number of factors, including the proportionate contribution of packaging and testing to our net revenues, our capacity utilization rates and the costs of raw materials. Over the last three years, our net revenues have been affected by the volume of units packaged and tested, the selling prices for these units, and currency fluctuations. In 1999, our results of operations were affected by our acquisition in May 1999 of 70% of the outstanding shares of ISE Labs, our acquisitions in July 1999 of ASE Chung Li and ASE Korea and our purchase from February through July 1999, in the open market, of a controlling 22.6% stake in Universal Scientific. Our interest in ISE Labs was subsequently increased to 75.3% following ASE Tests purchase of $30 million of additional shares of ISE Labs in April 2000. In addition, we subsequently increased our ownership interest in Universal Scientific to 23.3% through the purchase of additional shares in the open market in July and August of 2000.
Pricing and Revenue Mix
The semiconductor industry is characterized by a general trend towards declining prices for products and services of a given technology over time. During times of intense competition and adverse conditions in the semiconductor industry, such as in 1998, the pace of this decline in prices of our services may be more rapid than that experienced in other years. In 1998, the selling prices in U.S. dollar terms of our packaging and testing services experienced a sharp decline due to intense price competition from other independent packaging and testing companies that were attempting to maintain capacity utilization levels in the face of reduced demand.
Declines in selling prices have been partially offset over the last three years by a change in our revenue mix. In particular, we have been packaging more higher-priced package types, such as ball grid array, also called BGA, and advanced thin quad flat packages, also called TQFPs, and testing more complex semiconductor devices. We will continue to develop and offer new technology in packaging and testing services, as well as improve production efficiencies for older technology, in order to mitigate the effects of declining prices on our profitability.
High Fixed Costs
Our operations are capital intensive and are characterized by relatively high fixed costs. Our primary fixed costs are for packaging and testing equipment. Increases or decreases in capacity utilization rates can have a significant effect on gross profit margins, as the unit cost of packaging and testing services generally decreases as fixed charges, such as equipment depreciation expense, are allocated over a larger number of units. Depreciation is the principal component of our cost of testing revenues. Testers typically cost between US$2.0 million and US$3.0 million each, while wire bonders used in packaging typically cost approximately US$100,000 each. In 1997, 1998, 1999 and the six months ended June 30, 2000, our depreciation expense as a percentage of net revenues was 10.5%, 14.9%, 16.3% and 15.1%, respectively. The rise in depreciation expense partially reflects the increased contribution of testing to net revenues, as well as an increase in the cost of packaging and testing 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. This was the case in 1998, when depressed industry conditions resulted in lower than expected demand from customers and a sharp decline in selling prices, resulting in an increase in depreciation expense relative to sales. With the improvement in industry conditions at the end of 1998, utilization levels improved, along with a recovery in profitability.
Raw Material Costs
Substantially all of our raw material costs are accounted for by packaging, as testing requires minimal materials. In 1997, 1998, 1999 and the six months ended June 30, 2000, raw
32
Goodwill Amortization
Our operating and non-operating income in recent years have been affected by goodwill amortization charges in connection with acquisitions, the restructuring of our investment holdings and other share repurchases. Under generally accepted accounting principles in the ROC, additional purchases of shares of consolidated subsidiaries (majority owned) or of companies accounted for using the equity method (less than majority but greater than 20% owned) will generate goodwill in an amount equal to the difference between the purchase price and the book value per share of those shares. The goodwill generated is amortized over ten years. Goodwill generated on the purchases of shares of consolidated subsidiaries are recognized under general administrative and selling expense. Goodwill generated on the purchases of shares of companies which are less than majority but greater than 20% owned, and therefore accounted for using the equity method, are recognized as a debit under investment income. In addition to the acquisitions of ASE Korea and ISE Labs, other transactions which created significant goodwill charges were the open-market purchases of 22.6% of Universal Scientific shares in 1999, as well as the open-market purchases of ASE Test shares by a wholly-owned subsidiary as part of a share repurchase program in the period from December 1997 through March 1998. No goodwill was recognized in connection with the acquisition of ASE Chung Li, which was structured as an asset purchase, due to the appreciation of the fixed assets purchased.
Consolidation of ISE Labs, ASE Chung Li and ASE Korea
Under the method of consolidation used by us to consolidate the statements of income of ISE Labs, ASE Chung Li and ASE Korea for the year ended December 31, 1999: (1) ISE Labs full-year 1999 net revenues, cost of revenues and operating expenses are included in the Consolidated Financial Statements, and the pre-acquisition income of ISE Labs for the year ended December 31, 1999 (from January 1 to May 4, 1999) is then subtracted from our net income for 1999; and (2) the net revenues, cost of revenues, operating expenses and net income of ASE Chung Li and ASE Korea are included in the Consolidated Financial Statements since the date of acquisition. Under the method of consolidation used by ASE Test to consolidate the statement of income of ISE Labs for the year ended December 31, 1999, ISE Labss pre-acquisition net revenues, cost of revenues and operating expenses are not included in ASE Tests consolidated income statement. See Notes 2 and 28f of Notes to Consolidated Financial Statements.
33
Results of Operations
The following table sets forth, for the periods indicated,
financial data from our consolidated statements of income,
expressed as a percentage of net revenues.
Six Months Ended
Year Ended December 31,
June 30,
1997
1998
1999
1999
2000
(percentage of net revenues)
Net revenues
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Packaging
80.3
81.2
75.2
75.1
75.1
Testing
12.5
15.1
23.9
23.3
24.5
Other
7.2
3.7
0.9
1.6
0.4
Cost of revenues
(72.1
)
(74.5
)
(73.5
)
(75.9
)
(69.0
)
Packaging
(59.4
)
(63.5
)
(57.6
)
(59.3
)
54.4
Testing
(6.5
)
(7.9
)
(14.4
)
(13.8
)
14.0
Other
(6.2
)
(3.1
)
(1.5
)
(2.8
)
0.6
Gross profit
27.9
25.5
26.5
24.1
31.0
Packaging
20.9
17.8
17.6
15.8
20.7
Testing
6.0
7.2
9.5
9.5
10.5
Other
1.0
0.5
(0.6
)
(1.2
)
(0.2
)
Operating expenses
(9.5
)
(11.8
)
(11.6
)
(13.4
)
(10.9
)
Operating income
18.4
13.7
14.9
10.7
20.1
Non-operating income (expenses)
24.2
(4.1
)
12.9
31.0
(3.0
)
Income before income tax and minority interest
42.6
9.6
27.8
41.7
17.1
Income tax benefit (expense)
(2.0
)
0.7
(1.4
)
(1.4
)
(2.2
)
Income before minority interest
40.6
10.3
26.4
40.3
14.9
Pre-acquisition interest
(0.2
)
(0.5
)
Minority interest in net income of subsidiary
(1.9
)
(2.6
)
(2.3
)
(1.9
)
(2.5
)
Net income
38.7
%
7.7
%
23.9
%
37.9
%
12.4
%
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.
Six Months Ended
Year Ended December 31,
June 30,
1997
1998
1999
1999
2000
(percentage of net revenues)
Cost of revenues
Raw materials
38.2
%
34.9
%
30.0
%
32.1
%
29.2
%
Labor costs
12.5
12.5
13.0
12.6
12.7
Depreciation
10.5
14.9
16.3
18.0
15.1
Other
10.9
12.2
14.4
13.2
12.0
Total cost of revenues
72.1
%
74.5
%
73.5
%
75.9
%
69.0
%
Operating expenses
Selling
3.8
%
3.6
%
2.8
%
2.5
%
1.9
%
General and administrative(1)
3.4
4.4
5.0
6.1
5.4
Goodwill amortization(2)
0.3
1.6
1.7
1.8
1.3
Research and development
2.0
2.2
2.1
3.0
2.3
Total operating expenses
9.5
%
11.8
%
11.6
%
13.4
%
10.9
%
(2) | Included in general and administrative expense in the Consolidated Financial Statements. |
34
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999 |
Net Revenues. Our net revenues increased by 98.1% to NT$23,597.2 million (US$766.1 million) for the six months ended June 30, 2000 from NT$11,913.7 million for the comparable period in 1999, reflecting increases in net revenues at our existing facilities, as well as the effects of the acquisitions of ASE Chung Li and ASE Korea in July 1999. After eliminating the results of ASE Chung Li and ASE Korea for comparative purposes, our net revenues for the six months ended June 30, 2000, which we call our adjusted net revenues, was NT$17,744.0 million (US$576.1 million), a 48.9% increase over our net revenues reported for the comparable period in 1999, reflecting a 49.8% increase in packaging sales and a 53.7% increase in testing revenues. This increase in our adjusted net revenues for the six months ended June 30, 2000 compared to the comparable period in 1999 resulted primarily from an increase in packaging and testing volume, which was partially offset by a decrease in the average realized selling prices for our packaging and testing services.
Gross Profit. Our gross profit increased by 155.0% to NT$7,320.5 million (US$237.7 million) for the six months ended June 30, 2000 from NT$2,870.3 million for the comparable period in 1999, reflecting increases in gross profit at our existing facilities, as well as the effects of the acquisitions of ASE Chung Li and ASE Korea. After eliminating the results of ASE Chung Li and ASE Korea for comparative purposes, our gross profit for the six months ended June 30, 2000 increased by 92.5% over our gross profit reported for the comparable period in 1999. Our adjusted gross margin increased to 31.1% compared to 24.1% for the comparable period in 1999 primarily as a result of decreases in raw material costs and depreciation expense, which were partially offset by increases in equipment maintenance expense, all as a percentage of net revenues. Raw material costs as a percentage of net revenues decreased primarily as a result of lower substrate costs. Depreciation expense decreased as a percentage of net revenues primarily as a result of increased capacity utilization at our packaging and testing facilities.
Our adjusted gross margin for packaging increased to 27.1% in the six months ended June 30, 2000 from 21.0% in the comparable period in 1999, primarily due to increased capacity utilization at our packaging facilities and a decrease in raw material costs as a percentage of net revenues. Our gross margin for packaging in the six months ended June 30, 2000 was 27.6%, reflecting the higher packaging margins at the ASE Chung Li facilities acquired in 1999, partially offset by the lower packaging margins at the ASE Korea facilities acquired in 1999. Our adjusted gross margin for testing increased to 46.0% from 41.0% primarily due to a decrease in labor costs as a percentage of net revenues and increased capacity utilization at our testing facilities. Our gross margin for testing in the six months ended June 30, 2000 was 43.1%, reflecting the lower testing margins at our facilities acquired in 1999.
Operating Income. Our operating income increased 269.9% to NT$4,731.9 million (US$153.6 million) in the six months ended June 30, 2000 from NT$1,279.1 million for the comparable period in 1999, reflecting increases in operating income at our existing facilities, as well as the acquisition of ASE Chung Li and ASE Korea. After eliminating the results of ASE Chung Li and ASE Korea for comparative purposes, our operating income increased by 169.5% in the six months ended June 30, 2000 compared to the comparable period in 1999. Our operating margin increased to 20.1% in the six months ended June 30, 2000 from 10.7% in the comparable period in 1999. After eliminating the results of ASE Chung Li and ASE Korea for comparative purposes, our adjusted operating margin increased to 19.4% compared to 10.7% for 1999, reflecting the higher adjusted gross margin and decreases in selling expense, travel and entertainment costs, depreciation expense and other selling costs, partially offset by increases in salaries and bonuses, all as a percentage of net revenues.
Net Non-Operating Income. Our net non-operating loss was NT$707.8 million (US$23.0 million) in the six months ended June 30, 2000, compared to net non-operating gain of
35
Net Income. Our net income for the six months ended June 30, 2000 was NT$2,920.8 million (US$94.8 million) compared to NT$4,516.8 million for the comparable period in 1999. After eliminating the results of ASE Chung Li and ASE Korea, our adjusted net income for the six months ended June 30, 2000 was NT$1,832.5 million. Our net income and adjusted net income decreased in the six months ended June 30, 2000 compared to the comparable period in 1999 primarily because we had a significant net non-operating gain in the six months ended June 30, 1999 compared to a net non-operating loss in the comparable period in 2000. Excluding the extraordinary capital gains recognized in the six months ended June 30, 1999, our net income would have been NT$632.0 million for that period compared to net income of NT$2,920.8 million and adjusted net income of NT$1,832.5 million for the comparable period in 2000, representing a 362% increase in our net income and a 190% increase in our adjusted net income. The increase in recurring net income for the six months ended June 30, 2000 was due to the foregoing factors, partially offset by an increase in our effective tax rate to 12.4% in the six months ended June 30, 2000 compared to 3.3% in the comparable period in 1999. The low tax rate in 1999 primarily reflects the fact that capital gains are not subject to corporate income tax in the ROC.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net Revenues. Our net revenues increased by 57.1% to NT$32,609.6 million (US$1,058.7 million) in 1999 from NT$20,762.4 million in 1998, reflecting in part the effects of the acquisitions of ISE Labs in May 1999 and ASE Chung Li and ASE Korea in July 1999, as well as increases in net revenues at our existing facilities. For a discussion of the consolidation principles relating to our acquisitions of ISE Labs, ASE Chung Li and ASE Korea, see Note 2 of Notes to Consolidated Financial Statements. After eliminating the results of ISE Labs, ASE Chung Li and ASE Korea for comparative purposes, our net revenues for 1999 increased by 21.1% in 1999 compared to 1998, reflecting a 23.3% increase in packaging sales and a 29.7% increase in testing revenues. This increase was partially offset by a decrease in revenues attributable to our subsidiary that designs and assembles notebook computers, set-top boxes and liquid crystal display monitors, and assembles board and sub-systems, ASE Technologies Inc., due primarily to the continuing loss of one of its major customers in 1999. ASE Technologies intends to wind down its business upon approval by its shareholders in September 2000. See Business Other Members of the ASE Group for more information on ASE Technologies. In 1999, our adjusted packaging revenues accounted for 82.7% of our adjusted net revenues and our adjusted testing revenues accounted for 16.1% of our adjusted net revenues, compared to 81.2% and 15.1%, respectively, for 1998. The increase in our adjusted net revenues for 1999 compared to 1998 resulted primarily from an increase in packaging and testing volumes, which was partially offset by a decrease in the average realized selling prices for our packaging and testing services. The decrease in the average realized selling prices reflected the general trend in the semiconductor industry of
36
Gross Profit. Our gross profit increased by 63.4% to NT$8,650.0 million (US$280.8 million) in 1999 from NT$5,294.3 million in 1998, reflecting the effects of the acquisitions of ISE Labs, ASE Chung Li and ASE Korea, as well as increases in gross profit at our existing facilities. After eliminating the results of ISE Labs, ASE Chung Li and ASE Korea for comparative purposes, our gross profit increased by 28.2% in 1999 compared to 1998. Our adjusted gross margin increased to 27.0% compared to 25.5% for 1998 primarily as a result of decreases in raw material and labor costs, which were partially offset by increases in depreciation, factory supplies and other manufacturing overheads, as well as a decrease in provision for inventory obsolescence, all as a percentage of net revenues. Depreciation increased and raw material costs decreased as a percentage of net revenues primarily as a result of a change in our revenue mix, as testing services, which incur significant depreciation but almost no raw material costs, accounted for a greater portion of our net revenues, and a decrease in raw material prices. Cost of revenues also increased due to increases in factory supplies such as rinsing agents and manufacturing overhead and development costs associated with the ramp-up in BGA production capabilities. Our adjusted gross margin for packaging increased to 24.8% in 1999 from 21.9% in 1998 primarily due to decreases in direct and indirect labor and raw material costs as percentages of packaging revenue. Our gross margin for packaging in 1999 was 23.5%, compared with our adjusted gross margin for packaging of 24.8% for the same year, reflecting lower packaging margins at our facilities acquired in 1999 due to differences in product mix. Our adjusted gross margin for testing decreased to 45.2% from 47.4% in 1998 primarily due to increases in depreciation and amortization and other manufacturing costs, partially offset by a decrease in direct and indirect labor cost, all as percentages of testing revenue. Our gross margin for testing in 1999 was 39.8%, as compared to our adjusted gross margin for testing of 45.2% for the same year, reflecting lower testing margins at the facilities acquired in 1999 due to differences in the mix of testing services.
Operating Income. Our operating income increased by 70.7% to NT$4,848.6 million (US$157.4 million) in 1999 from NT$2,840.9 million in 1998, reflecting in part the effects of the acquisitions of ISE Labs, ASE Chung Li and ASE Korea, as well as increases in operating income at our existing facilities. After eliminating the results of ISE Labs, ASE Chung Li and ASE Korea for comparative purposes, our operating income increased by 31.6% in 1999 compared to 1998. Our adjusted operating margin increased to 15.0% compared to 13.7% for 1998, reflecting the higher adjusted gross margin and decreases in selling expense, partially offset by increases in research and development expense and other expense, all as a percentage of net revenues. Selling expense as a percentage of net revenues decreased primarily as a result of economies of scale realized from increased sales volumes at our existing facilities. Amortization of goodwill expense increased in 1999 compared to 1998 in absolute terms primarily as a result of the acquisition of ISE Labs and ASE Korea in 1999, but remained relatively unchanged as a percentage of net revenues.
Net Non-Operating Income. In 1999, our non-operating income increased significantly primarily as a result of an increase in capital gains recognized. These capital gains amounted to NT$5,544.2 million (US$180.0 million) and were mostly generated by the sales of ASE Test ordinary shares by our subsidiary J&R Holding Limited through a public offering of Taiwan Depositary Receipts and the sale of ASE Inc. common shares by our subsidiaries and affiliates in a private placement of GDSs. Most of the common shares underlying the GDSs were acquired by our subsidiaries between March 1996 and April 1998 as part of a share purchase program instituted in support of ROC government policies. A small amount was realized from open market sales of ASE Test Taiwan Depositary Receipts by our subsidiaries and affiliates.
37
Net foreign exchange loss decreased in 1999 compared to 1998, reflecting the higher than usual losses incurred in 1998 attributable to Japanese yen-denominated liabilities created in the second half of 1998 to manage our foreign exchange exposure. Net interest expense increased in 1999 compared to 1998 primarily as a result of increased debt financing incurred for our acquisitions in 1999.
Amortization of goodwill expense in connection with the acquisition of shares of our affiliates increased in 1999 compared to 1998, primarily as a result of our purchase of 22.6% of the outstanding shares of Universal Scientific.
Net Income. Our net income for 1999 was NT$7,794.7 million (US$253.1 million), or NT$7,225.4 million after eliminating the results of ISE Labs, ASE Chung Li and ASE Korea, compared to NT$1,604.0 million for 1998. Our adjusted net income increased in 1999 compared to 1998 primarily as a result of the foregoing factors, partially offset by an increase in our adjusted effective tax rate to 3.2% in 1999 compared to a benefit of (7.6%) in 1998. Our net income for 1999, less capital gains recognized upon the sale of long-term investments, was NT$2,250.5 million (US$73.1 million), compared to NT$997.1 million for 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net Revenues. In 1998, packaging and testing revenues accounted for 81.2% and 15.1% of our net revenues, respectively, compared to 80.3% and 12.5%, respectively, for 1997. The increase in our net revenues for 1998 compared to 1997 resulted primarily from the depreciation of the NT dollar against the U.S. dollar in 1998 compared to 1997. Because the majority of our sales were denominated in U.S. dollars, the depreciation of the NT dollar resulted in an increase of our sales in NT dollar terms. The selling prices in U.S. dollar terms for our packaging and testing services significantly decreased in 1998 compared to 1997, primarily as a result of the intense price competition we faced from other independent packaging and testing companies. Many of these companies sharply lowered prices in 1998 in an attempt to maintain capacity utilization in their facilities in response to a downturn in the semiconductor industry during this period. The decrease in selling prices also reflected the general trend in the semiconductor industry of declining prices per input/ output lead on semiconductor devices. The adverse effect on the average realized selling price of our packaging products was partially offset by a change in our revenue mix as our BGA packages, which typically command higher selling prices, accounted for a greater portion or our packaging volume, and as we tested more complicated semiconductor devices.
Gross Profit. Our gross profit decreased by 0.7% to NT$5,294.3 million in 1998 from NT$5,329.7 million in 1997. Our gross margin decreased to 25.5% in 1998 compared to 27.9% for 1997 primarily as a result of increases in depreciation and factory supplies as well as an increase in provision for inventory obsolescence, partially offset by decreases in raw material costs, all as a percentage of net revenues. The increase in provision for inventory obsolescence was due primarily to a one-time increase in provision for inventory obsolescence of ASE Technologies. Depreciation increased and raw material costs decreased in 1998 compared to 1997 primarily as a result of a change in our overall revenue mix as testing services, which typically incur significant depreciation costs but involve no raw material, accounted for a greater portion of our net revenues. Depreciation also increased in 1998 as we commenced depreciating new wire bonders and testers placed into service in part as a result of the ramp-up of our BGA production capabilities. The new equipment was then not fully utilized as a result of the downturn in the semiconductor industry. Factory supplies, such as rinsing agents and shipping materials, increased in 1998 compared to 1997 primarily reflecting increases in our packaging volume of BGA packages. Our gross margin for packaging decreased to 21.9% in 1998 from 26.0% in 1997 primarily due to increases in raw material and depreciation and amortization costs as well as inventory obsolescence reserve, all as percentages of packaging sales. The inventory obsolescence reserve increase was due to a one-time additional provision for inventory
38
Operating Income. Our operating income decreased by 19.3% to NT$2,840.9 million in 1998 from NT$3,521.4 million in 1997. Our operating margin decreased to 13.7% in 1998 compared to 18.4% for 1997, reflecting the lower gross margin and increases in amortization of goodwill expense, research and development expense and other expense, all as a percentage of net revenues. Amortization of goodwill expense increased in 1998 compared to 1997 primarily as a result of open market purchases of 2.1 million ASE Test ordinary shares as part of a market repurchase program carried out between December 1997 and March 1998. Other expense such as charitable donations, professional fees and facilities maintenance charges increased as a percentage of net revenues in 1998 compared to 1997. Research and development expense increased as a percentage of net revenues in 1998 compared to 1997 primarily as a result of increases in compensation expense for research and development personnel and in depreciation of testers and other equipment dedicated to research and development uses.
Net Non-Operating Income. Our net non-operating loss was NT$859.6 million in 1998, compared to a net income of NT$4,621.3 million in 1997, primarily as a result of a decrease in capital gains realized upon the sale of long-term investments and increases in net foreign exchange loss and net interest expense. Capital gains realized upon the sale of long-term investments decreased in 1998 compared to 1997, reflecting the higher than usual gains realized in 1997. The capital gains recognized in 1997, in an amount of NT$4,870.9 million, resulted primarily from the offering of ASE Test ordinary shares by J&R Holding in June 1997 and the offering of Taiwan Depositary Receipts representing ASE Test ordinary shares by J&R Holding in December 1997. Net foreign exchange loss increased in 1998 compared to 1997 primarily as a result of losses incurred in 1998 attributable to Japanese yen-denominated liabilities created in the second half of 1998 to manage our foreign exchange exposure. Net interest expense increased in 1998 compared to 1997 primarily as a result of interest payable on US$200 million aggregate principal amount of bonds convertible into common shares of ASE Inc. issued in November 1997.
Net Income. Our net income for 1998 was NT$1,604.0 million, compared to NT$7,403.5 million for 1997. Our net income decreased in 1998 compared to 1997 primarily as a result of the foregoing factors, partially offset by a decrease in our effective tax rate to a benefit of (7.6%) compared to 4.6% in 1997. Our net income for 1998, less capital gains recognized upon the sale of long-term investments, was NT$997.1 million, compared to NT$2,532.6 million for 1997.
Quarterly Net Revenues, Gross Profit and Gross Margin
The following table sets forth our unaudited consolidated net revenues, gross profit and gross margin for the quarterly periods indicated. You should read the following table in conjunction with the Consolidated Financial Statements and related notes included in this prospectus. Our net revenues, gross profit and gross margin for any quarter are not necessarily indicative of the results for any future period. Our quarterly net revenues, gross profit and gross margin may fluctuate significantly.
39
Quarter Ended
Mar. 31,
Jun. 30,
Sep. 30,
Dec. 31,
Mar. 31,
Jun. 30,
1999
1999
1999
1999
2000
2000
(in millions)
(unaudited)
Consolidated Net Revenues:
Packaging
NT$
4,362.3
NT$
4,580.6
NT$
7,190.0
NT$
8,390.1
NT$
8,378.4
NT$
9,347.1
Testing
1,340.7
1,432.0
2,182.7
2,837.8
2,776.2
3,013.3
Other
93.2
105.0
11.7
83.5
7.0
75.2
Total
NT$
5,796.2
NT$
6,117.6
NT$
9,384.4
NT$
11,311.4
NT$
11,161.6
NT$
12,435.6
Consolidated Gross Profit:
Packaging
NT$
897.7
NT$
977.5
NT$
1,797.3
NT$
2,080.5
NT$
2,320.1
NT$
2,568.2
Testing
550.4
585.3
872.8
1,096.7
1,208.7
1,285.8
Other
(60.6
)
(80.0
)
(0.2
)
(67.4
)
(39.0
)
(23.3
)
Total
NT$
1,387.5
NT$
1,482.8
NT$
2,669.9
NT$
3,109.8
NT$
3,489.8
NT$
3,830.7
Consolidated Gross Margin:
Packaging
20.6
%
21.3
%
25.0
%
24.8
%
27.7
%
27.5
%
Testing
41.1
%
40.9
%
40.0
%
38.6
%
43.5
%
42.7
%
Total
23.9
%
24.2
%
28.5
%
27.5
%
31.3
%
30.8
%
Our net revenues have generally increased in each quarter of the six-quarter period, except for the first quarter 2000. Our net revenues are generally lower in the first quarter of the year as compared to the fourth quarter of the preceding year, primarily due to the combined effects of holidays in the United States, Taiwan, Korea and Malaysia. Our net revenues increased significantly in the third and fourth quarters of 1999 compared to the first and second quarters of 1999. These increases in net revenues resulted in part from the revenues contributed by ASE Chung Li and ASE Korea which we acquired in July 1999 and in part as a result of increased volume and an upturn in the average realized selling prices for packaging and testing services resulting from an upturn in the semiconductor industry. Under ROC GAAP, the revenues contributed by ISE Labs, which we acquired on May 4, 1999, have been included in our consolidated net revenues as if we had acquired ISE Labs on January 1, 1999. After eliminating the results of ASE Chung Li and ASE Korea for comparative purposes, our net revenues increased by 11.5% to a total of NT$17,744.0 million in the first and second quarters of 2000 from NT$15,919.3 million in the third and fourth quarters of 1999.
Our gross margin has generally increased in the six-quarter period, except during the fourth quarter of 1999 and second quarter of 2000. The improvement in our gross margin is primarily the result of decreased raw material costs and depreciation expense, all as a percentage of net revenues. Raw material costs as a percentage of net revenues decreased primarily as a result of lower substrate costs. Depreciation expense decreased as a percentage of net revenues primarily as a result of increased capacity utilization at our packaging and testing facilities. Our gross margin decreased slightly to 30.8% in the second quarter of 2000 from 31.3% in the first quarter of 2000. This slight decrease resulted primarily from a change in our product mix as revenues derived from the testing of logic/mixed-signal semiconductors accounted for a smaller percentage of our net testing revenues. For the fourth quarter of 1999, our gross margin decreased slightly to 27.5% from 28.5% in the third quarter of 1999. This was primarily due to an increase in other manufacturing overhead costs as a percentage of net revenues.
Our quarterly operating results may vary significantly.
Unfavorable changes may adversely affect our business, financial
condition and results of operations.
Liquidity and Capital Resources
Our principal sources of cash are cash generated from operations
and debt financing and, in certain years, proceeds from the sale
of investments. Our primary uses of cash are to fund capital
expenditures and working capital requirements related to our
operations and expansion.
40
In connection with the expansion of our production capacity, we
have incurred capital expenditures of NT$8,237.4 million,
NT$7,447.7 million, NT$11,097.4 million
(US$360.3 million) and NT$15,032.9 million
(US$488.1 million) in 1997, 1998, 1999 and the six months
ended June 30, 2000, respectively.
As of June 30, 2000, we had total short-term lines of credit
of NT$19,677.0 million (US$638.9 million), of which
NT$9,789.5 million (US$317.8 million) had been drawn.
The interest rate for borrowings under these facilities ranged
from 1.4% to 8.5% in 1999 and from 0.7% to 8.7% during the first
half of 2000. See Note 11 of Notes to Consolidated Financial
Statements. The majority of our short-term borrowings are
denominated in NT dollars, with the remainder denominated
principally in U.S. dollars.
As of June 30, 2000, our outstanding long-term bank loans,
less current portion, were NT$10,116.4 million
(US$328.5 million). Certain of our bank loans are secured by
machinery and equipment. Our long-term bank loans bear interest
at floating rates, which in 1999 ranged from 1.3% to 8.3% and
from 5.223% to 9.5% during the first half of 2000. See
Note 14 of Notes to Consolidated Financial Statements. Most
of our long-term bank loans are denominated in NT dollars. In
addition, as of June 30, 2000, we had outstanding
convertible bonds denominated in U.S. dollars in an aggregate
amount of NT$10,960.9 million (US$355.9 million),
including amounts outstanding under bonds guaranteed by ASE Test.
See Note 13 of Notes to Consolidated Financial Statements.
We have budgeted total expenditures of NT$21,868.0 million
(US$710.0 million) for 2000 in connection with the expansion
of our production capacity, of which NT$15,032.9 million
(US$488.1 million) had already been incurred as of June 30,
2000. As of December 31, 1999, we have long-term loan
repayment obligations totaling NT$2,886.4 million
(US$93.7 million) due in 2000. We also have
NT$7,482.7 million (US$242.9 million) of short-term
borrowings outstanding, part of which we would expect to renew.
We expect to meet our working capital, capital expenditure, and
debt repayment requirements in 2000 through cash from operations,
the proceeds from this offering and the drawdown of outstanding
credit lines. We have also raised capital at the subsidiary level
to meet investment and capital requirements. In July 2000, ASE
Test completed a US$276.0 million follow-on equity offering.
As of June 30, 2000, we had a cash position of
NT$6,239.9 million (US$202.6 million), outstanding and
unused short-term credit lines
41
As of June 30, 2000, we had budgeted total capital
expenditures of NT$22,792.0 million (US$740.0 million)
for 2001. As of December 31, 1999, we have long-term loan
repayment obligations totaling NT$3,419.6 million
(US$111.0 million) in long-term loan repayments due in 2001.
In addition, we have long-term loan repayment obligations
totaling NT$7,991.6 million (US$259.5 million) in 2002,
including our US$200,000,000 Zero Coupon Convertible Bonds Due
2002. We expect to meet our long-term working capital, capital
expenditure and debt repayment requirements through cash from
operations, the proceeds from this offering and further debt
financing and capital raising if needed.
We have from time to time also liquidated long-term or short-term
investments to provide cash for our operations and capital
expenditures, including offerings of ASE Test ordinary shares,
sometimes in the form of Taiwan Depositary Receipts, in 1997 and
1999 and the sale by our subsidiaries of ASE Inc. common shares
in the form of GDSs in 1999.
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 have no
commitments to make any material investment, acquisition or
divestment.
Taxation
Based on their respective statuses either as a company which is
engaged in designated businesses in Taiwan or a
pioneer company in Malaysia, the operating companies
in the ASE Group were granted exemptions from ROC or Malaysia
income taxes, as the case may be, generally for a period of four
or five years, both at the initial stages of their operations and
following subsequent capital increases with respect to income
attributable to capital increases. These tax holidays resulted in
tax savings for us of approximately NT$535.9 million,
NT$508.8 million, NT$779.4 million
(US$25.3 million) and NT$464.1 million
(US$15.1 million) in 1997, 1998, 1999 and the six months
ended June 30, 2000, respectively. Our current tax holiday
under the ROC Statute for Upgrading of Industries expires at the
end of 2000, but may be extended through cash injections from
shareholders, such as rights offerings, the proceeds of which are
used to purchase eligible machinery and equipment. We have not
conducted a rights offering to our shareholders since 1996. The
ROC Ministry of Finance announced recently that commencing 2000,
this tax holiday may also be extended through the capitalization
of retained earnings, that is, through the issuance of stock
dividends. ASE Test Malaysias tax holiday in Malaysia
expired on June 30, 1999 and ASE Test Malaysia has received
approval to be a pioneer high technology company in
Malaysia, which entitles us to a five-year tax holiday
substantially similar to our previous tax holiday. We expect this
tax holiday to commence retroactively on July 1, 1999. See
Note 17 of Notes to Consolidated Financial Statements.
With facilities located in special export zones such as the
Nantze Export Processing Zone in Taiwan and the Bayan Lepas Free
Trade Zone in Malaysia, we enjoy exemptions from various import
duties and commodity taxes on imported machinery, equipment, raw
materials and components. 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.
Our effective income tax rate was 4.6%, 0%, 5.1% and 12.4% in
1997, 1998, 1999 and the six months ended June 30, 2000,
respectively. The effective tax rate was significantly lower in
1997, 1998 and 1999 because we had substantial capital gains
income in those years that was not subject to ROC corporate tax.
42
Market Risk
Our exposure to financial market risks derives primarily from
changes in interest rates and foreign exchange rates. To mitigate
these risks, we utilize derivative financial instruments, the
application of which is for hedging, and not for speculative,
purposes.
Interest Rate Risks.
Our exposure to interest rate
risks relates primarily to our long-term floating rate debt,
which is normally incurred to support our corporate activities,
primarily capital expenditures. We currently do not enter into
derivative transactions with regard to interest rates, but would
consider engaging in currency interest rate swaps to lock in
favorable currency and interest rate levels from time to time, if
available, on terms considered attractive by us. No derivative
contract was outstanding as of June 30, 2000.
Foreign Currency Risks.
Our foreign currency
exposures give rise to market risk associated with exchange rate
movements against the NT dollar, our functional currency. Foreign
currency denominated liabilities as of December 31, 1999
include U.S. dollar debt and Japanese yen debt. As of
December 31, 1999, approximately 59.0% of our cash and
accounts receivable were denominated in U.S. dollars, with a
substantial portion of the remainder denominated in NT dollars.
As of December 31, 1999, approximately 60.2% of our accounts
payable and payable for fixed assets 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 exchange rates, we may 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, and the premiums are amortized on a straight-line
basis over the life of the contract. As of December 31,
1999, there are no foreign currency forward exchange contracts
outstanding. The following table provides information about our
significant obligations that are sensitive to foreign currency
exchange rate fluctuations is provided in the table below. The
principal amounts are presented by year of maturity and
translated into U.S. dollars based on the current exchange rate.
Exchange Rate Fluctuations
Currently, the majority of our revenues from packaging and
testing services are denominated in U.S. dollars, with a portion
denominated in NT dollars, while our costs of revenues and
operating expenses associated with packaging and testing services
are incurred in several currencies, including U.S. dollars, NT
dollars, Malaysian ringgit, Korean won, Philippine pesos,
Singapore dollars and Hong Kong dollars. As a result, the
depreciation of the NT dollar against the U.S. dollar tends to
increase our net revenues in NT dollar terms. The slight increase
in 1998 in our net revenues in NT dollars terms in 1998 was
primarily as a result of this currency fluctuation effect. In
1997, 1998, 1999 and the six months ended June 30, 2000, the
average
43
US GAAP Reconciliation
Our financial statements are prepared in accordance with
generally accepted accounting principles in the ROC, or ROC GAAP,
which differ in material respects from generally accepted
accounting principles in the United States, or US GAAP. The
following table sets forth a comparison of our net income and
shareholders equity in accordance with ROC GAAP and US GAAP
for the periods indicated:
Note 27 of Notes to Consolidated Financial Statements
provides a description of the principal differences between ROC
GAAP and US GAAP as they relate to us, and a reconciliation to US
GAAP of select items, including net income and
shareholders equity. Differences between ROC GAAP and US
GAAP which have a material effect on our net income as reported
under ROC GAAP relate to gain from the sale of treasury stock and
compensation expense pertaining to bonuses to employees,
directors and supervisors.
In 1998 and 1999, three of our consolidated subsidiaries sold an
aggregate of 33.8 million ASE Inc. common shares in open market
sales. See Results of Operations
Year Ended December 31, 1999 Compared to Year Ended
December 31, 1998 Net Non-Operating
Income. Under US GAAP, when a subsidiary holds its
parents common shares as investments, the common shares are
treated as treasury stock and is presented in the consolidated
balance sheet as a deduction to shareholders equity. The
capital gain or loss from the sale of treasury stock is added to
or deducted from the balance of treasury stock. Under ROC GAAP,
this treatment is not required and, as a result, the investment
in ASE Inc. common shares by its subsidiaries is treated as
long-term investment in the balance sheets and the capital gain
or loss
44
We paid employee bonuses in 1997, 1998 and 1999 in the form of
common shares, and expect to pay all or a portion of employee
bonuses in future periods in the form of common shares. In
addition to bonuses paid as part of our regular employee bonus
plan, we paid in 1998 a special stock bonus to our employees on
account of our favorable results of operations for that year. The
number of common shares distributed as part of employee bonuses
is obtained by dividing the total nominal NT dollar amount of the
bonus to be paid in the form of common shares by the par value
of the common shares, or NT$10 per share, rather than their
market value, which has generally been substantially higher than
par value. Under ROC GAAP, the distribution of employee bonus
shares is treated as an allocation from retained earnings, and we
are not required to, and do not, charge the value of the
employee bonus shares to income. Under US GAAP, however, we would
be required to charge the market value of the employee bonus
shares to employee compensation expense in the period to which
they relate, correspondingly reduce our net income and income per
common share calculated in accordance with US GAAP.
The amount and the form of the payment of this compensation is
subject to approval by our board of directors and is only
determinable at the first board meeting which is held after the
issuance of our financial statements for the relevant year. Under
US GAAP, the compensation expense is initially accrued at the
nominal NT dollar amount of the aggregate bonus in the period to
which it relates. For US GAAP purposes, the difference between
the amount initially accrued and the market value of the common
shares issued as payment of all or any part of the bonus is
recorded as employee compensation expense in the period in which
board approval is obtained, which normally occurs during the
second quarter of each year. See Note 27 of Notes to
Consolidated Financial Statements. Net income and income per
common share amounts calculated in accordance with ROC GAAP and
US GAAP differ accordingly. The amount of the adjustment for
market price for the purpose of US GAAP reconciliation for the
special stock bonus paid in 1997 was allocated over a period of
three years commencing in the second quarter of 1998, reflecting
the additional length of service which we require from employees
who received special stock bonus.
45
BUSINESS
We believe we are one of the worlds largest independent
providers of semiconductor packaging services and, together with
our subsidiary ASE Test Limited, one of the worlds largest
independent providers of semiconductor testing services,
including front-end engineering testing, wafer probing and final
testing services. We believe that 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 because of:
We plan to continue to expand our business and operations through
both internal growth and acquisitions in order to enhance our
technological, processing and materials capabilities, broaden our
geographic coverage and increase our production capacity,
economies of scale management resources. In 1999, we incurred
consolidated capital expenditures of NT$11,097.4 million
(US$360.3 million) for the expansion of our facilities. For the
six months ended June 30, 2000, we incurred capital
expenditures of NT$15,032.9 million (US$488.1 million). In
addition, we acquired the semiconductor packaging and facilities
of Motorola in Taiwan and Korea, a 70% interest in ISE Labs,
a front-end engineering testing service provider, and a
controlling 22.6% interest in Universal Scientific, a leading
contract provider of electronics board assembly services in
Taiwan.
We offer packaging and testing services separately and on a
turnkey basis. Turnkey services consist of integrated packaging,
testing and direct shipment of semiconductors to end users
designated by our customers. Through our strategic alliance with
and close geographic proximity to TSMC, we are able to expand the
traditional scope of turnkey services to offer total
semiconductor manufacturing services to our customers, including
access to wafer fabrication services, also called foundry
services, in addition to our packaging, testing and direct
shipment services. We are developing similar strategic alliances
with other major foundries and providers of other complementary
semiconductor manufacturing services.
46
Through the effective implementation of our strategy, we have
been able to address the advanced semiconductor engineering
requirements of our customers for packaging and testing services.
Our global base of over 200 customers includes leading
semiconductor companies across a wide range of end use
applications:
Advanced Micro
Devices, Inc.
Altera Corporation
ATI Technologies Inc.
Cirrus Logic
International Ltd.
Conexant Systems, Inc.
Delphi Automotive
Systems Corp.
DSP Group
LSI Logic Corporation
Motorola, Inc.
Philips Electronics NV
Qualcomm Incorporated
ST Microelectronics
Pte Ltd.
VIA Technologies, Inc.
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 devices at a
lower cost per function. These improvements have resulted in
significant performance and price benefits to manufacturers of
electronic systems. As a result, semiconductor demand has grown
substantially in our primary markets of personal computers and
communications equipment, and has experienced increased growth in
additional markets such as consumer electronic devices,
automotive products, industrial automation and control systems.
According to Dataquest, the global semiconductor market is
expected to grow from US$169.1 billion in 1999 to US$319.8
billion in 2004, at a compound annual growth rate of 13.6%.
Dataquest forecasts that the communications electronics market
will be the fastest growing end use market for semiconductor
applications over this period with an expected compound annual
growth rate of 15.8%, followed by the automotive and consumer
electronics markets with expected annual growth rates of 14.6%
and 13.3%, respectively.
Outsourcing Trends in Semiconductor
Manufacturing
Historically, semiconductor companies designed, manufactured,
packaged and tested semiconductors primarily in their own
facilities. In recent 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 are currently the largest segments of the independent
semiconductor manufacturing services market. Most of the
worlds major integrated device manufacturers use some
independent manufacturing services to maintain a strategic mix of
internal and external manufacturing capacity. We believe that
many of these manufacturers are significantly reducing their
investments in new semiconductor packaging and testing facilities
and that several are contemplating the divestment of their
in-house packaging and testing operations. Motorolas sale
to us of its packaging and testing operations in Taiwan and Korea
in 1999 is an example of this divestment trend.
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
fabrication, packaging and testing requirements to independent
companies. Dataquest estimates that fabless
semiconductor companies share of the worldwide
semiconductor market is expected to increase from 6.8% in 1998 to
9.8% by 2003. Similarly, the availability of technologically
advanced independent manufacturing services has encouraged
systems companies, which traditionally outsourced the
manufacturing of
47
Electronic Trend Publications estimates that in 1999, 39.4% of
the worldwide semiconductor packaging market by revenue and 20.5%
by volume were accounted for by independent packaging service
providers. It estimates the total size of the outsourced
semiconductor packaging market in 1999 at US$7.2 billion. It
further estimates that the total semiconductor packaging market
will grow to US$35.7 billion in 2004, of which US$16.2 billion,
or 45.5%, will be outsourced. It also forecasts that the compound
annual growth rate for outsourced packaging between 1999 and
2004 will be 17.6% by revenue and 16.3% by volume with the
highest growth attributed to BGA packages and chip scale
packages. We estimate that the portion of the semiconductor
testing market accounted for by independent testing service
providers is smaller than that for packaging, and we expect
outsourced testing to grow at a faster rate than outsourced
packaging over the next few years.
We believe the outsourcing of semiconductor manufacturing
services will increase in the future from current levels for many
reasons, including the following:
Technological Sophistication 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. 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 not
only because of the high investment costs as well as their
inability to achieve sufficient economies of scales and
utilization rates in order 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.
Focus on Core Competencies.
As the cost of
semiconductor manufacturing facilities increases, 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.
Growth of Fabless Semiconductor Companies and Outsourcing
by Systems Companies.
The substantial growth in the
number of fabless semiconductor companies and systems companies
that increasingly outsource their manufacturing requirements to
independent companies will also continue to drive growth in the
market for independent foundry, packaging and testing services.
The Semiconductor Industry in Taiwan and
Southeast Asia
The semiconductor industry in Taiwan has been a leader in, and a
major beneficiary of, the trend in outsourcing. Most
semiconductor companies in Taiwan are engaged in only one or two
stages of the semiconductor manufacturing process. As a result,
Taiwans semiconductor industry tends to be more efficient
as companies focus on particular stages of the semiconductor
manufacturing process, develop economies of scale and maintain
higher capacity utilization rates.
48
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
business. Furthermore, the growth of Taiwans electronics
industry, particularly in personal computer design and
manufacturing, has created substantial local demand for
semiconductors.
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.
49
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 between circuit design to shipment:
We are involved in all stages of the semiconductor manufacturing
process except circuit design and wafer fabrication.
50
Strategy
Our objective is to provide leading-edge semiconductor packaging
and testing solutions which set industry standards and facilitate
the industry trend to outsource semiconductor manufacturing
requirements. The principal elements of our strategy are to:
Expand Strategically Our Production Capacity
and Product Expertise
We plan to continue to expand strategically our production
capacity and product expertise, both through internal growth and
through acquisitions, to address the increasing demand for
independent semiconductor packaging and testing services. We
evaluate acquisition opportunities on the basis of access to new
markets and technology, increased proximity to our existing and
potential customers, the enhancement of our production capacity
and economies of scale and our management resources.
In 1999, we acquired ISE Labs, an independent testing company
with operations in California, Hong Kong and Singapore, as well
as ASE Chung Li and ASE Korea, formerly the semiconductor
packaging and testing operations of Motorola located in Chung Li,
Taiwan and Paju, Korea. We acquired ISE Labs with a view to
combining its front-end engineering testing capabilities with our
final testing capabilities to provide our customers with
complete
51
We believe that the success of the Motorola acquisition will
encourage other integrated device manufacturers to divest their
in-house operations to us and then retain us to satisfy the
packaging and testing requirements formerly met by their in-house
operations. We continue to evaluate acquisition opportunities
and plan to make additional acquisitions in the future if
suitable opportunities arise. Although our general strategy is to
expand or invest in new packaging facilities through ASE Inc.
and new testing facilities through ASE Test, we will continue to
make these determinations on a case-by-case basis. For
opportunities such as the former Motorola facilities in Chung Li
and Korea with integrated packaging and testing operations, we
may continue to divide our investments among group companies to
reflect our estimates of the relative packaging and testing
values at those facilities.
Enhance Our Technological, Processing and
Materials Capabilities
We intend to continue our focus on developing advanced process
and product technology in order to provide our customers with
leading-edge solutions for their semiconductor packaging and
testing requirements. Our expertise in packaging technology has
enabled us to develop solutions such as fine-pitch bonding for
leadframe packages, stacked die configuration for ball grid
arrays and bump chip carrier packaging for communications
applications.
We intend to enhance our expertise both upstream and downstream
in the semiconductor manufacturing process in order to better
serve our customers in our core services of packaging and
testing. As product lives and production cycles shorten and
packaging and testing technologies advance more rapidly, our
customers increasingly value our ability, as a downstream service
provider, to work with them as an integral and strategic partner
in the upstream development of their products. Our acquisition
of the front-end engineering testing capabilities of ISE Labs has
enhanced greatly our capabilities to participate in the earlier
stages of circuit design and the semiconductor manufacturing
process. Our establishment of ASE Material for the production of
interconnect materials such as leadframes and substrates has
provided us with expertise in interconnect technology, which has
become an increasingly critical part of the product development
stage for our customers in terms of cost and production time.
The increasing miniaturization of semiconductors and the growing
complexity of interconnect technology have led to the blurring of
the traditional distinctions among assembly at different (that
is, upstream and downstream) levels of integration: chip, module,
board and systems. Our acquisition of a controlling interest in
Universal Scientific has given us access to process and product
technologies at the levels of module, board and systems assembly
and test, which helps us to better anticipate industry trends and
the needs of our end users, who are the end-clients of our
customers.
We intend to strengthen existing and develop new strategic
alliances 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.
52
Since 1997, we have maintained a strategic alliance with TSMC,
the worlds largest dedicated semiconductor foundry, which
designates the ASE Group 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.
We are also working with TSMC in developing the next generation
of packaging product technology. We are currently co-developing
with TSMC wafer bumping technology to implant directly onto the
die input/output leads that will be connected to leads on
laminate substrates without the use of wires. We are developing
similar strategic relationships with other major foundries and
providers of other complementary semiconductor manufacturing
services in Taiwan and Southeast Asia with which we already have
close business relationships.
Better Serve Our Customers Through Our
Diversified Geographic Presence
We are located in close geographic proximity to the facilities of
our customers and providers of complementary semiconductor
manufacturing services, including foundries, in key centers for
outsourced semiconductor manufacturing. This proximity enables us
to work closely with our customers, and other service providers,
enhances our responsiveness to the requirements of our customers
and shortens production cycles by reducing the time required to
ship semiconductors from one stage of the manufacturing process
to the next. We maintain packaging or testing facilities in the
following strategic locations in order to better serve our
customers:
Achieve Economies of Scale From Our Expanded
Production Capacity
We are re-mapping our organizational management structure to
better integrate our operations in areas such as research and
development, purchasing, manufacturing processes and materials,
marketing and sales and information technology systems across our
various facilities. Operations that were formerly conducted more
or less independently at our individual facilities will be
coordinated more closely and come under more centralized
management. The pooling of resources in a matrix organizational
management structure will enable all of our facilities to realize
the benefits of the expanded scale of our aggregate production,
such as reduced cost of raw materials and equipment purchased
through collective bargaining with various raw materials
suppliers and equipment vendors, a broader range of solutions and
services, enhanced geographic coverage and increased flexibility
in capacity allocation.
We are developing procedures which will facilitate the sharing of
the different expertise in process technology and practical
know-how among our different facilities. The sharing of best
practices will significantly reduce the amount of time required
by our facilities to install and operate a new production line
for the packaging or testing of new product types for which one
of our facilities may have greater expertise or know-how.
53
Principal Products and Services
We offer a broad range of semiconductor packaging products and
testing services. Our packaging products are based primarily on
surface mount technology, also known as SMT, and employ either
leadframes or laminate substrates as interconnect materials. Our
packaging products are used in a wide range of end use markets,
including for communications, consumer, industrial, automotive,
personal computer 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 offer our
customers the integrated packaging, testing and direct shipment
of semiconductors to end users designated by our customers. In
1999, our packaging revenues accounted for 75.2% of our net
revenues and our testing revenues accounted for 23.9% of our net
revenues. For the six months ended June 30, 2000, our
packaging revenues accounted for 75.1% of our net revenues and
our testing revenues accounted for 24.5% of our net revenues.
Packaging
We offer a broad range of semiconductor packages using primarily
the SMT technology, including:
Within our packaging product portfolio, we focus on the assembly
of semiconductor packages for which there is expected to be
strong demand, including high pin-count SMT packages, such as
QFPs and TQFPs, both of which are based on leadframes, and SMT
packages based on laminate substrates, such as BGAs.
In SMT, the leads on semiconductors and other electronic
components are soldered to the surface of the printed circuit
board rather than inserted into holes, as compared with the older
pin-through-hole technology, also called PTH. Our principal PTH
product is plastic dual in-line packages, also called PDIP. SMT
can accommodate a substantially higher number of leads than PTH,
enabling the board to interconnect a greater number of integrated
circuits. This in turn allows a reduction in the number of
integrated circuits used and, together with tighter component
spacing, permits a reduction in the dimensions of the printed
circuit board. Because of their high lead counts, most very large
scale integrated circuits are configured for surface mounting.
Additionally, SMT allows components to be placed on both sides of
the board, enabling even greater density. The substantially
finer lead-to-lead spacing, or pitch, in SMT products requires a
packaging process which is more exacting than the packaging
process for PTH products.
Leadframe-based products are the traditional SMT packages which
are packaged by connecting the die, using wire bonders, to the
leadframe with gold wire leads. As the packaging technology
improves, the number of leads per package increases. In the
process, packages have
54
55
Laminate-Based BGA Products
An important subset of SMT packages are BGA packages. In BGA
technology, the leads used to connect the semiconductor device to
the circuit board take the shape of small bumps or balls which
are attached to the bottom of the package surface, as opposed to
traditional leadframe technology which has leads protruding from
the edges like pins. These small bumps or balls are typically
distributed evenly across the bottom surface of the package,
allowing greater distance between individual leads. BGA packages
typically feature higher pin-count, smaller package sizes,
greater reliability, superior electrical signal transmission, and
better heat dissipation than traditional leadframe-based
packaging technology. 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. We also have capabilities in stacked-die BGA,
which assembles multiple dies into a single package. As an
extension to stacked-die BGA, we also assemble
systems-in-a-package products, which are integrated combinations
of logic chips assembled into the same package. We believe that
we are among the leaders in these packaging technologies.
The industry demand for BGA packages has grown significantly in
recent years. In light of the continuing demand for packages with
higher pin-counts and smaller sizes, we commenced in July 2000
volume production in flip chip packages. For interconnections
within the package, flip chip BGA technology replaces wire
bonding with wafer bumping, which requires tiny solder balls,
instead of wires, to be placed 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.
In addition, we are currently developing land grid array, or LGA,
a type of BGA package. Because LGA packages do not employ solder
balls, it is a lead free packaging solution. LGA packages are
designed for semiconductors requiring a small, thin and light
package. We expect
56
The following table sets forth our principal BGA packaging
products.
57
The following table sets forth, for the periods indicated, the
percentage of our packaging revenues accounted for by each
package type.
58
Electronic Trend Publications estimates that in 1999, the total
outsourcing packaging revenues accounted for by BGA packages was
US$2.8 billion. It forecasts that outsourced BGA package revenues
will have a compound annual growth rate of 25.0% between 1999
and 2004. It also estimates that the total outsourced packaging
revenues accounted for by QFP packages was US$2.0 billion in
1999. It forecasts that outsourced QFP package revenue will have
a compound annual growth rate of 10.9% between 1999 and 2004.
Testing
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. 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
overall net 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, or CPU, seconds.
Front-End Engineering Testing.
We provide front-end
engineering testing services, including software program
development, electrical design validation, and reliability and
failure analysis.
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 logic/mixed-signal
testing, and several of our testers are also used for wafer
probing.
59
Logic/Mixed-Signal Final Testing.
We conduct final
tests of a wide variety of logic/mixed-signal semiconductors,
with the number of leads ranging in the single digits to several
hundreds and operating frequencies of up to 400 MHz, which is 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, or ASICs,
for various specialized applications.
Memory Final Testing.
We provide final testing
services for a variety of memory products, such as static random
access memory, or SRAM, dynamic random access memory, or DRAM,
and single-bit electronical programmable read-only memory
semiconductors.
Other Test-Related Services.
We provide a broad
range of additional test-related services, including:
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 testing. We provide drop shipment services to a majority 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.
60
Facilities
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. Our facilities
range from our large-scale turnkey facilities in Taiwan and
Malaysia to our specialized Korea facility dedicated to wireless
communications and automotive end-products. With our diverse
facilities we are able to tailor our packaging and testing
solutions closely to our customers needs. We plan to
purchase additional wire bonders for our facilities and expect to
have 3,000, 678, 105, 411 and 124 wire bonders at our facilities
in Kaohsiung, Chung Li, Korea, Malaysia and the Philippines,
respectively, by the end of 2000. We also plan to purchase
additional testers for our facilities and expect to have 267,
225, 125, 158 and 42 testers at our facilities in Kaohsiung,
Chung Li, Korea, Malaysia and the Philippines, respectively, and
168 testers at our ISE Labs facilities, by the end of 2000. The
following table sets forth the location, commencement of
operation, primary use, approximate floor space, number of
testers and bonders we operate as of June 30, 2000, and net
revenues recorded in 1999 and for the six months ended
June 30, 2000 of our packaging and testing facilities.
61
[Additional columns below]
[Continued from above table, first column(s) repeated]
62
Expansion
We are expanding our facilities in Taiwan and Malaysia to meet
the growing demand for our products and services from existing
and new customers.
We commenced an expansion project in Chung Li, Taiwan in December
1999. The first phase of the project is the construction of a
building with aggregate floor space of approximately 800,000
square feet to accommodate the expected growth of our operations
in Chung Li. Construction is expected to be completed in the
fourth quarter of 2000. The total value of the first phase of the
project, including land and the completed building, is estimated
to be NT$2.0 billion. Hung Ching, which is the developer of
the project, will bear all costs relating to the development.
The new building is expected to house ASE Chung Lis testing
operations as well as part of the operations of other ASE Group
companies. See Certain Transactions.
Furthermore, we commenced an expansion project in Kaohsiung,
Taiwan in the second quarter of 2000. The first phase of the
project is the construction of a building with aggregate floor
space of 1.1 million square feet to accommodate the expected
growth of our operations in Kaohsiung. Construction is expected
to be completed in the second quarter of 2001 at a cost of NT$2.0
billion. The new building is expected to house part of ASE
Inc.s packaging operations in Kaohsiung, part of ASE Test
Taiwans testing operations and part of ASE Materials
substrate manufacturing operations. A portion of the net proceeds
of this offering will be applied to finance the cost of
constructing the new building.
We also commenced an expansion project in Penang, Malaysia in the
fourth quarter of 1999. The first phase of the project is the
construction of a building with floor space of approximately
100,000 square feet which is expected to be completed in the
third quarter of 2000. The construction of an additional 100,000
square feet is expected to be completed in the fourth quarter of
2000. The aggregate cost of the project is expected to be US$10.8
million.
In addition to the construction of facilities, we plan to
purchase an additional 1,488 wire bonders and 259 testers in
2000. We estimate the aggregate cost of this purchase will be
approximately US$650.0 million. A portion of the net proceeds of
this offering will be applied to finance these purchases.
Other Members of the ASE Group
Consolidated Subsidiaries
ASE Test.
ASE Test, which is a Singapore company,
is one of the largest independent testing companies in the world,
providing a complete range of semiconductor testing services to
leading international semiconductor companies. In addition, ASE
Test provides a broad range of leadframe and laminate-based
semiconductor packaging services. ASE Test has testing operations
in Taiwan, the United States, Hong Kong and Singapore, and also
maintains testing and packaging operations in Malaysia.
ASE Test was incorporated in 1996 and its ordinary shares have
been quoted for trading on the Nasdaq National Market since June
1996 under the symbol ASTSF. Following the completion
of ASE Tests follow-on equity offering on July 19,
2000, we held approximately 51.3% of the outstanding shares of
ASE Test. We also hold the equivalent of another 2.5% of the
company through options created on ASE Tests convertible
notes issued in 1999. ASE Test is a holding company whose
significant assets are its ownership interests in the following
operating companies:
63
In 1999, ASE Test recorded net revenues of US$298.7 million,
operating income of US$67.2 million and net income of US$62.2
million. For the six months ended June 30, 2000, ASE
Test recorded net revenues of US$194.8 million, operating
income of US$52.7 million and net income of
US$50.8 million. We currently intend to maintain a majority
ownership interest in ASE Test. We continue to evaluate
acquisition opportunities and plan to make additional
acquisitions in the future if suitable opportunities arise.
Although our general strategy is to expand or invest in new
packaging facilities through ASE Inc. and new testing facilities
through ASE Test, we will make these determinations on a
case-by-case basis. For opportunities such as the former Motorola
facilities in Chung Li and Korea with integrated packaging and
testing operations, we may continue to divide our investments
among group companies to reflect our estimates of the relative
packaging and testing values at those facilities.
ASE Material.
ASE Material, which is a ROC company,
manufactures leadframes and other substrates used in the
packaging of semiconductors. ASE Material currently supplies our
packaging facilities in Kaohsiung with a portion of our leadframe
and substrate requirements. See Raw Materials
and Suppliers Packaging. As of June 30,
2000, we held 47.7% of the outstanding shares of ASE Material,
comprising 37.7% held by ASE Inc. and 10.0% held by ASE Test
Taiwan. The supervisor and two of the five directors of ASE
Material are representatives of ASE Inc., one director is a
representative of ASE Test Taiwan and the remaining two directors
of ASE Material are Jason C.S. Chang, our Chairman, and Richard
H.P. Chang, our Vice Chairman and Chief Executive Officer,
serving in their individual capacities. Before October 1999, we
held a majority equity interest in ASE Material. We plan to
increase our current equity interest in ASE Material so as to
regain a majority ownership interest before December 31,
2000.
We believe that interconnect technology will play an increasingly
important role in semiconductor packaging as interconnect
materials, such as leadframes and substrates, account for a
growing portion of the cost of a semiconductor package. In
anticipation of this trend, we established ASE Material in
December 1997 for the purpose of developing, producing and
selling leadframes and advanced substrates. In 1999 and the
six months ended June 30, 2000, ASE Material supplied
interconnect materials that accounted for approximately 8.0% and
7.5%, respectively, of our consolidated raw material costs.
Substantially all of these materials were leadframes. We expect
that by the end of 2000, ASE Material will supply approximately a
third of the substrate requirements at our packaging facilities
in Kaohsiung. We expect to continue making investments in ASE
Material in order to further develop our in-house interconnect
technology.
ASE Materials facilities are located in the Nantze Export
Processing Zone near our packaging and testing facilities in
Kaohsiung, Taiwan. ASE Material plans to expand its production
capacity with new facilities to be located near our packaging and
testing facilities in Kaohsiung and Chung Li, Taiwan. In 1999,
ASE Material recorded revenues of NT$790.5 million (US$25.7
million), operating loss of NT$88.9 million (US$2.9 million) and
net income of NT$0.8 million (US$0.03 million). For the
six months ended June 30, 2000, ASE Material recorded
revenues of NT$576.4 million (US$18.7 million), operating loss of
NT$153.2 million (US$4.9 million) and net loss of NT$165.8
million (US$5.4 million). Substantially all of ASE
Materials sales are to other ASE Group companies, and
accordingly, substantially all of its sales and net income are
eliminated by ASE Inc. in preparing our consolidated financial
statements.
ASE Technologies.
ASE Technologies, Inc., a ROC
company, designs and assembles notebook computers, set-top boxes
and liquid crystal display monitors, and assembles board and
sub-systems. As of December 31, 1999, we held 75.0% of the
outstanding shares of ASE Technologies.
64
In 1999, ASE Technologies recorded revenues of NT$215.8 million
(US$7.0 million), operating loss of NT$461.1 million (US$15.0
million) and net loss of NT$410.3 million (US$13.3 million). We
intend to wind down the business of ASE Technologies upon
approval from ASE Technologies shareholders in September
2000. As of June 30, 2000, we accrued NT$83.0 million
(US$2.7 million) in losses in connection with the winding down of
ASE Technologies.
Unconsolidated Affiliates
In addition to our consolidated subsidiaries, Universal
Scientific and Hung Ching are commonly referred to as member
companies in the ASE Group. As of August 15, 2000, we held
approximately 23.3% of the outstanding shares of Universal
Scientific and 25.1% of the outstanding shares of Hung Ching.
Universal Scientific.
Universal Scientific, which
is a ROC company, manufactures electronics products in varying
degrees of system integration principally on a contract basis for
original equipment manufacturers, including:
We are the largest shareholder in Universal Scientific and six
out of the nine directors on its board of directors, including
the chairman, are representatives of ASE Inc.
Universal Scientifics principal manufacturing facilities
are located in Nantou, Taiwan. In 1999, Universal Scientific
recorded net revenues of NT$28,906 million
(US$938.5 million), operating income of NT$1,700.5 million
(US$55.2 million) and net income of NT$1,412.1 million (US$45.9
million). For the six months ended June 30, 2000, Universal
Scientific recorded net revenues of NT$19,189.1 million
(US$623.0 million), operating income of
NT$889.4 million (US$28.9 million) and net income of
NT$759.4 million (US$24.7 million). The shares of
Universal Scientific are listed on the Taiwan Stock Exchange. As
of June 30, 2000, Universal Scientific had a market
capitalization of NT$42,773.7 million
(US$1,388.8 million).
Hung Ching.
Hung Ching, which is a ROC company, is
engaged in the development and management of commercial,
residential and industrial real estate properties in Taiwan. Hung
Chings completed development projects include the ASE
Design Center commercial project and the Earl Village residential
project, both located in Hsichih, Taiwan. Hung Ching was founded
in 1986 by Chang Yao Hung-ying. Mrs. Chang is the mother of
both Jason C.S. Chang, our Chairman, and Richard H.P. Chang, our
Vice Chairman and Chief Executive Officer, and is a director of
ASE Inc. and ASE Test. As of June 30, 2000, we held 25.1% of
the outstanding shares of Hung Ching. Messrs. and Mdm. Chang and
other members of the Chang family are controlling shareholders
of Hung Ching.
In 1999, Hung Ching recorded net revenues of NT$446.8 million
(US$14.5 million), operating loss of NT$170.5 million (US$5.5
million) and net income of NT$489.8 million (US$15.9 million).
For the six months ended June 30, 2000, Hung Ching recorded
net revenues of NT$101.7 million (US$3.3 million),
operating loss of NT$81.5 million (US$2.6 million) and
net loss of NT$206.7 million (US$6.7 million). The
shares of Hung Ching are listed on the Taiwan Stock Exchange. As
of June 30, 2000, Hung Ching had a market capitalization of
NT$4,662.9 million (US$151.4 million).
65
Sales and Marketing
Sales and Marketing Offices
We maintain sales and marketing offices in the United States,
Taiwan and Malaysia. Our Hsinchu and Kaohsiung offices are
staffed with employees from both ASE Inc. and ASE Test Taiwan.
These employees often call on prospective customers together. In
addition, the sales agent for our packaging and testing services
maintains sales and marketing offices in San Jose, California;
Tempe, Arizona; Austin, Texas; and Beverly, Massachusetts in the
United States; and Brussels in Belgium. We conduct marketing
research through our in-house customer service personnel and
those of our sales agent 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
Sales and
Marketing Qualification and Correlation by
Customers.
Sales and Customer Service Agents
Under a commission agreement, each of ASE Inc., ASE Test Taiwan
and ASE Test Malaysia has appointed Gardex International Limited
as the non-exclusive sales agent for its services and products
worldwide, excluding Asia. Gardex helps us identify customers,
monitor delivery acceptance and payment by customers and, within
parameters set by us, negotiate price, delivery and other terms
with our customers. Purchase orders are placed directly with us
by our customers. We pay Gardex a commission of between 1.0% and
3.0% of our sales outside of Asia, based on where the customers
are headquartered, payable monthly, depending on the amount of
these sales. In 1999 and the six months ended June 30, 2000,
we paid US$8.8 million and US$7.2 million,
respectively, in commissions to Gardex.
Under a service agreement, each of ASE Inc., ASE Test Taiwan and
ASE Test Malaysia has appointed ASE (U.S.) Inc. as its
non-exclusive agent to provide customer service and after-sales
support to its customers in Europe and North America. We pay ASE
(U.S.) Inc. a monthly fee of between US$400,000 and US$700,000,
depending on the costs incurred by ASE (U.S.) Inc. in providing
us with its services. In 1999 and the six months ended
June 30, 2000, we paid US$7.1 million and
US$4.9 million, respectively, in fees and service charges to
ASE (U.S.) Inc.
Both Gardex and ASE (U.S.) Inc. are wholly owned by Mr. Y.C.
Hsu, who has had a long personal relationship with
Mr. Jason C.S. Chang, our Chairman, that pre-dates the
founding of our company. We have maintained business
relationships with Gardex, ASE (U.S.) Inc. and their predecessors
since 1985. Gardex and ASE (U.S.) Inc. currently perform
services only for us. We are currently negotiating with Gardex
and ASE (U.S.) Inc. the terms for the renewal of our agreements
with them.
Customers
Our global base of over 200 customers includes leading
semiconductor companies across a wide range of end use
applications:
Advanced Micro Devices, Inc.
Altera Corporation
ATI Technologies Inc.
Cirrus Logic International Ltd.
Conexant Systems, Inc.
Delphi Automotive Systems Corp.
DSP Group
LSI Logic Corporation
Motorola, Inc.
Philips Electronics NV
Qualcomm Incorporated
ST Microelectronics Pte Ltd.
66
VIA Technologies, Inc.
Our five largest customers together accounted for approximately
32.3%, 34.3%, 40.0% and 49.7% of our sales in 1997, 1998, 1999
and the six months ended June 30, 2000, respectively. Other
than Motorola, Inc. in 1999, no customer accounted for more than
10.0% of our net revenues in 1997, 1998 or 1999. For the six
months ended June 30, 2000, no customer other than Motorola
and VIA Technologies, Inc. accounted for more than 10% of our net
revenues. In connection with our acquisition in July 1999 of
Motorolas in-house packaging and testing operations in
Chung Li and Korea, we entered into manufacturing services
agreements for Motorolas continuing business at the Chung
Li and Korea facilities. As a result, Motorola accounted for
approximately 16.0% of our 1999 net revenues and 25.6% of our
first half 2000 revenues. There has been significant variation in
the composition of our largest five customers over time and, as
a result, we have been less dependent on any particular customer
over time. We package and test for our customers a wide range
products with end use applications in the personal computers,
consumer, industrial and automotive, and communications sectors.
The following table sets forth the names, in alphabetical order,
of our five largest customers for each of 1997, 1998 and 1999:
For the six months ended June 30, 2000, our five largest
customers, in alphabetical order, were Advanced Micro Devices
Inc., Motorola, Inc., On Semiconductor Corp., ST Microelectronics
N.V. and VIA Technologies, Inc.
The following table sets forth our 1999 and six months ended
June 30, 2000 revenues categorized by the principal end use
applications of the products which we packaged and tested as a
percentage of our net revenues in 1999 and the six months ended
June 30, 2000.
Many of our customers are leaders in their respective end use
markets. For example, we provide Motorola, an industry leader in
automotive and wireless communications semicondutor products,
with most of its outsourced packaging and testing requirements.
The following table sets forth our largest customers, categorized
by the principal end use applications of the products which we
package and test for them.
67
We categorize our packaging and testing revenues based on the
country in which the customer is headquartered. The following
table sets forth, for the periods indicated, the percentage
breakdown of our packaging and testing revenues, categorized by
geographic regions.
In 1999 and the six months ended June 30, 2000,
approximately 90.0% and 73.3%, respectively, of the testing
revenues of ASE Test Taiwan and 81.0% and 75.7%, respectively, of
the testing revenues of ASE Test Malaysia was accounted for by
the testing of semiconductors packaged at our packaging
facilities in Kaohsiung and Malaysia, respectively. The balance
represented testing revenues from customers who delivered
packaged semiconductors directly to ASE Test Taiwan or ASE Test
Malaysia for testing. In 1999 and the six months ended
June 30, 2000, approximately 43.0% and 26.1%, respectively,
of our packaging revenues in Kaohsiung and 62.0% and 65.2%,
respectively, of our packaging revenues in Malaysia was accounted
for by the packaging of semiconductors which were subsequently
tested at ASE Test Taiwan and ASE Test Malaysia, respectively. We
expect that more customers of our packaging facilities in
Kaohsiung and Malaysia 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
68
Pricing
We price our packaging services primarily on a cost-plus basis
and, to a lesser extent, with reference to market prices. Prices
are confirmed at the time firm orders are received from
customers, which is typically four to eight weeks before
delivery.
We price our testing services primarily on the basis of the
amount of time, measured in CPU 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.
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 and substrates, gold wire and molding compound
represented approximately 54.6%, 21.5% and 11.4%, respectively,
of our total cost of packaging materials in 1999, and
approximately 56.8%, 19.8% and 11.1%, respectively, of our total
cost of packaging materials for the six months ended
June 30, 2000.
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 generally receive the wafers from the customer for which the
semiconductor is being packaged. 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
months 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 1997 and 1998, the industry experienced a
shortage in the supply of advanced substrates used in BGA
packages, which is currently available only from a limited number
of suppliers located primarily in Japan. In these instances, we
generally negotiate an extension of the delivery date from our
customers.
We believe that interconnect technology will play an increasingly
important role in semiconductor packaging as interconnect
materials such as leadframes and substrates account for a growing
portion of the cost of a semiconductor package. In anticipation
of this trend, we established ASE Material in December 1997
for the purpose of developing, producing and selling leadframes
and advanced substrates. In 1999 and the six months ended
June 30, 2000, ASE Material supplied interconnect materials
that accounted for approximately 8.0% and 7.5%, respectively, of
our consolidated raw material costs. Substantially all of these
materials were leadframes. We expect that by the end of 2000, ASE
Material will supply approximately a third of the substrate
requirements at our packaging facilities in Kaohsiung. We expect
to continue making investments in ASE Material in order to
further develop our in-house interconnect technology.
69
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. The number of wire bonders at a given
facility is commonly used as a measure of the packaging capacity
of the facility. The wire bonders connect the input/output
terminals on the silicon die using extremely fine gold wire to
leads on leadframes or substrates. Typically, wire bonders may be
used, with minor modifications, for the packaging of different
products. We purchase wire bonders principally from Kulicke &
Soffa Industries Inc. and Shinkawa Limited of Japan. We
currently operate an aggregate of 3,636 wire bonders, 20 of which
are consigned by customers. In addition to wire bonders, we
maintain a variety of other types of packaging equipment, such as
wafer grind, wafer mount, wafer saw, die bonders, automated
molding machines, laser markers, solder plat, pad printers,
dejunkers, trimmers, formers, substrate saw and scanners.
Testing
Testing equipment is the most important and 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 testing equipment from major
international manufacturers, including Credence Systems
Corporation, Teradyne, Inc., Hewlett-Packard Asia Pacific
Limited, Schlumberger Technologies, Advantest Corporation,
Electroglas, Inc. and Megatest Corporation. Upon acquisition of
new testing equipment, we install, configure, calibrate, perform
burn-in diagnostic tests on and establish parameters for the
testing equipment based on the anticipated requirements of
existing and potential customers and considerations relating to
market trends. We currently operate an aggregate of 871 testers,
121 of which are consigned by customers. In addition to testers,
we maintain a variety of other types of testing equipment, such
as automated handlers and probers (with special handlers for
wafer probing), scanners, re-formers and personal computer
workstations for use in software development. Each tester is
attached to one or two handlers or probers, which transport
individual dies to the tester for testing or probing.
In general, particular semiconductors can be tested on only a
limited number of specially designed testers. As part of the
qualification process, customers will specify the machines on
which their semiconductors may be tested, and we often develop
test program conversion tools that enable us to test
semiconductors on multiple equipment 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.
Equipment Supply
As part of our expansion program, we plan to purchase
approximately 1,488 new wire bonders and approximately 259 new
testers in 2000. In particular, a majority of the testers we
70
The unavailability of new wire bonders or testers or the failure
of these equipment, or other equipment acquired by us, to operate
in accordance with our specifications or requirements, or delays
in the delivery of these equipment, could delay implementation
of our expansion plans and could materially and adversely affect
our financial condition or results of operation.
Research and Development
Packaging
We centralize our research and development efforts in packaging
technology in our Kaohsiung facilities. After initial phases of
development, we conduct pilot runs in one of our facilities
before the new techniques or technologies 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 Kulicke & Soffa Industries Inc., a United States
supplier of substantially all of our new wire bonders, 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 through ASE Material. Substrate is
the principal raw material for BGA packages. Development and
production of advanced substrates involves 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 the successful development of substrate
production capability by ASE Material will, among other things,
help ensure a stable and cost-effective supply of substrates for
our BGA packaging operations and to help shorten production time.
We expect that by the end of 2000, ASE Material will supply
approximately a third of the substrate requirements at our
packaging facilities in Kaohsiung.
We have also entered into various non-exclusive technology
license agreements with licensors including Tessera Inc., Fujitsu
Limited, Flip Chip Technologies and Motorola, Inc. The
technology we license from these companies include solder
bumping, redistribution, assembly and other technologies used in
the production of package types such as bump chip carrier, flip
chip packages and micro BGA. We are also working with TSMC in
developing the next generation of packaging product technology.
The license agreement with Tessera will not expire until the
expiration of the Tessera patents licensed by the agreement. The
license agreements with Fujitsu, Flip Chip, and Motorola will
expire on April 13, 2003, March 1, 2009, and
71
Testing
Our research and development efforts in the area of testing have
focused primarily on improving the efficiency and technology of
our testing processes. Our current projects include developing
software for parallel testing of logic semiconductors, rapid
automatic generation and cross-platform conversion of test
programs to test logic and 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 semiconductors
testing and wafer probing, as well as software to optimize
capacity utilization.
For 1997, 1998, 1999 and the six months ended June 30, 2000,
our research and development expenditures totaled approximately
NT$372.9 million, NT$453.6 million, NT$714.3 million (US$23.2
million) and NT$534.7 million (US$17.4 million), respectively.
These expenditures represented approximately 2.0%, 2.2%, 2.2% and
2.3% of net revenues in 1997, 1998, 1999 and the six months
ended June 30, 2000, respectively. We have historically
expensed all research and development costs as incurred and none
is currently capitalized. As of June 30, 2000, we employed
936 employees in research and development.
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
staff quality control stations along production lines, monitor
clean room environment 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.
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 209E
class 1,000, 10,000 and 100,000 standards. All of our
facilities have been certified as meeting the ISO 9002
quality standards by the International Standards Organization.
Our facilities in Taiwan, Korea and Malaysia have also been
certified as meeting the Quality System 9000 or QS-9000 quality
standards. The ISO 9002 certification is required by many
countries in connection with sales of industrial products in
these countries. The QS-9000 quality standards provide for
continuous improvement with an emphasis on the prevention of
defects and reduction of variation and waste in the supply chain.
Like the ISO 9002 certification, the QS-9000 certification
is required by some
72
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, especially those that also offer turnkey
packaging and testing services. 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.
Furthermore, several independent packaging companies in Asia plan
to expand their packaging capacities and enhance their testing
capabilities.
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 and lower costs
while maintaining equivalent or higher quality for several
reasons. First, we tend to have lower unit costs because of
higher utilization rate as compared to the in-house testing
operations of integrated device manufacturers. Second, we tend to
offer a wider range of products in terms of complexity and
technology as compared to the in-house testing operations of
integrated device manufacturers, since integrated device
manufacturers are less able to utilize individual testers for
long periods of time following the migration of product
technology.
Environmental Matters
The semiconductor packaging process generates gaseous chemical
wastes, principally at the stage at which the copper leads
protruding from the plastic or ceramic casings of the
semiconductor, commonly referred to as moldings, are plated with
tin or lead to improve their electrical conductivity. Liquid
waste is produced at the stage where silicon wafers are diced
into chips with the aid of diamond saws and cooled with running
water. In addition, excess materials on leads and moldings are
removed from packaged semiconductors in the trimming and
de-junking processes, respectively. 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
semiconductor 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.
Employees
As of June 30, 2000, we had 16,779 full-time employees
serving in the following capacities:
73
Eligible employees may participate in the ASE Inc. Employee Share
Bonus Plan and the ASE Test Share Option Plans. See
Management Compensation of Directors,
Supervisors and Executive Officers ASE Inc. Employee
Bonus Plan and Management Compensation of
Directors, Supervisors and Executive Officers ASE
Test Share Option Plans.
With the exception of ASE Koreas employees, our employees
are not covered by any collective bargaining arrangements. We
believe that our relationship with our employees is good.
Legal Proceedings
We are not involved in material legal proceedings the outcome of
which we believe would have a material adverse effect on us.
Criminal charges were brought in December 1998 by the
district attorney for Taipei against Jason C.S. Chang, our
Chairman, Richard H.P. Chang, our Vice Chairman and Chief
Executive Officer, and Chang Yao Hung-ying, our director, and
four others for alleged breach of fiduciary duties owed to our
affiliate Hung Ching in their capacity as directors and officer
of Hung Ching in connection with a land sale transaction in 1992
valued at approximately NT$1.7 billion. It was alleged that the
transaction in which Jason C.S. Chang sold the land to Hung Ching
unfairly benefited Jason C.S. Chang to the detriment of Hung
Ching. Hung Ching at that time was a privately owned company
whose principal shareholders were members of the Chang family.
Ancillary charges were brought against Jason C.S. Chang, Chang
Yao Hung-ying and another for alleged forgery of Hung Ching board
resolutions relating to that transaction. Neither Jason C.S.
Chang nor Richard H.P. Chang nor Chang Yao Hung-ying believes
that he or she committed any offense in connection with such
transactions, and all of them are vigorously contesting the
alleged charges. If convicted, they would be required to resign
from their respective positions with us and our group companies.
ASE Inc. is not a party to these proceedings and we do not expect
that these charges will result in any liability to us. See
Business Other Members of the ASE Group
for a description of Hung Ching.
We have been advised by counsel to Messrs. and Mdm. Chang that a
judgment in these proceedings may be rendered by the District
Court at any time, although there can be no certainty as to the
exact timing. Moreover, counsel to Messrs. and Mdm. Chang have
advised us that, as these proceedings may not be finally
determined until the case has been considered by the District
Court, the High Court and the Supreme Court of the ROC, two or
three years may elapse until they are fully resolved. As a
result, we do not expect that these proceedings will result in a
change in our management in the near future, if at all.
Insurance
We have insurance policies covering losses due to fire and we
believe that these insurance policies are sufficient for our
business. These insurance policies cover the buildings, machinery
and equipment at our major production facilities. We do not have
business interruption insurance, except in connection with fire.
Significant damage to any of our production facilities, whether
as a result of fire or other causes, would have a material
adverse effect on our results of operations. We are not insured
against the loss of key personnel.
74
RECENT ACQUISITIONS
ASE Chung Li and ASE Korea
In July 1999, we purchased Motorolas 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.
The businesses are now operated by ASE Chung Li and ASE Korea.
We acquired substantially all of the assets of ASE Chung Li for a
base price of US$150.0 million in cash, consisting of an
initial payment of US$80.0 million at closing and an
additional US$70.0 million payable over three years if sales
volume targets are met. We acquired 100% of the outstanding
shares of ASE Korea for a base price of US$140.0 million in
cash, consisting of an initial payment of US$36.0 million and an
additional US$104.0 million payable over five years. In
addition to the combined base price of US$290.0 million, we
also paid an aggregate of approximately US$60.1 million in
cash to purchase capital assets at both facilities which were
acquired after January 1, 1999 and specified inventories and cash
positions at both facilities. Under the acquisition agreements,
ASE Inc. acquired a 70.0% interest in each of the two businesses,
and ASE Test acquired the remaining 30.0% interest. This
division of the investment reflected in part our estimate of the
relative packaging and testing values at the facilities. Both
facilities provide semiconductor packaging and testing services
for Motorolas Semiconductor Products Sector, and will
continue to do so for at least three to five years following the
completion of the acquisition under manufacturing services
agreements with Motorola. See the combined financial statements
of Motorolas Semiconductor Products Sector Businesses in
Taiwan and Korea and our unaudited pro forma financial
statements.
ISE Labs
In May 1999, ASE Test purchased 70% of the outstanding
shares of ISE Labs. ISE Labs is an independent semiconductor
testing company currently based in San Jose, California. ISE Labs
also owns Digital Testing Services, Inc., a leading
semiconductor testing company based in Santa Clara, California.
ISE Labs offers a broad range of semiconductor testing services,
including software program development, electrical design
validation, reliability and failure analysis, wafer sort and
testing to semiconductor companies, with a focus on its principal
market in the Silicon Valley area. ISE Labs specializes in
front-end engineering testing, which is performed during and
following the circuit design stage of the semiconductor
manufacturing process.
The total purchase price for the 70% equity interest in ISE Labs
was US$98.0 million. The stock purchase agreement provides that
in the event ISE Labs (1) does not consummate an initial
public offering of its common stock by December 2001 at or
above a specified price or (2) disposes of certain of its
material assets, which in the aggregate is greater than 15% of
the total assets of ISE Labs as shown on the most recent audited
balance sheet of ISE Labs, then ASE Test will be obligated to
purchase the remaining 30% equity interest for US$42.0 million
plus accrued interest. The purchase price is payable either in
cash or ordinary shares of ASE Tests common stock, at the
option of the holders of the remaining shares, who are primarily
founders and employees of ISE Labs or its predecessors.
On April 27, 2000, ASE Test purchased $30 million of
additional shares of ISE Labs at $8 per share, which was financed
through a short-term loan from Citibank, N.A., Taipei OBU. As a
result, ASE Tests ownership in ISE Labs increased from
70.0% to 75.3%. ASE Test plans to purchase up to an additional
$40 million of shares at $8 per share during the third quarter of
2000. Upon the completion of this share purchase, ASE Test will
own up to 80.0% of the outstanding shares of ISE Labs.
ISE Labs has in the past entered into a multi-year outsourced
testing arrangement with a key customer, and may from time to
time in the future enter into similar arrangements with its other
75
Universal Scientific
From February through July of 1999, we purchased 22.6% of the
outstanding shares of Universal Scientific for approximately
NT$3,532.5 million (US$115.0 million), principally
through open market purchases on the Taiwan Stock Exchange. We
subsequently increased our holding to 23.3% following the open
market purchase of additional shares in July and August of 2000.
Six out of the nine directors on the Universal Scientific board
of directors, including the chairman, are our representatives.
76
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As at December 31, 1999
Expected Maturity Date
2000
2001
2002
2003
2004
Total
Fair Value
(in millions)
Short-term debt:
U.S. dollars
US$
72.9
US$
72.9
US$
72.9
average interest rate: 5.924% to 8.45%
Japanese yen
JPY
7,331
JPY
7,331
JPY
7,331
average interest rate: 0.95% to 1.4%
Long-term borrowing:
U.S. dollars
US$
39.5
US$
14.5
US$
205.6
US$
1.5
US$
110.0
US$
371.1
US$
371.1
average interest rate: 5.52% to 7.56%
Japanese yen
JPY
1,044.2
JPY
1,044.2
JPY
1,044.2
average interest rate: 1.3%
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Year Ended December 31,
Six Months Ended June 30,
1998
1999
1999
1999
2000
2000
(in millions)
(unaudited)
Net income in accordance with:
ROC GAAP
NT$1,604.0
NT$7,794.7
US$253.1
NT$4,516.8
NT$2,920.8
US$94.8
US GAAP
NT$298.9
NT$4,641.3
US$150.7
NT$3,717.4
NT$2,053.5
US$66.7
As of December 31,
As of June 30,
1998
1999
1999
1999
2000
2000
(in millions)
(unaudited)
Shareholders equity in accordance with:
ROC GAAP
NT$21,874.8
NT$30,057.0
US$975.9
NT$27,021.1
NT$32,805.4
US$1,065.1
US GAAP
NT$17,675.2
NT$26,569.7
US$862.7
NT$22,077.0
NT$29,178.6
US$ 947.4
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our broad range of advanced semiconductor packaging and testing
services;
our expertise in product and process technology for the
manufacture of increasingly lighter and thinner semiconductor
packages with lower power consumption and better thermal
dissipation characteristics;
our expertise in interconnect materials and assembly of
electronics boards;
our financial position which enables us to make significant
investments for future growth through both the expansion of
existing capacity and the acquisition of new businesses,
technologies and operations;
our experience in integrating acquired operations and using the
acquired operations to provide services to their former owners;
our strategic geographic locations with experienced teams in key
centers for outsourced semiconductor manufacturing; and
our strategic alliance with Taiwan Semiconductor Manufacturing
Company Limited, or TSMC, the worlds largest dedicated
semiconductor foundry, to provide complete turnkey services.
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Process
Description
Circuit Design
The design of a semiconductor is developed by laying out circuit
components and interconnections. A complex circuit may be
designed with as many as 20 layers of patterns or more.
Front-End Engineering Test
Throughout and following the design process, prototype
semiconductors undergo front-end engineering testing, which
involves software development, electrical design validation,
reliability and failure analysis.
Wafer Fabrication
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.
Wafer Probe
Each individual die is electrically tested, or probed, for
defects. Dies that fail this test are marked to be discarded.
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Process
Description
Packaging
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 wafer 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 ball grid
array packages, the leads take the shape of small bumps or balls.
Leads on the lead frame or the substrate are connected by
extremely fine gold wires to the input/output terminals on the
chips, through the use of automated machines known as wire
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 packages, or in
the form of small bumps on a surface of the package as in the
case of ball grid array or other laminate packages.
Final Test
Final testing is conducted to ensure that the packaged
semiconductor device meets performance specifications. Final
testing involves using sophisticated testing equipment and
customized software programs to electrically test a number of
attributes of packaged integrated circuits, including
functionality, speed, predicted endurance and power consumption.
The final testing of semiconductors is categorized by the
functions of the semiconductors tested into logic and 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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Strengthen and Develop Strategic Alliances with Providers
of Complementary Manufacturing Services
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Taiwan currently the largest center for outsourced
semiconductor manufacturing in Asia with its high concentration
of foundries, customers and end users;
Malaysia and Singapore the emerging center for
outsourced semiconductor manufacturing in Southeast Asia with a
concentration of integrated device manufacturers;
Korea a center for the manufacturing of memory
devices and semiconductors for communications applications with a
concentration of integrated device manufacturers specializing in
these products; and
Silicon Valley in California the pre-eminent center
for semiconductor design with a concentration of fabless
customers.
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plastic leaded chip carrier packages, also called PLCC;
quad flat packages, also called QFP;
thin quad flat packages, also called TQFP;
small outline plastic packages, also called SOP;
small outline plastic J-bend packages, also called SOJ;
thin small outline plastic packages, also called TSOP; and
ball grid array, also called BGA.
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Number
Package Format
of Leads
Applications
Quad Flat Package
QFP
44-240
Standard QFP designed for advanced processors and controllers,
digital application specific integrated circuits, also called
ASICs, and digital signal processors, also called DSPs which,
unlike conventional microprocessors, processes only digital
signals and therefore perform at higher speeds. Applications
include multimedia applications, cellular phones, personal
computers, automotive and industrial products.
Thin QFP
TQFP
32-128
Low profile QFP for use in applications such as cellular phones,
notebook computers, hard disk drives and communication boards
such as ethernet, a popular standard of communications, and
integrated services digital network, a high-speed communications
network based on fiber optic cable, which is also called ISDN.
Plastic Leaded Chip Carrier
PLCC
20-84
Designed for applications that do not require low profile package
with high density of interconnects. Applications include
personal computers, scanners, electronic games and monitors.
Small Outline Plastic Package
SOP
8-44
Consumer audio/video and entertainment products, cordless
telephones, pagers, fax machines, printers, copiers, personal
computer peripherals and automotive parts.
Thin SOP
TSOP
22-54
Standard leadframe package designed for logic and analog devices
and static random access memory, also called SRAM, dynamic random
access memory, also called DRAM, fast static RAM, a more
advanced type of SRAMs which feature faster speed, is used
predominantly in communications and applications and is also
called FSRAM, and flash memory devices, which are random access
memory devices of limited capacity which retain memory after
power shutdown and are used extensively in communications and
applications. Applications include telecommunications products,
recordable optical disks, hard disk drives, audio and video
products and consumer electronics.
Small Outline Plastic J-Bend Package
SOJ
20-44
Applications include DRAM memory devices, microcontrollers,
digital analog conversions and audio-video applications.
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Number
Package Format
of Balls
Applications
Plastic BGA
119-665
Designed for semiconductors which require the enhanced
performance provided by plastic BGA, including personal computer
chipsets, graphic controllers and microprocessors, ASICs, DSPs
and memory devices. Applications include wireless products,
cellular phones, global positioning systems, notebook computers,
disk drives and video cameras.
Map BGA
36-256
Smaller and thinner than conventional plastic BGA designed for
semiconductors such as memory, analog, and ASICs requiring a
smaller package. Applications include cellular and other
telecommunications and wireless systems, global positioning
systems, notebook/subnotebook computers and personal digital
assistants, also called PDAs.
Film BGA
112-280
Substrate-based package that has higher performance and lower
profile than plastic BGA. Applications include cellular phones,
pagers, wireless communications, DSPs and micro-controller
applications and high performance disk drives.
Viper BGA
256-480
Designed for memory devices such as flash memory devices, SRAM,
DRAM and FSRAM, microprocessors/controllers and high value ASICs
requiring a low profile, light and small package. Applications
include cellular and other telecommunications products, wireless
and consumer systems, PDAs, disk drives, notebook/subnotebook
computers and memory boards.
Stacked-Die BGA
66-256
Combination of multiple dies in a single package enables package
to have multiple functions within a small surface area.
Applications include cellular phones, local area networks, also
called LAN, graphic processors, digital cameras and pagers.
Flip Chip BGA
48-1500
Using advanced interconnect technology, 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.
Applications include high performance networking and graphics and
processor applications.
Systems-in-a-Package
256-665
Integrated combination of microprocessor, logic controller and
memory chips assembled in one package. Applications include
digital televisions, fax modems, personal computer peripherals,
CD players and copiers.
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Year Ended December 31,
Six Months Ended June 30,
1997
1998
1999
1999
2000
(percentage of packaging revenues)
Package Types:
BGA
11.7
%
22.0
%
35.3
%
32.3
%
43.8
%
TQFP
11.5
15.9
18.4
19.7
17.7
QFP
45.6
35.4
22.0
26.7
14.8
SOJ/SOP
13.3
11.2
9.8
7.6
9.6
PLCC
9.9
8.2
4.4
5.8
3.0
PDIP
7.1
6.5
4.9
5.9
3.3
Other
0.9
0.8
5.2
2.0
7.8
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
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Software Program Development.
Design and test
engineers develop a customized software program and related
hardware to test the semiconductor on advanced testing equipment.
A customized software program 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 submitted to electrical tests using
advanced test equipment, customized software programs and related
hardware. 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 verification or reliability testing processes, it
is typically subjected to failure analysis to determine why it
did not 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.
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Burn-in Testing.
Burn-in 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.
Six Months Ended
Year Ended December 31,
June 30,
1997
1998
1999
1999
2000
(percentage of testing revenues)
Testing Services:
Logic/mixed-signal final test
75.7
%
79.1
%
68.7
%
80.8
%
77.5
%
Memory final test
16.1
11.8
3.1
5.3
2.0
Front-end engineering test, wafer probe and others
8.2
9.1
28.2
13.9
20.5
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
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Approximate
Floor
Commencement
Primary
Space
Facility
Location
of Operation
Use
(in sq. ft.)
Testers
Bonders
ASEs facility in Kaohsiung
Kaohsiung, Taiwan
March 1984
Our primary packaging facility. Offers complete semiconductor
manufacturing solutions in conjunction with ASE Test Taiwan and
foundries located in Taiwan, such as TSMC. Focuses primarily on
advanced BGA and QFP packages for integrated device
manufacturers, fabless design companies and communications
systems companies.
538,000
0
2,368
ASE Test Taiwan
Kaohsiung, Taiwan
December 1987
Our primary testing facility. Offers complete semiconductor
solutions in conjunction with ASEs facility in Kaohsiung
and foundries located in Taiwan, such as TSMC. Focuses primarily
on advanced logic and mixed signal testing for integrated device
manufacturers, fabless design companies and communications
systems companies.
406,000
223
0
ASE Test Malaysia
Penang, Malaysia
February 1991
An integrated packaging and testing facility which focuses
primarily on the requirements of integrated device manufacturers
and communications systems companies.
322,000
122
396
ASE Chung Li
Chung Li, Taiwan
April 1985(1)
An integrated packaging and testing facility which specializes in
semiconductors for communications applications, particularly
those incorporating the Motorola- proprietary Map BGA technology.
264,000
222
663
ASE Korea
Paju, Korea
March 1967(2)
An integrated packaging and testing facility which specializes in
semiconductors for radio frequency, sensor and automotive
applications.
85,000
125
105
ISE Labs
San Jose, California
Fremont, California
Santa Clara, California
November 1983(3)
Front- end engineering and final testing facilities located in
northern California in close proximity to several of the
worlds largest fabless design companies.
331,000
(5)
157
0
Hong Kong
Singapore
Testing facilities located in close proximity to integrated
device manufacturers and fabless companies in Hong Kong and
Southeast Asia.
ASE Philippines
Cavite, Philippines
November 1995
Focuses primarily on the packaging of commodity semiconductor
products for integrated device manufacturers in the Philippines.
31,000
22
104
Total
1,853,000
871
3,636
Net Revenues
(in US$ millions)
Year Ended
December 31,
Six Months
Facility
1999
Ended June 30, 2000
ASEs facility in Kaohsiung
US$
557.5
US$
373.9
ASE Test Taiwan
101.3
68.7
ASE Test Malaysia
115.9
75.1
ASE Chung Li
84.6
(4)
129.8
ASE Korea
64.3
(4)
60.3
ISE Labs
81.5
48.8
ASE Philippines
8.4
6.9
Total
US$
1,013.5
US$
763.5
(1)
We acquired a 70.0% interest in ASE Chung Li in
July 1999 and ASE Test acquired the remaining 30.0% interest.
(2)
We acquired a 70.0% interest in ASE Korea in July
1999 and ASE Test acquired the remaining 30.0% interest.
(3)
We acquired a 70.0% interest in ISE Labs in May
1999, which was subsequently increased to 75.3% following ASE
Tests purchase of additional shares of ISE Labs in April
2000.
(4)
Represents net revenues for the period from
July 4 to December 31, 1999.
(5)
Includes an additional 38,000 square feet which we
will occupy upon the completion of the expansion and relocation
of our ISE Labs operations from San Jose, California to Fremont,
California.
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99.98% of ASE Test Taiwan;
100% of ASE Test Malaysia;
75.3% of ISE Labs;
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30% of ASE Chung Li (the remaining 70% of which is owned by ASE
Inc.); and
30% of ASE Korea (the remaining 70% of which is owned by ASE
Inc.).
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electronics 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 SMT 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.
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1997
1998
1999
Motorola, Inc.
ATI Technologies Inc.
ATI Technologies Inc
S3 International Ltd.
Motorola, Inc.
LSI Logic Corporation
Silicon Integrated Systems
VIA Technologies, Inc.
Motorola, Inc.
Corp.
Winbond Electronics
Silicon Integrated Systems
VIA Technologies, Inc.
Corporation
Corp.
Winbond Electronics
3Dfx
VIA Technologies, Inc.
Corporation
Six Months Ended
Year Ended December 31, 1999
June 30, 2000
(percentage of net revenues)
End Use Applications:
Communications
32.4
%
38.2
%
Consumer/ Industrial/ Automotive
16.6
24.2
Personal Computers
45.2
34.4
Other
5.8
3.2
Total
100.0
%
100.0
%
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Consumer/Industrial/
Communications
Automotive
Personal Computers
Advanced Micro Devices,
Altera Corporation
Advanced Micro Devices,
Inc.
Delphi Automotive Systems
Inc.
Conexant Systems, Inc.
Corp.
ATI Technologies, Inc.
DSP Group
LSI Logic Corporation
Cirrus Logic International
Motorola, Inc.
Motorola, Inc.
Ltd.
Philips Electronics NV
ST Microelectronics Pte Ltd.
IBM
Qualcomm Incorporated
ESS Technology, Inc.
ST Microelectronics Pte Ltd.
S3 International Ltd.
Silicon Integrated Systems
Corp.
VIA Technologies, Inc.
Winbond Electronics
Corporation
Six Months Ended
Year Ended December 31,
June 30,
1997
1998
1999
1999
2000
(percentage of net revenues)
North America
55.6
59.4
57.2
59.3
64.9
Taiwan
32.6
30.4
28.9
30.4
26.0
Other Asia
8.3
7.2
11.3
7.9
5.9
Europe
3.5
3.0
2.6
2.4
3.2
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
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Number of Employees
Direct labor
11,142
Indirect labor (manufacturing)
3,447
Indirect labor (administration)
1,254
Research and development
936
Total
16,779
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MANAGEMENT
Directors and Supervisors
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.
We currently have five supervisors, each serving a three-year term. Supervisors are typically elected at the time that directors are elected. The supervisors duties and powers include investigation of our business condition, inspection of our corporate records, verification of statements 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 or in contravention of our Articles of Incorporation. 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 and that a supervisors term of office be no more than three years.
The term of office for our directors is three years from the date of election. They may serve any number of consecutive terms and may be removed from office at any time for a valid reason by a resolution adopted at a general 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.
In accordance with ROC law, each of our directors and supervisors is elected either in the capacity as an individual shareholder or as an individual representative of a corporate or governmental shareholder. Of the current directors and supervisors, nine represent ASE Enterprises Limited. The remaining directors and supervisors serve in their capacity as individual shareholders.
The following table sets forth the name of each of our directors
and supervisors, his or her position in ASE Inc., the year they
were elected as director or supervisor and other significant
positions within the ASE Group held by them.
Director or
Supervisor
Name
Position
Since
Other Significant Positions Held
Jason C.S. Chang(1)
Director and Chairman
1984
Chairman of ASE Test
Richard H.P. Chang(1)
Vice Chairman
1984
Vice Chairman of ASE Test; Chairman of Universal Scientific
Leonard Y. Liu(2)
Director and President
2000
Director and Chief Executive Officer of ASE Test; Chief Executive
Officer of Universal Scientific
Joseph Tung(2)
Director and Chief Financial Officer
1997
Director of ASE Test; Supervisor of Universal Scientific
Chang Yao Hung-ying(1)(2)
Director
1984
Director of ASE Test
Chin Ko-Chien(2)
Director and Executive Vice President
1997
Director of ASE Test
David Pan(2)
Director
1997
Director and President
of ASE Test
77
Director or
Supervisor
Name
Position
Since
Other Significant Positions Held
Feng Mei-Jean(1)
Supervisor
1984
Yen-Yi Tseng
Supervisor
2000
Vice Chairman of Hung Ching
Alan Cheng(2)
Supervisor
1997
Director of ASE Test; Chairman of Hung Ching
John Ho(2)
Supervisor
1998
Director of Universal Scientific
Raymond Lo(2)
Supervisor
2000
(1) | Chang Yao Hung-ying is the mother of both Jason C.S. Chang and Richard H.P. Chang. Feng Mei-Jean is the wife of Richard H.P. Chang. |
(2) | Representative of ASE Enterprises, a Hong Kong company which held 21.5% of our outstanding common shares as of December 31, 1999. ASE Enterprises is wholly owned by Chang Yao Hung-ying. |
Executive Officers
The following table sets forth information relating to our executive officers.
Years | ||||||||
with the | ||||||||
Name | Position | Company | Age | |||||
|
|
|
|
|||||
Jason C.S. Chang | Chairman | 15 | 55 | |||||
Richard H.P. Chang | Vice Chairman and Chief Executive Officer | 15 | 51 | |||||
Leonard Y. Liu | President, ASE Inc. | 10 months | 58 | |||||
Chin Ko-Chien | Executive Vice President and General Manager, Kaohsiung packaging facility | 15 | 54 | |||||
David Pan | President, ASE Test | 5 | 55 | |||||
Raymond Lo | President, ASE Test Taiwan | 13 | 46 | |||||
Kanapathi A/L Kuppusamy | President, ASE Test Malaysia | 1 | 48 | |||||
Shih-Song Lee | President, ASE Chung Li | 1 | 59 | |||||
James Stilson | President, ASE Korea | 1 | 53 | |||||
Fu-Shing Chang | President, ASE Philippines | 15 | 49 | |||||
Gregory Lin | President, ASE Material | 4 | 56 | |||||
Joseph Tung | Chief Financial Officer | 5 | 41 |
Biographies of Directors, Supervisors and Executive Officers
Jason C.S. Chang has served as Chairman of ASE Inc. since its founding in March 1984. Mr. Chang is also the Chairman of ASE Test. He holds a degree in electrical engineering from National Taiwan University and a masters degree from the Illinois Institute of Technology. He is the son of Chang Yao Hung-ying, a director of ASE Inc., and the brother of Richard H.P. Chang, our Vice Chairman and Chief Executive Officer.
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 was appointed Chief Executive Officer of ASE Inc. in July 2000. 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 son of Chang Yao Hung-ying, a director of ASE Inc., and the brother of Jason C.S. Chang, our Chairman.
Leonard Y. Liu has served as a director since July 2000 and President of ASE Inc. since November 1999. Mr. Liu is also the Chief Executive Officer and a director of ASE Test and the Chief Executive Officer of Universal Scientific. Before joining ASE Inc., he was Chairman and Chief Executive Officer of Walker Interactive System, Inc. Mr. Liu has held other top management
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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 masters degree in business administration from the University of Southern California.
Chang Yao Hung-ying has served as a director of ASE Inc. since 1996. Mrs. Chang is also a director of ASE Test. Before April 1997, she was the Chairman of Hung Ching. She holds a degree from Shanghai University. She is the mother of Jason C.S. Chang and Richard H.P. Chang, our Chairman and our Vice Chairman and Chief Executive Officer, respectively.
Chin Ko-Chien has served as a director of ASE Inc. since March 1984 and Executive Vice President and General Manager of our packaging facility in Kaohsiung since March 1990. Mr. Chin is also a director of ASE Test. Before joining ASE Inc., he held managerial positions at Fu Hua Construction Co. Ltd. and De Ji Trading Company. He holds a degree in bearings technology from Taiwan Ocean University.
David Pan has served as a director of ASE Inc. since April 1997 and President and a director of ASE Test since November 1995. Before joining ASE Test, Mr. Pan was the Vice President responsible for research and development at Ultratech Stepper Inc. He holds a degree in physics from the University of Illinois and masters and doctorate degrees in physics from the University of California at Berkeley.
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 Chief Executive Officer.
Yen-Yi Tseng has served as a supervisor of ASE Inc. since July 2000 and Vice Chairman of Hung Ching since 1999. 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 masters 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.
Alan Cheng has served as a supervisor of ASE Inc. since April 1997. Mr. Cheng is also the Chairman of Hung Ching. He holds a degree in industrial engineering from Chung-Yuan University.
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 masters degree in business administration from the University of Iowa.
Raymond Lo has served as a supervisor of ASE Inc. since July 2000 and President of ASE Test Taiwan since December 1999, after serving as Vice President of Operations of ASE Inc. since July 1993. 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.
Kanapathi A/L Kuppusamy has served as President of ASE Test Malaysia since July 1999. Before joining ASE Test Malaysia, Mr. Kanapathi was President of Motorola Asia Final Manufacturing. He holds a masters degree in business administration from the University of East Asia in Kuala Lumpur, Malaysia.
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Shih-Song Lee has served as President of ASE Chung Li since July 1999. Before joining ASE Chung Li, Mr. Lee served as President of Motorolas Semiconductor Products Sector Businesses in Chung Li, Taiwan before we acquired the company. He holds a degree in electrical engineering from the Tatung Institute of Technology in Taiwan.
James Stilson has served as President of ASE Korea since July 1999. Before joining ASE Korea, Mr. Stilson served as President of Motorolas Semiconductor Products Sector Businesses in Paju, Korea before we acquired the company. He holds a degree in chemistry and a masters degree in business administration from the University of California.
Fu-Shing Chang has served as President of ASE Philippines since January 2000. Before joining ASE Philippines, Mr. Chang served as Vice President for Quality Assurance and Customer Service. He holds a degree in mechanical engineering from the National Cheng-kung University in Taiwan.
Gregory Lin has served as President of ASE Material since its inception in December 1997. Before joining ASE Material, Mr. Lin held research positions with Xerox Palo Alto Research Center. He holds a degree in chemistry from National Taiwan Chung Hsing University, and masters and doctorate degrees in chemistry from the University of Illinois.
Compensation of Directors, Supervisors and Executive Officers
In 1999, we paid to our directors, supervisors and executive
officers approximately NT$80 million (US$2.6 million)
in cash remuneration. In addition, an aggregate of 1,012,720
common shares of ASE Inc. and options exercisable for an
aggregate of 155,000 ordinary shares of ASE Test were granted in
1999 to our directors, supervisors and executive officers. In
1999, we also set aside an aggregate of NT$1.5 million (US$0.05
million) to provide pension, retirement and similar benefits for
our executive officers pursuant to existing plans provided by or
contributed to by our company or its subsidiaries. The following
table sets forth cash remuneration paid to our individual
directors and supervisors in 1999.
Name
Position
Compensation(1)
NT$
(in thousands)
Jason C.S. Chang
Chairman
4,875
Richard H.P. Chang
Director
4,731
Chang Yao Hung-ying
Director (Representative of ASE Enterprises)
2,400
(2)
Chin Ko-Chien
Director (Representative of ASE Enterprises)
2,400
(2)
David Pan
Director (Representative of ASE Enterprises)
2,400
(2)
Raymond Lo(3)
Director (Representative of ASE Enterprises)
2,400
(2)
Joseph Tung
Director (Representative of ASE Enterprises)
2,400
(2)
Feng Mei-Jean
Supervisor
2,400
Roger Cheung(3)
Supervisor (Representative of ASE Enterprises)
2,400
(2)
John Ho
Supervisor (Representative of ASE Enterprises)
2,400
(2)
Alan Cheng
Supervisor (Representative of ASE Enterprises)
2,400
(2)
Walt Delauder(3)
Supervisor (Representative of ASE Enterprises)
2,400
(2)
(1) | Does not include share bonuses of ASE Inc. or options to purchase ordinary shares of ASE Test. |
(2) | Paid to ASE Enterprises on account of its representative directors and supervisors and not to the directors and supervisors in their individual capacities. |
(3) | Term expired on July 11, 2000. |
ASE Inc. Employee Bonus Plan
We award bonuses to the employees of ASE Group companies based on overall income and individual performance targets. These employees are eligible to receive bonuses in the form of common shares of ASE Inc. valued at par. Actual amounts of bonuses to individual employees are determined based upon the employee meeting specified individual performance objectives. We granted an aggregate of 10,980,000 common shares, 30,760,000 common shares, 9,540,000 common shares and 47,833,062 common shares in 1997, 1998, 1999 and 2000, respectively, as
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ASE Test Share Option Plans
Directors, supervisors, and executive officers of ASE Group companies are also eligible to receive options to purchase ordinary shares of ASE Test under share option plans administered by ASE Test. ASE Test currently maintains five option plans: a pre-IPO plan as well as option plans approved in 1996, 1997, 1998, 1999 and 2000. Under ASE Tests share option plans, directors of ASE Test and employees, advisors and consultants of ASE Test or its affiliates may, at the discretion of a committee of the ASE Test board of directors administering the plan, be granted options to purchase ordinary shares of ASE Test at an exercise price of no less than market value on the date of grant. The committee has complete discretion to determine which eligible individuals are to receive option grants, the number of shares subject to each grant, the vesting schedule to be in effect for each option grant and the maximum term for which each granted option is to remain outstanding, up to a maximum term of five, or in the case of the 1999 and 2000 plan, ten years. ASE Tests board of directors may amend or modify the plans at any time. As of June 30, 2000, an aggregate of 30,300,000 ordinary shares had been reserved for issuance and 11,580,923 options to purchase ordinary shares remained outstanding under the various plans of ASE Test. An aggregate of 7,095,000 options had been granted to the directors, supervisors and executive officers of ASE Inc. Options granted under the various plans are exercisable at the market price at the date of the grant, which has ranged from an exercise price of US$3.00 to US$25.00, and, in the case of the pre-IPO plan, at an exercise price of US$2.0625 per ordinary share. Options granted under the pre-IPO, 1996, 1997 and 1998 plans are exercisable, in accordance with a vesting schedule, over a period of five years following the respective date of grant, and, in the case of options granted under the 1999 and 2000 plan, over a period of ten years following the date of grant.
Interests of Management in Certain Transactions
Several of our directors, supervisors and executive officers also serve as directors, supervisors or executive officers of companies with which we do business. These companies include our affiliates. See Principal Shareholders and Certain Transactions. We conduct these transactions on an arms length commercial basis.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information known to us with
respect to the beneficial ownership of our common shares as of
August 13, 2000, and as adjusted to reflect the sale of ADSs
offered by this prospectus, assuming no exercise of the
underwriters over-allotment option, by (1) each
shareholder known by us to own beneficially more than 5% of our
common shares, and (2) all directors, supervisors and
executive officers as a group.
Common Shares Beneficially Owned(1)
After giving effect to
Before this offering
this offering
Name of shareholder or group
Number
Percentage
Number
Percentage
ASE Enterprises(2)
426,532,017
21.5
%
426,532,017
20.5%
Directors, supervisors and executive officers as a group(3)
511,067,963
25.8
%
511,067,963
24.6%
(1) | Does not include the 31.5% stock dividend to be distributed in October 2000 to shareholders or GDS holders, as applicable, of record on August 13, 2000. |
(2) | ASE Enterprises is wholly owned by our director Chang Yao Hung-ying. |
(3) | Includes shareholding of ASE Enterprises. |
The above table does not include information relating to our
common shares held by our consolidated subsidiaries and
non-consolidated affiliates, which is set forth below on the same
basis as the information in the above table.
Common Shares Beneficially Owned(1)
After giving effect to
Before this offering
this offering
Name of shareholder
Number
Percentage
Number
Percentage
ASE Capital(2)
13,618,224
0.7%
13,618,224
0.7%
ASE Investment(2)(3)
89,278,909
4.5%
89,278,909
4.3%
ASE Test Taiwan(4)
424,240
0.02
%
424,240
0.02
%
Hung Ching(5)
25,696,807
1.3%
25,696,807
1.2%
(1) | Does not include the 31.5% stock dividend to be distributed in October 2000 to shareholders or GDS holders, as applicable, of record on August 13, 2000. |
(2) | ASE Capital and ASE Investment are our wholly-owned subsidiaries. |
(3) | Of the 89,278,909 common shares owned by ASE Investment, 10,550,490 are currently represented by an aggregate of 2,110,098 GDSs. The underwriters have an option to purchase those shares and additional 3,323,404 shares of stock dividends to be distributed on those shares in the form of ADSs to cover over-allotments, if any, in connection with this offering of ADSs. The information in the above table assumes no exercise of the underwriters over-allotment option to purchase from ASE Investment up to 2,774,778 ADSs. If this option is exercised in full, ASE Investment will hold 78,728,419, or 3.8%, of our common shares following the exercise. To the extent not sold to the underwriters in connection with this option, these GDSs will be exchanged for ADSs that will continue to be held by ASE Investment. Any ADSs that continue to be held by ASE Investment will be restricted securities for purposes of U.S. Federal securities laws and may only be freely sold in the United States pursuant to an effective registration statement under the Securities Act or pursuant to an exemption such as Rule 144 under the Securities Act, if available. |
(4) | ASE Test Taiwan is a wholly-owned subsidiary of ASE Test, our 51.3% owned subsidiary. |
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(5) | As of August 15, 2000, we held 25.1% of the outstanding shares of Hung Ching. Our director Chang Yao Hung-ying, our Chairman Jason C.S. Chang, our Vice Chairman and Chief Executive Officer Richard H.P. Chang and other members of the Chang family are controlling shareholders of Hung Ching. See Business Other Members of the ASE Group Unconsolidated Affiliates. |
In addition to the common shares held by our consolidated subsidiaries and unconsolidated affiliates set forth above, J&R Holding, our wholly-owned subsidiary, holds options exercisable for 76,066,445, or 2.9%, of our common shares at an exercise price of NT$60.2 per common share. The number of common shares covered by the options and the exercise price are subject to adjustments if specified events take place, such as the declaration of dividend in our common shares or the issuance of our common shares at less than the market price. There will be no adjustment as a result of this offering. The options expire in November 2002.
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CERTAIN TRANSACTIONS
In recent years, ASE Inc. has made awards of ASE Inc.s common shares to the employees of ASE Group companies as part of their compensation, based in part on the consolidated net income of ASE Inc. and the member companies contribution to the consolidated income. ASE Inc. granted an aggregate of 13,049,130 common shares in the six months ended June 30, 2000, 1,305,000 common shares in 1999, 6,105,410 common shares in 1998 and 1,017,233 common shares in 1997 as stock awards to employees of other companies of the ASE Group with a fair market value at the time of grant of NT$939.5 (US$30.5 million), NT$103.2 million (US$3.3 million), NT$458.7 million and NT$50.3 million, respectively. ASE Inc. expects this practice to continue in future periods.
ASE Material sold interconnect material, principally leadframes, in the aggregate amount of NT$515.2 million (US$16.7 million), NT$779.9 million (US$25.3 million), NT$452.1 million and NT$34.8 million to ASE Inc. for the six months ended June 30, 2000 and in 1999, 1998 and 1997, respectively. We expect that by the end of 2000, we will purchase approximately a third of our substrate requirements for our packaging facilities in Kaohsiung from ASE Material. We purchase, and plan to continue to purchase, materials from ASE Material at prevailing market prices.
ASE Test Taiwan has historically charged ASE Inc. fees for the testing of semiconductors packaged for a small number of customers that prefer to be billed through ASE Inc. for testing services performed by ASE Test Taiwan. These fees amounted to NT$49.5 million (US$1.6 million), NT$81.5 million (US$2.7 million), NT$155.7 million and NT$116.0 million for the six months ended June 30, 2000 and in 1999, 1998 and 1997, respectively. ASE Inc. sold to ASE Test Taiwan at book value a building at an aggregate price of NT$18.4 million (US$0.6 million) in the first half of 2000.
ASE Test Malaysia and ASE Philippines have historically purchased a portion of the raw materials used in their packaging operations, principally leadframes, from ASE Inc. when they face a shortage in the supply of these types of raw materials. These types of raw materials are typically resold by ASE Inc. to ASE Test Malaysia and ASE Philippines at book value. Purchases of raw materials by ASE Test Malaysia amounted to NT$3.1 million (US$0.1 million), NT$14.6 million (US$0.5 million), NT$28.0 million and NT$33.8 million for the six months ended June 30, 2000 and in 1999, 1998 and 1997, respectively. Purchases of raw materials by ASE Philippines amounted to NT$1.2 million (US$0.04 million), NT$2.1 million (US$0.07 million), NT$4.1 million and NT$3.3 million for the six months ended June 30, 2000 and in 1999, 1998 and 1997, respectively. In addition, ASE Inc. purchased raw materials, principally leadframes, from ASE Test Malaysia in an amount of NT$0.06 million (US$0.002 million), NT$4.3 million (US$0.1 million), NT$3.2 million and NT$4.2 million for the six months ended June 30, 2000 and in 1999, 1998 and 1997, respectively.
ASE Inc. has historically guaranteed the short-term borrowing of many of its subsidiaries. As of June 30, 2000, ASE Inc. has endorsed and guaranteed an aggregate amount of NT$9,742.6 million (US$316.3 million) of the outstanding promissory notes of its subsidiaries.
For the six months ended June 30, 2000 and 1999, ASE Inc. sold to ASE Philippines at book value machinery and equipment for the packaging of plastic dual in-line packages at an aggregate price of NT$9.6 million (US$0.3 million) and NT$12.9 million (US$0.4 million), respectively.
In January 2000, ASE Chung Li and Hung Ching, our affiliate company, entered into an agreement for the development of buildings on land currently owned by ASE Chung Li. Hung Ching will bear all costs relating to the development. Upon completion of the development, floor space in the buildings will be sold by Hung Ching at prices to be negotiated between Hung Ching and the buyers. ASE Chung Li and its affiliates will have priority in the purchase of the floor
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In October 1997, J&R Holding entered into agreements with Swiss Bank Corporation to purchase call options on a portion of our US$200 million Zero Coupon Convertible Bonds due 2002. The call options were offered by Swiss Bank Corporation as a part of the repackaging of our convertible bonds by SBC Warburg, an affiliate of Swiss Bank Corporation, into two separate instruments consisting of: (1) US$200 million callable floating rate notes secured by the convertible bonds and (2) call options on the convertible bonds. SBC Warburg decided to repackage the convertible bonds because the adverse market conditions resulting from the Asian financial crisis during the second half of 1997 made it difficult to market the convertible bonds. SBC Warburg was able to obtain commitments for the entire issue of the floating rate notes but, as a result of the adverse market conditions described above, was able to obtain commitments for only a portion of the call options. As a result, Swiss Bank Corporation approached a number of large institutional investors, including J&R Holding, with a proposal to sell a portion of the call options.
J&R Holding decided to purchase the call options because its management considered the call options to be a good investment. Under the first agreement with Swiss Bank Corporation, J&R Holding is required to make four cash payments to Swiss Bank Corporation in November 1998, 1999, 2000 and 2001. In return, J&R Holding has the right to call the convertible bonds back at any time during the period from November 1998 through November 2002. Under the second agreement, Swiss Bank Corporation paid US$200,000 to J&R Holding. In return, Swiss Bank Corporation had the right to sell a portion of the call options to J&R Holding at any time between November 4, 1997 and November 1, 1998. In any event, J&R Holding was required under the automatic exercise provision of the second agreement to purchase these call options upon the expiration of the agreement on November 1, 1998.
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EXCHANGE OFFER
In July 1995, we established with Citibank, N.A., as GDS depositary, two depositary receipts facilities, one for the purpose of facilitating the issuance of GDSs sold under Rule 144A and the other for the purpose of facilitating the issuance of GDSs sold pursuant to Regulation S. Each GDS represents five of our common shares. In December 1999, some of our affiliates offered and sold additional GDSs. The GDSs sold under Rule 144A have been designated as eligible for trading in the PORTAL System of the National Association of Securities Dealers, Inc. in the United States. The GDSs sold pursuant to Regulation S are listed on the Stock Exchange of Singapore and the Luxembourg Stock Exchange and quoted on SEAQ International. The closing price for the GDSs sold pursuant to Regulation S on SEAQ International on August 25, 2000 was US$9.50 per GDS.
Concurrently with this offering, we will arrange with our GDS depositary and our ADS depositary for the automatic conversion of each of our outstanding GDSs sold pursuant to Regulation S into one ADS. The ADSs issued upon conversion of our GDSs sold pursuant to Regulation S will be identified by a new CUSIP number. We have applied to have these ADSs listed for trading on the NYSE under the symbol ASX. Upon completion of the conversion of our GDSs sold pursuant to Regulation S into ADSs, we intend to delist these GDSs from the Stock Exchange of Singapore and the Luxembourg Stock Exchange and suspend quotation on SEAQ International.
Concurrently with this offering, we are offering to exchange one ADS for each of our outstanding GDSs sold under Rule 144A. The ADSs issued upon exchange of the GDSs sold under Rule 144A will also be identified by the same CUSIP number as that which will identify the ADSs issued upon conversion of the GDSs sold pursuant to Regulation S as described above, and all of those ADSs will be fully fungible for trading on the NYSE. The closing of the exchange offer is conditional upon closing of this offering. Upon the completion of the exchange offer, we will instruct the GDS depositary to terminate the global depositary receipt facility.
Until three months after their initial delivery to investors in this offering, the ADSs offered by this prospectus will not be fungible with, will trade under a different NYSE symbol and will settle with a CUSIP identification number distinct from, the ADSs issued upon conversion of and exchange for the GDSs. After that three-month period, the ADSs offered by this prospectus will become fully fungible with, and will be identified by the same CUSIP number and will be eligible for trading under the same NYSE trading symbol, as the ADSs issued upon conversion of and exchange for the GDSs as described above.
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DESCRIPTION OF COMMON SHARES
Set forth below is a summary of information relating to our share capital, including brief summaries of the relevant provisions of our Articles of Incorporation, the ROC Securities and Exchange Law and the ROC Company Law.
General
We were incorporated on March 23, 1984 as a company limited by shares under the ROC Company Law. Before our annual general shareholders meeting held on July 11, 2000, our authorized and paid-in share capital was NT$24,000,000,000, divided into 2,400,000,000 common shares, all of which were in registered form and 1,980,355,086 were issued and outstanding. At the meeting, our shareholders:
| approved an increase in our authorized share capital to NT$32,000,000,000, divided into 3,200,000,000 common shares; and | |
| approved the distribution of a stock dividend of NT$3.15 per common share. We expect to distribute the stock dividend in October 2000 to holders of record as of August 13, 2000. |
Before the offering, 1,980,355,086 common shares were issued and outstanding, including common shares represented by our GDSs. We do not have any equity in the form of preference shares or otherwise outstanding as of the date of this prospectus.
We have 200,000,000 common shares reserved for the issuance of common shares upon conversion of any convertible bonds issued by us, including 94,607,641 common shares reserved in connection with our US$200 million Zero Coupon Convertible Bonds Due 2002 issued in November 1997. As of August 15, 2000, these convertible bonds are convertible into our common shares at a conversion price of NT$60.2 per common share. The conversion price is subject to adjustment in the following circumstances:
(1) | the making of a free distribution or bonus issue of common shares; | |
(2) | subdivisions, consolidations or reclassifications of common shares; | |
(3) | the declaration of a dividend in common shares; | |
(4) | the grant, issue or offer to the holders of common shares or rights or warrants to subscribe for or purchase common shares at less than the current market price or to subscribe for or purchase any securities convertible into or exchangeable for common shares at less than the then current market price; | |
(5) | the distribution to the holders of common shares of evidences of indebtedness of ASE Inc. or of shares of capital stock of ASE Inc. (other than common shares) or of assets (other than regular periodic dividends in cash) or of rights or warrants to subscribe for or purchase shares or securities (other than those mentioned in (4) above); | |
(6) | the issue of securities (other than the bonds, certificates of payment issued on conversion of bonds and those mentioned in (4) above) convertible into or exchangeable for common shares at less than the then current market price or of rights or warrants (other than those mentioned in (4) above) to subscribe for or purchase common shares at less than the then current market price or to subscribe for or purchase securities convertible into or exchangeable for common shares at less than the then current market price; | |
(7) | the issue of common shares (other than common shares or certificates of payment issued on conversion of the bonds or in any of the circumstances described above, but |
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including to employees under any employee bonus arrangements) at less than the current market price; and | ||
(8) | any other event or circumstances which would have in our determination or in the determination of the trustee an analogous effect to any of the events in (1) to (7) above including, but not limited to, issues of receipts or certificates entitling holders to receive securities. |
Certificates of Payment
Under current ROC law, whenever we issue common shares, we will deliver one or more certificates of payment evidencing the aggregate number of common shares purchased to the purchaser (or the holder, in the case of a distribution of common shares to existing holders, or the subscriber, in the case of a holder subscribing for additional common shares under a rights offering). Each certificate of payment will represent the irrevocable right to receive the relevant number of common shares after all required ROC share issuance procedures have been complied with. We are required under ROC law to file an amendment to our corporate registration within 15 days after we receive the proceeds of an offering. Under ROC securities and exchange law and applicable regulations, we are required to deliver physical common share certificates to the relevant custodian within 30 days after receiving approval from the applicable ROC governmental authorities of our amendment to our corporate registration. We have agreed to issue and deliver physical common share certificates to the ADS custodian in exchange for any certificate of payment held in our ADS facility within 60 days after the date of issuance. During the period before this exchange, the relevant ADS owner will not be able to withdraw the underlying common shares. Except for the restrictions on sale and withdrawal during the three-month period, the certificates of payment we issue will have the same rights to receive distributions and deliver voting instructions as our common shares. Please refer to the section of this prospectus entitled Description of American Depositary Receipts Certificate of Payment ADSs for information regarding certificates of payment that may be held in our ADS facility.
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. The ROC Company Law also requires that 10% of annual net income (less prior years losses, 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 any gains on the disposal of fixed assets, prior years losses and additions to legal and special reserves, if any) should be paid to our directors and supervisors as compensation; and | |
| between 5% and 7% of the annual net income (less any gains on the disposal of fixed assets, prior years losses and legal and special reserves, if any) should be paid to our employees as bonuses. The 5% portion is to be distributed to all employees in the form of stock bonuses in accordance with our employee stock bonus plan, while any portion exceeding 5% 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. |
At the annual general shareholders meeting, our board of directors submits to the shareholders for their approval any proposal for the distribution of a dividend 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
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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 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 ASE Inc., the approval of the ROC Securities and Futures Commission 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 a 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 companys 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. 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.
In connection with the offering, our shareholders have waived their preemptive rights with respect to the common shares represented by the ADSs offered by this prospectus.
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. 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. Extraordinary 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 20 days, in the case of ordinary meetings, and 10 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.
Under the ROC Company Law, the applicable rules of the Taiwan Stock Exchange and our Articles of Incorporation, we are required to hold an ordinary meeting of our shareholders within six months following the end of each fiscal year.
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Voting Rights
Our Articles of Incorporation provide that a holder of common shares has one vote for each common share, except that a holder of more than 3% of the total outstanding common shares is not permitted to vote .1% of the number of common shares held by the holder in excess of 3%. There is cumulative voting for the election of directors and supervisors.
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; | |
| increase in authorized share capital; | |
| transfer of the whole or substantial part of its business or assets; | |
| taking over of the whole of the business of any other company; or | |
| distribution of any stock dividend. |
In case of a dissolution or amalgamation of the company, approval by a majority of the common shares represented at a shareholders meeting in which a quorum of at least three-fourths of all issued and outstanding common shares are represented is required.
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 will not have the right to exercise voting rights with respect to the underlying common shares, except as described in Description of American Depositary Receipts Voting Rights.
Register of Shareholders and Record Dates
Our share registrar, President Securities Corp., maintains our register of shareholders at its offices in Taipei, Taiwan, and enters transfers of common shares in our register upon presentation of, among other documents, certificates representing the common shares transferred. 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 one month; | |
| extraordinary shareholders meeting 15 days; | |
| relevant record date five days. |
Annual Financial Statements
At least 10 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.
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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, as amended on June 30, 2000, we may purchase our own common shares for treasury stock in limited circumstances, including:
| to transfer common shares to our employees; | |
| to reserve common shares to be issued upon conversion of convertible securities; and | |
| to increase our shareholders equity. |
We may purchase our common shares (1) on the Taiwan Stock Exchange, (2) on the over-the-counter market or (3) 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.
These restrictions on acquiring our common shares do not apply to our subsidiaries or affiliates. See Principal Shareholders.
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.
Substantial Shareholders and Transfer Restrictions
The ROC Securities and Exchange Law currently requires (1) each director, supervisor, manager 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 publicly listed company) to report any change in that persons shareholding to the issuer of the shares or the ROC Securities and Futures Commission and (2) each director, supervisor, manager or substantial shareholder holding those common shares for more than a 90-day period to report his or her intent to transfer any shares on the Taiwan Stock Exchange to the ROC Securities and Futures Commission at least three days before the intended transfer, unless the number of shares to be transferred is less than 10,000 shares.
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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:
| 0.5% of the outstanding shares of the company in the case of a company with no more than 30 million outstanding shares; or | |
| 0.5% of 30 million shares plus 0.25% 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, 10% 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 Securities and Futures Commission. |
These restrictions do not apply to sales or transfers of our ADSs.
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DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS
Citibank, N.A., will act as the depositary for the American Depositary Shares. Citibanks depositary offices are located at 111 Wall Street, New York, New York 10005. American Depositary Shares are commonly referred to as ADSs and represent ownership interests in securities that are on deposit with the depositary. ADSs are normally represented by certificates that are commonly known as American Depositary Receipts or ADRs. The depositary typically appoints a custodian to safekeep the securities on deposit. In this case, the custodian will be Citibank, N.A., Taipei Branch, located at Citicorp Center, 52 Min Sheng E. Road, Section 4, Taipei, Taiwan, ROC.
We have appointed Citibank as depositary bank pursuant to a deposit agreement. A copy of the deposit agreement is on file with the SEC under cover of a Registration Statement on Form F-6. You may obtain a copy of the deposit agreement from the SECs Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please refer to Registration Number 333- when retrieving your copy.
We are providing you with a summary description of the material terms of the ADSs and of your material rights as an owner of ADSs. Please remember that summaries by their nature lack the precision of the information summarized and that your rights and obligations as an owner of ADSs will be determined by reference to the terms of the deposit agreement and not to this summary. We urge you to review the deposit agreement in its entirety.
Each ADS represents five common shares on deposit with the custodian. An ADS will also represent any other property received by the depositary bank or the custodian on behalf of the owner of the ADS but that has not been distributed to the owners of ADSs because of legal restrictions or practical considerations. Until the completion of all required ROC share issuance procedures, the ADSs offered by this prospectus will represent certificates of payment, with each certificate of payment representing the irrevocable right to receive the relevant number of common shares. The depositary will establish procedures for the automatic conversion of ADSs representing the certificates of payment to ADSs representing common shares upon confirmation of the conversion certificates of payment for common shares in the ROC.
If you become an owner of ADSs, you will become a party to the deposit agreement and therefore will be bound to its terms and to the terms of the ADR that represents your ADSs. The deposit agreement and the ADR specify our rights and obligations as well as your rights and obligations as an owner of ADSs and those of the depositary. As an ADS owner you appoint the depositary to act on your behalf for the common shares represented by your ADSs, either upon (1) your specific instructions when we call a meeting of shareholders, distribute an elective dividend or make a rights offering, or (2) the specific terms of the deposit agreement to receive any dividends we distribute in NT dollars or common shares and to convert the NT dollars received. The deposit agreement is governed by New York law. However, our obligations to the holders of common shares will continue to be governed by ROC laws, which may be different from the laws in the United States. In addition, we note that the laws and regulations of the ROC may restrict the deposit and withdrawal of our common shares into or from the depositary receipts facility. Under ROC laws and regulations, as currently in effect, shares may be accepted for deposit and ADSs may be issued under the terms of the deposit agreement only in the following circumstances:
(1) upon obtaining regulatory approval from the ROC Securities and Futures Commission; | |
(2) upon dividend or a free distribution of common shares to existing shareholders; | |
(3) upon the exercise by existing shareholders of their preemptive rights in connection with capital increases for cash; and |
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(4) as permitted under the deposit agreement, the purchase directly by a person or through the depositary bank of common shares on the Taiwan Stock Exchange for the deposit in the depositary receipt facility, provided that the total number of ADSs outstanding after an issuance described in this paragraph (4) does not exceed the number of ADSs issued and previously approved by the ROC Securities and Futures Commission in connection with the offering plus any ADSs created under clauses (2) and (3) described above. |
Under ROC laws and regulations, the common shares deposited under the deposit agreement may be withdrawn upon cancellation of the corresponding ADSs in the following circumstances:
| upon the sale of the common shares on the Taiwan Stock Exchange; and | |
| upon the appointment of eligible ROC brokerage firm to the holding of common shares on the investors behalf in a designated account in the ROC. |
For a more complete description of these deposit or withdrawal restrictions see Annex B Foreign Investment and Exchange Controls in the ROC Depositary Receipts.
As an owner of ADSs, you may hold your ADSs either by means of an ADR registered in your name or through a brokerage or safekeeping account. If you decide to hold your ADSs through your brokerage or safekeeping account, you must rely on the procedures of your broker or bank to assert your rights as an ADS owner. Please consult with your broker or bank to determine what those procedures are. This summary description assumes you have opted to own the ADSs directly by means of an ADR registered in your name. In addition, except as otherwise described, when we refer to our ADSs and the common shares represented by our ADSs, we assume that the ADSs you hold represent our common shares, rather than certificates of payment.
Certificate of Payment ADSs
Under the terms of the deposit agreement, the depositary may issue ADSs representing certificates of payment that represent the right to receive our newly issued common shares, also called certificate of payment ADSs, rather than ADSs representing our common shares. Certificate of payment ADSs will be treated as ADSs issued under the terms of the deposit agreement except that:
| certificate of payment ADSs will not be fungible with ADSs and will be separately identified until exchanged for ADSs by the depositary; | |
| certificates of payment may not be withdrawn from the ADR facility; | |
| certificate of payment ADSs may not be exchanged for common shares; | |
| certificate of payment ADSs will trade on the NYSE under the temporary trading symbol ; | |
| certificate of payment ADSs will only be issued in book-entry form through DTC; | |
| certificate of payment ADSs are not eligible for pre-cancellation sales or pre-release transactions; and | |
| distributions made on certificate of payment ADSs shall be made only on the basis of distributions received for certificates of payment held by the depositary. |
Certificate of payment ADSs will be exchanged automatically into ADSs upon receipt by the depositary of common shares in exchange for certificates of payment. Until that exchange has been completed, the ADSs offered by this prospectus will represent interests in the certificates of payment held by our ADS depositary.
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Dividends and Distributions
As a holder, you generally have the right to receive the distributions we make on the securities deposited with the custodian, subject always to the laws and regulations of the ROC. Your receipt of these distributions may be limited, however, by practical considerations and legal limitations. Holders will receive these distributions under the terms of the deposit agreement in proportion to the number of ADSs owned as of a specified record date.
In the event that, for any reason, any common shares held on deposit with the custodian are not entitled to the full proportion of any distribution we may make (including certificates of payment described above), we have agreed to provide the depositary with a list of the common shares for which a full proportion of the distribution may not be made and direct the depositary to adjust the amount of the distribution upon those shares accordingly.
Distributions of Cash
Whenever we make a cash distribution upon the common shares held on deposit with the custodian, we will notify the depositary. Upon receipt of our notice of the distribution, the depositary will arrange for the funds to be converted into U.S. dollars and will distribute the U.S. dollars to the holders.
The conversion into U.S. dollars will take place only if practicable and if the U.S. dollars are transferable to the United States. The amounts distributed to holders will be net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. The depositary will apply the same method for distributing the proceeds of the sale of any property held by the custodian for securities on deposit.
Distributions of Shares
Whenever we make a free distribution of common shares for the securities on deposit with the custodian, we will notify the depositary and deposit the applicable number of shares with the custodian. Upon receipt of notice of the deposit, the depositary will, subject to ROC law, either distribute to holders new ADSs representing the common shares deposited or modify the ratio of ADSs representing our common shares, in which case each ADS you own will represent rights and interests in the additional common shares so deposited. Only whole new ADSs will be distributed. Fractional entitlements to ADSs will be sold and the proceeds of the sale will be distributed as in the case of a cash distribution.
The distribution of new ADSs or the modification of the ADS-to-common share ratio upon a distribution of common shares will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay taxes or governmental charges, the depositary may sell all or a portion of the new common shares so distributed.
No distribution of new ADSs will be made if it would violate any law or if it is not operationally practicable. If the depositary does not distribute new ADSs as described above, it will use its best efforts to sell the common shares received and will distribute the proceeds of the sale as in the case of a distribution of cash. In addition, if the number of common shares to which any holder is entitled is not five or an integral multiple of five, the depositary will use its best efforts to cause the sale of these shares and distribute the proceeds of that sale to the holders as in the case of a distribution in cash.
Distributions of Rights
Whenever we intend to distribute rights to purchase additional common shares, we will give prior notice to the depositary and we will assist the depositary in determining whether it is lawful and reasonably practicable to distribute rights to purchase additional ADSs to holders.
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The depositary will establish procedures to distribute rights to purchase additional ADSs to holders and to enable these holders to exercise these rights if it is lawful and reasonably practicable to make the rights available to holders of ADSs. You may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of your rights. The depositary is not obligated to establish procedures to facilitate the distribution and exercise by holders of rights to purchase new common shares directly rather than new ADSs.
The depositary will not distribute the rights to you if:
| we do not timely request that the rights be distributed to you or we request that the rights not be distributed to you; | |
| we fail to deliver satisfactory documents to the depositary; or | |
| it is not reasonably practicable to distribute the rights. |
The depositary will sell the rights that are not exercised or not distributed if the sale is lawful and reasonably practicable. The proceeds of the sale will be distributed to holders as in the case of a cash distribution. If the depositary is unable to sell the rights, it will allow the rights to lapse, in which case you will receive no value for the rights.
Elective Distributions
Whenever we intend to distribute a dividend payable at the election of shareholders either in cash or in common shares, we will give timely notice to the depositary and will indicate whether we wish the elective distribution to be made available to you. In we decide to make the elective distribution available to you, we will assist the depositary to determine whether this distribution is lawful and reasonably practicable.
The depositary will make the election available to you only if it is reasonably practicable and if we have provided all of the documentation contemplated in the deposit agreement. In this case, the depositary will establish procedures to enable you to elect to receive either cash or additional ADSs.
Other Distributions
Whenever we intend to distribute property other than cash, common shares or rights to purchase additional common shares, we will notify the depositary in advance and indicate whether we wish the distribution to be made to you. If so, we will assist the depositary in determining whether the distribution to holders is lawful and reasonably practicable.
If it is reasonably practicable to distribute the property to you and if we provide all of the documentation contemplated in the deposit agreement, the depositary will distribute the property to the holders in a manner it deems practicable.
The distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay these taxes and governmental charges, the depositary may sell all or a portion of the property received.
The depositary will not distribute the property to you and will sell the property if:
| We do not request that the property be distributed to you or if we ask that the property not be distributed to you; or | |
| We do not deliver satisfactory documents to the depositary; or | |
| The depositary determines that all or a portion of the distribution to you is not reasonably practicable. |
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The proceeds of the sale will be distributed to holders as in the case of a cash distribution.
Changes Affecting Our Common Shares
The common shares held on deposit for your ADSs may change from time to time. For example, there may be a change in nominal or par value, a split-up, cancellation, consolidation or reclassification of our common shares or we may undertake a recapitalization, reorganization, merger, consolidation or sale of assets.
If any change were to occur, your ADSs would, to the extent permitted by law, represent the right to receive the property received or exchanged for the common shares held on deposit. The depositary may in these circumstances deliver new ADSs to you or call for the exchange of your existing ADSs for new ADSs. If the depositary may not lawfully distribute the property to you, the depositary may sell the property and distribute the net proceeds to you as in the case of a cash distribution.
Issuance of ADSs Upon Deposit of Common Shares
Subject to limitations set forth in the deposit agreement and the ADRs, the depositary may create ADSs on your behalf if you or your broker deposit common shares with the custodian. The depositary will deliver these ADSs to the person you indicate only after you pay any applicable issuance fees and any charges and taxes payable for the transfer of the common shares to the custodian.
The depositary will refuse to accept our common shares for deposit whenever we have notified the depositary that we have restricted the transfer of those common shares to comply with ownership restrictions under ROC laws.
In the event there are new common shares with rights, including rights to dividends, that are different from the existing common shares held by the depositary, we may instruct the depositary to (1) refuse to accept the new common shares for deposit or (2) issue ADSs representing the new common shares that are separate and distinct from the ADSs representing the existing common shares.
In the event we instruct the depositary to issue ADSs representing the new common shares, these new ADSs will be distinguished from the existing ADSs through different CUSIP numbering and legending, if necessary. Upon written notice from us to the depositary that the new common shares no longer have different rights from the existing common shares, the depositary will (1) notify holders of the new ADSs and provide them with an opportunity to exchange their ADSs and (2) take the necessary actions to remove the distinctions between the two types of ADSs.
The issuance of ADSs may be delayed until the depositary bank or the custodian receives confirmation that all required approvals, if applicable, have been given and that the common shares have been duly transferred to the custodian. The depositary will only issue ADSs in whole numbers.
When you make a deposit of common shares, you will be responsible for transferring good and valid title to the depositary. Accordingly, you will be deemed to represent and warrant that:
| the common shares are duly authorized, validly issued, fully paid, non-assessable and legally obtained; | |
| all preemptive and similar rights, if any, with respect to the common shares have been validly waived or exercised; | |
| you are duly authorized to deposit the common shares; |
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| the common shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the ADSs issuable upon deposit will not be, restricted securities as defined in the deposit agreement; and | |
| the common shares presented for deposit have not been stripped of any rights or entitlements. |
If any of the representations or warranties are incorrect in any way, we and the depositary may, at your cost and expense, take any and all actions necessary to correct the consequences of the misrepresentations.
The term restricted securities is defined in the deposit agreement as common shares:
| acquired directly or indirectly from us or our affiliates in a transaction not involving a public offering and thus subject to resale limitations under the Securities Act; | |
| held directly or indirectly by an officer, director or our affiliates; or | |
| subject to other restrictions under applicable laws, our Articles of Incorporation, the rules and regulations of an applicable securities exchange or a shareholders agreement. |
Withdrawal of Common Shares Upon Cancellation of ADSs
Subject always to the withdrawal of deposited property being permitted under ROC laws and regulations, as a holder, you will be entitled to present your ADSs to the depositary for cancellation and then receive the corresponding number of underlying common shares at the custodians office. However, under current ROC law, if you wish to withdraw the common shares underlying your ADSs from the ADR facility, you will be required to appoint an eligible agent in the ROC to open (1) a securities trading account with a local brokerage firm after receiving an approval from the Taiwan Stock Exchange and (2) a bank account to pay ROC taxes, remit funds, exercise shareholders rights and perform any other functions as you may designate upon withdrawal. In addition, you will also be required to appoint an eligible custodian bank to hold our common shares in safekeeping, make confirmations and settle trades and report all relevant information. Without appointing a broker or opening the required accounts, you would not be able to subsequently sell our common shares on the Taiwan Stock Exchange or otherwise. These laws may change from time to time. We cannot assure you that current ROC law will remain in effect or that future changes in ROC law will not adversely affect your ability to withdraw our common shares from the ADR facility.
You may also request that our common shares represented by your ADSs be sold on your behalf. The depositary may require that you deliver your request for sale in writing. Any sale of our common shares will be conducted according to applicable ROC law through a securities company in the ROC on the Taiwan Stock Exchange or in other manner as is permitted under applicable ROC law. Any sale will be at your risk and expense. You may also be required to enter into a separate agreement to cover the terms of the sale of our common shares.
Upon receipt of any proceeds from any sale, subject to any restrictions imposed by ROC law and regulations, the depositary shall convert the proceeds into U.S. dollars and distribute the proceeds to you, net of any fees, expenses, taxes or governmental charges (including, without limitation, any ROC and U.S. taxes) incurred in connection with the sale. Sales of our common shares may be subject to ROC taxation on capital gains and will be subject to a securities transaction tax in the ROC. The ROC does not currently impose capital gains tax on ROC securities transactions, but we cannot assure you that a capital gains tax will not be imposed in the future or the manner in which any ROC capital gains tax would be imposed or calculated.
In order to withdraw the common shares represented by your ADSs, you will be required to pay to the depositary the fees for cancellation of ADSs and any charges and taxes payable upon the transfer of the common shares being withdrawn. You assume the risk for delivery of all funds
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During any period in which the custodian holds a certificate of payment representing the common shares underlying your ADSs, you will not be entitled to withdraw common shares upon surrender of your ADSs. In addition, under ROC regulations applicable to offerings of ADSs, newly-issued shares of ROC companies initially offered in ADS form may not be withdrawn from the ADS facility until three months following the initial delivery of the ADSs.
If you hold an ADR registered in your name, the depositary may ask you to provide proof of identity and genuineness of any signature and other documents as the depositary may deem appropriate before it will cancel the ADSs represented by your ADR. The withdrawal of the common shares represented by your ADSs may be delayed until the depositary receives satisfactory evidence of compliance with all applicable laws and regulations. Please keep in mind that the depositary will only accept ADSs for cancellation that represent a whole number of securities on deposit. We have reporting obligations under ROC law in respect of the ADR facility. In order to enable us to gather the information necessary for these reporting obligations, you will be asked to complete and sign a certification upon withdrawal of common shares from the ADR facility. In this certification you will be asked to disclose, among other information, the name, nationality and address of the beneficial owner of the ADSs presented for cancellation, the number of shares owned by the beneficial owner and whether certain affiliations exist between the beneficial owner and ASE Inc. The ADS depositary will refuse to release common shares to you until you deliver a completed and signed certification to it.
You will have the right to withdraw the common shares represented by your ADSs at any time except for:
| temporary delays that may arise because (1) the transfer books for the common shares or ADSs are closed, or (2) our common shares are immobilized on account of a shareholders meeting or a payment of dividends; | |
| obligations to pay fees, taxes and similar charges; and | |
| restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of securities on deposit. |
The deposit agreement may not be modified to impair your right to withdraw the securities represented by your ADSs except to comply with mandatory provisions of law.
Voting Rights
Except as described below, you generally have no right under the deposit agreement to instruct the depositary to exercise the voting rights for the common shares represented by your ADSs. Instead, by accepting ADSs or any beneficial interest in ADSs, you will be deemed to have authorized and directed the depositary to appoint our Chairman or his designee to represent you at our shareholders meetings and to vote the common shares deposited with the custodian according to the terms of the ADSs. The voting rights of holders of common shares are described in Description of Common Shares Voting Rights.
The depositary will mail to you 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.
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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 the instructions to 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, you 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 your ADSs in any manner he or his designee may wish, which may not be in the interests of holders.
Please note that 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 you that you will receive voting materials in time to
enable you to return voting instructions to the depositary in a
timely manner.
Fees and Charges
As an ADS owner, you will be required to pay the following
service fees to the depositary:
Service
Fees
issuance of ADSs upon the deposit of common shares
up to US$0.05 per ADS issued
cancellation of ADSs
up to US$0.05 per ADS canceled
distribution of ADSs pursuant to exercise of rights
to purchase additional ADSs
up to US$0.05 per ADS issued
distribution of cash (that is, upon the sale of
rights and other entitlements)
up to US$0.02 per ADS held
The depositary has waived its fees for the issuance of ADSs in connection with this offering.
As an ADS owner you will also be responsible to pay fees and expenses incurred by the depositary and taxes and governmental charges such as:
| fees for the transfer and registration of common shares charged by the registrar and transfer agent for the common shares in Taiwan upon deposit and withdrawal of common shares; | |
| expenses and charges incurred for converting foreign currency into U.S. dollars; | |
| fees and expenses incurred by the depositary in compliance with exchange controls or other regulatory requirements; | |
| expenses for cable, telex and fax transmissions and for delivery of securities; or | |
| taxes and duties upon the transfer of securities, for example, when common shares are deposited or withdrawn from deposit. |
We have agreed to pay other specified charges and expenses of the depositary. Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior notice of these changes.
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Amendments and Termination
We may agree with the depositary to modify the deposit agreement at any time without your consent. We undertake to give holders 30 days prior notice of any modifications that would materially prejudice any of their substantial rights under the deposit agreement. We will not consider to be materially prejudicial to your substantial rights any modifications or supplements that are reasonably necessary for the ADSs to be registered under the Securities Act or to be eligible for book-entry settlement, in each case without imposing or increasing the fees and charges you are required to pay. In addition, we may not be able to provide you with prior notice of any modifications or supplements that are required to accommodate compliance with applicable provisions of law.
You will be bound by the modifications to the deposit agreement if you continue to hold your ADSs after the modifications to the deposit agreement become effective. The deposit agreement cannot be amended to prevent you from withdrawing the common shares represented by your ADSs except as permitted by law.
We have the right to direct the depositary to terminate the deposit agreement. Similarly, the depositary may in certain circumstances on its own initiative terminate the deposit agreement. In either case, the depositary must give notice to the holders at least 30 days before termination.
Upon termination, the following will occur under the deposit agreement:
| For a period of six months after termination, subject always to the withdrawal of deposited property being permitted under ROC laws and regulations, you will be able to request the cancellation of your ADSs and the withdrawal of the common shares represented by your ADSs and the delivery of all other property held by the depositary in connection with those common shares on the same terms as before the termination. During the six months period the depositary will continue to collect all distributions received on the common shares on deposit but will not distribute any property to you until you request the cancellation of your ADSs. | |
| After the expiration of the six months period, the depositary may sell the securities held on deposit. The depositary will hold the proceeds from the sale and any other funds then held for the holders of ADSs in a non-interest bearing account. At that point, the depositary will have no further obligations to holders other than to account for the funds then held for the holders of ADSs still outstanding. |
Books of Depositary
The depositary will maintain ADS holder records at its depositary office. You may inspect the records at the depositarys office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and the deposit agreement.
The depositary will maintain in New York facilities to record and process the issuance, cancellation, combination, split-up and transfer of ADRs. These facilities may be closed from time to time, to the extent not prohibited by law.
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Limitations on Obligations and Liabilities
The deposit agreement limits our obligations and the depositarys obligations to you. Please note the following:
| We and the depositary are obligated only to take the actions specifically stated in the deposit agreement without negligence or bad faith. | |
| The depositary disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast or for the effect of any vote, provided it acts in good faith and in accordance with the terms of the deposit agreement. | |
| The depositary disclaims any liability for any failure to determine the lawfulness or practicality of any action, for the content of any document forwarded to you on our behalf or for the accuracy of any translation of such a document, for the investment risks associated with investing in common shares, for the validity or worth of those shares, for any tax consequences that result from the ownership of ADSs, for the credit-worthiness of any third party, for allowing any rights to lapse under the terms of the deposit agreement, for the timeliness of any of our notices or for our failure to give notice. | |
| We and the depositary will not be obligated to perform any act that is inconsistent with the terms of the deposit agreement. | |
| We and the depositary disclaim any liability if we are prevented or forbidden from acting on account of any law or regulation, any provision of our Articles of Incorporation, any provision of any securities on deposit or by reason of any act of God or war or other circumstances beyond our control. | |
| We and the depositary disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for the deposit agreement or in our Articles of Incorporation or in any provisions of the securities on deposit. | |
| We and the depositary further disclaim any liability for any action or inaction in reliance on the advice or information received from legal counsel, accountants, any person presenting common shares for deposit, any holder of ADSs or authorized representative, or any other person believed by either of us in good faith to be competent to give such advice or information. | |
| We and the depositary also disclaim liability for the inability by a holder to benefit from any distribution, offering, right or other benefit which is made available to holders of common shares but is not, under the terms of the deposit agreement, made available to you. | |
| We and the depositary may rely without any liability upon any written notice, request or other document believed to be genuine and to have been signed or presented by the proper parties. |
Pre-Release Transactions
The depositary will not deliver common shares before the receipt for cancellation of ADSs. The depositary may, however, in some circumstances, issue ADSs before receiving common shares for deposit. These transactions are commonly referred to as pre-release transactions.
The deposit agreement limits the aggregate size of pre-release transactions and imposes a number of conditions on pre-release transactions such as the need to receive collateral, the type of collateral required, and the need to receive written representations indicating that the recipient of pre-release ADSs owns the underlying common shares to be deposited and unconditionally
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Taxes
You will be responsible for the taxes and other governmental charges payable on the ADSs and the securities represented by the ADSs. We, the depositary and the custodian may deduct from any distribution the taxes and governmental charges payable by holders and may sell any and all property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for any deficiency if the sale proceeds do not cover the taxes that are due.
The depositary may refuse (1) to issue ADSs, (2) to deliver, transfer, split and combine ADRs or (3) to release securities on deposit until all taxes and charges are paid by the applicable holder. The depositary and the custodian may take reasonable administrative actions to obtain tax refunds and reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the depositary and to the custodian proof of taxpayer status and residence and other information as the depositary and the custodian may require to fulfill legal obligations. You are required to indemnify us, the depositary and the custodian for any claims with respect to taxes based on any tax benefit obtained for you.
Foreign Currency Conversion
The depositary will arrange for the conversion of all foreign currency received into U.S. dollars if the conversion is lawful and practical, and it will distribute the U.S. dollars in accordance with the terms of the deposit agreement. You may have to pay fees and expenses incurred in converting foreign currency, such as fees and expenses incurred in complying with currency exchange controls and other governmental requirements.
If the conversion of foreign currency is not practical or lawful, or if any required approvals are denied or not obtainable at a reasonable cost or within a reasonable period, the depositary may take the following actions in its discretion:
| convert the foreign currency to the extent practical and lawful and distribute the U.S. dollars to the holders for whom the conversion and distribution is lawful and practical; | |
| distribute the foreign currency to holders for whom the distribution is lawful and practical; or | |
| hold the foreign currency without liability for interest for the applicable holders. |
Under ROC laws and regulations relating to foreign exchange control, a depositary may, without obtaining further approvals from the Central Bank of China or any other governmental authority or agency of the ROC, convert NT dollars into other currencies, including U.S. dollars, in connection with the following:
| proceeds of the sale of common shares represented by depositary receipts; | |
| proceeds of the sale of common shares received as stock dividends and deposited into the depositary receipt facility; and | |
| any cash dividends or cash distributions received. |
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In addition, a depositary, without governmental approval, may also convert incoming payments into NT dollars for (1) purchases of underlying common shares for deposit into the depositary receipt facility against the creation of additional depositary receipts or (2) subscription payments for rights offering through us.
Under current ROC law, a holder, without obtaining further approval from the Central Bank of China, may convert NT dollars into other currencies, including U.S. dollars, upon receipt of the proceeds (1) of the sale of any underlying common shares withdrawn from the depositary receipt facility, (2) received as a stock dividend received upon the common shares and (3) any cash dividends or distribution paid upon the common shares.
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COMMON SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the ADSs sold in this offering, the ADSs issued upon conversion of our GDSs sold pursuant to Regulation S, and any ADSs issued in connection with the exchange offer being conducted concurrently with this offering, in aggregate approximately 38.4 million ADSs assuming no exercise of the underwriters over-allotment option, will be freely tradeable within the United States without restriction or further registration under the Securities Act by persons other than us or our affiliates as the term is defined in Rule 144 under the Securities Act.
Apart from (1) the 29,026,165 common shares underlying GDSs sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act on December 15, 1999 and (2) the 129,018,180 common shares currently owned by our affiliates, all of our outstanding common shares are freely tradable within the United States without restriction or registration under the Securities Act. There is no public market for the common shares in the United States. The common shares are listed on the Taiwan Stock Exchange. We intend to list the ADSs on the New York Stock Exchange. The depositary may create ADSs upon deposit of common shares with the custodian. The number of common shares that can be deposited in the depositary receipt facility is limited by the terms of the deposit agreement and total number of ADS previously approved by the ROC Securities and Futures Commission.
The common shares owned by these qualified institutional buyers and our affiliates are restricted securities as that term is defined in Rule 144 under the Securities Act. Restricted securities may be sold in the public market in the United States only if they are registered or if they qualify for an exemption from registration, including under Rule 144 or 701 under the Securities Act, which rules are summarized below.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:
| 1% the number of shares then outstanding, which will equal approximately 20,800,000 shares immediately after this offering; or | |
| the average weekly trading volume of the shares on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale. |
Sales under Rule 144 are also subject to the manner of sale provisions and notice requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell these shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases shares from us in connection with a compensatory share plan or other written agreement is eligible to resell these shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with some restrictions, including the holding period, contained in Rule 144.
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Lock-Up Agreements
We have agreed for a period of 90 days after the date of this prospectus not to sell, transfer or otherwise dispose of, and not to announce an intention to sell, transfer or otherwise dispose of, without the prior written consent of Goldman Sachs (Asia) L.L.C.:
| any of our common shares or depositary receipts representing our common shares; | |
| any common shares of our subsidiaries or controlled affiliates or depositary receipts representing those shares; and | |
| any securities that are substantially similar to the common shares or depositary receipts referred to above, including any securities that are convertible into, exchangeable for or otherwise represent the right to receive the common shares or depositary receipts referred to above; |
other than pursuant to (1) exercise of options under employee stock option plans existing on the date of this prospectus and (2) the conversion or exchange of convertible or exchangeable securities outstanding as of the date of this prospectus, which in each case is described in this prospectus.
In addition, we have agreed to cause each of our subsidiaries and controlled affiliates not to sell, transfer or otherwise dispose of, and not to announce an intention to sell, transfer or otherwise dispose of, for a period of 90 days after the date of this prospectus without the prior written consent of Goldman, Sachs & Co., any of the securities referred to above, other than pursuant to (1) exercise of options under employee stock option plans existing on the date of this prospectus and (2) the conversion or exchange of convertible or exchangeable securities outstanding as of the date of this prospectus, which in each case is described in this prospectus.
Furthermore, ASE Enterprises, our principal shareholder, and each of Jason C. S. Chang, Richard H. P. Chang, Chang Yao Hung-ying and Feng Mei-Jean have also entered into a similar 90-day lock-up agreement with respect to our common shares, depositary receipts representing our common shares and securities that are substantially similar to our common shares or depositary receipts representing our common shares.
These restrictions do not apply to:
| the 20,000,000 ADSs and the common shares represented being offered in connection with this offering; | |
| up to 2,774,778 ADSs and the common shares represented that may be purchased by the underwriters pursuant to their over-allotment option; | |
| the issuance of common shares of ASE Inc. pursuant to any stock dividend payable to all holders of common shares of ASE Inc. (including common shares represented by the ADSs) as of a record date subsequent to the date of this prospectus; | |
| employee bonuses in the form of common shares relating to our fiscal year ended December 31, 1999 approved at our annual general meeting of shareholders held on July 11, 2000; |
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| the issuance and sale by any subsidiary or controlled affiliate of equity securities where our beneficial ownership interest in that subsidiary or controlled affiliate will not decrease as a result of such issuance or sale; and | |
| the issuance and the sale by Universal Scientific of a number of its common shares not in excess of 18% of its outstanding ordinary shares as of the date of this prospectus (or depositary receipts representing up to the number of its ordinary shares, or debt or other securities initially convertible into not more than the number of shares or depositary receipts). The number of Universal Scientifics common shares outstanding as of the date of this prospectus is approximately 1,026.6 million. |
We are not aware of any plans by any major shareholders to dispose of significant numbers of common shares. No assurances can be given, however, that one or more existing shareholders or owners of securities convertible or exchangeable into or exercisable for our common shares will not dispose of significant numbers of common shares. In addition, following completion of this offering several of our subsidiaries and affiliates will continue to hold common shares, depositary shares representing common shares, and options to purchase common shares. We or they may decide to sell those securities in the future. See Principal Shareholders for a description of our significant shareholders and ASE Group companies that hold our common shares. No prediction can be made as to the effect, if any, that future sales of ADSs or common shares, or the availability of ADSs or common shares prevailing from time to time. Sales of substantial amounts of ADSs or common shares in the public market, or the perception that future sales may occur, could adversely affect the prevailing market price of ADSs or the common shares.
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TAXATION
ROC Taxation
The following discussion is the opinion of Lee and Li. The discussion describes the principal ROC tax consequences of the ownership and disposition of ADSs representing common shares to a non-resident individual or entity. It applies to you only if you are:
| an individual who is not a ROC citizen, who owns ADSs and who is not physically present in the ROC for 183 days or more during any calendar year; or | |
| a corporation or a non-corporate body that is organized under the laws of a jurisdiction other than the ROC for profit-making purposes and has no fixed place of business or other permanent establishment in the ROC. |
You should also consult your tax advisors concerning the ROC tax consequences of owning ADSs.
Dividends
Dividends declared by us out of our retained earnings and distributed to you 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 common shares in the case of stock dividends. However, a 10% ROC retained earnings tax paid by us on our undistributed after-tax earnings, if any, would provide a credit up to 10% of the gross amount of any dividends declared out of such earnings that would reduce the 20% ROC tax imposed on these distributions.
Dividends paid by us out of our capital reserves are not subject to ROC withholding tax.
Capital Gains
Under ROC law, capital gains on share securities transactions are exempt from income tax.
Subscription Rights
Distributions of statutory subscription rights for common shares in compliance with ROC law are not subject to any ROC tax. Proceeds derived from sales of statutory subscription rights evidenced by securities are exempted from income tax but are subject to securities transaction tax at the rate of 0.3% of the gross amount received. Proceeds derived from sales of statutory subscription rights which are not evidenced by securities are subject to capital gains tax at the rate of:
| 35% of the gross amount received if you are a natural person; or | |
| 25% of the gross amount received if you are an entity that is not a natural person. |
Subject to compliance with ROC law, we, at our sole discretion, can determine whether statutory subscription rights shall be evidenced by issuance of securities.
Securities Transaction Tax
A securities transaction tax, at the rate of 0.3% of the gross amount received, will be withheld upon a sale of common shares in the ROC. Transfers of ADSs are not subject to ROC securities transaction tax. Withdrawal of common shares from the deposit facility is not subject to ROC securities transaction tax.
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Estate and Gift Tax
ROC estate tax is payable on any property within the ROC of a deceased who is an individual, and ROC gift tax is payable on any property within the ROC donated by any such person. Estate tax is currently payable at rates ranging from 2% of the first NT$600,000 to 50% of amounts over NT$100,000,000. Gift tax is payable at rates ranging from 4% of the first NT$600,000 to 50% of amounts over NT$45,000,000. Under ROC estate and gift tax laws, common shares issued by ROC companies are deemed located in the ROC regardless of the location of the holder. It is unclear whether a holder of ADSs will be considered to hold common shares for this purpose since there is no authority directly indicating whether an ADR holder will be treated as owning the shares represented by the ADR. However, despite of this lack of direct authority, we are of the view that a holder of ADSs will not be subject to the ROC estate and gift tax because (1) the ADSs are not considered property within the ROC and (2) the transfer of ADSs is not deemed to be a transfer of the underlying common shares.
Tax Treaty
The ROC does not have an income tax treaty with the United States. On the other hand, the ROC has income tax treaties with Indonesia, Singapore, South Africa, Australia, Vietnam, New Zealand, Malaysia, Macedonia, Swaziland and Gambia, which may limit the rate of ROC withholding tax on dividends paid with respect to common shares in ROC companies. It is unclear whether if you hold ADSs, you will be considered to hold common shares for the purposes of these treaties. Accordingly, if you may otherwise be entitled to the benefits of the relevant income tax treaty, you should consult your tax advisors concerning your eligibility for the benefits with respect to the ADSs.
United States Federal Income Taxation
The following discussion is the opinion of Davis Polk & Wardwell. The discussion describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of ADSs to those U.S. holders described below. For these purposes, you are a U.S. holder if you are a beneficial owner of common shares that, for U.S. federal income tax purposes, is:
| a citizen or resident of the United States; | |
| a corporation or other entity taxable as a corporation 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 includable in gross income for U.S. federal income tax purposes regardless of its source. |
This discussion only applies to ADSs that you purchase through this offering and only if you hold the ADSs as capital assets.
This discussion assumes that ASE Inc. will not be considered a passive foreign investment company. Please see our discussion of passive foreign investment company rules below.
Please note that 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 purchasers subject to special rules, including:
| persons subject to the alternative minimum tax; | |
| insurance companies; | |
| tax-exempt entities; | |
| dealers or traders in securities; | |
| financial institutions; |
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| persons who hold or will hold common shares as part of an integrated investment, including a straddle, hedging or conversion transaction, comprised of common shares and one or more other positions for tax purposes; | |
| persons whose functional currency is not the U.S. dollar; or | |
| persons who own 10% or more of our voting stock. |
This discussion is based on the Internal Revenue Code of 1986, Treasury Regulations, administrative announcements and judicial decisions currently in effect. These laws and regulations may 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.
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. However, the U.S. Treasury has expressed concerns that parties to whom depositary shares are pre-released may be taking actions that are inconsistent with the claiming of foreign tax credits by the holders of ADSs. Accordingly, the analysis of the creditability of ROC taxes described below could be affected by future actions that may be taken by the U.S. Treasury.
Please consult your tax advisors with regard to the application of the U.S. federal income tax laws to ADSs as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdictions.
Dividends
Any dividends you receive on 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 ASE Inc., other than pro rata distributions of common shares to all shareholders including holders of ADSs, will constitute foreign source dividend income to the extent paid out of earnings and profits as calculated for U.S. federal income tax purposes. 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 depositary receives the dividend. If you realize gain or loss on a sale or other disposition of NT dollars, it will be U.S. source ordinary income or loss. You will not be entitled to a dividends-received deduction for dividends you receive.
Subject to applicable limitations and restrictions, the ROC taxes withheld from dividend distributions, reduced by any credit against the withholding tax on account of the 10% retained earnings tax, will be eligible for credit against your U.S. federal income tax liabilities. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income including, amongst others, passive income, financial services income and general limitation income. For this purpose, dividends paid with respect to the common shares will constitute passive income or, in the case of U.S. financial services providers may be, financial services income.
Pro rata distributions of common shares by a company to 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. Any ROC tax of this nature will only be creditable against a U.S. holders U.S. federal income tax liability with respect to income in the general limitation income class and not passive income or financial services income, subject to applicable limitations and restrictions.
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Capital Gains
You will recognize capital gain or loss for U.S. federal income tax purposes on the sale or exchange of ADSs in the same manner as you would on the sale or exchange of any other common shares held as capital assets. The gain or loss will be U.S. source income or loss. You should consult your own tax advisor 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
Based on management estimates and the available financial data, ASE Inc. does not expect to be a passive foreign investment company. In general, a foreign corporation is a passive foreign investment company for any taxable year in which (1) 75% or more of its gross income consists of passive income (such as dividends, interest, rents and royalties) or (2) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. The determination of whether ASE Inc. may be a passive foreign investment company will be based on the composition of its income and assets, as well as those of its subsidiaries and certain affiliates, from time to time. Since the composition of ASE Inc.s income and assets will vary over time, there can be no assurance that it will not be considered a passive foreign investment company for any fiscal year. If ASE Inc. is a passive foreign investment company at any time that you own ADSs:
| You may be subject to additional taxes and interest charges on any gain realized on the disposition of the ADSs, as applicable, and on excess distributions. The additional taxes are assessed at the highest tax rate applicable for corporate or individual taxpayers for the relevant tax periods; and | |
| You will be subject to additional U.S. tax filing requirements for each year that you hold ADSs. |
Please consult your tax advisors about the possibility that ASE Inc. may be a passive foreign investment company and the rules that would apply to you if it were.
Estate and Gift Tax
As discussed in ROC Taxation, you might be required to pay ROC estate and gift tax. You should consult your tax advisor regarding the effect of these taxes.
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UNDERWRITING
We and the underwriters named below have entered into an
underwriting agreement with respect to the ADSs being offered.
Subject to the conditions set forth in the underwriting
agreement, each underwriter has severally agreed to purchase the
number of ADSs indicated in the following table. Goldman Sachs
(Asia) L.L.C. and Morgan Stanley & Co. Incorporated are the
representatives of the underwriters.
Number of
Underwriters
ADSs
Goldman Sachs (Asia) L.L.C.
Morgan Stanley & Co. Incorporated
Deutsche Bank Securities Inc.
UBS AG, acting through its business group UBS Warburg
Wit SoundView Corporation
Warburg Dillon Read LLC
Barits Securities Corporation
FB Gemini Capital Limited
Total
20,000,000
If the underwriters sell more ADSs than the total number set forth in the table above, the underwriters have an option to buy up to an additional 2,774,778 ADSs from a wholly-owned subsidiary of ASE Inc. to cover these sales. They may exercise that option for 30 days. If any ADSs are purchased pursuant to this option, the underwriters will severally purchase ADSs in approximately the same proportion as set forth in the table above.
The following table shows the per ADS and total underwriting
discounts and commissions to be paid to the underwriters by us.
These amounts are shown assuming both no exercise and full
exercise of the underwriters option to purchase 2,774,778
additional ADSs.
Paid by ASE Inc.
No
Full
Exercise
Exercise
Per ADS
$
$
Total
$
$
ADSs sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any ADSs sold by the underwriters to securities dealers may be sold at a discount of up to US$ per ADS from the initial public offering price. Any such securities dealers may resell any ADSs purchased from the underwriters to certain other brokers or dealers at a discount of up to US$ per ADS from the initial public offering price. If all the ADSs are not sold at the initial public offering price, the representatives may change the offering price and the other selling items.
We have been advised by the underwriters that certain of the underwriters are expected to make offers and sales both inside and outside of the United States through their respective selling agents.
We have entered into a 90-day lock-up agreement with the underwriters regarding: (1) our common shares and depositary receipts representing our common shares, including those held by our subsidiaries and controlled affiliates; (2) common shares of our subsidiaries and controlled affiliates and depositary receipts representing those shares; and (3) securities that are
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Each underwriter has represented and agreed that (1) it has not offered or sold and prior to the date six months after the date of issue of the ADSs will not offer or sell any ADSs to persons in the United Kingdom, except to persons whose ordinary activities involve in them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances that have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (2) it has complied, and will comply with, all applicable provisions of the Financial Services Act 1986 of Great Britain with respect to anything done by it in relation to the ADSs in, from or otherwise involving the United Kingdom; and (3) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of the ADSs to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) of Great Britain or is a person to whom the document may lawfully be issued or passed on.
Each underwriter has acknowledged and agreed that the ADSs have not been registered under the Securities and Exchange Law of Japan and are not being offered or sold and may not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan, except (1) pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and (2) in compliance with any other applicable requirements of Japanese law. As part of the offering, the underwriters may offer ADSs in Japan to a list of 49 offerees in accordance with the above provisions.
Each underwriter has also represented and agreed that it has not offered or sold, and has agreed not to offer or sell any ADSs, directly or indirectly, in Canada in contravention of the securities laws of Canada or any province or territory thereof and has represented that any offer of ADSs in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer is made. Each underwriter has also represented and agreed that it will send to any dealer who purchases from it any ADSs a notice stating in substance that, by purchasing such ADSs, such dealer represents and agrees that it has not offered or sold, and will not offer or sell, directly or indirectly, any of such ADSs in Canada or any province or territory thereof and that any offer of ADSs in Canada or to, or for the benefit of, any resident of Canada in contravention of the securities laws of Canada or to any province or territory thereof and that any offer of ADSs in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province of Canada in which such offer is made, and that such dealer will deliver to any other dealer to whom it sells any such ADSs a notice to the foregoing effect.
This prospectus has not been delivered for registration to the Registrar of Companies in Hong Kong and, accordingly, must not be issued, circulated or distributed in Hong Kong other than to persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or agent, within the meaning of the Hong Kong Companies Ordinance, or in circumstances which do not constitute an offer to the public for the purposes of the Hong Kong Companies Ordinance. Unless permitted by the securities laws of Hong Kong, no person may issue or cause to be issued in Hong Kong this prospectus or any amendment or supplement hereto or other invitation, advertisement or document relating to the shares of ADSs to anyone
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This document has not been registered as a prospectus with the Registrar of Companies in Singapore, and the ADSs will be offered in Singapore pursuant to an exemption invoked under Section 106C and Section 106D of the Companies Act, Chapter 50 of Singapore, or the Singapore Companies Act. Accordingly, the ADSs may not be offered or sold, nor may this document or any other offering document or material relating to the ADSs be circulated or distributed, directly or indirectly, to the public or any member of the public in Singapore other than (1) to an institutional investor or other person specified in Section 106C of the Singapore Companies Act, (2) to a sophisticated investor, and in accordance with the conditions, specified in Section 106D of the Singapore Companies Act or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Singapore Companies Act.
The securities may not be offered, sold, transferred or delivered in or from The Netherlands, as part of their initial distribution or as part of any re-offering, and neither this prospectus nor any other document in respect of the offering may be distributed or circulated in The Netherlands, other than to individuals or legal entities which include, but are not limited to, banks, brokers, dealers, institutional investors and undertakings with a treasury department, who or which trade or invest in securities in the conduct of a business or profession.
No action has been or will be taken in any jurisdiction other than the United States that would permit a public offering of the ADSs or the possession, circulation or distribution of this prospectus in any jurisdiction where action for that purpose is required. Accordingly, the ADSs may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the ADSs may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction.
Each underwriter has also represented and agreed that it has not offered or sold, and has agreed not to offer or sell any ADSs, directly or indirectly, in the ROC.
A prospectus in electronic format may be made available on the Web sites maintained by one or more underwriters or securities dealers. The representatives of the underwriters may agree to allocate a number of ADSs to the underwriters for sale to their online brokerage account holders. ADSs to be sold pursuant to an Internet distribution will be allocated by the representatives to the underwriters that may make Internet distributions on the same basis as other allocations. In addition, ADSs may be sold by the underwriters to securities dealers who resell ADSs to online brokerage account holders.
Application has been made for listing of the ADSs offered by this prospectus on the New York Stock Exchange under the temporary symbol for a period of three months and thereafter under the symbol ASX. In order to meet one of the requirements for listing the ADSs on the New York Stock Exchange, the underwriters have undertaken to sell lots of 100 or more ADSs to a minimum of 2,000 beneficial holders.
Before the offering, there has been no public market for the ADSs in the United States. The initial offering price of the ADSs will be determined based on, in addition to prevailing market conditions and the level of investor interest in the ADSs, the closing price of the common shares on the Taiwan Stock Exchange.
In connection with the offering, the underwriters may purchase and sell ADSs in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of ADSs than they are required to purchase in the offering. Covered short sales are sales made in an amount not greater than the underwriters option to purchase
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The underwriters also may impose a penalty bid in the offering. This occurs when a particular underwriter repays to the underwriters for the same offering a portion of the underwriting discount received by it because the representatives have repurchased ADSs sold by or for the account of the underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of the ADSs, and together with the imposition of a penalty bid, may stabilize, maintain or otherwise affect the market price of the ADSs. As a result, the price of the ADSs may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise.
We estimate that our share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately US$1,500,000.
We have agreed to indemnify the several underwriters against liabilities, including liabilities under the Securities Act of 1933.
115
ENFORCEABILITY OF CIVIL LIABILITIES
We are a company limited by shares and incorporated under the ROC Company Law. Substantially all of our directors and executive officers, our supervisors and some of the experts named in this prospectus are residents of the ROC and a substantial portion of our assets and such persons are located in the ROC. As a result, it may not be possible for investors to effect service of process upon us or such persons within the United States, or to enforce against them judgments obtained in the United States courts, including those predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by Lee and Li, our ROC counsel, that in their opinion any final judgment obtained against us in any court other than the courts of the ROC in connection with any legal suit or proceeding arising out of or relating to the ADSs will be enforced by the courts of the ROC without further review of the merits only if the court of the ROC in which enforcement is sought is satisfied that:
| the court rendering the judgment has jurisdiction over the subject matter according to the laws of the ROC; | |
| the judgment is not contrary to the public order or good morals of the ROC; | |
| if the judgment was rendered by default by the court rendering the judgment, we were served within the jurisdiction of the court or process was served on us with judicial assistance of the ROC; and | |
| judgments of the courts of the ROC are recognized and enforceable in the court rendering the judgment on a reciprocal basis. |
A party seeking to enforce a foreign judgment in the ROC would be required to obtain foreign exchange approval from the Central Bank of China for the payment out of the ROC of any amounts recovered in connection with the judgment denominated in a currency other than NT dollars.
VALIDITY OF SECURITIES
The validity of the ADSs will be passed upon for ASE Inc. by Davis Polk & Wardwell, New York, New York, and for the underwriters by Sullivan & Cromwell, New York, New York. The validity of the common shares will be passed upon for ASE Inc. by Lee and Li, Taipei, Taiwan, ROC.
EXPERTS
The Consolidated Financial Statements and the selected income statement and balance sheet data under the caption Selected Consolidated Financial Information for each of the five years in the period ended December 31, 1999 have been derived from the audited consolidated financial statements of ASE Inc. Our financial statements for the years ended December 31, 1997, 1998 and 1999 have been audited by T.N. Soong & Co., independent public accountants, as indicated in their reports with respect thereto. T.N. Soong & Co. is a member firm of Andersen Worldwide, SC in Taiwan, ROC. The Consolidated Financial Statements and selected income statement and balance sheet data of ASE Inc. referred to above have been included herein in reliance upon the reports of the firm and upon the authority of the firm as experts in accounting and auditing in giving said reports. The combined balance sheet of Motorolas Semiconductor Products Sector Businesses in Taiwan and Korea as of December 31, 1998, and the related combined statements of operations and cash flows for the year then ended have been included herein and in the registration statement in reliance upon the report of KPMG Certified Public Accountants, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
116
AVAILABLE INFORMATION
We have filed a registration statement on Form F-1, a registration statement on Form F-4 and a registration statement on Form F-6 with the SEC under the U.S. Securities Act of 1933 covering the common shares represented by the ADSs offered by this prospectus, as well as the ADSs. You should refer to our registration statements and their exhibits and schedules if you would like to find out more about us and about the ADSs and the common shares represented by the ADSs. This prospectus summarizes material provisions of contracts and other documents that we refer you to. Since the prospectus may not contain all the information that you may find important, you should review a full text of these documents. We have included copies of these documents as exhibits to our registration statements.
You may review copies of the registration statements at the SECs public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SECs regional offices located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may also get copies of all or any portion of the registration statements from the public reference room, the regional offices or by calling the SEC at 1-800-SEC-0330 or by writing the SEC upon payment of a prescribed fee.
Upon completion of the offering, we will be subject to the information requirements of the U.S. Securities Exchange Act of 1934 and, in accordance therewith, we will file with the SEC annual reports on Form 20-F within six months of our fiscal year-end, and provide to the SEC other material information on Form 6-K. These reports and other information can be inspected at the public reference room at the SEC and at the SEC regional offices listed above. You can also obtain copies of the material from the public reference room, the regional offices or by calling or writing the SEC upon payment of a prescribed fee. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders.
We will furnish to Citibank, N.A., as depositary of the ADSs, our annual reports. We will also furnish the depositary with quarterly reports. When the depositary receives these reports, it will upon our request promptly provide them to all holders of record of ADSs. We also will furnish the depositary with all notices of shareholders meeting and other reports and communications in English that we make available to our shareholders. The depositary will make these notices, reports and communications available to holders of ADSs and will upon our request mail to all holders of record of ADSs the information contained in any notice of a shareholders meeting it receives.
117
INDEX TO FINANCIAL STATEMENTS
Page | |||||
|
|||||
Consolidated Financial Statements of Advanced Semiconductor Engineering, Inc. and Subsidiaries | |||||
Independent Auditors Report | F-2 | ||||
Consolidated Balance Sheets | F-3 | ||||
Consolidated Statements of Income | F-5 | ||||
Consolidated Statement of Changes in Shareholders Equity | F-7 | ||||
Consolidated Statements of Cash Flows | F-13 | ||||
Notes to Consolidated Financial Statements | F-16 | ||||
Combined Financial Statements of Motorolas Semiconductor Products Sector Businesses in Taiwan and Korea | |||||
Independent Auditors Report | F-64 | ||||
Combined Balance Sheets | F-65 | ||||
Combined Statements of Operations | F-66 | ||||
Combined Statements of Cash Flow | F-67 | ||||
Notes to Combined Financial Statements | F-68 | ||||
Unaudited Pro Forma Financial Statements | |||||
Unaudited Pro Forma Statement of Income | F-76 | ||||
Notes to Unaudited Pro Forma Financial Statements | F-77 | ||||
Supplemental Information | |||||
Schedule II Valuation and Qualifying Accounts | F-80 |
F-1
INDEPENDENT AUDITORS REPORT
The Board of Directors and Shareholders
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
consolidated subsidiaries (the Corporation) as
of December 31, 1998 and 1999 and the related consolidated
statements of income, changes in shareholders equity and
cash flows for the years ended December 31, 1997, 1998 and
1999, all expressed in New Taiwan dollars. These financial
statements are the responsibility of the Corporations
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards in the Republic of China, which are
substantially similar to generally accepted auditing standards in
the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of the Corporation as of December 31, 1998 and
1999, and the results of their operations and their cash flows
for the years ended December 31, 1997, 1998 and 1999, in
conformity with the regulations governing the preparation of
financial statements of public companies and generally accepted
accounting principles in the Republic of China.
Certain accounting practices of the Corporation used in preparing
the accompanying financial statements conform with generally
accepted accounting principles in the Republic of China, but do
not conform with generally accepted accounting principles in the
United States of America (US GAAP). A
description of the differences and the adjustments required to
conform the financial statements to US GAAP are set forth in
Note 27.
The consolidated financial statements of the Corporation as of
and for the six months ended June 30, 1999 and 2000, which
are presented solely for comparative purposes, were not audited
by independent auditors.
January 31, 2000
F-2
T N Soong & Co
A Member Firm of Andersen Worldwide, SC
Taipei, Taiwan
Republic of China
Table of Contents
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
F-3
CONSOLIDATED BALANCE SHEETS
F-4
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
F-5
CONSOLIDATED STATEMENTS OF INCOME
F-6
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY
[Additional columns below]
[Continued from above table, first column(s) repeated]
The accompanying notes are an integral part of the consolidated
financial statements.
F-7
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY
[Additional columns below]
[Continued from above table, first column(s) repeated]
The accompanying notes are an integral part of the consolidated
financial statements.
F-8
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY
[Additional columns below]
[Continued from above table, first column(s) repeated]
The accompanying notes are an integral part of the consolidated
financial statements.
F-9
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY
[Additional columns below]
[Continued from above table, first column(s) repeated]
The accompanying notes are an integral part of the consolidated
financial statements.
F-10
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY
[Additional columns below]
[Continued from above table, first column(s) repeated]
The accompanying notes are an integral part of the consolidated
financial statements.
F-11
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY
[Additional columns below]
[Continued from above table, first column(s) repeated]
The accompanying notes are an integral part of the consolidated
financial statements.
F-12
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
F-13
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
F-14
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
F-15
ADVANCED SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
Advanced Semiconductor Engineering, Inc. (ASE), a
corporation incorporated under the laws of the Republic of China
(the ROC), is an independent provider of
semiconductor packaging and testing service. ASEs common
shares are traded on the Taiwan Stock Exchange. ASE and its
consolidated subsidiaries and affiliates is referred to as
ASE Group.
ASE has five wholly-owned subsidiaries: a) ASE Holding Limited
(incorporated in Bermuda in 1990) holds shares in ASE Group
companies; b) ASE Marketing Services Ltd. (incorporated in Hong
Kong in 1991) engages in trading; c) ASE Investment Co.
(incorporated in the ROC in March 1996) holds shares in ASE Group
companies; d) J&R Holding Limited (incorporated in Bermuda
in May 1996) holds shares in ASE Group companies; and e) ASE
Capital Co. (incorporated in Taiwan in November 1997) holds
shares in ASE Group companies. As of December 31, 1999, ASE
also has a 75% equity stake in ASE Technologies, Inc., a company
incorporated in the ROC engaged in the research and development,
manufacture and sale of computers and related accessories, and a
38% equity stake in ASE Material Inc. (ASE Material),
a company incorporated in the ROC engaged in manufacturing and
processing of leadframes for semiconductors. In addition, ASE
Test, Inc. has a 10% equity stake in ASE Material.
In 1999, ASE (Chung Li) Inc. (ASE Chung Li) and ASE
Investment (Labuan) Inc., a holding company, were incorporated to
acquire a 100% interest in the Motorola Semiconductor Products
Sector Businesses (Motorola SPS Businesses) in Chung
Li, Taiwan and Paju, Korea on July 4, 1999. ASE and ASE Test
Limited (ASE Test) own 70% and 30% equity stakes in
the two subsidiaries, respectively. ASE Investment (Labuan) Inc.
owns 100% equity of ASE Korea Inc. The acquisition transaction
was accounted for as a purchase, and the purchase price was
approximately US$350.1 million (NT$10,783.1 million) (see
Note 26).
ASE Holding Limited has the following wholly-owned subsidiaries:
a) ASEP Realty Corporation (incorporated in the Philippines in
December 1995) is engaged in developing and investing in real
estate; b) ASE Holding Electronics (Philippines) (incorporated in
the Philippines in December 1995) is engaged in the manufacture
of electronic products, components and semiconductors; and c) ASE
Holding (Singapore) Pte. Ltd. (incorporated in Singapore in
December 1994) holds shares in ASE Group companies. A portion of
the share capital of the Philippine subsidiaries are held by
certain individuals due to legal limitations; share transfer
agreements have been signed to safeguard such investments. ASE
Holding (Singapore) Pte. Ltd. has 100% equity in ASE Electronics
(M) Sdn, Bhd. (ASE Test Malaysia) (incorporated
in Malaysia in 1991), which is engaged in the manufacturing,
processing, testing and sales of integrated circuits. In April
1997, ASE Holding Limited transferred its shareholding in ASE
Test Malaysia to ASE Test.
J&R Holding Limited has a 48%-owned subsidiary, namely ASE
Test (incorporated in Singapore in May 1996) and holds shares in
ASE Group companies. In addition, ASE Holding Limited has a 9%
equity stake in ASE Test. The shares of ASE Test have been listed
on the NASDAQ National Market in the United States since June
1996.
ASE Test has four majority-owned subsidiaries: a) ASE Test,
Inc., which is engaged in the testing of semiconductors;
b) ASE Test Malaysia, which is engaged in the packaging and
testing of semiconductors; c) ASE Test Holding, which mainly
holds shares in ASE Group companies;
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
and d) ASE Test Finance Limited (incorporated in Mauritius
in June 1999), which is engaged in financing activities.
ASE Test, Inc. has a wholly-owned subsidiary, ASE Test
(USA) Inc., which is engaged in the after-sale service of
tested semiconductors.
In May 1999, ASE Test acquired 70% of the outstanding shares
of ISE Labs, Inc. (ISE Labs). ISE Labs engages in
front-end engineering testing, final testing and packaging of
semiconductors. The purchase cost, including transaction costs,
was approximately US$100.1 million (NT$3,083.1 million). ASE Test
has committed to the minority shareholders of ISE Labs that if
ISE Labs (i) does not consummate its initial public offering
in the United States by December 31, 2001 at or above a
predetermined price or (ii) disposes of certain material
assets, ASE Test will be obligated to purchase the remaining 30%
equity of ISE Labs for US$42 million (NT$1,293.6 million) plus
accrued interest (payable either in cash or shares at the option
of the minority shareholders) (see Note 26). Any future
acquisition of the remaining 30% equity of ISE Labs will be
accounted for as step-acquisitions using the purchase method. In
June 1999, ASE Test Finance Limited issued US$160 million
(NT$4,928 million) of convertible notes to finance the
acquisitions of ISE Labs and Motorola SPS Businesses by ASE Test
(see Note 13).
ASE Technologies, Inc. has two subsidiaries: a) ASE Technologies
(U.S.A.), Inc. (100% ownership), which is mainly engaged in
research and development, manufacture and sales of computers and
related accessories; and b) Transmonde Technologies, Inc. (83%
ownership), which is mainly engaged in sales of computers and
related accessories.
2. Significant Accounting Policies
The accompanying financial statements have been prepared in
conformity with regulations governing the preparation of
financial statements of public companies, and generally accepted
accounting principles in the ROC (ROC GAAP).
Significant accounting polices are summarized as follows:
Presentation of financial statements
For the purpose of the proposed offering of depositary shares,
the accompanying balance sheets are presented for two year-ends
as at December 31, 1998 and 1999, and the accompanying
statements of income, changes in shareholders equity and
cash flows are presented for three years ended December 31,
1997, 1998 and 1999. Unaudited interim information as at and for
the six months ended June 30, 1999 and 2000 is also
presented for comparative purposes.
Unless otherwise stated, amounts presented are in thousands of
New Taiwan dollars (NT$) or U.S. dollars (US$).
Consolidation
The consolidated financial statements include the accounts of ASE
and all of the aforementioned companies (hereinafter,
individually or collectively referred to as the
Corporation).
The consolidated method used by the Corporation to consolidate
the statement of income of ISE Labs for the year ended
December 31, 1999, ISE Labs full year 1999 net
revenues, cost of revenues and operating expenses are included in
the Corporations consolidated statements of
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
income. The pre-acquisition income of ISE Labs for the year ended
December 31, 1999 (from January 1 to May 4, 1999)
is then subtracted from the Corporations net income for
1999.
The statements of income for both ASE Chung Li and ASE (Korea)
Inc. (ASE Korea) (representing the acquirees from
acquisitions of Motorola SPS Businesses) are consolidated since
the date of acquisitions due to the change of business type after
acquisition in ASE Chung Li and ASE Korea for the accounting of
silicon wafers from previous purchase and sale transaction to
customers consignments (see accounting policy for
inventories).
The accounts of ASE Material for 1999 are consolidated because
ASE in effect controls ASE Material in the following manner.
First, two of the five board members of ASE Material are
appointed by ASE and one board member is appointed by ASE Test,
Inc., a consolidated subsidiary of ASE. Second, Mr. Jason
Chang, the Chairman of ASE, also serves as the Chairman of ASE
Material. Third, ASE appoints ASE Materials sole
Supervisor, whose duty under the ROC Company Law is to monitor
ASE Materials business and financial condition. Finally,
Mr. Jason Chang has committed to vote his shares of ASE
Material, which represent a 11.4% ownership interest in ASE
Material, in concert with ASE.
All intercompany accounts and transactions have been eliminated
and minority shareholders interests in the equity and
earnings of the subsidiaries are presented separately in the
financial statements. The differences between the costs of
investments and the proportionate equity in each subsidiary when
the stocks were acquired are recorded as consolidated credits
(debits) and are amortized on the straight-line method over
ten years.
Use of estimates
The preparation of financial statements in conformity with ROC
GAAP and the generally accepted accounting principles in the
United States (US GAAP) requires management to make
estimates and assumptions that affect certain reported amounts
and disclosures. Actual results could differ from those
estimates.
Short-term investments
Marketable securities are carried at cost less allowance for
decline in market value.
Allowances for doubtful accounts
Allowance for doubtful accounts is provided based on an
evaluation of the collectibility of receivables.
Inventories
Inventories are stated at the lower of weighted average cost or
market value. Unbilled processing charges incurred (included in
finished goods and work in process) are stated at actual cost.
Market value represents net realizable value for finished goods
and work in process, and replacement costs for raw materials,
supplies and spare parts.
Materials received from customers for processing, mainly silicon
wafers, are excluded from inventories.
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Long-term investments in shares of stock
Long-term investments of which ASE owns at least 20% of the
outstanding voting shares and where ASE exercises significant
influence on the investee companies operations are
accounted for by the equity method. Under the equity method, the
investments are initially carried at cost and subsequently
adjusted for ASEs proportionate share in the net earnings
or losses of the investee companies. Such proportionate share in
earnings or losses are recognized as investment income or losses
while any cash dividends received are reflected as a reduction in
the carrying value of the investments. The goodwill representing
the excess of the investment costs over ASEs proportionate
equity in the net assets of the investees at the time of
investments or at the time the equity method of accounting is
first applied to a particular investment, is amortized over ten
years. Changes in ASEs ownership percentage of investees
accounted for by equity method are accounted for as adjustments
of long-term investments and capital surplus. The writedown of
carrying value of long-term investments has been taken on the
basis of the discounted cash flows expected to be realized in the
future.
Other long-term investments (including ASE common shares) in
shares of stock are carried at cost. An allowance for decline in
value is made for any permanent impairment in the carrying value
of the investments and such decline in value is charged to
current income. Cash dividends received are recognized as income.
The sales of ASE stocks are reflected as gain from sale of
long-term investment in the statement of income.
Unrealized profits or losses arising from transactions with
equity investees or between equity investees are offset against
investment income or loss from long-term investments, based on
the percentage of ownership.
Long-term investments in bonds
Bond securities being held to maturity are stated at amortized
cost.
Properties
Properties, except leased equipment, are stated at cost.
Equipment held under capital lease and related obligations are
stated at the lower of the fair value of the equipment at the
beginning of the lease period or the present value of the total
rental payments and the purchase price at the end of the lease
period. Major renewals and improvements are capitalized, while
maintenance and repairs are expensed currently.
Depreciation is provided on the straight-line method over
estimated service lives which range as follows: land
improvements, 20 years; long leasehold land, 60 years
(lease period); buildings and improvements, 3 to 40 years;
machinery and equipment, 3 to 8 years; furniture and
fixtures, 5 to 10 years; transportation equipment, 3 to
10 years; and leased assets and leasehold improvements, 3 to
10 years. In the event that an asset depreciated to its
residual value is deemed to have a continual useful life to the
company, the residual value is depreciated over the remaining
life, not to exceed 2 years.
When properties are retired or disposed of, their costs and
accumulated depreciation are removed from the accounts and any
loss is charged to income; any gain is credited to income and,
after deducting applicable income tax, is transferred to capital
surplus.
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Deferred charges
Deferred charges are amortized on the straight-line method as
follows: tooling, 2 years; issuance costs of convertible bonds, 5
years; telecommunications, electrical and computer network
systems, 5 years; and others, 2 to 5 years.
Consolidated debits
The consolidated debits as shown in the balance sheet
representing goodwill arising from the excess of the acquisition
costs of investments over ASEs proportionate equity in the
net assets of the consolidated subsidiaries at the time of
acquisitions or investments, are amortized on the straight-line
method over 10 years.
Revenue recognition
Revenue from the sale of semiconductor and computer products and
testing services is recognized upon shipment of the products or
completion of the services, with a provision for estimated
returns and allowances recorded at the time of recognition of
revenue.
Income tax
Tax effects of deductible temporary differences and unused tax
credits are recognized as deferred income tax assets, while those
of taxable temporary differences are recognized as deferred
income tax liabilities. Valuation allowance is provided for
deferred income tax assets based on the estimated realizability.
Adjustments of prior years income tax are added to or
deducted from the current years tax provision.
Income taxes on undistributed earnings (10%) generated in 1998
and onwards for consolidated entities in the ROC are recorded as
expense in the following year when the shareholders have resolved
that the earnings shall be retained.
Pension cost
Pension cost is recorded based on actuarial calculations.
Convertible bonds
Conversion of convertible bonds into common shares is accounted
for by book value method. Under this method, unamortized bond
issuance cost, accrued interest no longer payable and the
carrying value of the bond are written off. In addition, common
shares are recorded at par value of the shares issued and the
excess is recorded as capital surplus.
Foreign currency transactions and
translation of foreign currency financial statements
ASE and its subsidiaries maintain their accounts in the currency
of their respective countries of incorporation (local currencies)
and functional currencies.
Foreign currency transactions, other than foreign currency
forward exchange contracts, are recorded in the local currencies
at the rates of exchange in effect when the transactions occur.
Gains or losses resulting from the application of different
foreign exchange rates when foreign currency assets and
liabilities are settled, are credited or charged to income in the
year of
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
settlement. Year-end balances of foreign currency assets and
liabilities are restated based on prevailing exchange rates and
the resulting differences are credited or charged to income.
The financial statements of the foreign subsidiaries are
translated into New Taiwan dollars at the following rates: assets
and liabilities, current rate; and income and expenses, average
exchange rate during the year. The net resulting translation
adjustment is reported as a separate component of
shareholders equity.
Derivative financial instruments
Premiums or discounts on foreign currency forward exchange
contracts which hedge foreign currency assets or liabilities
arising from the difference between the forward rate and the spot
rate at the date of each contract are deferred and amortized
over the contract period. At year end, the balances of the
forward exchange receivables or payables are restated based on
prevailing exchange rates and the resulting gain or loss is
credited or charged to income. Any exchange gain or loss when the
contract is settled is also credited or charged to income. The
difference between receivable and payable balances arising from
forward exchange contracts is accounted for as either current
asset or current liability.
Written option contracts to purchase foreign currencies entered
into for hedging purposes are not recorded as assets or
liabilities on the contract dates. Gains or losses upon
settlement are credited or charged to income. Amounts received or
paid are amortized over each contract period. The outstanding
written option contracts are marked to market with charges to
income.
Interest rate swap agreements to limit the impact of the variable
interest rate of certain long-term debt are not recorded as
assets or liabilities on the contract date. The variable rates on
swaps are based primarily on U.S. dollar LIBOR. The differential
between fixed and variable rates to be paid or received on swaps
is accrued as interest rates change in accordance with the
agreements and is included in current interest expense.
Earnings per share
(EPS) and earnings per equivalent GDS and ADS
Common shares of ASEs convertible bonds are not considered
in the calculation of primary and fully diluted EPS because they
have anti-dilutive effect. Common share equivalents of the
employees stock options of ASE Test are included in the EPS
calculation (See Note 20).
Earnings per equivalent global depositary share
(GDS) and pro forma equivalent American
depositary share (ADS) are calculated by multiplying
earnings per share by five (each of the GDS and ADS represents
five common shares).
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
U.S. dollar amount
ASE prepares its consolidated financial statements in New Taiwan
dollars. Translations into U.S. dollars for 1999 and the first
half of 2000 financial statements are included solely for the
convenience of the readers, and are based on the U.S. Federal
Reserve Bank of New York noon buying rate of NT$30.8 to US$1.00
in effect as at June 30, 2000. The convenience translations
should not be construed as representations 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 rates.
3. Short-Term Investments
4. Accounts Receivable Net
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The movement of allowance for doubtful accounts and sales
allowances are as follows:
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Inventories
The movement of allowance for obsolescence is as follows:
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Long-Term Investments Common Stock
ASE acquired its 27.3% equity interest in Hung Ching Kwan Co.
(HCKC) in 1992 by transferring to HCKC a parcel of
land as an investment in HCKC at an agreed valuation of
NT$390,470. The resulting gain of NT$300,149, which represents
the excess of such value over the cost of the land plus the land
value increment tax, has been deferred until the disposal of this
investment. As of June 30, 2000, ASE has a 43.2% (1998:
43.1%) effective interest in HCKC, which consists of 27.3%
interest directly owned by ASE, and 15.9% (1998: 15.8%) interest
indirectly owned through Hung Ching Development &
Construction Co. (HCDC) (based on HCDCs 63.4%
interest in HCKC).
As of June 30, 2000 and December 31, 1999, the
undistributed earnings for each investee are NT$668,996
(US$21,721) and NT$781,864 (US$25,385) for HCDC, NT$903,876
(US$29,347) and NT$1,412,141 (US$45,849) for USI, and NT$57,605
(US$1,870) and NT$40,991 (US$1,331) for HCKC. HCKC did not
declare dividends in 1998 and 1999. Universal Scientific
Industrial Co., Ltd. (USI) declared stock dividends
of NT$3.00 per share in 1998 and
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NT$4.00 per share in 2000, and did not declare any dividend in
1999. HCDC declared stock dividends in 1999 of NT$1.60 per share,
but has not been distributed.
ASE had net investment losses of NT$40,929 in 1997 and NT$100,549
in 1998, net investment income of NT$50,595 (US$1,642) in 1999,
and net investment losses of NT$93,240 and NT$86,138 (US$2,796)
for the six months ended June 30, 1999 and 2000 from its
investments in the afore-mentioned equity investees.
7. Long-Term Bond Investments
8. Properties
Accumulated depreciation consists of:
Capitalized interest expenses were NT$100,052, NT$144,416,
NT$123,347 (US$4,005) and NT$93,054 (US$3,021) for the years
ended December 31, 1997, 1998 and 1999 and the six months
ended June 30, 2000, respectively. Insurance coverages on
properties were NT$12,839,786 in 1998 and NT$19,232,010
(US$624,416) in 1999.
Machinery in transit and prepayments pertain to the purchase of
packaging and testing equipment, which are associated with
machinery purchased with title transferred but are not yet
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
in ready-for-use condition, and down payments for machinery
purchased with non-cancellable purchase orders.
Major components for machinery in transit and prepayments are as
follows:
9. Other Assets
10. Consolidated Debits
These represent goodwill arising from the purchases of:
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Amortizations of the above-mentioned goodwill for consolidated
subsidiaries (as reflected in general and administrative expenses
in the statement of income) were NT$53,161, NT$345,726, and
NT$542,682 (US$17,620) and NT$308,321 (US$10,010) for the years
ended December 31, 1997, 1998 and 1999 and the six months
ended June 30, 2000, respectively.
In addition, the carrying values of investments in HCDC and USI
as discussed in Note 6 as of December 31, 1998, 1999
and as of June 30, 2000 included unamortized goodwill, which
is being amortized over ten years through April 2006 for
HCDC and July 2009 for USI, resulting from the purchases of HCDC
shares in 1995 and 1996, and USI shares in 1999, as follows:
Amortization of the above-mentioned goodwill for equity investees
(as reflected in investment income (loss) by equity method
in the statement of income) were NT$155,088, NT$155,088,
NT$279,242 (US$9,066) and NT$176,944 (US$5,745) for the years
ended December 31, 1997, 1998 and 1999 and the six months
ended June 30, 2000, respectively.
11. Short-Term Borrowings
As of December 31, 1998, 1999 and June 30, 2000, unused
credit lines for short-term borrowings and commercial papers and
bank acceptances payable totaled approximately NT$11,339,814,
NT$11,191,775 (US$363,369) and NT$9,887,435 (US$321,021),
respectively.
12. Commercial Papers and Bank Acceptances Payable
Commercial papers and bank acceptances payable bear interest
rates ranging from 4.95% to 7.9% in 1998, 4.7% to 6.76% in 1999
and 4.1% to 6.25% in 2000, respectively.
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. Long-Term Bonds Payable
Set forth below is information on the long-term bonds payable:
A.
Convertible bonds US$200 million
(NT$6,160 million)
In November 1997, ASE issued bonds, consisting of 200 units
with face value of US$1 million (NT$30.8 million) each, with zero
coupon, due November 2002. The bonds bear an implicit
interest rate of 6.372%.
Starting from December 1997 through October 2002,
bondholders may convert the bonds into common shares at the
specified conversion price. The conversion rate was based on the
current market price at the time of sale. As of June 30,
2000, 355,100 common shares were issued as a result of the
conversion of such bonds, resulting in capital surplus of
NT$32,102 (US$1,042). As of June 30, 2000, the outstanding
convertible bonds aggregated US$199 million (NT$6,129 million).
On or at any time after October 14, 2000, ASE may redeem the
bonds at the redemption price if:
In addition, ASE may, if the applicable tax law is unfavorably
changed, redeem at any time all, but not some, of the bonds.
On September 5, 1997, ASE entered into a firm commitment
subscription agreement with SBC Warburg Securities Pte. Ltd.
(SBC Warburg) for the sale by ASE to SBC Warburg of
US$200 million Zero Coupon Convertible Bonds due 2002 (the
Convertible Bonds). The closing of the sale of the
Convertible Bonds was initially scheduled to occur on
October 6, 1997. Due to the adverse market conditions
prevailing during this period of time as a result of the Asian
financial crisis, however, SBC Warburg requested that the closing
date for the sale of the Convertible Bonds be extended.
During the extension period (the Extension Period),
SBC Warburg decided to market the Convertible Bonds to potential
investors as two separate instruments by repackaging them into:
(1) a debt portion consisting of US$200 million callable
floating rate notes which are secured by the
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Convertible Bonds (the FRNs) and (2) an equity
portion consisting of options to purchase the Convertible Bonds
(the Call Options). SBC Warburg was able to obtain
commitments for the entire issue of the FRNs but, as a result of
the adverse market conditions described above, was able to obtain
commitments for only a portion of the Call Options. As a result,
Swiss Bank Corporation (SBC), an affiliate of SBC
Warburg, approached a number of large institutional investors,
including J&R Holding Limited (J&R Holding),
a consolidated subsidiary of ASE, with a proposal to sell a
portion of the Call Options. Subsequently, J&R Holding
entered into two agreements with SBC to purchase options on a
portion of the Convertible Bonds.
Under the first agreement with SBC, J&R Holding is required
to make four cash payments to SBC on November 4, 1998, 1999,
2000 and 2001 as long as the Call Options remain unexercised and
outstanding. In return, J&R Holding has the right to call
the Convertible Bonds at any time during the period from November
1998 through November 2002. The exercise price of the Call
Options is equal to the accreted carrying value of the
Convertible Bonds as shown on the Corporations balance
sheet at the date exercised. Pursuant to the second agreement,
SBC paid US$200,000 to J&R Holding. In return, SBC has the
right to sell a portion of the Call Options to J&R Holding at
any time between November 4, 1997 and November 1,
1998. In any event, J&R Holding was required under the
automatic exercise provision of this agreement to purchase the
Call Options upon the expiration of the agreement on
November 1, 1998.
The closing of the sale of the Convertible Bonds eventually took
place on November 4, 1997. Upon the closing of the sale of
the Convertible Bonds, SBC Warburg immediately resold the
Convertible Bonds to a subsidiary of SBC Warburg. Such subsidiary
in turn repackaged the Convertible Bonds into the FRNs and the
Call Options for resale to the investors that had indicated an
interest in purchasing the FRNs and/or the Call Options during
the Extension Period. The closing of the sale of the FRNs and the
Call Options took place on November 5, 1997.
SBC Warburg and its subsidiary have entered into a swap
transaction, which stipulated that SBC Warburg will pay the
interest on the FRNs interest (aggregating US$80 million
(NT$2,464 million)) on the subsidiarys behalf. The
subsidiary will repay the interest to SBC Warburg at the maturity
date of the Convertible Bonds. ASE has contracted with certain
banks to issue letters of credit for US$73,676 (NT$2,269,221) to
SBC Warburg to guarantee the interest payment obligation of the
subsidiary. Under the contract with these banks, ASE may not,
among other things, change its scope of operations and is
required to maintain certain financial ratios.
B.
Foreign convertible bonds US$110 million
(NT$3,388 million)
In June 1999, ASE Test (the Guarantor), in
connection with the acquisitions of ISE Labs and the Motorola SPS
Businesses, issued US$160 million (NT$4,928 million) of 1%
guaranteed convertible notes (the Convertible Notes)
due July 1, 2004 through its subsidiary, ASE Test Finance
Limited (the Issuer). ASE subscribed to US$50 million
(NT$1,540 million) of the Convertible Notes and, accordingly,
the net balance of US$110 million (NT$3,388 million) is shown in
the accompanying balance sheet.
The holders of the Convertible Notes are entitled to convert the
Convertible Notes into ASE Tests ordinary shares at the
specified conversion price at any time after December 29,
1999 and before or on July 1, 2004.
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Convertible Notes may be redeemed under the following
circumstances:
As of June 30, 2000, Convertible Notes with an aggregate
principal amount of US$110 have been converted into ordinary
shares of ASE Test.
14. Long-Term Debts
Long-term debts consist of the following:
A. Mortgage bank loans for purchases of machinery:
These represent various bank loans obtained by ASE, ASE Test,
Inc., ASE Technologies, Inc., and ASE Material. ASE has syndicate
loan agreements with banks that stipulate, among other things,
the following:
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
These mortgage bank loans are repayable quarterly or
semi-annually through December 2003, and bear interest at rates
ranging from 1.3478% to 8.525% in 1998, 1.3% to 8.3% in 1999 and
5.625% to 8.27% in 2000.
B. Acceptances payable to syndicate banks
Acceptances payable to syndicate banks were covered by several
bank acceptance agreements made by ASE and ASE Test, Inc. which
stipulate, among other things, the following:
ASE Test provided a guaranty on the bank acceptance agreement
entered into by ASE Test, Inc. Under the guaranty, ASE Test is
required to maintain certain financial ratios and, without
written consent of the majority banks, shall not:
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
These bank loans are collateralized by all assets of ISE Labs.
The maturities of the loans range from February 2002 to
May 2009 and bear interest ranging from 7% to 9.5% or at the
prime rate. These agreements contain certain covenants and
default provisions that require ISE Labs to maintain certain
financial ratios, dividend and capital expenditure restrictions
and maintenance of working capital requirements.
These represent a loan of JPY1.3 billion in 1998 and 1999
and loans of JPY1.3 billion and NT$250 million in 2000. The
loan of JPY1.3 billion is payable in the equivalent amount
of US$10 million (NT$308 million) over three equal
semi-annual installments starting October 9, 2000 with an
interest rate equal to LIBOR plus 0.5% margin. The loan of
NT$250 million is repayable in quarterly installments
starting June 2002 with interest at 7%.
As of December 31, 1998, 1999 and June 30, 2000, unused
long-term bank facilities totaled approximately NT$4,986,786,
NT$3,106,827 (US$100,871) and NT$2,827,716 (US$91,809),
respectively.
As of December 31, 1999 and June 30, 2000, the future
maturities of long-term debts (including long-term bond payable)
are as follows:
Long-term debts (including long-term bond payable) by currencies
are detailed as follows:
15. Shareholders Equity
In July 1995, ASE issued 8,600,000 GDSs, representing
43,000,000 common shares. As of June 30, 2000, the
outstanding GDSs represented 4.8% of ASEs outstanding
common shares.
The GDS holders generally have the same rights and obligations as
the shareholders, subject to provisions of relevant ROC laws.
The exercise of such rights and obligations shall
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
comply with the related regulations and the deposit agreement,
which stipulate, among other things, that the GDS holders can,
through Citicorp Financial Services Limited, as nominee
holder: (a) exercise their voting rights; (b) sell
their GDSs; and (c) receive dividends declared and
subscribe to the issuance of new shares.
Under the ROC Company Law, capital surplus can only be used to
offset a deficit or be transferred to capital. Under relevant
regulations, the paid-in capital in excess of par value can be
transferred to capital only once a year and is subject to a
specified limit.
ASEs Articles of Incorporation provide that the annual net
income shall be appropriated as follows:
The aforementioned appropriations shall be approved by the
shareholders in the following year and given effect to in the
financial statements of such year.
Under the ROC Company Law, the aforementioned legal reserve may
be used to offset a deficit. Also, when the reserve has reached
50% of capital, up to 50% thereof may be transferred to capital.
Under the Integrated Income Tax System, which became effective on
January 1, 1998, non-corporate resident shareholders are
allowed a tax credit for the income tax paid or payable by ASE on
earnings generated in 1998 and onwards. An Imputation Credit
Account (ICA) is maintained by ASE 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 June 30, 2000, the creditable taxes aggregated
NT$278,309 (US$9,036). The actual percentage for the distribution
of 1998 and 1999 net income was 8.82% and 4.74%, respectively.
As of June 30, 2000, the unappropriated earnings prior to
1998 (the year that the Integrated Income Tax System became
effective) amounted to NT$17,644 (US$573).
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16. Gain on Sale of Investments
This consists of the gain on sales of:
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The gain on sale of ASE Tests ordinary shares, as shown
above, is broken out as follows:
The gain on sale of ASEs common shares, as shown above, is
broken out as follows:
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
17. Income Tax
a. Income tax expense (benefit) is summarized as
follows:
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
b. The above-mentioned taxes on pre-tax accounting
income at the statutory rates for domestic and foreign entities
are shown below:
c. Deferred income tax assets and liabilities as of
December 31, 1998, 1999 and June 30, 2000 are
summarized as follows:
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
In assessing the realizability of deferred tax assets, ASE
considered its future taxable earnings and expected timing for
the reversal of temporary differences. The valuation allowance is
provided to reduce the gross deferred tax assets to an amount
which ASE believes will more likely be realized. Deferred tax
assets and liabilities are classified in the consolidated balance
sheet based on the classification of the related assets or
liabilities or the expected timing of the reversal of temporary
differences.
The gain on sales of the ASE Tests ordinary shares in 1997
and 1999, as discussed in Note 16, was considered as a
permanent difference because management decided to re-invest and
not to distribute the gain and, accordingly, no deferred tax
liability was recognized.
d. As of December 31, 1999 and June 30,
2000, unused tax credits of ROC subsidiaries which can be
utilized to offset their future income tax are set forth below:
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
In the ROC, the tax credits may be utilized to reduce up to 50%
of income tax payable each year. In the expiring year, any
remainder can be used entirely.
In addition, as of December 31, 1999 and June 30, 2000,
ASE Test Malaysia has unused tax credits of NT$152,711
(US$4,958) and NT$36,542 (US$1,186), respectively, which has no
expiration period.
A portion of ASEs and ASE Test, Inc.s income from the
manufacture, processing and testing of semiconductors is exempt
from income tax for five years ending December 2000 and 2005,
respectively. The income of ASE Test Malaysia (during the
pioneer status tax period) was exempt from income tax
for five years through June 1999. ASE Test Malaysia has
been granted approval of hi-tech pioneer status for
an additional five years and is expected to commence the tax
holiday retroactively from July 1, 1999. The per share
effect of tax holiday is NT$0.3 in 1997, NT$0.3 in 1998, and
NT$0.4 (US$0.01) in 1999.
Income tax returns of ASE, ASE Test, Inc., ASE Material and ASE
Technologies have been examined by the ROC tax authorities
through 1998. As a result of the examination by the ROC tax
authorities, ASE has recorded and paid additional taxes of
NT$40,000 (US$1,299). ASE has appealed the rulings of the ROC tax
authorities relating to the aforementioned additional taxes and
is awaiting the outcome of the appeal. No additional taxes were
required to be paid by ASE Test, Inc. and ASE Material.
18. Pension Plans
The consolidated subsidiaries in the ROC have pension plans for
their regular employees. Retirement benefits are based on the
length of service and average salaries or wages of the last six
months before retirement. Those subsidiaries make monthly
contributions, at 2% of salaries and wages, to pension funds
which are in the name of, and are administered by, the employee
pension plan committee of the respective subsidiaries. The
changes in the retirement funds are summarized as follows:
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Pension costs for these subsidiaries consist of:
Other pension information based on actuarial calculations of the
plan are as follows:
19. Stock Option Plans
ASE Test has five stock option plans, the 1996 Option Plan (the
Pre-IPO Plan), the 1996 Executive Management Option
Plan (the 1996 Plan), and the 1997, 1998 and
1999 Option Plans. Stock options granted under these plans are
exercisable for ASE Test ordinary shares based on a vesting
schedule over five years until the options expire. Because the
exercise price
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
is equal to the market price of the shares on the date of grant,
no compensation cost was recognized.
20. Earnings Per Share, GDS and ADS
Primary and fully diluted earnings per share for the years ended
December 31, 1997, 1998 and 1999 and for the six months
ended June 30, 1999 and 2000 are calculated as follows:
The denominator is the weighted average number of outstanding
shares of common stock of 1,017,000,000, 1,780,000,000 and
1,980,000,000 shares in 1997, 1998 and 1999 and 1,780,000,000 and
1,980,234,123 shares for the six months ended June 30, 1999
and 2000, respectively. The numerator is the net income with the
primary and fully diluted EPS adjustment for the employee stock
options of ASE Test.
Primary and fully diluted earnings per GDS and ADS for the years
ended December 31, 1997, 1998 and 1999 and for the six
months ended June 30, 1999 and 2000 are calculated as
follows:
The denominator is the above mentioned weighted average
outstanding shares divided by five (one GDS represents five
common shares). The numerator is the same as mentioned in above
EPS calculation.
21. Assets Pledged or Mortgaged
The following assets have been pledged or mortgaged as first
priority collateral for short-term and long-term debt,
recruitment of foreign laborers and for tax appeal to the tax
authorities:
In addition, the total assets of ASE Test Malaysia and Transmonde
Technologies, Inc. amounting to NT$2,699,704 and NT$32,257,
respectively, as of December 31, 1998, and the total assets
of ISE Labs amounting to NT$3,009,291 (US$97,704) and
NT$4,748,789 (US$154,181) as of December 31, 1999, and
June 30, 2000, have been pledged as collaterals for its
long-term and short-term debt.
22. Commitments and Contingency as of
December 31, 1999 and June 30, 2000
a. ASE, ASE Test, Inc., ASE Technologies and
ASE Material lease the land on which their buildings are
situated under various operating lease agreements with the
government expiring on various dates through September 2009.
The agreements grant these entities options to renew the
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
leases and reserve the right for the lessor to adjust the lease
charges upon an increase in the assessed value of the land and to
terminate the leases under certain conditions.
ASE Technologies (U.S.A.), Inc. has three operating lease
agreements for office facilities. In addition, ASE and
ISE Labs also lease equipment under non-cancellable capital
lease agreements. The net book value as of December 31, 1999
and June 30, 2000 of the equipment acquired under the lease
obligations amounted to NT$325,473 and NT$214,229, respectively.
The future minimum lease payments under above-mentioned
operating leases are as follows:
The future minimum lease payments under above-mentioned capital
leases as of December 31, 1998, 1999 and June 30, 2000
are as follows:
b. ASE, ASE Test, Inc., ASE Test Malaysia
and ASE Chung Li (since 1999) engage outside sales
agencies. Commissions and service fees were paid based on monthly
incurred service-related cost and expenses plus 15% or based on
1%-3% of net export sales. Commissions paid in 1997, 1998, 1999
and the six months ended June 30, 2000 totaled approximately
NT$447,305, NT$469,613, NT$570,729 (US$18,530) and NT$371,276
(US$12,054), respectively.
c. As of December 31, 1999 and June 30,
2000, the undrawn letters of credit totaled approximately
NT$805,577 (US$26,155) and NT$1,244,590 (US$40,409),
respectively.
d. As of December 31, 1999 and June 30,
2000, commitments to purchase machinery and equipment totaled
approximately NT$3,990,578 (US$129,564) and NT$8,936,636
(US$290,151), respectively.
e. As of December 31, 1999 and June 30,
2000, commitments for construction of buildings totaled
approximately NT$384,408 (US$12,481) and NT$938,696 (US$30,477),
respectively.
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
f. ASE and ASE Technologies entered into
technology agreements which will expire in 2016 (with foreign
companies) for the procurement of manufacturing technology for
certain products. Based on the agreements, ASE and
ASE Technologies shall pay royalties at a specified
percentage of sales quantities. Such royalties in 1997, 1998,
1999 and the six months ended June 30, 2000 were
approximately NT$71,593, NT$86,516, NT$112,025 (US$3,637) and
NT$83,265 (US$2,703), respectively.
g. As of December 31, 1999 and June 30,
2000, ASE has endorsed and guaranteed the promissory notes of its
subsidiaries, as follows:
23. Derivative Financial Instruments
Information on derivative transactions are as follows:
a.
Interest rate swap
ASE entered into two interest rate swap contracts with a foreign
bank, which expired in January and December 1999. Under
these contracts, ASE paid interest based on a nominal principal
amount of US$20 million (NT$616 million) and floating interest
rate at 4.85%-5.19% or LIBOR minus 0.21%-0.25%, whichever was
higher. The foreign bank paid interest to ASE based on the same
nominal principal and floating interest rate of 3 months
USD LIBOR. The interest settlement was made on net basis. The net
interest income from such contracts amounted to NT$2,690 in
1997, NT$3,116 in 1998 and NT$842 (US$27) in 1999. As of
December 31, 1999 and June 30, 2000, there were no
outstanding contracts.
b.
Forward exchange contracts
ASE and ASE Test, Inc. entered into forward contracts with
several banks to hedge foreign exchange fluctuations associated
with foreign currency assets and liabilities. As of
December 31, 1999 and June 30, 2000, there were no
outstanding contracts.
c.
European options
Because ASE and ASE Test, Inc. expects to receive U.S. dollars
from export sales and to pay Japanese yen or New Taiwan dollars
for long-term debt, ASE entered into foreign currency option
contracts to hedge the risks of exchange rate fluctuations.
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Significant option contracts made into during 1998, 1999 and 2000
are set forth below:
The losses arising from such contracts based on
marktomarket valuation were approximately NT$465,817,
NT$336,101 (US$10,912) and NT$2,864 (US$93) in 1998, 1999 and
the six months ended June 30, 2000, respectively.
d.
Transaction risk
1) Credit risk
ASE is exposed to credit risk in the event of non-performance of
the counterparties to forward contracts on maturity. In order to
manage this risk, ASE transacts only with financial institutions
with good credit ratings. As a result, no material losses
resulting from counterparty defaults are anticipated.
2) Market risk
ASE entered into European option and interest rate swap contracts
to hedge the effects of foreign currency fluctuations on net
assets or net liabilities, and the fluctuations in interest
rates. Hence, the impact of market risk was reduced. ASE has no
outstanding derivative contracts to hedge exposure to existing
foreign currency assets and liabilities as of December 31,
1999.
3) Liquidation risk and cash-flow risk
ASE entered into European option contracts to hedge its exposure
to the effect of exchange rate fluctuations on net assets or net
liabilities. At the maturity of these contracts, ASE has enough
operating capital to meet cash requirements, so there is no fund
raising risk. Therefore, ASE believes there are no significant
exposures to liquidation risk and cash flow risk.
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
24. Financial Instruments
[Additional columns below]
[Continued from above table, first column(s) repeated]
The carrying values of cash, notes receivable, accounts
receivable, short-term borrowings, C/P and B/A payable, and notes
and accounts payable approximate fair value because of the short
maturity of these instruments. The fair value of short-term and
long-term investments are determined based on market values or
net equity values. The fair value of long-term liabilities is
determined based on the estimated present value of future cash
flow using the interest rates of similar long-term debt
instruments which ASE is able to obtain as the discount rate.
Fair value of long-term debt is its carrying value because
floating interest rates are applied.
25. Segment and Geographical Information
a. Geographical sales information
1) Net revenue
[Additional columns below]
[Continued from above table, first column(s) repeated]
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2) Long-lived assets
[Additional columns below]
[Continued from above table, first column(s) repeated]
b. Major customers
Customers accounting for 10% or more of total revenues are shown
below:
[Additional columns below]
[Continued from above table, first column(s) repeated]
d. Reported segment information
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
F-48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
26. ACQUISITIONS
In May 1999, ASE Test acquired 70% equity of ISE Labs, which
is engaged in the testing and packaging of semiconductors. The
purchase cost, including transaction costs, was approximately
US$100.1 million (NT$3,083.1 million), which was paid in
May 1999.
In July 1999, ASE and ASE Test purchased 70% and 30%,
respectively, of the interest of the Motorola SPS Businesses. The
purchase cost was approximately US$350.1 million (NT$10,783.1
million). As of December 31, 1999, US$176.2 million
(NT$5,426.96 million) has been paid and the balance of US$173.9
million (NT$5,356.1 million), plus interest (commencing as of the
acquisition date July 1999) is payable,
$70.0 million of which is subject to target sales volumes
being met for the Motorola SPS Businesses in Chung Li, Taiwan,
based on specified payment dates within four years. ASE believes
the contingent payments of US$70 million are determinable
beyond a reasonable doubt. As of December 31, 1999, ASE has
provided guaranteed letters of credit of US$173,876
(NT$5,355,381) to Motorola for the future payable. Both acquirees
currently provide packaging and testing of semiconductors. A
portion of the purchase price was financed through a convertible
notes offering completed on June 29, 1999 by ASE Test
Finance Limited and fully and unconditionally guaranteed by ASE
Test (see Note 13).
Future payments for investments in Motorola as of
December 31, 1999 are as follows:
The acquisitions of the Motorola SPS Businesses and ISE Labs were
accounted for by the purchase method. Assets acquired and
liabilities assumed have been recorded at their estimated fair
values as of the acquisition dates. The purchase prices exceeded
the fair value of the net tangible assets by about US$81.9
million (NT$2,522.5 million) for Motorola SPS Businesses and
F-49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
US$76.5 million (NT$2,356.2 million) for ISE Labs. The purchase
cost in excess of fair value of net tangible assets was allocated
to various intangible assets, which will be amortized on a
straight-line basis over 3 to 38 years.
The purchase price and the calculation of goodwill for those
acquisitions described above are as follows (in millions):
The excess purchase price was allocated as follows (in millions):
The purchase price of US$350.1 and US$100.1 million for Motorola
SPS Businesses and ISE Labs acquisitions, respectively, is
allocated as follows (in millions):
F-50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The unaudited pro forma consolidated results of operations are
presented as if the acquisitions of the Motorola SPS Businesses
had been made at the beginning of 1998 and 1999, and in the case
of ISE Labs, at the beginning of 1998:
The pro forma results of operations include adjustments to give
effect to the net decrease in depreciation and the amortization
of goodwill related to the increased value of acquired fixed
assets and identifiable intangible assets, and interest expense
on debt assumed to finance the purchases. The unaudited pro forma
information is not necessarily indicative of the results of
operations that would have occurred had the purchases been made
at the beginning of the periods or the future results of the
combined operations.
The above pro forma consolidated results of operations include
the pre-acquisition revenues and net income as follows:
27.
Summary of Significant Differences Between Accounting Principles
Followed by the Corporation and Generally Accepted Accounting
Principles in the United States
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles in the
Republic of China (ROC GAAP), which differ in the
F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
following respects from generally accepted accounting principles
in the United States (US GAAP):
a. Pension benefits
b. Short-term investments
c. Bonuses to employees, directors and supervisors
d. Treasury stock
F-52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
e. Depreciation of buildings
f. Excess of book value on transfer of buildings
between related parties
g. Gain on sales of subsidiarys stock
h. Effects of US GAAP adjustments on equity long-term
investment
i. Impairment of long-lived assets
F-53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following reconciles net income and shareholders equity
under ROC GAAP as reported in the consolidated financial
statements to the approximate net income and shareholders
equity amounts as determined under US GAAP, giving effect to
adjustments for the differences listed above.
F-54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
F-55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A reconciliation of the significant balance sheet accounts to the
approximate amounts as determined under US GAAP is as follows:
F-56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
As a result of the adjustments presented above, the approximate
amounts of total assets based on US GAAP are NT$42,988,352,
NT$74,089,380 (US$2,405,499) and NT$85,683,718 (US$2,781,939) as
of December 31, 1998, 1999 and June 30, 2000,
respectively.
28. Additional Disclosures Required by US GAAP
ASE is required by SEC Staff Accounting Bulletin No. 74, to
disclose the impact recently issued accounting standards will
have on its financial statements when adopted in a future period,
as well as make certain disclosures about recently issued
accounting standards.
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133
(SFAS 133), accounting for derivative
instruments and hedging activities.
ASE has not yet quantified the impacts of adopting
SFAS 133 on the financial statements and has not
determined the timing of or method of adoption of SFAS 133.
However, the SFAS 133 could increase volatility in earnings
and other comprehensive income. The adoption of SFAS 133
will not be effective until 2001.
a. Pension
F-57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Actuarial assumptions:
ASE has no other post-retirement or post-employment benefit
plans.
b. Short-term investments
At December 31, 1999 and June 30, 2000, certain
investments carried at cost under ROC GAAP were restated under
US FAS 115:
[Additional columns below]
[Continued from above table, first column(s) repeated]
F-58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
c. Income taxes expense
Reconciliation between the income tax calculated on pre-tax
financial statement income based on the statutory tax rate and
the income tax expense (benefit), which conforms to US GAAP, is
as follows:
F-59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The abovementioned taxes on pre-tax accounting income at the
statutory rates for domestic and foreign subsidiaries are shown
below:
d. Stock option plans
ASE Test has five stock option plans, the 1996 Option Plan
(Pre-IPO Plan), the 1996 Executive Management Option
Plan (1996 Plan), the 1997 Option Plan, the 1998
Option Plan and the 1999 Option Plan. The Pre-IPO Plan provided
for grants of options, which are currently exercisable, to ASE
Tests directors, officers, employees and independent
consultants to purchase 1,500,000 shares at US$2.0625 (NT$63.53)
per share. Up to 10,000,000 shares, 3,200,000 shares, 1,600,000
shares and 2,000,000 shares have been reserved for issuance under
the 1996, 1997, 1998 and 1999 Option Plans, respectively.
The 1996, 1997, 1998 and 1999 Option Plans granted the following
stock options to purchase ASE Tests ordinary shares, which
are exercisable based on a vesting schedule over a period of five
years until the expiration of the options, to directors,
officers, key employees and independent consultants.
F-60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
If any granted shares are forfeited, the shares may be granted
again, to the extent of any such forfeiture.
The exercise price of each option was equal to the stocks
market price on the date of grant and all options will expire
after five years, except for options granted under the 1999
Option Plan, which will expire after ten years.
FAS 123, Stock-Based Compensation
(FAS 123), effective in 1996, establishes
accounting and disclosure requirements using a fair value-based
method of accounting for stock-based employee compensation plans.
Under FAS 123, ASE Test has elected to continue using the
intrinsic value-based method and provide pro forma disclosures of
net income and earnings per share as if the fair value
accounting provisions of this statement had been adopted.
ASE has computed for pro forma disclosure purposes the fair value
of each option grant, as defined by FAS 123, using the
Black-Scholes option pricing model with the following
assumptions:
[Additional columns below]
[Continued from above table, first column(s) repeated]
F-61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For purposes of pro forma disclosure, the estimated fair value of
the options are amortized to expense over the option rights
vesting periods. Had ASE Test recorded compensation costs based
on the estimated grant date fair value, as defined by FAS 123,
ASEs net income under US GAAP would have been reduced to
the pro forma amounts below.
e. According to FAS 130, the statement of
comprehensive income for the years ended December 31, 1998
and 1999 are presented below:
f. Consolidation
The 1999 net revenues, cost of revenues and operating expenses of
ISE Labs before the date of acquisition in the amounts of
NT$736,765 (US$23,921), NT$475,250 (US$15,430) and NT$117,880
(US$3,827), respectively, were consolidated in the 1999
consolidated financial statements. The net revenues for the
pre-acquisition period only represented 2% of the ASEs
consolidated net revenues in 1999 and such presentation has no
impact on the 1999 consolidated net income and shareholders
equity under US GAAP. If the results of ISE Labs were
consolidated from the date of acquisition, the net revenues,
gross profit and income from operation of 1999 consolidated
statement of income will be NT$31,872,796 (US$1,034,831),
NT$8,388,480 (US$272,353) and NT$4,704,924 (US$152,757).
F-62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
g. US GAAP Cash Flow Information
The following represents the major captions of cash flow under US
GAAP pursuant to SFAS No. 95:
The significant reclassifications for US GAAP cash flow statement
pertain to the following:
29. Subsequent Events
In January 2000, ASE Chung Li and HCDC entered into an agreement
for the development of buildings on land currently owned by ASE
Chung Li. HCDC will bear all costs relating to the development.
Following development, floor space in the completed buildings
will be sold by HCDC at prices to be negotiated between HCDC and
the buyers. ASE Chung Li and its affiliates will have priority in
the purchase of that floor space. In the event that floor space
is sold to persons other than ASE Chung Li, ASE Chung Li will
receive 25% of the purchase price. The first phase of the
development project is the construction of a building with
aggregate floor space of approximately 800,000 square feet, which
is expected to be completed in the fourth quarter of 2000. The
total value of the first phase of the project, including land and
the completed building, is estimated to be NT$2.0 billion.
F-63
INDEPENDENT AUDITORS REPORT
The Board of Directors
We have audited the accompanying combined balance sheets of
Motorolas Semiconductor Products Sector Businesses in
Taiwan and Korea as of December 31, 1997 and 1998 and the
related combined statements of operations and cash flows for the
years then ended. These combined financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the combined
financial position of Motorolas Semiconductor Products
Sector Businesses in Taiwan and Korea as of December 31,
1997 and 1998 and the combined results of their operations and
their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of
America.
KPMG Certified Public Accountants
Taipei, Taiwan
F-64
MOTOROLAS SEMICONDUCTOR PRODUCTS SECTOR BUSINESSES IN
TAIWAN AND KOREA
COMBINED BALANCE SHEETS
See accompanying notes to combined financial statements.
F-65
MOTOROLAS SEMICONDUCTOR PRODUCTS SECTOR BUSINESSES IN
TAIWAN AND KOREA
COMBINED STATEMENTS OF OPERATIONS
See accompanying notes to combined financial statements.
F-66
MOTOROLAS SEMICONDUCTOR PRODUCTS SECTOR BUSINESSES IN
TAIWAN AND KOREA
COMBINED STATEMENTS OF CASH FLOW
See accompanying notes to combined financial statements.
F-67
MOTOROLAS SEMICONDUCTOR PRODUCTS SECTOR BUSINESSES IN
TAIWAN AND KOREA
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) Organization, Principal Activities and Basis of
Presentation
On July 4, 1999, ASE Test Limited and Advanced Semiconductor
Engineering, Inc. (the ASE Group) purchased
Motorola, Inc.s Semiconductor Products Sectors
(SPS) businesses in Taiwan and South Korea. The
acquisition consisted of substantially all of the assets of
Motorolas SPS facility in Chung Li, Taiwan and 100% of the
common stock of Motorola Korea Ltd. Substantially all of the
assets and liabilities included in Motorola Korea Ltd. related to
the SPS business. The assets and liabilities of the SPS business
in Taiwan were included in Motorola Electronics Taiwan Ltd.
Prior to the acquisition, both Motorola Korea Ltd. and Motorola
Electronics Taiwan Ltd. were wholly-owned subsidiaries of
Motorola, Inc.
Basis of presentation
The combined financial statements reflect the combined financial
condition, results of operations and cash flows of the SPS
businesses under common control in a manner similar to a pooling
of interests. Accordingly, the combined financial statements have
been prepared on the basis of historical costs and as if the
business activities of the SPS businesses in Taiwan and Korea had
been conducted on a combined basis throughout the relevant
periods.
In preparing the combined financial statements, the financial
statement balances related to the SPS business in Taiwan were
carved-out from the legal entity, Motorola
Electronics Taiwan Ltd., and combined with the financial
statements of Motorola Korea Ltd. Accordingly, the combined
financial statements include certain previously unallocated
general and administrative expenses related to the SPS business
in Taiwan aggregating $239,445 and $574,478 for the years ended
December 31, 1997 and 1998. The expenses allocated relate to
costs from Motorola Electronics Taiwan Ltd.s accounting,
public affairs, and general office departments and income taxes.
The basis for the allocation of costs from the public affairs and
general managers office was primarily based on sales and
inventory levels of the SPS business in Taiwan as compared to the
total sales and inventory levels of Motorola Electronics Taiwan
Ltd. Costs allocated from the accounting department was based on
actual hours incurred by the department on behalf of the SPS
business. Income taxes were calculated as if the SPS business in
Taiwan was a stand-alone legal entity.
In addition, a net foreign currency gain of $2,446,000 and a net
foreign currency loss of $2,405,964 was allocated to the SPS
businesses for the years ended December 31, 1997 and 1998,
respectively. These gains and losses were incurred by
Motorola, Inc. Motorola, Inc.s treasury department
enters into forward foreign currency contracts to hedge foreign
currency positions of its subsidiaries on a global basis. Gains
and losses from these contracts are allocated to individual
businesses within Motorola based on the specific foreign currency
contracts entered into to hedge each entitys foreign
currency denominated monetary asset and liability positions and
future cash flow needs. The foreign currency balances were
generally denominated in either New Taiwan dollars or Korean won.
All other costs included in net income of the SPS businesses were
specifically identified as costs directly related to these
businesses.
Management believes that the basis of allocation of general and
administrative expenses were reasonable based on the level of
services provided to the SPS business in Taiwan and that the
combined financial statements include all revenues and costs
directly and indirectly attributable to Motorolas SPS
businesses in Taiwan and Korea.
F-68
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
The combined financial statements have been prepared in
accordance with generally accepted accounting principles in the
United States. The financial data and accompanying notes for the
six-month periods ended June 30, 1998 and 1999 are unaudited
but reflect all adjustments which are, in the opinion of
management, necessary to present such information on a basis
consistent with that applied to the audited combined financial
statements as of and for the years ended December 31, 1997
and 1998.
(2) Summary of Significant Accounting Policies
Basis of combination
The combined financial statements include the SPS businesses in
Taiwan and Korea which were owned by Motorola, Inc. prior to
July 4, 1999. All intercompany balances and transactions
between these two businesses have been eliminated.
Cash equivalents
All highly liquid investments purchased with an original
effective maturity of three months or less are considered to be
cash equivalents.
Inventories
Inventories are valued at the lower of cost (weighted average
method) or net realizable value.
Foreign currency translation
The functional and reporting currency of the SPS businesses is
the U.S. dollar. Transactions denominated in other currencies for
nonmonetary assets and liabilities are translated and recorded
at the exchange rates in effect when the transactions occur.
Monetary assets and liabilities denominated in other currencies
are translated into U.S. dollars at the end of the period. The
resulting exchange gain or loss is included in results of
operations.
Revenue recognition
Revenues are recognized at the time of shipment of products.
Property, plant and equipment
Property, plant and equipment is stated at cost. The SPS
businesses provide for depreciation of property, plant and
equipment utilizing the straight-line method over the estimated
useful lives of the assets. Buildings and improvements are
depreciated over 8 to 40 years, machinery and equipment over 3 to
8 years and furniture and fixtures over 4 to 10 years.
Income taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax asset
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the periods in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized as income in the period that includes the enactment
date.
F-69
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Accounting estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(3) Transactions with Related Parties
Prior to July 4, 1999, the SPS businesses were captive
operations of Motorolas semiconductor business segment. The
operations of the SPS businesses included purchasing
semiconductor wafers from various Motorola locations, performing
the final assembly and testing functions, and selling the
resulting integrated circuit product to various Motorola
businesses located throughout the world. Total sales to Motorola
companies for the years ended December 31, 1997 and 1998
aggregated $657 million and $753 million, respectively.
Total purchases from Motorola companies aggregated $626 million
and $703 million for the years ended December 31, 1997
and 1998, respectively. The net balance due to the SPS businesses
from Motorola companies was $7.1 million as of December 31,
1997. The net balance due from Motorola companies was
$7.9 million as of December 31, 1998.
Purchase and sales prices are determined on a cost-plus basis.
The cost-plus arrangement differs by each country depending on a
number of factors such as market prices, local transfer pricing
rules and tax strategies. Since the service performed by the SPS
businesses is selling a captive operation, management is unable
to estimate the historical effect on net income as if these
purchases and sales were made with unrelated entities.
Pursuant to the July 3, 1999 manufacturing services
agreement between the ASE Group and Motorola, the SPS businesses
will continue to provide processing services to Motorola for the
next three to five years. Under the agreement, Motorola will
maintain ownership of the inventory and the SPS businesses will
charge Motorola a fee for assembly and test services. The fees
for this service will be negotiated periodically based on factors
such as supply needs and market conditions. Due to the
uncertainty of the future service fee rates, management is unable
to estimate the impact that the new pricing structure would have
had on the historical net income of the SPS businesses.
Motorola Korea Ltd. loaned funds to a related company in Korea.
The loan was denominated in Korean won and carried a variable
interest rate of 12% in 1997. The interest rate on the loan
ranged from 13% to 20% in 1998. The outstanding loan balance as
of December 31, 1997 and 1998 was $35,016 and $26,919,
respectively. The related interest income was $6,428 and $5,573
in 1997 and 1998, respectively.
In 1997, the SPS business in Korea moved its operations to a new
facility. As a result, plant and equipment with an aggregate net
book value of approximately $107 million was sold to various
Motorola companies. These assets were sold at their net book
value.
F-70
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(4) Inventories
The components of inventories as of December 31, 1997 and
1998 and June 30, 1999 are summarized as follows:
(5) Property, Plant and Equipment
A summary of property, plant and equipment as of
December 31, 1997 and 1998 is as follows:
(6) Accrued Expenses and Other Current Liabilities
As of December 31, 1997 and 1998, the following accrued
expenses items exceeded 5% of total current liabilities:
(7) Short-term Debt
The SPS businesses incurred interest costs of $688,000 for the
year ended December 31, 1998, related to bank overdraft
balances. The interest rate on these borrowings ranged from 14.1%
to 17.9% during 1998. The overdraft balance was fully paid at
December 31, 1998.
(8) Retirement Plans
Employees of the SPS businesses in Taiwan are included in the
Motorola Electronics Taiwan Ltd. defined benefit pension plan.
The plan covers substantially all of the employees in the SPS
businesses. Future retirement payments are based on the
employees salary level upon
F-71
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
retirement and length of service with the company. At the end of
each year, an actuarial calculation is prepared in accordance
with Statement of Financial Accounting Standards No. 87,
Employers Accounting for Pensions. Based on
this calculation, Motorola Electronics Taiwan Ltd. will transfer
funds to the Central Trust of China, a government institution,
equal to the projected benefit obligation. The plan was fully
funded at December 31, 1997 and 1998. For financial
reporting purposes in the accompanying combined financial
statements, the SPS business in Taiwan has accounted for its
participation in the plan as a multiemployer pension plan.
Accordingly, contributions to the plan by the SPS business in
Taiwan of $1.4 million and $1.2 million in 1997 and 1998,
respectively, have been recognized as pension expense in the
accompanying combined statements of operations. Employees who
have been with the SPS business in Korea for more than one year
are entitled to lump-sum payments based on current rates of pay
and length of service when they leave the Company.
Managements estimated liability under the plan, equal to
the amount which would be payable if all employees left the
Company at the balance sheet date, has been accrued in the
accompanying combined financial statements.
Under the National Pension Scheme of Korea, the SPS businesses in
Korea is required to transfer a certain percentage of retirement
benefits of employees to the National Pension Fund. The amount
transferred will reduce the retirement and severance benefit
amount payable to the employees when they leave the Company and
is reflected as a direct deduction from the retirement and
severance benefits liability in the accompanying combined
financial statements.
At December 31, 1997 and 1998, an accrued balance of $23.4
million and $17.5 million, respectively, was included as a
noncurrent liability on the combined balance sheets related to
the plan of the SPS business in Korea. Pension expense of
approximately 2.1 million and $1.9 million related to this
plan was recorded in the statement of operations for the years
ended December 31, 1997 and 1998, respectively. In addition,
approximately $9.6 million was paid to employees that were
terminated as a result of the SPS business in Koreas move
to a new facility in 1997 (refer to note 3). This amount was
included in selling, general and administrative
expense in the accompanying combined statement of
operations for the year ended December 31, 1997.
(9) Owners Equity
Owners equity consists of the stockholders equity of
Motorola Korea Ltd. and the SPS business in Taiwans
interdivision balance with Motorola Electronics Taiwan Ltd. The
changes in the owners equity balance during 1997 and 1998
are shown below:
F-72
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
As of December 31, 1997 and 1998, Motorola Korea Ltd. had
1,482,563 shares of common stock issued and outstanding. The
shares have a par value of 5,000 Korean won per share.
(10) Income Taxes
The components of income tax expense for the years ended
December 31, 1997 and 1998 are summarized as follows:
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
at December 31, 1997 and 1998 were as follows:
Investment tax credits primarily relate to investments in
production improvement equipment. The substantial majority of the
credits expire on December 31, 2002.
F-73
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Pre-tax income (loss) was generated in the following countries
for the years ended December 31, 1997 and 1998:
The SPS businesses are subject to statutory income tax rates of
25% and 30.8% in Taiwan and Korea, respectively. The expected
income tax expense at the combined statutory income tax rates
differs from the actual tax expense as follows for the years
ended December 31, 1997 and 1998:
(11) Segment Information
The net property, plant and equipment balance of the SPS
businesses were located in the following countries as of
December 31, 1997 and 1998:
(12) Subsequent Event
As a result of the acquisition of the SPS businesses by the ASE
Group on July 3, 1999, lump-sum payments aggregating
approximately $6.5 million were paid by Motorola Korea Ltd. to
its employees in July 1999. The payments were conditional on
the sale of Motorola Korea Ltd. to the ASE Group.
F-74
ASE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma statement of income for the
year ended December 31, 1999 give effect to the acquisitions
by Advanced Semiconductor Engineering, Inc. (ASE) on
July 4, 1999 through its substantially-owned
subsidiaries 30% interest through ASE Test Limited
and 70% interest through J&R Holding Limited and ASE Holding
Limited of the Motorola Semiconductor Products Sector Businesses
(the Motorola SPS Businesses) in a transaction
accounted for as purchase. The unaudited pro forma statement of
income is based on an individual financial statement of ASE for
the year ended December 31, 1999. Adjustments to the
statement of income for the year ended December 31, 1999
have been made to give effect to the acquisition of the Motorola
SPS Businesses as if the acquisition had occurred on
January 1, 1999.
Prior to being acquired by the ASE in July 1999, the Motorola SPS
Businesses in Taiwan and Korea took legal ownership of the
silicon wafers sourced from various Motorola facilities at
Motorola-determined internal transfer prices. Therefore, the cost
of the silicon wafers was included in sale and cost of sales.
Commencing July 4, 1999, ASE (Chung Li) Inc. (ASE
Chung Li) and ASE (Korea) Inc. (ASE Korea) no
longer took legal ownership of the silicon chips and therefore
excluded such purchase price from their sales and cost of sales,
in conformity with the ASEs customary accounting treatment
for silicon wafers received from ASEs customers as
consignment to ASE for packaging and testing. If ASEs
accounting treatment had been in effect at ASE Chung Li and ASE
Korea prior to ASE acquisition of these operations, reported net
revenues and cost of revenues for the periods prior to
July 4, 1999, would have been substantially lower than those
set forth in the following pro forma statement of income.
The following unaudited pro forma statement of income is not
necessarily indicative of the future results of operations of ASE
or the results of operations which would have resulted had ASE
and the Motorola SPS Businesses been combined during the period
presented. In addition, the pro forma results are not intended to
be a projection of future results. The unaudited pro forma
statement of income should be read in conjunction with the
Consolidated Financial Statements of ASE and its subsidiaries and
the financial statements of the Motorola SPS Businesses,
including the notes thereto, appearing elsewhere in this
Registration Statement.
F-75
ASE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF INCOME
[Additional columns below]
[Continued from above table, first column(s) repeated]
See accompanying notes.
F-76
ASE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited pro forma statements of income have been prepared
to reflect the acquisition of the Motorola SPS Businesses by ASE,
as if the acquisition had occurred on January 1, 1999.
The combined financial statements of the Motorola SPS Businesses
(the combined financial statements) reflect the
combined financial condition, results of operations and cash
flows of the Motorola SPS Businesses acquired by the ASE Group.
In preparing the combined financial statements, the financial
statement balances related to the Motorola SPS Businesses in
Taiwan were carved-out from the legal entity,
Motorola Electronics Taiwan Ltd., and combined with the financial
statements of Motorola Korea Ltd. Accordingly, the combined
financial statements include certain previously unallocated
general and administrative expenses related to the Motorola SPS
Businesses in Taiwan aggregating US$258,916 for the six months
ended June 30, 1999. The expenses allocated relate to costs
from Motorola Electronics Taiwan Ltd.s accounting, public
affairs, general office departments and income taxes.
The basis for the allocation of costs from the public affairs and
general managers office was primarily based on sales and
inventory levels of the Motorola SPS Businesses in Taiwan as
compared to the total sales and inventory levels of Motorola
Electronics Taiwan Ltd. Cost allocated from the accounting
department was based on actual hours incurred by the department
on behalf of the Motorola SPS Businesses. Income taxes were
calculated as if the Motorola SPS Businesses in Taiwan was a
stand-alone legal entity.
In addition, the treasury department of Motorola, Inc.
(Motorola) enters into forward foreign currency
contracts to hedge foreign currency positions of its subsidiaries
of a global basis. Gains and losses from these contracts are
allocated to individual businesses within a global basis. Gains
and losses from these contracts and allocated to individual
businesses within Motorola based on their foreign denominated
monetary asset and liability positions and future cash flow
needs. The foreign currency balances were generally denominated
in either New Taiwan dollars or Korean won.
All other costs included in net income of the Motorola SPS
Businesses were specifically identified as costs directly related
to these businesses.
Management of the Motorola SPS Businesses believes that the basis
of allocation of general and administrative expenses were
reasonable based on the level of services provided for the
Motorola SPS Businesses in Taiwan and that the combined financial
statements include all revenues and costs directly and
indirectly attributable to the Motorolas SPS Businesses in
Taiwan and Korea.
2. Pro Forma Adjustments
F-77
NOTES TO UNAUDITED PRO FORMA FINANCIAL
STATEMENTS (Continued)
3. Change for Sales Pricing in Motorola SPS Businesses
Prior to July 4, 1999, the Motorola SPS Businesses were
captive operations of Motorolas semiconductor business
segment. The Motorola SPS Businesses would purchase semiconductor
wafers from various Motorola locations, perform the final
assembly and testing functions, and then sell the resulting
integrated circuit product to various Motorola businesses located
throughout the world.
Purchases and sales prices are based on a cost-plus basis. The
cost-plus arrangement differs by each country depending on a
number of factors such as market prices, local transfer pricing
rules and tax strategies. Since the service was performed by the
Motorola SPS Businesses in basically a captive operation without
a substantial market, management is unable to estimate the
historical effect on net income if these purchases and sales were
made on an arms-length basis.
Pursuant to the July 3, 1999 manufacturing services
agreement between the ASE Group and Motorola, the Motorola SPS
Businesses will continue to provide processing services to
Motorola for the next three to five years. Under the agreement,
Motorola will maintain ownership of the inventory and ASE will
charge Motorola a fee for assembly and test services. The fees
for this service will be negotiated periodically based on factors
such as supply needs and market conditions. Due to the
uncertainty of the future service fee rates, management is unable
to estimate the impact that the new pricing structure would have
had on the historical net income of the Motorola SPS Businesses.
4. Purchase Cost and Goodwill
The purchase cost and calculation of goodwill for the acquisition
described as above are as follows (in millions):
F-78
NOTES TO UNAUDITED PRO FORMA FINANCIAL
STATEMENTS (Continued)
The analysis of excess purchase cost allocation is as follows (in
millions):
The purchase cost was US$350.1 million and were financed as
follows (in millions):
Note 5.
1. Detailed calculations for Note 2(b) and (c) (in
thousands)
2. Detailed Calculations for Note 2(d)
F-79
Table of Contents
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
1997
1998
1999
1999
1999
2000
2000
NT$
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
NET REVENUES (Note 25)
Packaging
15,334,317
16,867,404
24,522,968
796,200
8,942,914
17,725,445
575,501
Testing
2,383,326
3,131,278
7,793,198
253,026
2,772,722
5,789,520
187,972
Other
1,370,537
763,741
293,395
9,526
198,093
82,185
2,668
Subtotal
19,088,180
20,762,423
32,609,561
1,058,752
11,913,729
23,597,150
766,141
COST OF REVENUES
Packaging
11,343,806
13,173,587
18,769,995
609,415
7,067,689
12,837,141
416,790
Testing
1,234,606
1,646,706
4,687,939
152,206
1,637,068
3,294,980
106,980
Other
1,180,049
647,840
501,632
16,287
338,662
144,509
4,692
Subtotal
13,758,461
15,468,133
23,959,566
777,908
9,043,419
16,276,630
528,462
GROSS PROFIT
5,329,719
5,294,290
8,649,995
280,844
2,870,310
7,320,520
237,679
OPERATING EXPENSES
Selling
733,500
744,742
924,347
30,011
291,278
458,288
14,879
General and administrative
701,899
1,255,081
2,162,765
70,220
946,267
1,595,563
51,804
Research and development
372,914
453,611
714,324
23,192
353,654
534,721
17,361
Total Operating Expenses
1,808,313
2,453,434
3,801,436
123,423
1,591,199
2,588,572
84,044
INCOME FROM OPERATIONS
3,521,406
2,840,856
4,848,559
157,421
1,279,111
4,731,948
153,635
NON-OPERATING INCOME
Interest
340,272
605,397
423,158
13,739
206,735
204,122
6,627
Gain on sale of investments (Notes 2 and 16)
4,870,929
606,944
5,544,155
180,005
3,884,817
Investment income under equity method net (Notes 2
and 6)
50,595
1,642
Foreign exchange gain net (Note 2)
210,004
183,794
5,967
Other
86,387
146,516
314,549
10,213
56,232
29,757
966
Total Non-Operating Income
5,297,588
1,358,857
6,332,457
205,599
4,357,788
417,673
13,560
NON-OPERATING EXPENSES
Interest (Notes 2, 8 and 13)
426,197
985,796
1,469,795
47,721
572,525
1,021,752
33,174
Investment loss under equity method net (Notes 2
and 6)
40,929
100,549
93,240
86,138
2,796
Foreign exchange loss net (Notes 2 and 24)
133,799
935,474
538,368
17,479
Other
75,348
196,613
110,412
3,585
3,760
17,612
572
Total Non-Operating Expenses
676,273
2,218,432
2,118,575
68,785
669,525
1,125,502
36,542
INCOME BEFORE INCOME TAX AND
MINORITY INTEREST AND ACQUISITION
8,142,721
1,981,281
9,062,441
294,235
4,967,374
4,024,119
130,653
INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 17)
(374,865
)
150,777
(459,543
)
(14,920
)
(163,983
)
(499,231
)
(16,209
)
INCOME BEFORE MINORITY INTEREST AND ACQUISITION
7,767,856
2,132,058
8,602,898
279,315
4,803,391
3,524,888
114,444
INCOME BEFORE ACQUISITION (Note 2)
(65,167
)
(2,116
)
(65,167
)
MINORITY INTEREST IN NET INCOME
OF SUBSIDIARIES
(364,308
)
(528,097
)
(743,065
)
(24,125
)
(221,473
)
(604,064
)
(19,612
)
Table of Contents
Table of Contents
CAPITAL STOCK (NT$10 Par Value)
RETAINED EARNINGS
Issued and
Outstanding
CAPITAL
Authorized
SURPLUS
Legal
Shares
Shares
Amount
(Note 2)
Reserve
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 1997
1,000,000,000
729,000,000
NT$
7,290,000
NT$
3,357,428
NT$
452,284
Increase in authorized capital, April 12, 1997
400,000,000
Appropriations of 1996 earnings (Note 15)
Legal reserve
197,127
Compensation to directors and supervisors
Stock dividends 21%
153,090,000
1,530,900
Bonus to employees stock
10,980,000
109,800
Bonus to employees cash
Stock dividends from capital surplus 17%
123,930,000
1,239,300
(1,239,300
)
Reduction of earnings resulting from appropriations by a
subsidiary of bonus to employees and compensation to directors
and supervisors
Transfer of subsidiarys net gain on disposal of properties
816
Adjustment of equity in subsidiary due to change in percentage of
ownership
231,038
Net income in 1997
Transfer of net gain on disposal of properties
2,372
Cumulative translation adjustments (Note 2)
BALANCE, DECEMBER 31, 1997
1,400,000,000
1,017,000,000
NT$
10,170,000
NT$
2,352,354
NT$
649,411
RETAINED EARNINGS
UNREALIZED
LOSS ON
LONG-TERM
CUMULATIVE
INVESTMENT IN
TRANSLATION
TOTAL
Unappropriated
SHARES OF
ADJUSTMENTS
SHAREHOLDERS
Earnings
Total
STOCK (Note 2)
(Note 2)
EQUITY
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 1997
NT$
1,956,916
NT$
2,409,200
NT$
NT$
101,927
NT$
13,158,555
Increase in authorized capital, April 12, 1997
Appropriations of 1996 earnings (Note 15)
Legal reserve
(197,127
)
Compensation to directors and supervisors
(35,400
)
(35,400
)
(35,400
)
Stock dividends 21%
(1,530,900
)
(1,530,900
)
Bonus to employees stock
(109,800
)
(109,800
)
Bonus to employees cash
(14,390
)
(14,390
)
(14,390
)
Stock dividends from capital surplus 17%
Reduction of earnings resulting from appropriations by a
subsidiary of bonus to employees and compensation to directors
and supervisors
(13,890
)
(13,890
)
(13,890
)
Transfer of subsidiarys net gain on disposal of properties
(816
)
(816
)
Adjustment of equity in subsidiary due to change in percentage of
ownership
231,038
Net income in 1997
7,403,548
7,403,548
7,403,548
Transfer of net gain on disposal of properties
(2,372
)
(2,372
)
Cumulative translation adjustments (Note 2)
304,192
304,192
BALANCE, DECEMBER 31, 1997
NT$
7,455,769
NT$
8,105,180
NT$
NT$
406,119
NT$
21,033,653
Table of Contents
CAPITAL STOCK (NT$10 Par Value)
RETAINED EARNINGS
Issued and
Outstanding
CAPITAL
Authorized
SURPLUS
Legal
Shares
Shares
Amount
(Note 2)
Reserve
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 1998
1,400,000,000
1,017,000,000
NT$
10,170,000
NT$
2,352,354
NT$
649,411
Increase in authorized capital, March 21, 1998
800,000,000
Appropriations of 1997 earnings (Note 15)
Legal reserve
740,118
Compensation to directors and supervisors
Stock dividends 60%
610,200,000
6,102,000
Bonus to employees stock
30,760,000
307,600
Bonus to employees cash
Stock dividends from capital surplus 12%
122,040,000
1,220,400
(1,220,400
)
Transfer of subsidiarys net gain on disposal of properties
204
Adjustment of equity in subsidiary due to change in percentage of
ownership
55,605
Net income in 1998
Transfer of net gain on disposal of properties
1,410
Unrealized loss on long-term investment in shares of stock
Cumulative translation adjustments (Note 2)
BALANCE, DECEMBER 31, 1998
2,200,000,000
1,780,000,000
NT$
17,800,000
NT$
1,189,173
NT$
1,389,529
RETAINED EARNINGS
UNREALIZED
LOSS ON
LONG-TERM
CUMULATIVE
INVESTMENT IN
TRANSLATION
TOTAL
Unappropriated
SHARES OF
ADJUSTMENTS
SHAREHOLDERS
Earnings
Total
STOCK (Note 2)
(Note 2)
EQUITY
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 1998
NT$
7,455,769
NT$
8,105,180
NT$
NT$
406,119
NT$
21,033,653
Increase in authorized capital, March 21, 1998
Appropriations of 1997 earnings (Note 15)
Legal reserve
(740,118
)
Compensation to directors and supervisors
(120,000
)
(120,000
)
(120,000
)
Stock dividends 60%
(6,102,000
)
(6,102,000
)
Bonus to employees stock
(307,600
)
(307,600
)
Bonus to employees cash
(92,400
)
(92,400
)
(92,400
)
Stock dividends from capital surplus 12%
Transfer of subsidiarys net gain on disposal of properties
(204
)
(204
)
Adjustment of equity in subsidiary due to change in percentage of
ownership
55,605
Net income in 1998
1,603,961
1,603,961
1,603,961
Transfer of net gain on disposal of properties
(1,410
)
(1,410
)
Unrealized loss on long-term investment in shares of stock
(703,865
)
(703,865
)
Cumulative translation adjustments (Note 2)
97,854
97,854
BALANCE, DECEMBER 31, 1998
NT$
1,695,998
NT$
3,085,527
NT$
(703,865
)
NT$
503,973
NT$
21,874,808
Table of Contents
CAPITAL STOCK (NT$10 Par Value)
RETAINED EARNINGS
Issued and
Outstanding
CAPITAL
Authorized
SURPLUS
Legal
Shares
Shares
Amount
(Note 2)
Reserve
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 1999
2,200,000,000
1,780,000,000
NT$
17,800,000
NT$1,189,173
NT$
1,389,529
Increase in authorized capital, June 9, 1999
200,000,000
Appropriations of 1998 earnings (Note 15)
Legal reserve
160,255
Compensation to directors and supervisors
Stock dividends 7.8%
138,840,000
1,388,400
Bonus to employees stock
9,540,000
95,400
Bonus to employees cash
Stock dividends from capital surplus 2.9%
51,620,000
516,200
(516,200
)
Transfer of subsidiarys net gain on disposal of properties
4,931
Transfer of net gain on disposal of properties
736
Adjustment of equity in subsidiary due to change in percentage of
ownership
5,034
Net income in 1999
Reversal of unrealized loss on long-term investment in shares of
stock
Cumulative translation adjustments (Note 2)
BALANCE, DECEMBER 31, 1999
2,400,000,000
1,980,000,000
NT$
19,800,000
NT$683,674
NT$
1,549,784
RETAINED EARNINGS
UNREALIZED
LOSS ON
LONG-TERM
CUMULATIVE
INVESTMENT IN
TRANSLATION
TOTAL
Unappropriated
SHARES OF
ADJUSTMENTS
SHAREHOLDERS
Earnings
Total
STOCK (Note 2)
(Note 2)
EQUITY
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 1999
NT$
1,695,998
NT$
3,085,527
NT$
(703,865
)
NT$
503,973
NT$
21,874,808
Increase in authorized capital, June 9, 1999
Appropriations of 1998 earnings (Note 15)
Legal reserve
(160,255
)
Compensation to directors and supervisors
(28,800
)
(28,800
)
(28,800
)
Stock dividends 7.8%
(1,388,400
)
(1,388,400
)
Bonus to employees stock
(95,400
)
(95,400
)
Bonus to employees cash
(5,500
)
(5,500
)
(5,500
)
Stock dividends from capital surplus 2.9%
Transfer of subsidiarys net gain on disposal of properties
(4,931
)
(4,931
)
Transfer of net gain on disposal of properties
(736
)
(736
)
Adjustment of equity in subsidiary due to change in percentage of
ownership
(113,080
)
(113,080
)
(108,046
)
Net income in 1999
7,794,666
7,794,666
7,794,666
Reversal of unrealized loss on long-term investment in shares of
stock
703,865
703,865
Cumulative translation adjustments (Note 2)
(173,957
)
(173,957
)
BALANCE, DECEMBER 31, 1999
NT$
7,693,562
NT$
9,243,346
NT$
NT$
330,016
NT$
30,057,036
Table of Contents
CAPITAL STOCK (NT$10 Par Value)
RETAINED EARNINGS
Issued and
Outstanding
CAPITAL
Authorized
SURPLUS
Legal
Unappropriated
Shares
Shares
Amount
(Note 2)
Reserve
Earnings
Total
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 2000
2,400,000,000
1,980,000,000
NT$
19,800,000
NT$
683,674
NT$
1,549,784
NT$
7,693,562
NT$
9,243,346
Convertible bonds converted into common shares
355,086
3,551
32,102
Adjustment of equity in subsidiary due to change in percentage of
ownership
57,410
(83,108
)
(83,108
)
Net income for six months ended June 30, 2000
2,920,824
2,920,824
Cumulative translation adjustment (Note 2)
BALANCE, JUNE 30, 2000 (Unaudited)
2,400,000,000
1,980,355,086
NT$
19,803,551
NT$
773,186
NT$
1,549,784
NT$
10,531,278
NT$
12,081,062
UNREALIZED
LOSS ON
LONG-TERM
CUMULATIVE
INVESTMENT IN
TRANSLATION
TOTAL
SHARES OF
ADJUSTMENTS
SHAREHOLDERS
STOCK (Note 2)
(Note 2)
EQUITY
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 2000
NT$
NT$
330,016
NT$
30,057,036
Convertible bonds converted into common shares
35,653
Adjustment of equity in subsidiary due to change in percentage of
ownership
(25,698
)
Net income for six months ended June 30, 2000
2,920,824
Cumulative translation adjustment (Note 2)
(182,386
)
(182,386
)
BALANCE, JUNE 30, 2000 (Unaudited)
NT$
NT$
147,630
NT$
32,805,429
Table of Contents
CAPITAL STOCK (NT$10 Par Value)
Issued and
Outstanding
CAPITAL
Authorized
SURPLUS
Shares
Shares
Amount
(Note 2)
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 1999
2,200,000,000
1,780,000,000
US$
577,922
US$
38,610
Increase in authorized capital, June 9, 1999
200,000,000
Appropriations of 1998 earnings (Note 15)
Legal reserve
Compensation to directors and supervisors
Stock dividends 7.8%
138,840,000
45,078
Bonus to employees stock
9,540,000
3,097
Bonus to employees cash
Stock dividends from capital surplus 2.9%
51,620,000
16,760
(16,760
)
Transfer of subsidiarys gain on disposal of properties
160
Transfer of net gain on disposal of properties
24
Adjustment of equity in subsidiary due to change in percentage of
ownership
163
Net income in 1999
Reversal of unrealized loss on long-term investment in shares of
stock
Cumulative translation adjustments (Note 2)
BALANCE, DECEMBER 31, 1999
2,400,000,000
1,980,000,000
US$
642,857
US$
22,197
RETAINED EARNINGS
UNREALIZED
LOSS ON
LONG-TERM
CUMULATIVE
INVESTMENT IN
TRANSLATION
TOTAL
Legal
Unappropriated
SHARES OF
ADJUSTMENTS
SHAREHOLDERS
Reserve
Earnings
Total
STOCK (Note 2)
(Note 2)
EQUITY
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 1999
US$
45,115
US$
55,064
US$
100,179
US$
(22,853
)
US$
16,363
US$
710,221
Increase in authorized capital, June 9, 1999
Appropriations of 1998 earnings (Note 15)
Legal reserve
5,203
(5,203
)
Compensation to directors and supervisors
(935
)
(935
)
(935
)
Stock dividends 7.8%
(45,078
)
(45,078
)
Bonus to employees stock
(3,097
)
(3,097
)
Bonus to employees cash
(179
)
(179
)
(179
)
Stock dividends from capital surplus 2.9%
Transfer of subsidiarys gain on disposal of properties
(160
)
(160
)
Transfer of net gain on disposal of properties
(24
)
(24
)
Adjustment of equity in subsidiary due to change in percentage of
ownership
(3,671
)
(3,671
)
(3,508
)
Net income in 1999
253,074
253,074
253,074
Reversal of unrealized loss on long-term investment in shares of
stock
22,853
22,853
Cumulative translation adjustments (Note 2)
(5,648
)
(5,648
)
BALANCE, DECEMBER 31, 1999
US$
50,318
US$
249,791
US$
300,109
US$
US$
10,715
US$
975,878
Table of Contents
CAPITAL STOCK (NT$10 Par Value)
Issued and
Outstanding
CAPITAL
Authorized
SURPLUS
Shares
Shares
Amount
(Note 2)
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 2000
2,400,000,000
1,980,000,000
US$
642,857
US$
22,197
Convertible bonds converted into common shares
355,086
115
1,042
Adjustment of equity in subsidiary due to change in percentage of
ownership
1,864
Net income for six months ended June 30, 2000
Cumulative translation adjustment (Note 2)
BALANCE, JUNE 30, 2000 (Unaudited)
2,400,000,000
1,980,355,086
US$
642,972
US$
25,103
RETAINED EARNINGS
UNREALIZED
LOSS ON
LONG-TERM
CUMULATIVE
INVESTMENT IN
TRANSLATION
TOTAL
Legal
Unappropriated
SHARES OF
ADJUSTMENTS
SHAREHOLDERS
Reserve
Earnings
Total
STOCK (Note 2)
(Note 2)
EQUITY
(In Thousands, Except Share Data)
BALANCE, JANUARY 1, 2000
US$
50,318
US$
249,791
US$
300,109
US$
US$
10,715
US$
975,878
Convertible bonds converted into common shares
1,157
Adjustment of equity in subsidiary due to change in percentage of
ownership
(2,698
)
(2,698
)
(834
)
Net income for six months ended June 30, 2000
94,832
94,832
94,832
Cumulative translation adjustment (Note 2)
(5,922
)
(5,922
)
BALANCE, JUNE 30, 2000 (Unaudited)
US$
50,318
US$
341,925
US$
392,243
US$
US$
4,793
US$
1,065,111
Table of Contents
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
1997
1998
1999
1999
1999
2000
2000
NT$
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Motorola SPS Businesses
(4,259,541
)
(138,297
)
Acquisition of ISE Labs, Inc.
(3,014,427
)
(97,871
)
(3,014,427
)
Acquisition of fixed assets
(8,030,125
)
(6,944,980
)
(9,869,161
)
(320,427
)
(2,593,926
)
(13,140,580
)
(426,642
)
Payments for long-term investments:
Shares of stock
(846,522
)
(2,598,519
)
(3,538,728
)
(114,894
)
(3,349,229
)
(1,500,000
)
(48,702
)
Bonds
(285,790
)
(190,039
)
Increase in other assets
(657,445
)
(462,699
)
(202,668
)
(6,580
)
(134,384
)
(516,046
)
(16,755
)
Proceeds from sales of:
Properties
219,326
493,898
361,149
11,726
50,736
161,382
5,240
Shares of stock:
ASE Inc.
75,672
3,170,957
102,953
ASE Test Limited
5,495,021
214,865
4,718,324
153,192
4,505,479
Bonds
282,306
9,166
Purchase of ASE Test Limited shares
(962,119
)
(2,676,952
)
Net cash used in investing activities
(5,067,654
)
(12,088,754
)
(12,351,789
)
(401,032
)
(4,535,751
)
(14,995,244
)
(486,859
)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayments of):
Issuance of foreign convertible bonds
6,420,000
3,460,050
112,340
3,268,000
Long-term debts
2,010,786
828,345
4,201,517
136,413
3,218,508
1,560,202
50,656
Commercial papers and bank acceptances payable
923,217
807,665
(517,031
)
(16,787
)
(553,920
)
856,571
27,811
Proceeds from (repayments of) short-term borrowings
1,020,861
(692,274
)
1,218,200
39,552
2,998,249
3,480,643
113,008
Repayments of long-term domestic bonds payable
(200,000
)
Increase (decrease) in deferred intercompany profit
185,244
(22,008
)
(61
)
(2
)
Increase (decrease) in minority interest
993,871
(119,994
)
231,591
7,519
113,461
344,619
11,189
Compensation to directors and supervisors and bonus to employees
(63,680
)
(212,400
)
(28,800
)
(935
)
Net cash provided by financing activities
11,290,299
589,334
8,565,527
278,102
9,044,298
6,241,974
202,662
Effect of exchange rate changes
1,030,683
78,905
(168,350
)
(5,466
)
(44,378
)
(168,969
)
(5,486
)
NET INCREASE (DECREASE) IN CASH
9,438,585
(2,695,894
)
3,635,211
118,027
6,788,821
(5,569,255
)
(180,820
)
CASH, BEGINNING OF YEAR (PERIOD)
1,431,210
10,869,795
8,173,901
265,386
8,173,901
11,809,112
383,413
CASH, END OF YEAR (PERIOD)
10,869,795
8,173,901
11,809,112
383,413
14,962,722
6,239,857
202,593
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
1997
1998
1999
1999
1999
2000
2000
NT$
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
SUPPLEMENTAL INFORMATION
Interest paid (excluding capitalized interest)
333,623
542,590
787,106
25,555
308,479
522,665
16,970
Income tax paid
152,254
293,901
397,065
12,892
241,322
400,032
12,988
Acquisition of fixed assets
8,237,441
7,447,692
11,097,395
360,305
2,794,345
15,032,862
488,080
Increase in payable
(207,316
)
(502,712
)
(1,228,234
)
(39,878
)
(200,419
)
(1,892,282
)
61,438
Cash paid for acquisition of fixed assets
8,030,125
6,944,980
9,869,161
320,427
2,593,926
13,140,580
426,642
Total assets acquired from acquisition of Motorola SPS Businesses
12,783,224
415,040
Less: liabilities assumed
1,627,383
52,837
Payable amounts
11,155,841
362,203
Less: payable balance at end of year
5,474,780
177,753
Cash paid
5,681,061
184,450
Less: cash received at the date of acquisition
1,421,520
46,153
Net cash outflow
4,259,541
138,297
Total assets acquired from acquisition of ISE Labs, Inc.
4,671,849
151,684
4,671,849
Less: liabilities assumed
1,371,453
44,528
1,371,453
Cash paid
3,300,396
107,156
3,300,396
Less: cash received at the date of acquisition
285,969
9,285
285,969
Net cash outflow
3,014,427
97,871
3,014,427
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Table of Contents
Table of Contents
Table of Contents
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Mutual funds
480,000
186,667
6,060
2,976,713
96,647
Stocks
228,113
19,613
637
4,698
152
Convertible bonds and government bonds
10,000
325
20,198
656
708,113
216,280
7,022
3,001,609
97,455
Allowance for loss
(60,904
)
647,209
216,280
7,022
3,001,609
97,455
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Accounts receivable
3,383,809
7,496,669
243,398
8,753,286
284,198
Allowance for doubtful accounts
(84,708
)
(187,162
)
(6,076
)
(246,728
)
(8,011
)
Allowance for sales allowances
(53,000
)
(47,092
)
(1,529
)
(66,719
)
(2,166
)
3,246,101
7,262,415
235,793
8,439,839
274,021
Table of Contents
Doubtful
Sales
NT$
Accounts
Allowances
NT$
NT$
Balance, beginning of 1997
47,486
5,500
Additions
32,933
7,000
Deductions
Balance, end of 1997
80,419
12,500
Additions
4,289
40,500
Deductions
Balance, end of 1998
84,708
53,000
Additions
109,263
Deductions
(6,809
)
(5,908
)
Balance, end of 1999
187,162
47,092
Additions
74,662
19,757
Deductions
(15,096
)
(130
)
Balance, June 30, 2000 (unaudited)
$
246,728
$
66,719
US$
US$
US$
Balance, end of 1998
2,750
1,721
Additions
3,548
Deductions
(222
)
(192
)
Balance, end of 1999
6,076
1,529
Additions
2,425
641
Deductions
(490
)
(4
)
Balance, June 30, 2000 (unaudited)
8,011
2,166
Table of Contents
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Finished goods
114,830
122,193
3,967
196,636
6,384
Work in process
384,882
349,910
11,361
464,818
15,091
Raw materials
1,120,060
1,685,424
54,722
1,606,942
52,174
General supplies and spare parts
253,526
379,775
12,330
400,073
12,989
1,873,298
2,537,302
82,380
2,668,469
86,638
Allowance for obsolescence
(199,018
)
(176,205
)
(5,721
)
(169,793
)
(5,513
)
1,674,280
2,361,097
76,659
2,498,676
81,125
Supplies in transit
70,509
88,594
2,876
212,233
6,891
1,744,789
2,449,691
79,535
2,710,909
88,016
Allowance for
Obsolescence
NT$
NT$
Balance, beginning of 1997
102,494
Additions
100,782
Deductions
Balance, end of 1997
203,276
Additions
106,708
Deductions
(110,966
)
Balance, end of 1998
199,018
Additions
50,566
Deductions
(73,379
)
Balance, end of 1999
176,205
Additions
258,046
Deductions
(264,458
)
Balance, June 30, 2000 (unaudited)
169,793
Table of Contents
Allowance for
Obsolescence
US$
US$
Balance, end of 1998
6,462
Additions
1,642
Deductions
(2,383
)
Balance, end of 1999
5,721
Additions
8,378
Deductions
(8,586
)
Balance, June 30, 2000 (unaudited)
5,513
December 31,
June 30,
1998
1999
2000
% of
% of
% of
Direct
Direct
Direct
NT$
Ownership
NT$
US$
Ownership
NT$
US$
Ownership
(Unaudited)
Equity method
Hung Ching Development & Construction Co. (HCDC)
(Note 10)
2,428,613
24.9
2,405,571
78,103
25.1
2,250,280
73,061
25.1
Hung Ching Kwan Co. (HCKC)
392,363
27.3
401,664
13,041
27.3
406,202
13,189
27.3
Universal Scientific Industrial Co., Ltd. (USI) (Note 10)
3,600,626
116,904
22.7
3,623,827
117,657
22.2
Cost method
ASE stock held by subsidiaries
4,704,995
6.9
2,922,561
94,888
5.2
2,922,561
94,888
5.2
InveStar Burgeon Venture Capital, Inc.
148,898
13.0
145,408
4,721
13.0
142,380
4,623
13.0
Core-Pacific Securities Investment Trust Co.
9,000
3.0
9,000
292
3.0
9,000
292
3.0
Taiwan Fixed Network Co., Ltd.
1,500,000
48,701
1.63
7,683,869
9,484,830
307,949
10,854,250
352,411
Adjustment for evaluation of ASE stock
(829,291
)
Unrealized gain on sale of land
(300,149
)
(300,149
)
(9,745
)
(300,149
)
(9,745
)
6,554,429
9,184,681
298,204
10,554,101
342,666
Table of Contents
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Fai Insurances Ltd. bond: maturity date on July 1, 1999;
bearing interest at 9.625%; and payable annually
260,784
APP Global Finance Ltd. bond: maturity date on October 4,
2001; bearing interest at 9.75%; and payable semiannually
311,791
304,166
9,876
298,192
9,681
Federal National Mortgage Association: maturity date on
May 2, 2001; bearing interest at 6.40%; and payable
semiannually
190,039
185,585
6,025
181,720
5,900
762,614
489,751
15,901
479,912
15,581
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Buildings and improvements
420,524
966,103
31,367
1,102,852
35,807
Machinery and equipment
7,372,729
13,451,590
436,740
16,261,574
527,973
Transportation equipment
22,119
21,949
712
31,642
1,027
Furniture and fixtures
145,346
369,481
11,996
341,337
11,083
Leased assets and leasehold improvements
15,942
147,336
4,784
167,599
5,442
Long leasehold land
4,025
4,925
160
5,309
172
7,980,685
14,961,384
485,759
17,910,313
581,504
Table of Contents
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Bonders
563,574
460,551
14,953
1,662,995
53,993
Testers
409,547
640,250
20,787
2,416,003
78,442
Others
387,763
2,224,128
72,212
3,336,468
108,327
Total
1,360,884
3,324,929
107,952
7,415,466
240,762
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Deferred charges (Note 2)
Tooling
275,259
271,646
8,820
218,978
7,110
Issuance costs of convertible bonds
126,500
189,730
6,160
160,744
5,219
Telecommunications, electrical and computer network systems
106,715
142,266
4,619
190,494
6,185
Other
92,184
72,035
2,339
189,195
6,143
600,658
675,677
21,938
759,411
24,657
Deferred income tax assets net (Notes 2 and 17)
312,979
Guarantee deposits
64,085
86,542
2,810
106,255
3,450
Non-operating properties
68,093
54,860
1,781
224,268
7,281
Other
80,067
135,678
4,405
58,644
1,904
1,125,882
952,757
30,934
1,148,578
37,292
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Motorola SPS Businesses (Note 26)
427,944
13,894
403,853
13,112
ISE Labs shares (Note 26)
2,056,775
66,779
1,988,117
64,549
ASE Test shares
3,237,264
2,749,558
89,271
2,531,587
82,195
Other
11,551
375
11,310
367
3,237,264
5,245,828
170,319
4,934,867
160,223
Table of Contents
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
HCDC
1,090,974
935,886
30,386
858,342
27,868
USI
1,862,225
60,462
1,762,825
57,235
1,090,974
2,798,111
90,848
2,621,167
85,103
December 31,
June 30,
1998
1999
2000
Interest
Interest
Interest
Rate (%)
NT$
Rate (%)
NT$
US$
Rate (%)
NT$
US$
(Unaudited)
Letters of credit
1.18.575
1,085,096
6.578.515
1,160,916
37,692
0.70828.01
2,647,148
85,946
Revolving
7.58.25
1,484,351
1.48
1,601,589
52,000
1.378.25
3,631,238
117,897
Promissory notes
6.668.45
1,025,142
33,284
7.858.7
1,204,362
39,103
2,569,447
3,787,647
122,976
7,482,748
242,946
Table of Contents
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Foreign convertible bonds US$200 million
6,453,000
6,292,000
204,286
6,142,135
199,420
Foreign convertible bonds US$110 million
3,460,050
112,339
3,384,612
109,890
Accrued interest
490,703
1,075,613
34,923
1,434,157
46,563
6,943,703
10,827,663
351,548
10,960,904
355,873
a.
(i) the closing price of the common shares for a period of
30 consecutive trading days is higher than 140% of the conversion
price (NT$81 per share as at June 30, 2000) in effect on
each such trading day and (ii) the closing price of the
common shares translated into U.S. dollars at the prevailing
rate for a period of 30 consecutive trading days is higher than
140% of the conversion price then in effect translated into
U.S. dollars at the rate of NT$28.62 = US$1.00; or
b.
at least 95% of the bonds have already been converted, redeemed,
or purchased and cancelled.
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Table of Contents
a. Redemption for taxation reasons:
If the applicable tax law or treaty is unfavorably revised, the
Issuer or ASE Test may redeem the Convertible Notes in whole at
the early redemption price, at any time upon giving written
notice not less than 30 days and not more than 60 days
to the holders.
b. Redemption at the option of the Issuer:
On or at any time after July 1, 2002, the Issuer may redeem
all or a part of the Bonds at the early redemption price.
December 31,
June 30,
1998
1999
1999
2000
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Mortgage bank loans for purchase of machinery
4,859,508
4,272,641
138,722
3,451,021
112,046
Acceptances payable to syndicate banks
1,985,354
6,947,225
225,559
7,240,327
235,076
Bank loans secured by assets
112,400
921,978
29,934
775,406
25,176
Revolving bank loans
323,298
315,317
10,238
983,163
31,921
Obligation under capital leases (Note 22)
30,873
168,829
5,482
199,831
6,488
7,311,433
12,625,990
409,935
12,649,748
410,707
Current portion
2,020,155
2,886,351
93,713
2,533,342
82,252
5,291,278
9,739,639
316,222
10,116,406
328,455
1) Without the prior written consent from the majority of
the banks, ASE cannot:
a) Give guarantees to, or assume direct or indirect liabilities
of other parties, except for its existing obligations, in excess
of US$40 million (NT$1,232 million).
b) Enter into a merger agreement.
c) Transfer or sell more than 20% of its total assets, including
equipment and receivables.
d) Provide collateral to other parties involving 25% of its total
assets.
e) Make loans to other parties.
f) Enter into contracts with terms and conditions which are not
at arms length.
g) Change significantly its accounting practices.
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h) Invest up to 50% of its equity in shares of HCDC.
2) Maintenance by ASE of certain financial ratios.
December 31,
June 30,
1998
1999
1999
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Principal five-year revolving credit lines
aggregating NT$8,000,000 (US$259,740) through June 2003,
interest at 5.038%-5.75% in 1998, 4.66%-6.2558% in 1999 and
5.223%-6.379% in 2000
2,010,000
7,075,000
229,708
7,375,000
239,448
Unamortized discounts
(24,646
)
(127,775
)
(4,149
)
(134,673
)
(4,372
)
1,985,354
6,947,225
225,559
7,240,327
235,076
1) Without the prior written consent from the majority of
the banks, ASE can not pledge its assets or assume liabilities or
change its operating items or merge with any other entity or
dispose of more than 20% of total assets, or provide financing to
any other entity, or make such investment that will unfavorably
affect its financial condition.
2) ASEs tangible net worth (as defined) should not be
less than NT$19 billion (US$617 million).
3) ASE can only invest up to 50% of its tangible net worth
(as defined) in the shares of HCDC.
4) ASE is required to maintain certain financial ratios.
5) ASE is required to pay an annual commitment fee at
0.15-0.2% of the difference between the authorized and utilized
credit line.
6) ASE should not change its accounting policies
significantly.
1) Merge or consolidate with any other entity or take any
action to dissolve, liquidate or reorganize.
2) Purchase or redeem its shares or reduce its share
capital.
3) Reduce its ownership in ASE Test, Inc. to less than 51%.
4) Transfer, sell, lease or dispose of a substantial
portion of its assets.
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C.
Bank loans secured by assets
D.
Revolving bank loans
December 31, 1999
June 30, 2000
NT$
US$ (Note 2)
NT$
US$ (Note 2)
(Unaudited)
Within the following year
2,886,351
93,713
2,533,342
82,252
During the second year
3,419,632
111,027
4,606,602
149,565
During the third year
7,991,629
259,469
11,032,494
358,198
During the fourth year
5,201,909
168,893
1,268,306
41,179
During the fifth year and thereafter
3,954,132
128,381
4,169,908
135,386
23,453,653
761,483
23,610,652
766,580
December 31,
June 30,
1998
1999
2000
(Unaudited)
New Taiwan Dollars
NT$
4,007,357
NT$
9,296,544
NT$
10,552,620
U.S. Dollars
US$
17,463
US$
361,117
US$
423,631
Deutsche Mark
DM
DM
2,897
DM
Japanese Yen
JPY
9,738,800
JPY
2,344,208
JPY
Singapore Dollars
SGD
SGD
24
SGD
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a. gain on disposal of properties, less applicable
income tax, as capital surplus;
b. offset against deficit, if any;
c. 10% of the remainder as legal reserve, until the
accumulated amount equals paid-in capital;
d. an amount (Note 6) equal to the income from
long-term investments in shares of stock accounted for by equity
method, excluding cash dividends, as special reserve;
e. not more than 2% of the remainder as compensation
to directors and supervisors;
f. 5% to 7% of the remainder as bonus to employees, of
which 5% will be distributed in shares based on the employee
stock bonus plan and the excess to be distributed to specific
employees as decided by the board of directors; and
g. the remainder, as dividends to shareholders.
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Year Ended December 31,
Six Months Ended June 30,
1997
1998
1999
1999
2000
NT$
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Sale of ASE Tests shares
4,870,929
190,999
4,007,674
130,119
3,833,870
Sale of ASEs shares held by subsidiaries (Note 27)
42,692
1,388,523
45,082
Other
373,253
147,958
4,804
50,947
4,870,929
606,944
5,544,155
180,005
3,884,817
Table of Contents
Six Months Ended
Year Ended December 31,
June 30,
1997
1998
1999
1999
2000
NT$
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
U.S. secondary public offering of 2,244,000 shares in June and
July 1997
2,211,078
First offering of 1,400,000 shares sold to third party investors
for issuances of Taiwan Depositary Receipts
(TDRs) in December 1997
2,659,851
Sale of 100,000 shares for issuance of TDR from January to March
1998
190,999
Secondary offering of 2,500,000 shares for issuances of TDRs in
March 1999
4,007,674
130,119
3,833,870
4,870,929
190,999
4,007,674
130,119
3,833,870
Year Ended
Six Months
December 31,
Ended June 30,
1998
1999
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
1,405,000 shares sold in December 1998
42,692
32,450,000 shares sold in December 1999
through the re-issuance of GDSs
1,388,523
45,082
42,692
1,388,523
45,082
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
1997
1998
1999
1999
2000
NT$
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Current
Tax based on pre-tax accounting income at statutory rate
2,358,582
819,508
3,218,520
104,497
1,451,079
1,580,926
51,329
Add (less) tax effects of:
Permanent differences
Tax-exempt income
tax holiday
(535,949
)
(508,822
)
(779,437
)
(25,306
)
(293,923
)
(464,051
)
(15,067
)
gain from sales of securities
(384,079
)
(12,470
)
(8,784
)
(5,955
)
(193
)
Investment income sale of ASE Test shares
(1,217,732
)
(47,750
)
(1,001,919
)
(32,530
)
(958,468
)
Unamortized expense for issuance of GDS
(9,540
)
(4,770
)
Temporary differences
Investment (income) loss
(212,548
)
(132,528
)
(398,886
)
(12,951
)
48,899
(268,712
)
(8,724
)
Unfunded pension costs
11,082
16,357
8,494
276
4,122
4,915
159
Unrealized foreign exchange (gain) loss
13,183
(6,265
)
(38,701
)
(1,257
)
69,870
(63,920
)
(2,075
)
Provision for (reversal of) loss on short-term investments
5,375
(2,695
)
(2,680
)
(87
)
Bond interest payable
17,332
109,442
112,318
3,647
56,137
55,677
1,807
Depreciation
(5,141
)
33,219
209,580
6,805
46,386
1,506
Other
146,645
23,371
41,865
1,359
45,970
(28,588
)
(928
)
571,289
299,067
985,075
31,983
414,902
856,678
27,814
Credits for investments and research and development
(288,415
)
(138,923
)
(401,525
)
(13,036
)
(166,008
)
(502,169
)
(16,304
)
Deferred
42,764
(267,511
)
(155,437
)
(5,047
)
(84,911
)
29,598
961
Income taxes (10%) on undistributed earnings generated in 1998
44,539
1,446
124,974
4,058
Adjustment of prior years income tax
49,227
(43,410
)
(13,109
)
(426
)
(9,850
)
(320
)
Income tax (benefit) expense
374,865
(150,777
)
459,543
14,920
163,983
499,231
16,209
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
1997
1998
1999
1999
2000
NT$
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Domestic entities in ROC (25% statutory rate)
2,139,587
537,192
2,717,796
88,240
1,259,985
1,254,332
40,725
Foreign entities
ASE Korea (30.8% statutory rate)
55,770
1,811
51,486
1,672
ISE Labs (33% statutory rate)
163,240
5,300
82,689
78,932
2,563
ASE Test Malaysia (30% statutory rate)
218,995
282,316
281,714
9,146
108,405
196,176
6,369
2,358,582
819,508
3,218,520
104,497
1,451,079
1,580,926
51,329
December 31,
June 30,
1998
1999
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Current assets
Unused tax credits
220,424
470,956
15,291
706,219
22,929
Provision for inventory obsolescence
46,341
35,141
1,141
21,619
702
Provision for doubtful accounts and sales allowance
14,341
34,500
1,120
23,937
777
Unrealized foreign exchange loss
10,979
2,292
74
6,091
198
Other
71,449
129,184
4,194
135,566
4,401
363,534
672,073
21,820
893,432
29,007
Valuation allowance
(107,159
)
(152,738
)
(4,959
)
(81,816
)
(2,656
)
256,375
519,335
16,861
811,616
26,351
Deferred income tax liability unrealized foreign
exchange gain
(26,802
)
(870
)
(8,000
)
(260
)
256,375
492,533
15,991
803,616
26,091
Non-current assets (liabilities)
Unused tax credits
944,902
1,152,528
37,420
837,228
27,183
Accrued pension costs
39,953
44,203
1,435
50,116
1,627
Accrued interest on convertible bonds
122,676
229,186
7,441
279,778
9,084
Loss carryforward
110,258
260,523
8,458
Others
4,604
11,909
387
117,880
3,827
Table of Contents
December 31,
June 30,
1998
1999
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
1,222,393
1,698,349
55,141
1,285,002
41,721
Valuation allowance
(421,414
)
(589,916
)
(19,153
)
(286,940
)
(9,316
)
800,979
1,108,433
35,988
998,062
32,405
Deferred income tax liability
Investment income
(475,000
)
(675,000
)
(21,915
)
(929,000
)
(30,162
)
Unrealized foreign exchange gain
(13,000
)
(56,600
)
(1,838
)
(17,000
)
(552
)
Goodwill amortization
(156,952
)
(5,096
)
(80,993
)
(2,630
)
Others
(226,471
)
(7,353
)
(223,508
)
(7,257
)
(488,000
)
(1,115,023
)
(36,202
)
(1,250,501
)
(40,601
)
312,979
(6,590
)
(214
)
(252,439
)
(8,196
)
December 31, 1999
ASE
ASE
ASE
ASE
Year of Expiry
ASE
Chung Li
Technologies
Material
Test, Inc.
Total
2000
$
$
$
12,183
$
$
91,636
$
103,819
2001
14,514
254,506
269,020
2002
34,559
18,460
27,665
153,183
233,867
2003
616,210
53,220
971
28,710
164,956
864,067
$
650,769
$
53,220
$
46,128
$
56,375
$
664,281
$
1,470,773
Table of Contents
June 30, 2000 (Unaudited)
ASE
ASE
ASE
Year of Expiry
ASE
Chung Li
Material
Test, Inc.
Total
2000
$
$
$
$
37,976
$
37,976
2001
254,506
254,506
2002
27,665
153,183
180,848
2003
30,234
222,900
253,134
2004
673,000
75,807
68,176
816,983
$
673,000
$
75,807
$
57,899
$
736,741
$
1,543,447
Year Ended December 31,
1997
1998
1999
NT$
NT$
NT$
US$
Balance, beginning of year
$
112,377
$
145,726
$
186,412
$
6,053
Contributions
26,843
32,358
34,410
1,117
Payments
(200
)
(2,738
)
(574
)
(19
)
Interest income
6,706
11,066
11,957
388
Balance, end of year
$
145,726
$
186,412
$
232,205
$
7,539
Table of Contents
Year Ended December 31,
1997
1998
1999
NT$
NT$
NT$
US$
Service costs
$
63,724
$
76,656
$
56,870
$
1,846
Interest
20,050
28,075
23,243
755
Projected return on pension assets
(8,661
)
(11,491
)
(12,543
)
(407
)
Amortization of prior period service cost, gain or loss on plan
assets, etc.
6,288
6,426
2,689
87
$
81,401
$
99,666
$
70,259
$
2,281
December 31,
1997
1998
1999
NT$
NT$
NT$
US$
a. Benefit obligations
Accumulated benefit
obligation
154,674
163,174
209,543
6,803
Additional benefits
based on future salaries
247,961
196,843
228,743
7,427
Projected benefit
obligation
402,635
360,017
438,286
14,230
Fair value of assets
(146,010
)
(188,433
)
(211,576
)
(6,869
)
Funded status
256,625
171,584
226,710
7,361
Unrealized prior
service costs
(7,299
)
(6,951
)
(226
)
Unrecognized net
transition obligation
(129,433
)
(118,034
)
(114,468
)
(3,716
)
Unrecognized gain
(loss) of pension assets
(24,882
)
124,207
92,854
3,015
Additional liability
1,088
Portion in other
current liabilities
(2,278
)
(2,397
)
(8,956
)
(291
)
Accrued pension cost
101,120
168,061
189,189
6,143
b. Vested obligation
1,925
240
2,162
70
c. Actuarial assumption
Discount rate
7%
6.5% 7%
6.5% 7%
Increase in future
salary level
6%
5% 6%
4% 5.5%
Expected rate of return
on plan assets
7%
6.5% 7%
6.5% 7%
Table of Contents
December 31,
June 30,
1998
1999
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Land
29,472
Buildings and improvements
131,913
Machinery and equipment
3,844,803
4,427,859
143,762
6,966,240
226,177
Long-term investments
1,889,716
1,785,323
57,965
1,653,743
53,693
Time deposits
26,820
428,137
13,900
35,115
1,140
Guarantee deposits time deposits
275,018
55,219
1,793
67,244
2,183
6,197,742
6,696,538
217,420
8,722,342
283,193
Table of Contents
Operating Leases
NT$
US$
July 1, 2000 June 30, 2000
127,811
4,150
July 1, 2001 June 30, 2002
73,992
2,402
July 1, 2002 June 30, 2003
39,188
1,272
July 1, 2003 June 30, 2004
24,629
800
Thereafter
4,116
134
Total minimum lease payments
269,736
8,758
December 31,
June 30,
1998
1999
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Within the following year
19,399
79,274
2,574
99,407
3,227
Within the second year
11,200
63,028
2,046
77,208
2,507
Within the third year
2,478
40,225
1,306
44,101
1,432
Within the fourth year
7,235
235
Total minimum lease payments
33,077
189,762
6,161
220,716
7,166
Less: imputed interest
(2,204
)
(20,933
)
(680
)
(20,885
)
(678
)
Present value of future lease obligations
30,873
168,829
5,481
199,831
6,488
Capital lease obligation, current
(17,992
)
(72,013
)
(2,338
)
(90,035
)
(2,923
)
Capital lease obligation, long-term
12,881
96,816
3,143
109,796
3,565
Table of Contents
December 31, 1999
June 30, 2000
NT$
US$
NT$
US$
(Unaudited)
ASE (Labuan)
3,257,551
105,765
3,206,133
104,095
ASE Technologies
658,560
21,382
878,165
28,512
ASE Holding
125,440
4,073
123,460
4,009
ASE (Philippines)
1,599,360
51,927
1,574,115
51,108
ASE Investment
300,000
9,740
300,000
9,740
ASE Material
392,000
12,727
385,813
12,526
ASE Chung Li
2,352,000
76,364
2,314,875
75,158
HCDC
960,000
31,169
8,684,911
281,978
9,742,561
316,317
Table of Contents
Amount
Strike Price
Contract
(Thousand)
US$/JPY
Maturity Date
Selling put
USD 20,000
140.70 (US$/JP¥
)
Dec. 15, 1998
Selling put
USD 20,000
137.00 (US$/JP¥
)
Dec. 15, 1998
Selling put
USD 20,000
138.00 (US$/JP¥
)
Dec. 14, 1998
Selling put
USD 20,000
140.70 (US$/JP¥
)
Oct. 15, 1998
Selling put
USD 10,000
141.50 (US$/JP¥
)
Nov. 4, 1999
Selling put
USD 5,000
141.50 (US$/JP¥
)
Nov. 4, 1999
Selling put
USD 40,000
137.50 (US$/JP¥
)
Nov. 11, 1999
Selling call
USD 5,000
30.90 (US$/NT$
)
July 17, 2000
Selling call
USD 2,000
111.00 (US$/JP¥
)
Aug. 15, 2000
Selling call
USD 4,000
107.00 (US$/JP¥
)
Aug. 24, 2000
Buying put
USD 2,000
30.75 (US$/NT$
)
Aug. 15, 2000
Buying put
USD 2,000
107.00 (US$/JP¥
)
July 26, 2000
Table of Contents
December 31,
June 30,
1998
1999
2000
Carrying
Fair
Carrying
Fair
Carrying
Fair
Carrying
Non-derivative financial instruments
Value
Value
Value
Value
Value
Value
Value
NT$
NT$
NT$
NT$
US$
US$
NT$
(Unaudited)
Assets
Cash
8,173,901
8,173,901
11,809,112
11,809,112
383,413
383,413
6,239,857
Short-term investments
647,209
647,209
216,280
228,864
7,022
7,431
3,001,409
Notes receivable
390,572
390,572
201,042
201,042
6,527
6,527
272,142
Accounts receivable net
3,246,101
3,246,101
7,262,415
7,262,415
235,793
235,793
8,439,839
Long-term investments
7,317,043
6,595,876
9,674,432
19,974,481
314,105
648,522
11,034,013
Liabilities
Short-term borrowings
2,569,447
2,569,447
3,787,647
3,787,647
122,976
122,976
7,482,748
C/ P and B/ A payable
2,220,624
2,220,624
1,703,593
1,703,593
55,311
55,311
2,306,773
Notes payable
214,858
214,858
Accounts payable
1,410,319
1,410,319
3,152,353
3,152,353
102,349
102,349
4,592,250
Long-term bonds payable
6,943,703
6,943,703
10,827,663
10,827,663
351,548
351,548
10,960,904
Long-term debts (included current portion)
7,311,433
7,311,433
12,625,990
12,625,990
409,935
409,935
12,649,748
Long-term payable for investments
5,474,780
5,474,780
177,752
177,752
5,360,281
June 30,
2000
Fair
Carrying
Fair
Non-derivative financial instruments
Value
Value
Value
NT$
US$
US$
(Unaudited)
Assets
Cash
6,239,857
202,593
202,593
Short-term investments
3,061,605
97,455
99,403
Notes receivable
272,142
8,836
8,836
Accounts receivable net
8,439,839
274,021
274,021
Long-term investments
22,973,747
358,247
745,901
Liabilities
Short-term borrowings
7,482,748
242,946
242,946
C/ P and B/ A payable
2,306,773
74,895
74,895
Notes payable
Accounts payable
4,592,250
149,099
149,099
Long-term bonds payable
10,960,904
355,873
355,873
Long-term debts (included current portion)
12,649,748
410,707
410,707
Long-term payable for investments
5,360,281
174,036
174,036
Year Ended December 31,
1997
1998
1999
% of
% of
% of
Total
Total
Total
NT$
Sales
NT$
Sales
NT$
US$
Sales
America
10,617,594
56
12,331,369
59
18,645,953
605,388
57
Domestic
6,231,124
33
6,301,536
31
9,427,343
306,083
29
Europe
662,635
3
625,742
3
852,110
27,666
3
Asia and other
areas
1,576,827
8
1,503,776
7
3,684,155
119,615
11
19,088,180
100
20,762,423
100
32,609,561
1,058,752
100
Six Months Ended June 30,
1999
2000
% of
% of
Total
Total
NT$
Sales
NT$
US$
Sales
(Unaudited)
(Unaudited)
America
7,063,898
59
15,314,550
497,226
65
Domestic
3,618,590
30
6,135,259
199,197
26
Europe
285,540
3
755,109
24,516
3
Asia and other
areas
945,701
8
1,392,232
45,202
6
11,913,729
100
23,597,150
766,141
100
Table of Contents
Year Ended December 31,
1997
1998
1999
% of
% of
% of
Total
Total
Total
Long-
Long-
Long-
lived
lived
lived
NT$
Assets
NT$
Assets
NT$
US$
Assets
Domestic
14,212,448
87
17,362,422
85
27,849,826
904,215
73
Asia
2,140,568
13
2,986,362
15
8,567,995
278,182
22
America
10,091
8,059
1,689,645
54,858
5
16,363,107
100
20,356,843
100
38,107,466
1,237,255
100
Six Months Ended June 30,
2000
% of
Total
NT$
US$
Sales
(Unaudited)
Domestic
35,652,312
1,157,542
73
Asia
9,658,138
313,576
20
America
3,593,990
116,688
7
48,904,440
1,587,806
100
Year Ended December 31,
1997
1998
1999
% of
% of
% of
Total
Total
Total
NT$
Sales
NT$
Sales
NT$
US$
Sales
Motorola, Inc.
1,297,431
7
1,508,662
7
5,155,573
167,389
16
VIA Technologies, Inc.
1,412,525
7
1,328,795
6
2,576,155
83,641
8
Six Months Ended June 30,
1999
2000
% of
% of
Total
Total
NT$
Sales
NT$
US$
Sales
(Unaudited)
(Unaudited)
Motorola, Inc.
506,815
4
6,040,027
196,105
26
VIA Technologies, Inc.
679,083
6
2,855,255
92,703
12
Packaging
Testing
Investing
All other
Total
NT$
NT$
NT$
NT$
NT$
1997
Revenue from external customer
15,334,317
2,383,326
1,370,537
19,088,180
Inter-segment revenues
Interest revenue
193,256
29,990
77,943
39,083
340,272
Interest expense
297,160
42,815
43,918
42,304
426,197
Net interest revenue (expense)
(103,904
)
(12,825
)
34,025
(3,221
)
(85,925
)
Depreciation and amortization
1,561,507
543,156
116
196,779
2,301,558
Segment profit
2,583,017
847,546
5,580,430
(868,272
)
8,142,721
Segment asset
27,038,426
6,129,129
10,481,075
1,510,500
45,159,130
Expenditures for segment assets
5,411,301
2,776,138
50,002
8,237,441
Table of Contents
Packaging
Testing
Investing
All other
Total
NT$
NT$
NT$
NT$
NT$
1998
Revenue from external customer
NT$
16,867,404
NT$
3,286,944
NT$
NT$
1,317,230
NT$
21,471,578
Inter-segment revenues
(155,666
)
(553,489
)
(709,155
)
Interest revenue
380,470
18,471
186,069
20,387
605,397
Interest expense
655,684
149,224
138,439
42,449
985,796
Net interest revenue (expense)
(275,214
)
(130,753
)
47,630
(22,062
)
(380,399
)
Depreciation and amortization
2,204,323
979,234
116
53,516
3,237,189
Segment profit
1,592,322
792,924
(209,595
)
(194,370
)
1,981,281
Segment asset
25,435,533
8,409,405
10,575,845
2,590,684
47,011,467
Expenditures for segment assets
4,225,601
1,976,084
1,246,007
7,447,692
1999
Revenue from external customer
NT$
24,522,968
NT$
7,874,728
NT$
NT$
1,207,287
NT$
33,604,983
Inter-segment revenues
(81,530
)
(913,892
)
(995,422
)
Interest revenue
25,219
227,616
84,567
85,756
423,158
Interest expense
714,780
264,939
137,515
352,561
1,469,795
Net interest revenue (expense)
(689,561
)
(37,323
)
(52,948
)
(266,805
)
(1,046,637
)
Depreciation and amortization
2,994,302
2,418,278
140
141,647
5,554,367
Segment profit
3,131,508
2,224,801
4,642,002
(935,870
)
9,062,441
Segment asset
35,318,472
16,203,198
11,840,510
13,968,595
77,330,775
Expenditures for segment assets
5,617,480
4,808,413
671,502
11,097,395
1999
Revenue from external customer
US$
796,200
US$
255,673
US$
US$
39,198
US$
1,091,071
Inter-segment revenues
(2,647
)
(29,672
)
(32,319
)
Interest revenue
819
7,390
2,746
2,784
13,739
Interest expense
23,207
8,602
4,465
11,447
47,721
Net interest revenue (expense)
(22,388
)
(1,212
)
(1,719
)
(8,663
)
(33,982
)
Depreciation and amortization
97,217
78,516
5
4,599
180,337
Segment profit
101,672
72,234
150,714
(30,385
)
294,235
Segment asset
1,146,703
526,078
384,432
453,526
2,510,739
Expenditures for segment assets
182,386
156,117
21,802
360,305
Six months ended June 30, 1999
(Unaudited)
Revenue from external customer
NT$
8,942,914
NT$
2,802,457
NT$
NT$
538,999
NT$
12,284,370
Inter-segment revenues
(29,735
)
(340,906
)
(370,641
)
Segment profit
982,437
671,999
3,540,736
(227,798
)
4,967,374
Segment asset
27,642,720
10,573,642
19,297,287
7,171,669
64,685,318
Table of Contents
Packaging
Testing
Investing
All other
Total
NT$
NT$
NT$
NT$
NT$
Six months ended June 30, 2000
(Unaudited)
Revenue from external customer
NT$
17,725,445
NT$
5,838,971
NT$
NT$
654,512
NT$
24,218,928
Inter-segment revenues
(49,451
)
(572,327
)
(621,778
)
Segment profit
3,255,980
1,568,406
(549,170
)
(251,097
)
4,024,119
Segment asset
44,183,558
24,909,317
12,796,887
7,114,239
89,004,001
Six months ended June 30, 2000
(Unaudited)
Revenue from external customer
US$
575,501
US$
189,577
US$
US$
21,250
US$
786,328
Inter-segment revenues
(1,605
)
(18,582
)
(20,187
)
Segment profit
105,714
50,922
(17,830
)
(8,153
)
130,653
Segment asset
1,434,531
808,744
415,483
230,982
2,889,740
NT$
US$
Within the following year
1,490,599
48,396
Within the second year
1,679,176
54,519
Within the third year
1,679,176
54,519
Within the fourth year
625,829
20,319
5,474,780
177,753
Table of Contents
Purchase Cost
Net Book Value
Excess
Acquires
ISE Labs
US$
100.1
(NT$3,083.1
)
US$
23.6
(NT$726.9
)
US$
76.5
(NT$2,356.2
)
Motorola SPS Businesses
US$
350.1
(NT$10,783.1
)
US$
268.2
(NT$8,260.6
)
US$
81.9
(NT$2,522.5
)
Motorola SPS
ISE Labs
Businesses
NT$
US$
NT$
US$
Item
Write-up of land
78.5
2.5
2,752.9
89.4
Write-up (write-down) in buildings
84.7
2.8
(361.0
)
(11.7
)
Write-up (write-down) in machinery
282.5
9.2
(263.7
)
(8.6
)
Deferred tax liability
(178.9
)
(5.8
)
Goodwill
2,134.5
69.3
442.6
14.4
2,401.3
78.0
2,570.8
83.5
Motorola SPS
Businesses
ISE Labs
NT$
US$
NT$
US$
Cash
1,418.8
46.1
135.0
4.4
Accounts receivable
951.1
30.9
448.9
14.6
Other current assets
216.6
7.0
22.0
0.7
Fixed assets net
9,504.9
308.6
2,589.7
84.1
Other assets
81.6
2.6
109.9
3.6
Goodwill
442.6
14.4
2,134.5
69.3
Total liabilities
(1,626.0
)
(52.8
)
(1,864.6
)
(60.5
)
Minority interest
(433.2
)
(14.2
)
10,989.6
356.8
3,142.2
102.0
Table of Contents
Year Ended December 31,
1998
1999
NT$
NT$
US$
Revenue
46,555,084
49,804,626
1,617,033
Net income
1,926,805
6,937,554
225,245
Earnings per share outstanding common shares
Primary
0.80
3.46
0.11
Fully diluted
0.80
3.45
0.11
Earnings per GDS and pro forma equivalent ADS
Primary
4.01
17.29
0.56
Fully diluted
4.01
17.27
0.56
Motorola SPS
ISE Labs
Businesses
1998
1999
1998
1999
NT$
NT$
NT$
NT$
Net revenues
2,152,538
736,765
(1)
23,640,123
17,195,065
Net income (loss)
154,188
65,167
809,862
(106,946
)
(1)
Under the method of consolidation used by the Corporation to
consolidate the statement of income of ISE Labs for the year
ended December 31, 1999, ISE Labs full-year 1999 net
revenues, cost of revenues and operating expenses are included in
the corporations consolidated statements of income.
Table of Contents
U.S. Financial Accounting Standards (FAS) 87,
Accounting for Pensions, was effective no later than
the beginning of the first period for which a US GAAP
reconciliation is required. A portion of the unrecognized net
transition obligation at the adoption date is to be allocated
directly to equity. The adoption date of ASE for US FAS 87 is the
beginning of 1987. ROC SFAS 18, which is substantially similar
to US FAS 87, was effective in 1996 for listed companies in
Taiwan. Therefore, pension expenses due to different adoption
dates is adjusted.
Under ROC GAAP, marketable equity securities are carried at the
lower of aggregate cost or market value, and debt securities at
cost. Under US FAS 115, Accounting for Certain
Investments in Debt and Equity Securities, except for debt
securities classified as held-to-maturity securities,
investments in debt and equity securities, other than those
recorded on the equity method, should be stated at fair value.
All of the Corporations short-term investments are
classified as trading securities under US GAAP, with gains and
losses recognized currently in income. The unrealized holding
gain included in earnings under US GAAP were NT$12,584 (US$408)
in 1999. All of the Corporations short-term investments in
mutual funds, stock and convertible debt are bought and held
principally for the purpose of selling them in the near term.
According to ROC regulations and the Articles of Incorporation of
ASE, a portion of distributable earnings should be set aside as
bonuses to employees, directors and supervisors. Bonuses to
directors and supervisors are always paid in cash. However,
bonuses to employees may be granted in cash or stock or both. All
of these appropriations, including stock bonuses which are
valued at par value of NT$10, are charged against retained
earnings under ROC GAAP, after such appropriations are formally
approved by the board of directors and resolved by the
shareholders in the following year. Under US GAAP, such bonuses
are charged to income currently in the year earned. Stock issued
as part of these bonuses is recorded at fair market value. Since
the amount and form of such bonuses are not finally determinable
until the board of directors meeting in the subsequent year, the
total amount of the aforementioned bonuses (regular
bonuses) is initially accrued based on the
managements estimate regarding the amount to be paid based
on ASEs Articles of Incorporation. Any difference between
the initially accrued amount and the fair market value of the
bonuses settled by the issuance of shares is recognized in the
year of approval by the board of directors. The management
estimates that the regular annual employee bonuses, including
cash and stock, will approximate three to four months
salaries and wages.
Aside from the aforementioned regular bonus plan, ASE decided to
grant a special stock bonus to employees in 1997. Employees who
received the special stock bonus are required to continue working
for ASE for an additional three years. Accordingly, the amount
of special stock bonuses is being allocated over three years as
special compensation expenses in the statement of income.
Table of Contents
Under US GAAP, when a subsidiary holds its parents stock as
investments, the stock should be treated as treasury stock and
is presented in the consolidated balance sheet as a deduction to
shareholders equity. The capital gain (loss) from
sales of treasury stock is added to or deducted from the balance
of treasury stock. Under ROC GAAP, such treatment is not required
and, as a result, the investment in ASE common shares are
presented in long-term investment in the balance sheets and
capital gain (loss) from sale of treasury stock is recognized and
included in the statement of income.
Under ROC GAAP, the estimated life of a building can be as long
as 40 years based on ROC practices. For US GAAP purpose, an
assessment for useful lives of buildings is estimated to be
25 years.
ASE Test, Inc., a consolidated subsidiary, purchased buildings
and facilities from another consolidated subsidiary, ASE
Technologies, in 1997. The actual costs purchased from ASE
Technologies were based on market value. Such additional payment
for the excess of book value of NT$17,667 was capitalized by ASE
Test, Inc. as allowed under ROC GAAP. Under US GAAP, transfers of
assets from related parties should not be recorded by the
transferee at stepped-up values.
The carrying value of stock investments in ASE Test by J&R
Holding under ROC GAAP is different from that under US GAAP
mainly due to the differences in accounting for bonuses to
employees, directors and supervisors. Since parts of such stock
investments were sold in 1997 and 1999, the disposal gain (loss)
under US GAAP was different from that under ROC GAAP as a result
of the difference in carrying values.
The carrying values of equity-basis investments and the
investment income (loss) accounted for by the equity method in
HCDC, HCKC and USI are reflected in the financial statements
under ROC GAAP. The financial statements of these equity
investees under ROC GAAP are different from the financial
statements had those financial statements been prepared under US
GAAP mainly due to the differences in accounting for bonuses to
employees, directors and supervisors and depreciation of
buildings. Therefore, the investment income (loss) has been
adjusted to reflect the differences between ROC and US GAAP in
the investees financial statements.
U.S. FAS 121 requires entities to perform separate
calculations for assets to be held and used to determine whether
recognition of an impairment loss is required, and, if so, to
measure the impairment. If the sum of expected future cash flows,
undiscounted and without interest charges, is less than an
assets carrying value, an impairment loss is recognized; if
the sum of the expected future cash flows is greater than an
assets carrying value, an impairment loss cannot be
recognized. Measurement of an impairment loss is based on the
fair value of the asset. U.S. FAS 121 also generally
requires that long-lived assets and certain identifiable
intangibles to be disposed of should be reported at the lower of
the carrying value or fair value less cost to sell. Based on an
assessment by ASE of the
Table of Contents
potential impact of U.S. FAS 121, there is no impairment
loss as of December 31, 1999 for ASE.
Year Ended December 31,
Six Months Ended June 30,
1998
1999
1999
1999
2000
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Net income
Net income based on ROC GAAP
1,603,961
7,794,666
253,074
4,516,751
2,920,824
94,832
Adjustments:
a. Pension benefits (cost)
26,075
(15,799
)
(513
)
(7,900
)
2,152
70
b. Short-term investments
(12,973
)
12,584
409
63,683
47,412
1,539
c. Bonuses to employees, directors and
supervisors:
Accrued regular bonuses
(812,960
)
(1,089,135
)
(35,362
)
(544,568
)
(502,159
)
(16,304
)
Special stock bonuses
(433,224
)
(577,500
)
(18,750
)
(288,750
)
(288,750
)
(9,375
)
d. Gain from sale of treasury stock
(42,692
)
(1,388,523
)
(45,082
)
e. Depreciation of buildings
(21,718
)
(30,731
)
(998
)
(15,366
)
(14,407
)
(468
)
f. Excess of book value of buildings transferred
between related parties
432
432
14
216
216
7
g. Restate carrying value and related capital
gain (loss) from sale of subsidiarys stocks
7,433
(5,180
)
(168
)
(5,742
)
(2,553
)
(83
)
h. Effects for US GAAP adjustments on equity
long term investments
(21,966
)
(154,218
)
(5,007
)
(20,636
)
(112,584
)
(3,655
)
i. Effect of US GAAP adjustment on income tax
4,538
5,691
185
2,846
3,028
98
j. Effect of US GAAP adjustments on minority
interest
1,944
89,014
2,890
16,859
302
10
Net decrease in net income
(1,305,111
)
(3,153,365
)
(102,382
)
(799,358
)
(867,343
)
(28,161
)
Approximate net income based on US GAAP
298,850
4,641,301
150,692
3,717,393
2,053,481
66,671
Earnings per share
Basic
0.15
2.34
0.08
1.88
1.04
0.03
Diluted
0.10
2.30
0.07
1.86
1.00
0.03
Earnings per GDS and pro forma equivalent ADS
Basic
0.75
11.72
0.38
9.39
5.18
0.17
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
1998
1999
1999
1999
2000
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Diluted
0.51
11.48
0.37
9.32
5.00
0.16
Number of weighted average shares outstanding
1,980,000,000
1,980,000,000
1,980,000,000
1,980,000,000
1,980,234,123
1,980,234,123
Number of pro forma equivalent ADS
396,000,000
396,000,000
396,000,000
396,000,000
396,046,825
396,046,825
Year Ended December 31,
Six Months Ended June 30,
1998
1999
1999
2000
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Shareholders equity
Shareholders equity based on ROC GAAP
21,874,808
30,057,036
975,878
27,021,142
32,805,429
1,065,111
Adjustments:
a. Pension benefits
(31,996
)
(47,794
)
(1,552
)
(39,896
)
(45,642
)
(1,482
)
b. Restatement of short-term investments
12,584
408
63,683
59,996
1,948
c. Bonuses to employees, directors and supervisors
(34,300
)
(217,827
)
(7,072
)
(108,914
)
(280,868
)
(9,119
)
d. Effects of US GAAP adjustments on equity
investments
(32,830
)
(187,048
)
(6,073
)
(53,466
)
(299,632
)
(9,728
)
e. Effect of US GAAP adjustments on income tax
9,479
15,170
492
12,325
18,198
591
f. Purchases and sales of treasury stocks
f1. reversal of unrealized loss
703,865
f2. classification of treasury stock
(4,704,995
)
(2,922,561
)
(94,888
)
(4,704,995
)
(2,922,561
)
(94,888
)
g. Effect of US GAAP adjustments on useful life
(64,564
)
(95,296
)
(3,093
)
(79,930
)
(109,703
)
(3,562
)
h. Excess of book value of buildings transferred
between related parties
(17,055
)
(16,623
)
(540
)
(16,839
)
(16,407
)
(533
)
i. Restate carrying value of subsidiaries
long-term investment
(42,441
)
(47,621
)
(1,546
)
(48,183
)
(50,174
)
(1,629
)
j. Effect of US GAAP adjustments on minority
interest
15,228
19,667
638
32,087
19,969
648
Net decrease in shareholders equity
(4,199,609
)
(3,487,349
)
(113,226
)
(4,944,128
)
(3,626,824
)
(117,754
)
Approximate shareholders equity based on US GAAP
17,675,199
26,569,687
862,652
22,077,014
29,178,605
947,357
Changes in shareholders equity based on US GAAP:
Balance, beginning of year
18,533,750
17,675,199
573,870
17,675,199
26,569,687
862,652
Convertible bonds converted into common shares
35,653
1,158
Net income for the year (Period)
298,850
4,641,301
150,692
3,717,393
2,053,481
66,671
Adjustment for common shares issued as bonuses to employees, and
compensations to directors and supervisors
1,211,884
1,448,808
47,039
724,404
727,868
23,632
Translation adjustment for subsidiaries
97,854
(173,957
)
(5,648
)
(29,128
)
(182,386
)
(5,922
)
Adjustment from changes in ownership percentage of investees
55,605
(108,046
)
(3,508
)
(10,854
)
(25,698
)
(834
)
Purchase of treasury stock
(2,598,416
)
Sale of treasury stock
32,980
1,782,434
57,871
Capital gain from sale of treasury stock
42,692
1,303,948
42,336
Balance, end of year
17,675,199
26,569,687
862,652
22,077,014
29,178,605
947,357
Table of Contents
As of December 31,
As of June 30,
1998
1999
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Short-term investments
As reported
647,209
216,280
7,022
3,001,609
97,455
US GAAP adjustments
Restatement of investments to fair value
12,584
409
59,996
1,948
As adjusted
647,209
228,864
7,431
3,061,605
99,403
Long-term investments
As reported
7,317,043
9,674,432
314,105
11,034,013
358,247
US GAAP adjustments
Treasury stock
(3,875,704
)
(2,922,561
)
(94,888
)
(2,922,561
)
(94,888
)
Equity investments
(32,830
)
(187,048
)
(6,073
)
(299,632
)
(9,728
)
As adjusted
3,408,509
6,564,823
213,144
7,811,820
253,631
Buildings and improvement
As reported
4,138,461
7,304,856
237,171
8,167,102
265,166
US GAAP adjustments
Effect of US GAAP adjustments on useful life
(64,564
)
(95,296
)
(3,094
)
(109,703
)
(3,562
)
Excess of book value of buildings transferred between related
parties
(17,055
)
(16,623
)
(540
)
(16,407
)
(533
)
As adjusted
4,056,842
7,192,937
233,537
8,040,992
261,071
Other assets
As reported
1,125,882
952,757
30,934
1,148,578
37,292
US GAAP adjustments
Effect of US GAAP adjustments on income tax
9,479
15,170
492
18,198
591
As adjusted
1,135,361
967,927
31,426
1,166,776
37,883
Consolidated debits
As reported
3,237,264
5,245,828
170,319
4,934,867
160,223
US GAAP adjustments
Restate carrying value of subsidiaries long-term investment
(42,441
)
(47,621
)
(1,546
)
(50,174
)
(1,629
)
As adjusted
3,194,823
5,198,207
168,773
4,884,693
158,594
Current liabilities
As reported
10,301,480
17,636,203
572,604
24,722,596
802,682
US GAAP adjustments bonuses to employees, directors and
supervisors
34,300
217,827
7,072
280,868
9,119
As adjusted
10,335,780
17,854,030
579,676
25,003,464
811,801
Table of Contents
As of December 31,
As of June 30,
1998
1999
2000
NT$
NT$
US$
NT$
US$
(Unaudited)
Accrued pension cost
As reported
168,061
189,189
6,142
261,257
8,482
US GAAP adjustments pension benefits
15,683
42,691
1,386
45,642
1,482
As adjusted
183,744
231,880
7,528
306,899
9,964
Set forth below is pension information disclosed in accordance
with U.S. FAS 132:
Year Ended December 31,
1998
1999
NT$
NT$
US$
Components of net periodic benefit cost
Service cost
59,531
81,240
2,638
Interest cost
19,569
23,796
772
Expected return on plan assets
(13,023
)
(12,242
)
(397
)
Amortization of prior service cost
777
642
21
Net periodic benefit cost
66,854
93,436
3,034
Table of Contents
Year ended December 31,
1998
1999
NT$
NT$
US$
Changes in benefit obligation
Benefit obligation at beginning of year
286,215
359,510
11,672
Service cost
57,234
79,410
2,578
Interest cost
18,604
23,369
759
Actuarial gain
3,586
116
Benefits paid
(2,543
)
(201
)
(6
)
Benefit obligation at end of year
359,510
465,674
15,119
Changes in plan assets
Fair value of plan assets at beginning of year
127,275
165,155
5,361
Actual return on plan assets
11,153
10,790
350
Employer contribution
29,270
32,545
1,057
Benefits paid
(2,543
)
(201
)
(6
)
165,155
208,289
6,762
Funded status
194,355
257,385
8,357
Unrecognized actuarial loss
(8,214
)
(16,549
)
(372
)
Net amount recognized (recognized as accrued pension cost)
186,141
240,836
7,985
1997-1999
Discount rate
6.5%
Rate of compensation increase
4.0%-5.5%
Expected return on plan assets
6.5%
December 31, 1999
June 30, 2000
Unrealized
Carrying
Holding
Carrying
Value
Fair Value
Gains
Value
NT$
US$
NT$
US$
NT$
US$
NT$
US$
(Unaudited)
Short-term investments (Note 3)
216,280
7,022
228,864
7,431
12,584
409
3,001,609
97,455
June 30, 2000
Unrealized
Holding
Fair Value
Gains
NT$
US$
NT$
US$
(Unaudited)
Short-term investments (Note 3)
3,061,605
99,403
59,996
1,948
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
1998
1999
1999
1999
2000
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Income tax currently payable
160,144
583,550
18,947
248,894
354,509
11,510
Deferred
(272,049
)
(161,128
)
(5,232
)
(87,757
)
26,570
863
Income tax on undistributed earnings generated in 1998
44,539
1,446
124,974
4,058
Adjustment of prior years income taxes
(43,410
)
(13,109
)
(426
)
(9,850
)
(320
)
(155,315
)
453,852
14,735
161,137
496,203
16,111
Year Ended December 31,
Six Months Ended June 30,
1998
1999
1999
2000
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Income tax at statutory rate
491,610
2,406,503
78,133
1,246,313
1,363,258
44,261
Add (less) tax effects of:
Permanent differences
Tax-exempt income
(508,822
)
(1,163,516
)
(37,777
)
(302,707
)
(470,006
)
(15,260
)
Investment loss (income)
(38,935
)
(653,493
)
(21,217
)
(957,033
)
638
21
Unamortized expense for issuance of GDS
(4,770
)
Bonus to employee and directors
311,546
416,659
13,528
208,330
197,727
6,420
Other
8,734
35,408
1,150
(10,762
)
16,293
529
Tax credits
Utilized
(138,923
)
(401,525
)
(13,037
)
(166,008
)
(502,169
)
(16,304
)
Deferred
(232,345
)
(217,614
)
(7,065
)
143,004
(224,662
)
(7,294
)
Income taxes (10%) on undistributed earnings generated in 1998
44,539
1,446
124,974
4,058
Adjustment of prior years income tax
(43,410
)
(13,109
)
(426
)
(9,850
)
(320
)
Income tax (benefit) expense
(155,315
)
453,852
14,735
161,137
496,203
16,111
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
1998
1999
1999
2000
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Domestic subsidiaries in ROC (25% statutory rate)
209,294
1,905,779
61,875
1,055,219
1,036,664
33,657
Foreign subsidiaries
ASE Korea Inc. (30.8% statutory rate)
55,770
1,811
51,486
1,672
ISE Labs, Inc. (33% statutory rate)
163,240
5,300
82,689
78,932
2,563
ASE Test Malaysia (30% statutory rate)
282,316
281,714
9,147
108,405
196,176
6,369
491,610
2,406,503
78,133
1,246,313
1,363,258
44,261
Table of Contents
Stock Option Plan
Exercise Price
Number of shares granted
US$
NT$
1996 Option Plan
I R&F 2
3
92
40,000
II DIR/ R&F
3.5
108
7,750,000
III R&F 3
5
154
12,000
IV R&F 4
5.46875
168
2,010,000
V C961
14
431
163,200
VI C962
13.4375
414
45,800
VII R&F 5
20
616
187,500
1997 Option Plan
I P971
9.5625
295
2,720,000
II C971
14
431
16,000
III C972
13.4375
414
16,600
IV P972
20
616
480,000
1998 Option Plan
I P981
11
339
1,269,680
II P982
20
616
325,000
1999 Option Plan
20
616
1,750,000
Pre-IPO Plan
1996 Option Plan
1997 Option Plan
1998 Option Plan
Risk free interest rate
5.41
%
5.47-5.76
%
4.29-5.76
%
4.56-5.76
%
Expected dividend yield
0
%
0
%
0
%
0
%
Expected lives
1.5 years
3.6-4 years
3.4-3.8 years
3.4-3.8 years
Volatility
54.64
%
54.64-55.53
%
54.64-55.53
%
55.53-82.08
%
1999 Option Plan
Risk free interest rate
6.01
%
Expected dividend yield
0
%
Expected lives
5 years
Volatility
55.53
%
Table of Contents
Year Ended December 31,
1998
1999
1999
NT$
NT$
US$
Net income based on US GAAP
298,850
4,641,301
150,692
Pro forma net income
109,497
4,479,803
145,448
Pro forma EPS Basic
0.06
2.26
0.07
Diluted
0.04
2.21
0.07
Year Ended December 31,
1998
1999
1999
NT$
NT$
US$
Net income based on US GAAP
298,850
4,641,301
150,692
Translation adjustment on subsidiaries
97,854
(173,957
)
(5,648
)
Comprehensive Income
396,704
4,467,344
145,044
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
1998
1999
1999
1999
2000
NT$
NT$
US$
NT$
NT$
US$
(Unaudited)
Cash flows
Net cash provided by operating activities
8,512,221
7,561,023
245,488
2,235,896
3,352,984
108,863
Net cash used in investing activities
(9,566,406
)
(15,522,746
)
(503,985
)
(4,535,751
)
(14,995,244
)
(486,859
)
Net cash provided by (used in) financing activities
(1,720,614
)
11,765,284
381,990
9,044,298
6,241,974
202,662
Net increase (decrease) in cash
(2,774,799
)
3,803,561
123,493
6,744,443
(5,400,286
)
(175,334
)
Cash balance, beginning of year (period)
10,869,795
8,173,901
265,386
8,173,901
11,809,112
383,413
Effect of exchange rate changes on cash
78,905
(168,350
)
(5,466
)
44,378
(168,969
)
(5,486
)
Cash balance, end of year (period)
8,173,901
11,809,112
383,413
14,962,722
6,239,857
202,593
1)
the effect of exchange rate changes on cash is shown in the
reconciliation of the beginning balance and ending balance of
cash (as opposed to operating activities under ROC GAAP)
2)
compensation to directors and supervisors and bonuses to
employees is shown in the operating activity under US GAAP (as
opposed to financing activities under ROC GAAP)
3)
proceeds from sales of treasury stock and purchases of treasury
stock are shown in the financing activities under US GAAP (as
opposed to investing activities under ROC GAAP).
Table of Contents
Table of Contents
December 31,
1997
1998
June 30, 1999
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
36,544
$
10,537
$
32,983
Due from related parties
7,900
94,478
Inventories
70,455
101,507
37,264
Prepaid expenses
165
863
13,084
Deferred income tax assets
1,677
Other current assets
8,124
6,328
3,787
Total current assets
115,288
127,135
183,273
Property, plant and equipment, net
201,424
234,360
255,457
Deferred income tax assets
4,109
2,822
1,002
Refundable deposits
6,863
5,691
1,514
Loans to related parties
35,016
26,919
Total assets
$
362,700
$
396,927
$
441,246
Liabilities and Owners Equity
Current liabilities:
Accounts payable
$
5,434
6,456
$
8,762
Deferred income tax liabilities
1,827
1,155
Due to related party
7,127
Accrued expenses and other current liabilities
18,067
15,418
11,715
Total current liabilities
32,455
23,029
20,477
Accrual for retirement benefits
23,437
17,542
21,200
Total liabilities
55,892
40,571
41,677
Owners equity
306,808
356,356
399,569
Total liabilities and owners equity
$
362,700
$
396,927
$
441,246
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December 31
June 30,
1997
1998
1998
1999
(unaudited)
(unaudited)
Sales to related parties
$
656,806
$
753,110
$
350,484
$
547,788
Costs of revenues
(625,746
)
(702,572
)
(325,174
)
(534,667
)
Gross profit
31,060
50,538
25,310
13,121
Selling, general and administrative expenses
(39,607
)
(29,009
)
(13,268
)
(11,068
)
Operating income (loss)
(8,547
)
21,529
12,042
2,053
Interest income
12,858
9,586
4,005
1,442
Interest expense
(688
)
(295
)
Foreign currency exchange gain (loss), net
(28,325
)
6,081
1,865
2,739
Gain (loss) on disposal of property, plant and equipment
292
324
57
(546
)
Income before income taxes
(23,722
)
36,832
17,674
5,688
Income tax expense
(5,941
)
(11,032
)
(5,351
)
(2,281
)
Net income (loss)
$
(29,663
)
$
25,800
$
12,323
$
3,407
Table of Contents
December 31,
June 30,
1997
1998
1998
1999
(unaudited)
(unaudited)
Cash flows from operating activities:
Net income (loss)
$
(29,663
)
$
25,800
$
12,323
$
3,407
Adjustments to reconcile net income (loss) to cash provided by
(used in) operating activities:
Depreciation and amortization
28,964
34,371
15,671
23,296
Loss (gain) on disposal of property, plant and equipment
(292
)
(324
)
(57
)
546
Increase (decrease) in deferred income tax
assets/liabilities
2,147
614
80
(1,012
)
Changes in operating assets and liabilities:
(Increase) decrease in due from related parties
39,043
(15,027
)
(28,278
)
(86,578
)
(Increase) decrease in inventories
(22,351
)
(31,052
)
(26,362
)
64,243
(Increase) decrease in prepaid expenses
1,112
(698
)
(881
)
(12,221
)
Decrease in other current assets
678
1,797
6,866
2,541
Increase in accounts payable
777
1,022
942
2,306
Increase (decrease) in accrual for retirement benefits
(13,415
)
(5,895
)
(3,333
)
3,658
Increase (decrease) in accrued expenses and other current
liabilities
$
4,635
(2,649
)
(392
)
(3,703
)
Decrease in refundable deposits
34,283
1,172
3,582
4,177
Cash provided by (used in) operating activities
45,918
9,131
(19,839
)
660
Cash flows from investing activities:
Purchases of property, plant and equipment
(178,307
)
(75,339
)
(36,134
)
(48,883
)
Proceeds from sale of property, plant and equipment
107,867
8,356
3,929
3,944
Net change in loans to related parties
18,862
8,097
(5,176
)
26,919
Cash used in investing activities
(51,578
)
(58,886
)
(37,381
)
(18,020
)
Cash flows from financing activities:
Net change in inter-division balance with Motorola Electronics
Taiwan Ltd.
(25,220
)
23,748
29,935
39,806
Cash dividends
(9,065
)
Net increase in short-term debt
10,944
Cash provided by (used in) financing activities
(34,285
)
23,748
40,879
39,806
Net increase (decrease) in cash and cash equivalents
(39,945
)
(26,007
)
(16,341
)
22,446
Cash and cash equivalents at beginning of period
76,489
36,544
36,544
10,537
Cash and cash equivalents at end of period
$
36,544
$
10,537
$
20,203
$
32,983
Supplementary disclosure of cash flow information:
Cash payments for income taxes
$
5,214
$
10,916
$
3,034
$
8,790
Cash payments for interest
$
$
688
$
295
$
Table of Contents
Table of Contents
Table of Contents
Table of Contents
December 31,
June 30,
1997
1998
1999
(in thousands of U.S. dollars)
(unaudited)
Finished goods
$
692
$
361
$
3,082
Work in process
11,040
74,620
6,798
Raw materials and supplies
58,723
26,526
27,384
$
70,455
$
101,507
$
37,264
December 31,
(in thousands of U.S. dollars)
1997
1998
Land and land improvements
$
22,763
$
20,653
Buildings and improvements
90,152
105,383
Machinery and equipment
201,123
261,363
Furniture, fixtures and vehicles
27,967
3,579
Construction in progress
14,117
356,122
390,978
Less: accumulated depreciation
(154,698
)
(156,618
)
Net property, plant and equipment
$
201,424
$
234,360
December 31,
(in thousands of U.S. dollars)
1997
1998
Accrued payroll
$
9,177
$
6,453
Accrued taxes
2,147
6,347
Table of Contents
Inter-division
balance with
Motorola Korea Ltd.
Motorola
Electronics
Capital
Legal
Retained
Total owners
(in thousands of U.S. dollars)
Taiwan Ltd.
stock
reserve
earnings
equity
Balance at January 1, 1997
$
129,352
32,736
5,965
202,703
370,756
Net change in inter-division balance
(25,220
)
(25,220
)
Cash dividends
(9,065
)
(9,065
)
Net income (loss)
16,104
(45,767
)
(29,663
)
Balance at December 31, 1997
120,236
32,736
5,965
147,871
306,808
Net change in inter-division balance
23,748
23,748
Net income
16,937
8,863
25,800
Balance at December 31, 1998
$
160,921
32,736
5,965
156,734
356,356
Table of Contents
(in thousands of U.S. dollars)
1997
1998
Current:
Taiwan
$
(974
)
$
8,958
Korea
4,768
1,460
$
3,794
$
10,418
Deferred:
Taiwan
$
1,647
$
(2,486
)
Korea
500
3,100
2,147
$
614
Total income tax expense
$
5,941
$
11,032
December 31,
(in thousands of U.S. dollars)
1997
1998
Current deferred tax assets:
Amortization for tax purpose
$
305
$
3,217
Inventory adjustment for tax purpose
1,177
Bonus accrual
250
147
Other accrued expenses
390
397
Investment tax credits
2,051
$
945
$
6,989
Current deferred tax liabilities:
Unrealized foreign exchange gain
$
1,999
$
338
Accruals allowed for tax purposes
773
7,806
$
2,772
$
8,144
Net deferred tax liabilities current:
$
1,827
$
1,155
Noncurrent deferred tax assets:
Accrual for retirement benefits
$
4,109
$
2,822
Table of Contents
(in thousands of U.S. dollars)
1997
1998
Taiwan
$
16,777
$
23,409
Korea
(40,499
)
13,423
$
(23,722
)
$
36,832
(in thousands of U.S. dollars)
1997
1998
Expected income tax expense (benefit)
$
(8,280
)
$
9,986
Permanent impact of foreign currency gains and losses recognized
for tax purposes
16,466
549
Investment tax credits earned and utilized
(2,670
)
Other
425
497
Actual income tax expense
$
5,941
$
11,032
The SPS businesses classifies its operations into one operating
segment of semiconductors products. For the years ended
December 31, 1997 and 1998, sales were made to Motorola
companies in the following geographical regions.
(in thousands of U.S. dollars)
1997
1998
North America
$
396,945
$
408,072
Europe
69,399
117,967
Asia
190,462
227,071
$
656,806
$
753,110
(in thousands of U.S. dollars)
1997
1998
Taiwan
$
62,801
$
86,776
Korea
138,623
147,584
$
201,424
$
234,360
Table of Contents
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Table of Contents
The following adjustments were applied to the historical
financial statements to arrive at the pro forma financials:
a. Reflects the pre-acquisition operating results of the Motorola
SPS Businesses. These figures reflect the 6-month results of the
Motorola SPS Businesses through June 30, 1999 plus the cash
bonuses paid to employees in early July of NT$202,622 thousand
(US$6.5 million), net of 30.8% tax.
b. Reflects the decrease in depreciation arising from the
purchase accounting adjustments to the Motorola SPS Businesses
(see note 5 detailed calculations below).
Table of Contents
c. Reflects the amortization of the goodwill created upon the
acquisitions of the Motorola SPS Businesses over 10 years
(see note 5 detailed calculations below).
d. Reflects interest expense on payable for long-term investment
at rate of 8% for one half year (the pre-acquisition period), and
convertible bonds issued by ASE Test Limited (ASE
Test). We do not expect to derive any tax benefit from
interest on the convertible bonds. Tax benefit deriving from part
of the interest on long-term payable is reflected in g.
e. Part of the acquisition cost is from ASEs present cash
balances. This adjustment reflects the pro-forma reduction in
interest income, at 3%, on the cash balances that were used to
make the acquisition.
f. Reflects the 10.5% minority interest of the Motorola SPS
Businesses pre-acquisition net income (after considering
the adjustments in b (net of tax) and c) and 35% of ASE Test
share of the interest expense adjustment (net of tax) in d.
g. Reflect tax effects for tax deductible interest expense and
income generated, and decrease in depreciation.
Purchase
Net
Acquirees
Cost
Book Value
Excess
Motorola SPS Businesses
$
350.1
$
268.2
$
81.9
Table of Contents
Motorola
SPS
Item
Businesses
Write-up of land
US$
87.7
Write-up (Write-down) in buildings
(11.5
)
Write-up (Write-down) in machinery
(8.4
)
Goodwill
14.1
US$
81.9
Amount
Financing Activities
ASE Test
ASE
Total
(1) Cash
US$
US$
123.3
US$
123.3
(2) Issuance of convertible bonds by ASE Test
52.9
52.9
(3) Payable for long-term investment ASE Korea
31.2
72.7
103.9
(4) Payable for long-term investment ASE Chung
Li
21.0
49.0
70.0
US$
105.1
US$
245.0
US$
350.1
Total
Adjustment
Item
Buildings
Machinery
Goodwill
Amount
Chung Li
Write-down value
NT$
(61,600
)
NT$
(262,547
)
NT$
Remaining useful life
25
3
Amortization of goodwill (decrease in depreciation) for the
period from January 1, to July 3, 1999
(1,232
)
(43,758
)
NT$
(44,990
)
Korea
Goodwill (Write-down value)
(298,708
)
442,530
Remaining useful life
38
10
Amortization of goodwill (decrease in depreciation) for the
period from January 1, 1999 to July 3, 1999
(3,930
)
22,126
18,196
NT$
(26,794
)
Financing activities for
Interest
Interest
acquisition
Amount
Rate
Expense
(1) Issuance of convertible bonds
NT$
1,659,580
7.25
%
NT$
60,160
(2) Payable for long-term investments
Motorola SPS Businesses
5,474,780
8
%
218,991
NT$
7,134,360
NT$
279,151
Table of Contents
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
Additions
(1)
(2)
Balance at
Charged to
Charged to
beginning
costs and
other
Balance at
Description
of year
expenses
accounts
Deductions
end of year
1999
Allowance for doubtful accounts
NT$
84,708
NT$
109,263
NT$
NT$
(6,809
)
NT$
187,162
Allowance for sales allowances
53,000
(5,908
)
47,092
Allowance for obsolescence
199,018
50,566
(73,379
)
176,205
1998
Allowance for doubtful accounts
80,419
2,944
1,345
84,708
Allowance for sales allowances
12,500
40,500
53,000
Allowance for obsolescence
203,276
106,708
(110,966
)
199,018
1997
Allowance for doubtful accounts
47,486
32,933
80,419
Allowance for sales allowances
5,500
7,000
12,500
Allowance for obsolescence
102,494
100,782
203,276
F-80
Annex A
THE SECURITIES MARKETS OF THE ROC
The information provided in this section has been extracted from various government and other publicly available publications. References to the ROC Securities and Futures Commission in this section include both the ROC Securities and Futures Commission and the ROC Securities and Exchange Commission, its predecessor.
In September 1960, the ROC Government established the ROC Securities and Exchange Commission to supervise and control all aspects of the existing domestic securities market and the Taiwan Stock Exchange began to take shape soon thereafter. In the 1970s and the early 1980s, the ROC government implemented a number of steps designed to upgrade the quality and importance of the ROC securities markets, such as encouraging listing on the Taiwan Stock Exchange and establishing an over-the-counter market. In the mid-1980s, the ROC government began to revise its laws and regulations in a manner designed to facilitate the gradual internationalization of the ROC securities markets. In 1997, the ROC Securities and Exchange Commission was renamed the ROC Securities and Futures Commission.
The Taiwan Stock Exchange
In 1961, the ROC Securities and Futures Commission, working together with private interests, established the Taiwan Stock Exchange to provide a marketplace for securities trading. 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. The Taiwan Stock Exchange is a corporation owned by government-controlled and private banks and enterprises. The Taiwan Stock Exchange is independent of entities transacting business through it, each of which pays a users fee. Subject to limited exceptions, all transactions in listed securities by brokers, traders and integrated securities firms, that is, firms which are permitted to combine the activities of brokerage, dealing and underwriting, must be made through the Taiwan Stock Exchange.
The Taiwan Stock Exchange commenced operations in 1962 and during the remainder of the 1960s grew at a slow pace, largely due to lack of experience among issuers and investors and an unwillingness on the part of ROC businesses to offer their shares to the public. During the early 1980s, the ROC Securities and Futures Commission more actively encouraged new listings on the Taiwan Stock Exchange and the number of listed companies grew from 119 in 1983 to 472 as of July 31, 2000. As of July 31, 2000, the total market value of shares listed on the Taiwan Stock Exchange was approximately NT$11,150 billion.
The instruments traded on the Taiwan Stock Exchange have primarily been limited to common shares and bonds. However, recent legislative revisions and the current attitude of the ROC Securities and Futures Commission regarding liberalization of securities regulations have encouraged some innovation. In 1988, the Ministry of Finance permitted the issue of the ROCs first exchangeable bonds. These bonds were exchangeable at the option of the bondholders into shares of companies owned by the issuers. Since 1989, there have been offerings of domestic convertible bonds and convertible preferred shares. In addition, beneficiary units evidencing beneficiary interests in closed-end investment funds and bonds issued by supernational financial institutions are also listed on the Taiwan Stock Exchange and traded on the ROC Over-the-Counter Securities Exchange.
In the absence of special regulatory approval, only ROC companies are permitted to list their securities on the Taiwan Stock Exchange. The ROC Securities and Futures Commission has promulgated regulations that would permit foreign issuers to list their equity securities on the Taiwan Stock Exchange. To date, only one foreign issuer has been approved to list its securities
A-1
For a company to be listed, it must have been established for at least five fiscal years, have paid-in capital of at least NT$300.0 million for the latest two fiscal years and have at least 1,000 registered shareholders, including not fewer than 500 shareholders holding between 1,000 and 50,000 shares each. These 500 shareholders must together hold either at least 20% of the outstanding shares or at least 10 million shares. The company may not have an accumulated deficit for the previous fiscal year and the pre-tax net profit and operating profit levels of the company must meet any of the following requirements: (1) having exceeded 6% of paid-in capital for each of the previous two fiscal years or (2) having exceeded 6% in average of the paid-in capital for the previous two fiscal years with the profitability of the most recent fiscal year being superior than that of the preceding fiscal year or (3) having been no less than 3% of the paid-in capital for each of the previous five fiscal years. However, special listing criteria apply to high-tech companies and key businesses engaging in national economic development.
The Over-the-Counter Market
To complement the Taiwan Stock Exchange, an over-the-counter market was established in September 1982 on the initiative of the ROC Securities and Futures Commission. In early 1988, the ROC Securities and Futures Commission promulgated regulations designed to encourage trading of unlisted securities of companies whose securities do not qualify for listing on the Taiwan Stock Exchange. The over-the-counter market is currently limited to unlisted equity securities, bank and corporate bonds and debentures and government bonds. As of August 25, 2000, 312 public companies had offered their equity securities on the over-the-counter market. The value of all bonds outstanding in the over-the-counter market grew from approximately NT$76.0 billion at the end of 1983 to NT$1,161.3 billion on December 31, 1999.
Taiwan Stock Exchange Index
The Taiwan Stock Exchange Index is comparable to the Standard and Poors Index in the United States and the Nikkei Stock Average in Japan, insofar as it is calculated on the basis of a wide selection of listed shares weighted according to the number of shares outstanding. It is compiled using the Paasche Formula by dividing the market value by the base days total market value for the index shares. The Taiwan Stock Exchange Index is the oldest and most widely quoted market index in the ROC.
The weighing of stocks in the index is fixed as long as the number of shares outstanding remains constant. When the total number of shares outstanding changes, the weight of each stock is adjusted. Stock splits and stock dividends are adjusted automatically. Cash dividends are not included in the calculation.
A-2
The following table sets forth, for the periods indicated,
information relating to the Taiwan Stock Exchange Index.
Trading Value
Number of Listed
Companies at
Index at
Period
Period End
(NT$ billions)
Index High
Index Low
Period End
1992
256
5,917.0
5,391.63
3,327.6
3,377.0
1993
285
9,056.7
6,070.5
3,135.5
6,070.5
1994
313
18,812.1
7,183.7
5,194.6
7,124.6
1995
347
10,151.5
7,051.4
4,503.3
5,173.7
1996
382
12,907.5
6,982.8
4,690.2
6,933.9
1997
404
37,241.1
10,116.8
6,820.3
8,187.2
1998
437
29,618.9
9,277.0
6,251.3
6,418.4
1999
462
29,291.5
8,608.9
5,475.0
8,448.8
2000 (through July 31)
472
22,663.8
10,202.2
7,900.4
8,114.9
Source: | Status of Securities Listed on Taiwan Stock Exchange December 1999 Taiwan Stock Exchange. |
As indicated above, the performance of securities traded on the Taiwan Stock Exchange has in recent years been characterized by extreme price volatility. On August 25, 2000, the TSE Index closed at 8,026.3.
Price Limits, Commissions, Transaction Tax and Other Matters
Fluctuations in the price of securities traded on the Taiwan Stock Exchange are currently subject to a restriction of 7% above and below the previous days closing price (or reference price set by the Taiwan Stock Exchange if the previous days closing price is not available because of lack of trading activity) in the case of equity securities and 5% in the case of debt securities. The price limit for movements below the previous days closing price was temporarily revised to 3.5% following the September 21, 1999 earthquake, but has since reverted to 7%. The ROC Securities and Futures Commission has announced that limitations on price fluctuations will be relaxed with a view towards eventually eliminating all share price fluctuation controls.
Brokerage commissions are set by the Taiwan Stock Exchange. Effective from July 1, 2000, the ceiling for commission rate for brokers is 0.1425% of the transaction price. Brokers may determine the commission rate within this ceiling, provided that they report the rates to the ROC Securities and Futures Commission. A securities transaction tax, currently levied at the rate of 0.3% of the transaction price, is payable by the seller of equity securities and a tax at the rate of 0.1% of the transaction price is payable by the seller of debt securities other than government bonds. The securities transaction taxes are withheld at the time of the transaction giving rise to the taxes. Sales of shares of companies listed on the Taiwan Stock Exchange are currently sold in round lots of 1,000 shares. Investors who would like to sell less than 1,000 shares of a listed company occasionally experience delays in effecting these sales. Transactions that include 500 trading lots, that is 500,000 shares, or more must be registered and executed pursuant to Taiwan Stock Exchange guidelines.
Regulation and Supervision
The ROC Securities and Futures Commission has been under the jurisdiction of the Ministry of Finance since 1981. The ROC Securities and Futures Commission has extensive regulatory authority over companies listed on the Taiwan Stock Exchange and unlisted public issuing companies generally, including ROC companies whose capital exceed the currently specified minimum amount of NT$200 million. These companies are generally required to obtain approval
A-3
The ROC Securities and Futures Commission has responsibility for implementation of the Securities and Exchange Law and for overall administration of governmental policies in the ROC securities market. It has extensive regulatory authority over the offering, issue and trading of securities. In addition, the Securities and Exchange Law specifically empowers the ROC Securities and Futures Commission to promulgate rules under specified circumstances.
The Securities and Exchange Law prohibits market manipulation. It also permits an issuer to recover certain short-term trading profits made through purchases and sales within six months by directors, managerial personnel, supervisors and 10% or above shareholders of the issuer. The Securities and Exchange Law prohibits trading by insiders based on non-public information that materially affects share price movements. According to the Securities and Exchange Law, the term insiders includes directors, supervisors, managers and 10% or above shareholders of the issuing company and their spouses, minor children and nominees, any person who has learned the information due to an occupational or controlling relationship with the issuing company and any person who has learned the information from any of the foregoing. Sanctions include prison terms. In addition, damages may be awarded to persons injured by the transaction. Notwithstanding these regulatory requirements, there have been recurring press reports on insider trading and manipulation of stock prices in the ROC.
The Securities and Exchange Law also imposes criminal liability on certified public accountants and lawyers who make false certifications in their examination and audit of an issuers contracts, reports and other evidentiary documents that are related to securities transactions. ROC Securities and Futures Commission regulations require that financial reports of listed companies be audited by accounting firms consisting of at least three certified public accountants and be signed by at least two certified public accountants.
The Securities and Exchange Law was amended in January 1988 to provide for, among other matters:
| new regulations relating to public offerings of securities; | |
| measures to strengthen the capital structure of issuers; | |
| civil liability for material misstatements or omissions made by issuers; | |
| more stringent regulation of the securities activities of officers, directors and major shareholders of issuers; | |
| regulations regarding tender offers; and | |
| a significant expansion of the prohibitions against insider trading, including the imposition of treble civil damages and criminal sanctions. |
The Securities and Exchange Law was further amended on June 30, 2000 to provide for, among other matters, the treasury stock system and criminal liabilities on certain personnel of a company for direct or indirect trading of the companys securities against the companys interest.
The ROC Securities and Futures Commission does not have criminal or civil enforcement powers under the Securities and Exchange Law. Criminal actions may be pursued only by the district prosecutors located in the district where the defendant is domiciled or where the violation occurred. Under ROC law, civil actions may only be brought by plaintiffs who assert that they have suffered damages. The ROC Securities and Futures Commission is directly empowered to
A-4
In addition to providing a market for securities trading, the Taiwan Stock Exchange has primary responsibility for reviewing applications by ROC issuers to list securities on the Taiwan Stock Exchange. In addition, the ROC Securities and Futures Commission reviews all securities offerings by listed companies. If issuers of listed securities violate relevant laws and regulations or encounter significant difficulties, the Taiwan Stock Exchange may, with the approval of the ROC Securities and Futures Commission, delist securities of these issuers.
A-5
Annex B
FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN THE ROC
Foreign Investment
Historically, foreign investment in the ROC securities markets has been restricted. Since 1983, the ROC government has periodically enacted legislation and adopted regulations to permit foreign investment in the ROC securities market. Currently, non-ROC persons may invest in ROC securities through the following vehicles.
Depositary Receipts
In April 1992, the ROC Securities and Futures Commission enacted regulations permitting ROC companies with securities listed on the Taiwan Stock Exchange, with the prior approval of the ROC Securities and Futures Commission, to sponsor the issuance and sale to foreign investors of depositary receipts. Depositary receipts represent deposited shares of ROC companies. In December 1994, the Ministry of Finance allowed companies whose shares are traded on the ROC Over-the-Counter Securities Exchange or listed on the Taiwan Stock Exchange, upon approval of the ROC Securities and Futures Commission, to sponsor the issuance and sale of depositary receipts. The approval will be granted (1) if the underlying shares are newly issued shares, for a fixed number of depositary receipts or (2) if the underlying shares are not newly issued shares, for a maximum number of depositary receipts and, with limited exceptions (as described below), may not be increased without additional approvals by ROC Securities and Futures Commission.
Starting three months after the initial issue of depositary receipts, a holder of depositary receipts may request the foreign depositary bank issuing the depositary receipts to cause the underlying securities to be sold in the ROC and to distribute the proceeds of the sale to the depositary receipt holder or to withdraw from the depositary receipt facility shares represented by depositary receipts and transfer the shares to the depositary receipt holder (other than citizens of the Peoples Republic of China and entities organized under the laws of the Peoples Republic of China); provided that settlement for trading of shares represented by the depositary receipts through the book-entry system maintained by the Taiwan Securities Central Depositary Co. Ltd. is permitted. As discussed above, because the ROC Securities and Futures Commission approval is for a fixed or maximum number of depositary receipts, we or the foreign depositary bank may not increase the number of depositary receipts by depositing shares in a depositary receipt facility or issuing additional depositary receipts against these deposits without specific ROC Securities and Futures Commission approval, except in limited circumstances. These circumstances include issuances of additional depositary receipts in connection with:
(1) dividends on or free distributions of shares; | |
(2) the exercise by holders of existing depositary receipts of their pre-emptive rights in connection with capital increases for cash; or | |
(3) if permitted under the deposit agreement and custody agreement, the purchase directly by any person or through a depositary of the underlying shares on the Taiwan Stock Exchange or the ROC Over-the-Counter Securities Exchange (as applicable) or delivery of the underlying shares for deposit in the depositary receipt facility. |
However, the total number of deposited shares outstanding after an issuance under the circumstances described in clause (3) above may not exceed the number of deposited shares previously approved by the ROC Securities and Futures Commission in connection with the initial offering plus any depositary receipts created under the circumstances described in clauses (1) and (2) above (subject to any adjustment in the number of shares represented by each
B-1
Under current ROC law, a non-ROC holder of ADSs who withdraws the underlying shares must appoint an eligible local agent to:
(1) open a securities trading account with a local securities brokerage firm after having obtained consent from the Taiwan Stock Exchange or the ROC Over-the-Counter Securities Exchange; | |
(2) remit funds; and | |
(3) exercise rights on securities and perform other matters as may be designated by the holder. |
In addition, a withdrawing non-ROC holder must appoint a local bank to act as custodian for handling confirmation and settlement of trades, safekeeping of securities and cash proceeds and reporting of information. Under existing ROC laws and regulations, without this account, holders of ADSs that withdraw and hold the common shares represented by the ADSs would not be able to hold or transfer the common shares, whether on the Taiwan Stock Exchange or otherwise.
Holders of ADSs withdrawing common shares represented by ADSs who are non-ROC persons are required under current ROC laws and regulations to appoint an agent in the ROC for filing tax returns and making tax payments. The agent, a tax guarantor, must meet qualifications set by the ROC Ministry of Finance and, upon appointment, becomes a guarantor of the withdrawing holders ROC tax payment obligations. In addition, under current ROC law, repatriation of profits by a non-ROC withdrawing holder is subject to the submission of evidence of the appointment of a tax guarantor to, and approval thereof by, the tax authority or submission of tax clearance certificates so long as the capital gains from securities transactions are exempt from ROC income tax. As required by the Central Bank of China, if repatriation by a holder is based on a tax clearance certificate, the aggregate amount of the cash dividends or interest on bank deposits converted into foreign currencies to be repatriated by the holder shall not exceed the amount of:
(1) the net payment indicated on the withholding tax voucher issued by the tax authority; | |
(2) the net investment gains as indicated on the holders certificate of tax payment; or | |
(3) the aggregate transfer price as indicated on the income tax return for transfer of tax-deferred dividend shares, whichever is applicable. |
Under existing laws and regulations relating to foreign exchange control, a depositary may, without obtaining further approvals from the Central Bank of China or any other governmental authority or agency of the ROC, convert NT dollars into other currencies, including U.S. dollars, in respect of the following: proceeds of the sale of shares represented by depositary receipts, proceeds of the sale of shares received as stock dividends and deposited into the depositary receipt facility and any cash dividends or cash distributions received. In addition, a depositary, also without any of these approvals, may convert incoming payments into NT dollars for purchases of underlying shares for deposit into the depositary receipt facility against the creation of additional depositary receipts. The approval from the Central Bank of China is required for a depositary on a payment-by-payment basis for conversion into NT dollars of subscription payments relating to rights offerings. A depositary may also be required to obtain foreign exchange approval from the Central Bank of China on a payment-by-payment basis for conversion from NT dollars into other currencies relating to the sale of subscription rights for
B-2
Overseas Corporate Bonds
Since 1989, the ROC Securities and Futures Commission has approved a series of overseas bonds issued by ROC companies listed on the Taiwan Stock Exchange in offerings outside the ROC. Under current ROC law, overseas corporate bonds can be:
(1) converted by bondholders, other than citizens of the Peoples Republic of China and entities organized under the laws of the Peoples Republic of China, into shares of ROC companies; or | |
(2) subject to ROC Securities and Futures Commission approval, may be converted into depositary receipts issued by the same ROC company or by the issuing company of the exchange shares, in the case of exchangeable bonds. |
The relevant regulations also permit public issuing companies to issue corporate debt in offerings outside the ROC. Proceeds from the sale of the shares converted from overseas convertible bonds may be used for reinvestment in securities listed on the Taiwan Stock Exchange or traded on the ROC Over-the-Counter Securities Exchange, subject to limitations and restrictions applicable to Qualified Foreign Institutional Investors or General Foreign Investors (as applicable).
Qualified Foreign Institutional Investors
On December 28, 1990, the Executive Yuan approved guidelines drafted by the ROC Securities and Futures Commission which, since January 1, 1991, allow direct investment in ROC securities listed on the Taiwan Stock Exchange or other ROC securities approved by the ROC Securities and Futures Commission by eligible foreign institutional investors. Under current guidelines, eligible foreign institutional investors include:
(1) banks which rank among the top 1,000 banks in the non-Communist world having experience in international financial, securities or trust business; | |
(2) insurance companies which have existed for more than three years and hold securities assets of at least US$300,000,000; | |
(3) fund management institutions which have existed for more than three years and manage assets of at least US$200,000,000; | |
(4) offshore fund management institutions which are more than 50% owned by ROC securities investment trust enterprises, provided the funds to be used for investment in ROC securities do not come from the ROC, funds owned by these offshore fund management institutions or mainland China; | |
(5) general securities firms which have a net worth of at least US$100 million and experience in international securities investments; | |
(6) offshore subsidiary securities firms which are more than 50.0% owned by an ROC securities firm or other offshore securities firms which are wholly owned by these offshore subsidiary securities firms; |
B-3
(7) offshore subsidiary securities firms which are 100.0% owed by an ROC securities firm or other offshore securities firms which are more than 51.0% owned by these offshore subsidiary securities firm; | |
(8) foreign government-owned investment institutions; | |
(9) pension funds which have been set up for two years; | |
(10) mutual funds, unit trusts or investment trusts which have been established for three years and have assets of at least US$200.0 million; and | |
(11) other institutional investors approved by the ROC Securities and Futures Commission. |
Eligible foreign institutional investors who wish to qualify as Qualified Foreign Institutional Investors need to apply for and receive an investment permit from the ROC Securities and Futures Commission. Any application for investment exceeding US$50 million must also be approved by the Central Bank of China. The application with the ROC Securities and Futures Commission requires the submission of, among other documents, proof of eligibility, proof of appointment of a local agent and custodian, credentials of the local agent and custodian and a copy of the custodial contract. Foreign institutional investors who receive a permit (each a Qualified Foreign Institutional Investor) may currently invest up to US$1.2 billion (with limited exceptions, the maximum amount of US$1.2 billion may be exceeded) and are required to remit the full amount into the ROC within one year after receiving the investment permit. The percentage of individual foreign ownership and total foreign ownership in an ROC listed company (or a company whose shares are traded on the ROC Over-the-Counter Securities Exchange) may not exceed 50%.
Common shares represented by depositary receipts and common shares converted from overseas convertible bonds are disregarded for the purposes of calculation of the foregoing investment limits. However, if a foreign investor sells shares converted from overseas convertible bonds or common shares withdrawn from the depositary receipt facility and uses the proceeds therefrom to reinvest in securities listed on the Taiwan Stock Exchange or traded on the ROC Over-the-Counter Securities Exchange, the foreign investor will be subject to the 50% foreign ownership percentage limitations. Custodians for Qualified Foreign Institutional Investors are also required to submit to the Central Bank of China and the ROC Securities and Futures Commission a monthly report of trading activities and status of assets under custody and other matters. Capital remitted to the ROC under these guidelines may be remitted out of the ROC at any time after the date the capital is remitted to the ROC. Capital remitted out of the ROC may be returned to the ROC within one year of the outward remittance without the ROC Securities and Futures Commissions approval. Capital gains and income on investments may be remitted out of the ROC at any time.
Other Foreign Investment
In addition to Qualified Foreign Institutional Investors, under existing ROC laws and regulations relating to foreign investment, individual and institutional foreign investors which meet qualifications set by the ROC Securities and Futures Commission (General Foreign Investors) may invest in the shares of Taiwan Stock Exchange-listed or the ROC Over-the-Counter Securities Exchange-Listed companies up to a limit of US$50.0 million (in the case of institutional investors) and US$5.0 million (in the case of individual investors) after obtaining permission from the Taiwan Stock Exchange or the ROC Over-the-Counter Securities Exchange. General Foreign Investors are also subject to the foreign ownership percentage limitations described in the preceding paragraph.
Foreign investors (other than Qualified Foreign Institutional Investors, General Foreign Investors, investors investing in overseas convertible bonds and depositary receipts) who wish
B-4
Under current law, any non-ROC person possessing a Foreign Investment Approval may repatriate annual net profits, interest and cash dividends attributable to the approved investment. Stock dividends attributable to the investment, investment capital and capital gains attributable to such investment may be repatriated by the non-ROC person possessing a foreign investment approval after approvals of the Investment Commission or other government authorities have been obtained.
In addition to the general restriction against direct investment by non-ROC persons in securities of ROC companies, non-ROC persons (except in limited cases) are currently prohibited from investing in certain industries in the ROC pursuant to a Negative List, as amended by the Executive Yuan. The prohibition on foreign investment in the prohibited industries specified in the Negative List is absolute in the absence of specific exemption from the application of the Negative List. Pursuant to the Negative List, certain other industries are restricted so that non-ROC persons (except in limited cases) may invest in these industries only up to a specified level and with the specific approval of the relevant competent authority which is responsible for enforcing the relevant legislation which the Negative List is intended to implement.
Exchange Controls
The Foreign Exchange Control Statute and regulations provide that all foreign exchange transactions must be executed by banks designated to handle the business, by the Ministry of Finance or by the Central Bank of China. 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.
Trade aside, ROC companies and resident individuals may, without foreign exchange approval, remit outside the ROC foreign currency of up to US$50,000,000 (or its equivalent) and US$5,000,000 (or its equivalent) respectively in each calendar year. In addition, ROC companies and resident individuals may, without foreign exchange approval, remit into the ROC foreign currency of up to US$50,000,000 (or its equivalent) and US$5,000,000 (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 China.
In addition, foreign persons may, subject to specified requirements, but without foreign exchange approval of the Central Bank of China, 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.
B-5
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the ADSs offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
TABLE OF CONTENTS
Page | ||||
|
||||
Prospectus Summary | 1 | |||
Summary Consolidated Financial Information | 7 | |||
Risk Factors | 9 | |||
Forward-Looking Statements | 20 | |||
Use of Proceeds | 21 | |||
Market Price Information for Our Common Shares | 22 | |||
Market Price Information for Our Global Depositary Shares | 23 | |||
Dividends and Dividend Policy | 24 | |||
Exchange Rates | 26 | |||
Capitalization | 27 | |||
Dilution | 28 | |||
Selected Consolidated Financial Information | 29 | |||
Managements Discussion and Analysis of Financial Condition and Results of Operations | 31 | |||
Business | 46 | |||
Recent Acquisitions | 75 | |||
Management | 77 | |||
Principal Shareholders | 82 | |||
Certain Transactions | 84 | |||
Exchange Offer | 86 | |||
Description of Common Shares | 87 | |||
Description of American Depositary Receipts | 93 | |||
Common Shares Eligible for Future Sale | 105 | |||
Taxation | 108 | |||
Underwriting | 112 | |||
Enforceability of Civil Liabilities | 116 | |||
Validity of Securities | 116 | |||
Experts | 116 | |||
Available Information | 117 | |||
Index to Financial Statements | F-1 | |||
Annex A The Securities Markets of the ROC | A-1 | |||
Annex B Foreign Investment and Exchange Controls in the ROC | B-1 |
Through and including , 2000 (the 25th day after the date of this prospectus), all dealers effecting transactions in the ADSs or common shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealers obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Advanced
20,000,000
Representing
Goldman Sachs (Asia) L.L.C.
Morgan Stanley Dean Witter
Deutsche Banc Alex. Brown
Representatives of the Underwriters
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses, other than
the underwriting discounts and commissions, payable by the
registrant in connection with the offering described in the
Registration Statement (all amounts are estimated except the
Securities and Exchange Commission registration fee):
Item 14.
Indemnification of Directors and Officers
The relationship between Advanced Semiconductor Engineering, Inc.
(ASE Inc.) and its directors and officers is
governed by the Republic of China (ROC) Civil Code,
ROC Company Law and ASE Inc.s Articles of Incorporation.
There is no written contract between ASE Inc. and its directors
and officers governing the rights and obligations of such
parties. Each person who was or is a party or is threatened to be
made a party to, or is involved in any threatened, pending or
completed action, suit or proceeding by reason of the fact that
such person is or was a director or officer of ASE Inc. in the
absence of willful misconduct or negligence on the part of such
person in connection with such persons performance of
duties as a director or officer, as the case may be, may be
indemnified and held harmless by ASE Inc.
Item 15.
Recent Sales of Unregistered Securities
The only securities of the registrant that were issued or sold by
the registrant within the past three years and not registered
with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the Securities Act), are
described below. The securities listed in A. Stock
Dividends and Employee Bonus Shares below were offered and
issued outside the United States to individuals or entities who
were not citizens or residents of the United States in reliance
upon Regulation S promulgated under the Securities Act.
Accordingly, the offering and issuance of the securities listed
in A. Stock Dividends and Employee Bonus Shares below
were not subject to the registration requirements of the
Securities Act.
A. Stock Dividends and Employee Bonus
Shares
II-1
B. Debt Securities
C. GDS Sale
Item 16.
Exhibits and Financial Statement Schedules
II-2
II-3
Item 17.
Undertakings
A. The registrant hereby undertakes:
(a) The undersigned registrant hereby undertakes to provide
to the underwriter at the closing specified in the underwriting
agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt
delivery to each purchaser.
(b) The undersigned registrant hereby undertakes that:
(c) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than payment by a registrant of expenses
incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
II-4
Securities and Exchange Commission Registration Fee
$
59,809.20
New York Stock Exchange Listing Fee
150,000
National Association of Securities Dealers, Inc. Filing Fee
30,500
Blue Sky Fees and Expenses
15,000
Legal Fees and Expenses
800,000
Accounting Fees and Expenses
300,000
Miscellaneous
25,000
TOTAL
$
1,380,309.20
Date
Issue Type
Issue Size
Underwriter
Issue Price
July 10, 1997
Stock dividend
153,090,000 common shares
N/A
NT$10/share
July 10, 1997
Bonus to employees
10,980,000 common shares
N/A
NT$10/share
June 10, 1998
Stock dividend
610,200,000 common shares
N/A
NT$10/share
June 10, 1998
Bonus to employees
30,760,000 common shares
N/A
NT$10/share
September 10, 1999
Stock dividend
138,840,000 common shares
N/A
NT$10/share
September 10, 1999
Bonus to employees
9,540,000 common shares
N/A
NT$10/share
Table of Contents
ASE Inc. issued on November 4, 1997, US$200,000,000
aggregate principal amount of Zero Coupon Convertible Bonds Due
2002 (the Bonds). The Bonds are convertible into
shares of ASE Inc. at an initial conversion price of NT$157.00
per share. The Bonds were sold by ASE Inc. to SBC Warburg Dillon
Read at 100% of the principal amount, less an underwriting
discount of 2.5% (the Purchaser). The Purchaser
concurrently resold the Bonds to certain investors. ASE Inc.
believes that the sale of the Bonds was exempt from registration
under the Securities Act because the Purchaser resold the Bonds
only (1) outside the United States in offshore transactions
in reliance on Regulation S under the Securities Act or
(2) to qualified institutional buyers (as such term is
defined in Rule 144A under the Securities Act) in the United
States in reliance on Rule 144A under the Securities Act.
On December 15, 1999, ASE Inc. and some of its affiliates
sold 10,489,902 Global Depositary Shares (each a GDS) each
representing five common shares of ASE Inc. to Goldman Sachs
(Asia) L.L.C., Goldman Sachs & Co., and Goldman Sachs
International (collectively, Goldman Sachs) at a
purchase price of US$15.50 per GDS, or the equivalent of US$3.1
per common share. Goldman Sachs concurrently resold the GDSs to
certain investors. ASE Inc. believes that the sale of the shares
in the form of GDSs was exempt from registration under the
Securities Act because Goldman Sachs resold the GDSs only
(1) outside the United States in offshore transactions in
reliance on Regulation S under the Securities Act or
(2) to qualified institutional buyers (as defined in
Rule 144A under the Securities Act) in the United States in
reliance on Rule 144A under the Securities Act.
Exhibits
Description
1.1*
Form of Underwriting Agreement.
3.1
Articles of Incorporation of ASE Inc. (in Chinese with English
language translation).
4.1
Form of 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.
5.1
Opinion of Lee and Li, ROC counsel to ASE Inc., as to the
validity of the common shares.
8.1
ROC Tax Opinion of Lee and Li (included in Exhibit 5.1).
8.2
U.S. Tax Opinion of Davis Polk & Wardwell.
10.1
Stock Purchase Agreement dated as of March 15, 1999 between
ASE Test Limited and the Selling Shareholders relating to the
purchase and sale of 12,250,000 shares of Common Stock of ISE
Labs, Inc. (incorporated by reference to Exhibit 10.1 of
ASE Test Limiteds Registration on Form F-3 (File
No. 333-10892) which was declared effective by the SEC on
December 22, 1999 (the ASE Test 1999 Registration
Statement)).
10.2
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
of the ASE Test 1999 Registration Statement).
Table of Contents
Exhibits
Description
10.3
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% of the
Common Stock of Motorola Korea Ltd. (incorporated by reference to
Exhibit 10.3 of the ASE Test 1999 Registration Statement).
10.4
Manufacturing Services Agreement dated as of July 3, 1999
among Motorola, Inc., ASE Inc. and ASE (Chung Li) Inc.
10.5
Manufacturing Services Agreement dated as of July 3, 1999
among Motorola, Inc., ASE Inc. and ASE (Korea) Inc.
10.6
BGA Immunity Agreement dated as of January 25, 1994 between
ASE Inc. and Motorola, Inc.
10.7
Commission Agreement dated as of December 28, 1997 between
ASE Inc. and Gardex International Limited.
10.8
Service Agreement dated as of December 15, 1998 between ASE
Inc. and ASE (U.S.) Inc.
10.9
Commission Agreement dated as of December 28, 1997 between
ASE Test, Inc. and Gardex International Limited (incorporated by
reference to Item 19(b)(2)(f) of ASE Test Limiteds
Annual Report on Form 20-F for the year ended
December 31, 1998).
10.10
Service Agreement dated as of December 15, 1998 between ASE
Test, Inc. and ASE (U.S.) Inc. (incorporated by reference to
Item 19(b)(2)(e) of ASE Test Limiteds Annual Report on
Form 20-F for the year ended December 31, 1998).
10.11
Commission Agreement dated as of December 28, 1997 between
ASE Electronics (M) Sdn, Bhd. and Gardex International Limited.
10.12
Service Agreement dated as of December 22, 1997 between ASE
Electronics (M) Sdn, Bhd. and ASE (U.S.) Inc.
10.13
ASE Inc. Employee Bonus Plan (in Chinese with English
translation).
10.14
Land Lease effective October 1, 1999 until
September 30, 2009 between ASE Inc. and the Nantze Export
Processing Zone (in Chinese with English language summary).
10.15
Land Lease effective September 1, 1999 until August 30,
2009 between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.16
Land Lease effective April 1, 1998 until March 31, 2008
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.17
Land Lease effective October 1, 1997 until
September 30, 2007 between ASE Inc. and the Nantze Export
Processing Zone (in Chinese with English language summary).
10.18
Land Lease effective October 1, 1997 until
September 30, 2007 between ASE Inc. and the Nantze Export
Processing Zone (in Chinese with English summary).
10.19
Land Lease effective August 1, 1997 until July 31, 2007
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English summary).
10.20
Land Lease effective January 1, 1996 until December 31,
2005 between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English summary).
10.21
Land Lease effective November 1, 1995 until October 31,
2005 between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English summary).
10.22
Land Lease effective July 1, 1995 until June 30, 2005
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English summary).
Table of Contents
Exhibits
Description
10.23
Land Lease effective July 1, 1995 until June 30, 2005
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English summary).
10.24
Land Lease effective August 1, 1994 until July 31, 2004
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English summary).
10.25
Land Lease effective April 6, 1994 until April 5, 2004
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English summary).
21.1
List of subsidiaries of ASE Inc.
23.1
Consent of T.N. Soong & Co.
23.2
Consent of KPMG Certified Public Accountants.
23.3
Consent of Lee and Li (included in Exhibit 5.1).
23.4
Consent of Davis Polk & Wardwell (included in
Exhibit 8.2).
24.1
Power of Attorney.
27.1
Financial Data Schedule.
*
To be filed by amendment.
Confidential treatment requested. Confidential material has been
redacted and has been separately filed with the Securities and
Exchange Commission.
(i)
For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(i) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(ii)
For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form F-1
and has duly caused this Registration Statement or amendment
thereto to be signed on its behalf by the undersigned, thereunto
duly authorized, in Taipei, Taiwan, Republic of China, on
August 28, 2000.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement or amendment thereto has been signed
on August 28, 2000 by the following persons in the
capacities indicated:
II-5
SIGNATURE OF AUTHORIZED REPRESENTATIVE OF THE REGISTRANT
Pursuant to the Securities Act of 1933, the undersigned, the duly
authorized representative in the United States of Advanced
Semiconductor Engineering, Inc., has signed this Registration
Statement or amendment thereto in Newark, Delaware, on
August 28, 2000.
II-6
ADVANCED SEMICONDUCTOR ENGINEERING, INC.
By:
/s/ JASON C.S. CHANG
Jason C.S. Chang
Chairman
Signature
Title
/s/ JASON C.S. CHANG
Jason C.S. Chang
Chairman and Director
/s/ RICHARD H.P. CHANG
Richard H.P. Chang
Chief Executive Officer and Director
(Principal Executive Officer)
*
Leonard Y. Liu
President and Director
/s/ JOSEPH TUNG
Joseph Tung
Chief Financial Officer and Director
(Principal Accounting Officer)
*
Chang Yao Hung-ying
Director
*
Chin Ko-Chien
Director
*
David Pan
Director
*By /s/ JOSEPH TUNG
Joseph Tung
Attorney-in-fact
Table of Contents
PUGLISI & ASSOCIATES
By:
/s/ DONALD PUGLISI
Donald Puglisi
Managing Director
Table of Contents
INDEX TO EXHIBITS
Exhibits
Description
1.1*
Form of Underwriting Agreement.
3.1
Articles of Incorporation of ASE Inc. (in Chinese with English
language translation).
4.1
Form of 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.
5.1
Opinion of Lee and Li, ROC counsel to ASE Inc., as to the
validity of the common shares.
8.1
ROC Tax Opinion of Lee and Li (included in Exhibit 5.1).
8.2
U.S. Tax Opinion of Davis Polk & Wardwell.
10.1
Stock Purchase Agreement dated as of March 15, 1999 between
ASE Test Limited and the Selling Shareholders relating to the
purchase and sale of 12,250,000 shares of Common Stock of ISE
Labs, Inc. (incorporated by reference to Exhibit 10.1 to
ASE Test Limiteds Registration on Form F-3 (File
No. 333-10892) which was declared effective by the SEC on
December 22, 1999 (the ASE Test 1999 Registration
Statement)).
10.2
Asset Purchase Agreement dated as of July 3, 1999 among ASE
(Chung Li) Inc., Advanced Semiconductor Engineering, Inc.,
Motorola Electronics Taiwan, Ltd. and Motorola, Inc.
(incorporated by reference to Exhibit 10.2 of the ASE Test
1999 Registration Statement).
10.3
Stock Purchase Agreement dated as of July 3, 1999 among ASE
Investment (Labuan) Inc., Advanced Semiconductor Engineering,
Inc., Motorola Asia Ltd. and Motorola, Inc. relating to the
purchase and sale of 100% of the Common Stock of Motorola Korea
Ltd. (incorporated by reference to Exhibit 10.3 of the ASE
Test 1999 Registration Statement).
10.4
Manufacturing Services Agreement dated as of July 3, 1999
among Motorola, Inc., ASE Inc. and ASE (Chung Li) Inc.
10.5
Manufacturing Services Agreement dated as of July 3, 1999
among Motorola, Inc., ASE Inc. and ASE (Korea) Inc.
10.6
BGA Immunity Agreement dated as of January 25, 1994 between
ASE Inc. and Motorola, Inc.
10.7
Commission Agreement dated as of December 28, 1997 between
ASE Inc. and Gardex International Limited.
10.8
Service Agreement dated as of December 15, 1998 between ASE
Inc. and ASE (U.S.) Inc.
10.9
Commission Agreement dated as of December 28, 1997 between
ASE Test, Inc. and Gardex International Limited (incorporated by
reference to Item 19(b)(2)(f) of ASE Test Limiteds
Annual Report on Form 20-F for the year ended
December 31, 1998).
10.10
Service Agreement dated as of December 15, 1998 between ASE
Test, Inc. and ASE (U.S.) Inc. (incorporated by reference to
Item 19(b)(2)(e) of ASE Test Limiteds Annual Report on
Form 20-F for the year ended December 31, 1998).
10.11
Commission Agreement dated as of December 28, 1997 between
ASE Electronics (M) Sdn, Bhd. and Gardex International
Limited.
10.12
Service Agreement dated as of December 22, 1997 between ASE
Electronics (M) Sdn, Bhd. and ASE (U.S.) Inc.
Table of Contents
Exhibits
Description
10.13
ASE Inc. Employee Bonus Plan (in Chinese with English
translation).
10.14
Land Lease effective October 1, 1999 until
September 30, 2009 between ASE Inc. and the Nantze Export
Processing Zone (in Chinese with English language summary).
10.15
Land Lease effective September 1, 1999 until August 30,
2009 between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.16
Land Lease effective April 1, 1998 until March 31, 2008
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.17
Land Lease effective October 1, 1997 until
September 30, 2007 between ASE Inc. and the Nantze Export
Processing Zone (in Chinese with English language summary).
10.18
Land Lease effective October 1, 1997 until
September 30, 2007 between ASE Inc. and the Nantze Export
Processing Zone (in Chinese with English language summary).
10.19
Land Lease effective August 1, 1997 until July 31, 2007
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.20
Land Lease effective January 1, 1996 until December 31,
2005 between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.21
Land Lease effective November 1, 1995 until October 31,
2005 between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.22
Land Lease effective July 1, 1995 until June 30, 2005
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.23
Land Lease effective July 1, 1995 until June 30, 2005
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.24
Land Lease effective August 1, 1994 until July 31, 2004
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
10.25
Land Lease effective April 6, 1994 until April 5, 2004
between ASE Inc. and the Nantze Export Processing Zone (in
Chinese with English language summary).
21.1
List of subsidiaries of ASE Inc.
23.1
Consent of T.N. Soong & Co.
23.2
Consent of KPMG Certified Public Accountants.
23.3
Consent of Lee and Li (included in Exhibit 5.1).
23.4
Consent of Davis Polk & Wardwell (included in
Exhibit 8.2).
24.1
Power of Attorney.
27.1
Financial Data Schedule.
*
To be filed by amendment.
Confidential treatment requested. Confidential material has been
redacted and has been separately filed with the Securities and
Exchange Commission.
EXHIBIT 3.1
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
Advanced Semiconductor Engineering, Inc.
Articles of Incorporation
(Translation)
CHAPTER ONE: GENERAL PRINCIPLES
Article 1. This company is called Advanced Semiconductor Engineering, Inc., 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; and
(3). General import and export trading business (excluding the approved businesses requiring special permits).
Article 2-1. 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 3. This company may provide guaranty.
Article 4. 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.
Article 5. The public announcements of this company shall be made in accordance with Article 28 of the Company Law.
CHAPTER TWO: SHARES
This company's total capital is NT$32,000,000,000, divided into 3,200,000,000 shares, NT$10 per share, NT$2,000,000,000 of which are reserved for convertible bonds. The Board of Directors is authorized to determine the issue of unissued shares in installments if deemed necessary for business needs.
Article 7. The share certificates shall be in registered form and have the signatures and 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 one month before each regular shareholders meeting, or within fifteen 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 20 days, in case of regular meetings, and 10 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 share has one vote, but for a shareholder who
possesses 3% or more of the issued shares, the portion that exceeds such 3% shall amount to 99.9% of votes.
Article 14. Any shareholder, who for any reason is unable to attend shareholders meetings, may execute a proxy affixed with the chop same as the impression left with 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, he may appoint another director to act for him. If the chairman fails to make the aforesaid appointment, the chairman for the meeting can be elected from among the directors.
CHAPTER FOUR: DIRECTORS, SUPERVISORS AND MANAGERS
Article 16. This company has 5 to 7 directors, 5 supervisors with tenures of 3 years and who are elected from among the shareholders. Re-elections are allowed.
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 and managers.
(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. Board of Directors meetings shall be convened by the chairman, unless otherwise stipulated by the Company Law. Board of Directors meetings can be held at any place in the ROC or abroad.
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 managing the daily affairs of this company in accordance with the relevant laws and regulations, Articles of Incorporation of this company and the resolutions of shareholders meetings or directors meetings.
Article 22. This company has several managers to assist the general manager to deal with the daily affairs of this company. The appointment, discharge and salary of the managers shall be managed in accordance with Article 29 of Company Law, unless otherwise specified in these Articles of Incorporation.
CHAPTER SIX: ACCOUNTING
Article 23. 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 24. The annual net income ("Income") shall not be distributed before:
(1). The capital gain realized from the disposal of fixed assets being set aside as capital reserve;
(2). Making up losses, if any;
(3). 10% being set aside as legal reserve;
(4). A special reserve being set aside pursuant to the laws or regulation of governmental authority;
(5). Selling 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:
(6). Not more than 2% of the balance (i.e., the Income deducting (1) to (5) above) as compensation to directors and supervisors;
(7). Not less than 5% and not more than 7% of the balance (i.e. the Income deducting (1) to (5) above) as bonus to employees (the 5% portion being distributed to all employees in the form of stock bonus in accordance with the employee bonus rules, while the portion exceeding 5% 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
(8). The remainder is distributed in proportion to the aggregate amount of outstanding shares proposed by the board.
Article 24-1 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, the dividend policy of this Company is that stock dividends be distributed preferably than cash dividends. The ratio for cash dividends shall not exceed 20% in principle, provided that in the event the cash dividend is lower than NT$ 0.1 per share, this Company will not distribute cash dividends, instead stock dividend.
Given the above, the distribution ratio for cash dividend depends on the operation of business in such year and take the capital budget plan in the next year into consideration so as to determine the most appropriate dividend policy and distribution manner which shall be proposed by the board and resolved by the shareholders meeting.
CHAPTER SEVEN: APPENDIX Advanced Semiconductor Engineering Inc. Articles of Incorporation |
Comparison of Original and Amended Articles of Incorporation
------------------------------------------------------------------------------------------------------------------------------------ Original Amended ------------------------------------------------------------------------------------------------------------------------------------ Article 6 This company's total capital is NT$24,000,000,000, This company's total capital is NT$32,000,000,000, divided into 2,400,000,000 shares, NT$10 per share, divided into 3,200,000,000 shares, NT$10 per share, NT$2,000,000,000 of which are reserved for NT$2,000,000,000 of which are reserved for convertible bonds. The Board of Directors is convertible bonds. The Board of Directors is authorized to determine the issue of unissued shares authorized to determine the issue of unissued shares in installments if deemed necessary for business in installments if deemed necessary for business needs. needs. ------------------------------------------------------------------------------------------------------------------------------------ Article 18 The Board of Directors is constituted by The Board of Directors is constituted by directors, directors, and the chairman is elected by the and the chairman and vice chairman is elected by the majority of the directors at a board meeting at majority of the directors at a board meeting at which the majority of directors are present. If the which the majority of directors are present. If the chairman is on leave or for any reason could not chairman is on leave or for any reason could not discharge his duties, his acting proxy shall be discharge his duties, his acting proxy shall be elected in accordance with Article 208 of the elected in accordance with Article 208 of the Company Law. Company Law. ------------------------------------------------------------------------------------------------------------------------------------ Article 24 The annual net income ("Income") shall be The annual net income ("Income") shall not be distributed in the following order: distributed before: (1). The capital gain realized from the disposal (1). The capital gain realized from the disposal of fixed assets being set aside as capital of fixed assets being set aside as capital reserve; reserve; (2). Making up losses, if any; (2). Making up losses, if any; |
(3). 10% as legal reserve; (3). 10% being set aside as legal reserve; (4). A special reserve equal to the (unrealized) (4). A special reserve being set aside pursuant to investment income under equity method for the laws or regulation of governmental long-term investment, excluding cash authority; dividends (the realized income shall be classified as earnings for distribution); (5). Selling aside a special reserve equal to the (unrealized) investment income under equity (5). Not more than 2% of the balance (i.e., the method for long-term investment, excluding Income deducting (1) to (4) above) as cash dividends (the realized income shall be compensation to directors and supervisors; classified as earnings for distribution); (6). Not less than 5% and not more than 7% of the If any Income remains, it shall be distributed as balance (i.e. the Income deducting (1) to (4) follows: above) as bonus to employees (the 5% portion being distributed to all employees in the (6). Not more than 2% of the balance (i.e., the form of stock bonus in accordance with the Income deducting (1) to (5) above) as employee bonus rules, while the portion compensation to directors and supervisors; exceeding 5% being distributed to individual employees (having special contributions) in (7). Not less than 5% and not more than 7% of the accordance with the rules made by the board balance (i.e. the Income deducting (1) to (5) of directors with the authority granted above) as bonus to employees (the 5% portion hereby); and being distributed to all employees in the form of stock bonus in accordance with the (7). The remainder as dividend to stockholders employee bonus rules, while the portion unless retained. exceeding 5% 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 (8). The remainder is distributed in proportion to the aggregate amount of outstanding shares proposed by the board. ------------------------------------------------------------------------------------------------------------------------------------ Article 24-1 Nil 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, the dividend policy of this Company is that stock dividends be distributed preferably than cash dividends. The ratio for cash dividends shall not exceed 20% in principle, provided that in the event the cash dividend is lower than NT$ 0.1 per share, this Company will not distribute cash dividends, instead stock dividend. Given the above, the distribution ratio for cash dividend depends on the operation of business in such year and take the capital budget plan in the next year into consideration so as to determine the most appropriate dividend policy and distribution manner which shall be proposed by the board and resolved by the shareholders meeting. ------------------------------------------------------------------------------------------------------------------------------------ |
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 July 11, 2000.
EXHIBIT 4.1
Citibank, N.A. - Draft August 16, 2000
For Discussion Purposes Only
AMENDED AND RESTATED DEPOSIT AGREEMENT
by and among
ADVANCED SEMICONDUCTOR ENGINEERING, INC.
AND
CITIBANK, N.A.,
as Depositary,
AND
THE HOLDERS AND BENEFICIAL OWNERS
OF AMERICAN DEPOSITARY SHARES EVIDENCED BY
AMERICAN DEPOSITARY RECEIPTS ISSUED HEREUNDER
Dated as of [DATE], 2000
AMENDED AND RESTATED DEPOSIT AGREEMENT, dated as of ___________, 2000 (this Amended and Restated Deposit Agreement and all Exhibits hereto, as amended and supplemented from time to time in accordance with its terms, the "Deposit Agreement"), by and among (i) ADVANCED SEMICONDUCTOR ENGINEERING, INC., a company incorporated under the laws of the Republic of China, and its successors (the "Company"), (ii) CITIBANK, N.A., a national banking association organized under the laws of the United States of America acting in its capacity as depositary, and any successor depositary hereunder (the "Depositary"), and (iii) all Holders and Beneficial Owners of American Depositary Shares evidenced by American Depositary Receipts issued hereunder (all such capitalized terms as hereinafter defined).
W I T N E S S E T H T H A T:
WHEREAS, the Company has duly authorized and has outstanding common shares, having a par value of NT$10.00 per share (the "Shares"), which are listed for trading on the Taiwan Stock Exchange; and
WHEREAS, the Company and the Depositary previously entered into a Deposit Agreement, dated as of July 13, 1995 and amended by Amendment No. 1 to Deposit Agreement, dated as of November 30, 1998 (such Deposit Agreement as so amended, the "Original Deposit Agreement"), to provide for the deposit of the Shares and the creation of (i) International Global Depositary Shares (the "International GDSs") representing the Shares so deposited (the depositary receipts facility for the International GDSs, the "Reg S GDR Facility") and (ii) Rule 144A Global Depositary Shares (the "Rule 144A GDSs") representing the Shares so deposited (the depositary receipts facility for the Rule 144A GDSs, the "Rule 144A GDR Facility"); and
WHEREAS, pursuant to an Exchange Offer Prospectus, dated __________, 2000 (the "Exchange Offer Prospectus"), as filed with the U.S. Securities and Exchange Commission under cover of a Registration Statement on Form F-4 (Reg. No. 333-___) on ______, 2000 and declared effective on _______, 2000, the Company has made an offer to holders of its Rule 144A GDSs to exchange such Rule 144A GDSs upon the terms set forth in such Exchange Offer Prospectus for ADSs (as hereinafter defined) (the "Exchange Offer"); and
WHEREAS, the Company desires (i) to amend and restate the Original Deposit Agreement to convert the International GDSs into American Depositary Shares (the "ADSs") listed for trading on The New York Stock Exchange, Inc. (the "NYSE") (the depositary receipts facility for such NYSE-listed ADSs, the "NYSE-listed ADR Facility" or the "ADR Facility") and (ii) to terminate the Rule 144A GDR Facility created under the terms of the Original Deposit Agreement following the completion of the Exchange Offer in accordance with the terms of the Original Deposit Agreement; and
WHEREAS, the Company wishes to provide for the deposit of a single global Certificate of Payment (as hereinafter defined) and the creation of "Temporary American Depositary Shares" representing interests in the Certificate of Payment so deposited upon the terms set forth herein
(the "Temporary ADSs") listed for trading on the NYSE (the depositary receipts facility for such Temporary ADSs, the "Temporary ADR Facility," and together with the NYSE-listed ADR Facility, the "ADR Facilities"); and
WHEREAS, the Depositary is willing to act as the Depositary for the ADR Facilities upon the terms set forth in this Deposit Agreement; and
WHEREAS, the American Depositary Receipts evidencing each series of the American Depositary Shares issued pursuant to the terms of this Deposit Agreement are to be substantially in the form of Exhibit A attached hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Deposit Agreement; and
WHEREAS, the Board of Directors of the Company (or an authorized committee thereof) has duly approved the establishment of the ADR Facilities.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
All capitalized terms used, but not otherwise defined, herein shall have the meanings set forth below, unless otherwise clearly indicated:
Section 1.1 "Affiliate" shall have the meaning assigned to such term by the Commission (as hereinafter defined) under Regulation C promulgated under the Securities Act (as hereinafter defined), or under any successor regulation thereto.
Section 1.2 "American Depositary Share(s)" and "ADS(s)" shall mean the
rights and interests in the Deposited Securities (as hereinafter defined)
granted to the Holders and Beneficial Owners pursuant to the terms and
conditions of this Deposit Agreement and the American Depositary Receipts issued
hereunder to evidence such ADSs. The International GDSs issued and outstanding
as of the date hereof shall, from and after the date hereof, be deemed for all
purposes to be Share ADSs (as hereinafter defined) issued and outstanding under
the terms of this Deposit Agreement, unless otherwise specifically noted. Each
American Depositary Share shall represent (i) in the case of Share ADSs, [FIVE
(5)] Share(s) and (ii) in the case of Temporary ADSs, interests in the
Certificate of Payment, each interest representing the irrevocable right to
receive [FIVE (5)] Shares from the Company, in each case until there shall occur
a distribution upon Deposited Securities referred to in Section 4.2 or a change
in Deposited Securities referred to in Section 4.11 with respect to which
additional American Depositary Shares are not issued, and thereafter each
American Depositary Share shall represent the Deposited Securities determined in
accordance with the terms of such Sections. Unless
otherwise specifically set forth in this Deposit Agreement or the applicable ADR, the terms "American Depositary Shares" and "ADSs" shall include Temporary ADSs.
Section 1.3 "ADS Record Date" shall have the meaning given to such term in Section 4.9.
Section 1.4 "Applicant" shall have the meaning given to such term in
Section 5.10.
Section 1.5 "Beneficial Owner" shall mean as to any ADS, any person or entity having a beneficial interest deriving from the ownership of such ADS. A Beneficial Owner of ADSs may or may not be the Holder of the ADR(s) evidencing such ADSs. A Beneficial Owner shall be able to exercise any right or receive any benefit hereunder solely through the person who is the Holder of the ADR(s) evidencing the ADS(s) owned by such Beneficial Owner. Beneficial Owners of International GDSs issued and outstanding as of the date hereof shall, from and after the date hereof, be deemed for all purposes to be Beneficial Owners of Share ADSs under the terms hereof, unless otherwise specifically noted.
Section 1.6 "Business Day" shall mean any day on which both the banks in the Republic of China and the banks in New York are open for business.
Section 1.7 "Certificate(s) of Payment" shall mean the single global Certificate of Payment issued by the Company evidencing the irrevocable right to receive definitive share certificates representing the Shares delivered by the Company in connection with the Offering or any Certificate of Payment issued by the Company in connection with any subsequent offerings or distributions of Shares by the Company.
Section 1.8 "Commission" shall mean the Securities and Exchange Commission of the United States or any successor governmental agency thereto in the United States.
Section 1.9 "Company" shall mean Advanced Semiconductor Engineering, Inc., a company incorporated and existing under the laws of the Republic of China, having its principal executive offices at 26 Chin Third Road, Nantze Export Processing Zone, Nantze, Kaohsiung, Taiwan, Republic of China.
Section 1.10 "Custodian" shall mean, as of the date hereof, Citibank, N.A., Taipei Branch, having its principal office at Citicorp Center, 52, Min Sheng East Road, Section 4, Taipei, the Republic of China, as the custodian for the purposes of this Deposit Agreement, and any other entity that may be appointed by the Depositary pursuant to the terms of Section 5.5 as successor, substitute or additional custodian hereunder. The term "Custodian" shall mean any custodian individually or all custodians collectively, as the context requires.
Section 1.11 "Deliver" and "Delivery" shall mean, when used in respect of ADSs, Deposited Securities and Eligible Securities (as such terms are hereinafter defined) and to the
extent permissible under the laws of the Republic of China, either (i) the physical delivery of the certificate(s) representing such securities (including, without limitation, Receipts, as such term is hereinafter defined), or (ii) the electronic delivery of such securities by means of book-entry transfer, if available.
Section 1.12 "Deposit Agreement" shall mean this Amended and Restated Deposit Agreement and all exhibits hereto, as the same may from time to time be amended and supplemented from time to time in accordance with the terms hereof.
Section 1.13 "Depositary" shall mean Citibank, N.A., a national banking association organized under the laws of the United States, in its capacity as depositary under the terms of this Deposit Agreement, and any successor as depositary pursuant to the terms of Section 5.4 hereof.
Section 1.14 "Deposited Securities" shall mean, collectively or individually, as the context may require and unless otherwise specifically set forth herein, (a) with respect to Share ADSs (as such term is hereinafter defined), Shares and (b) with respect to Temporary ADSs (as such term is hereinafter defined), interests in the single global Certificate of Payment, in each case at any time deposited under this Deposit Agreement and any and all other securities, property and cash held by the Depositary or the Custodian in respect thereof, subject, in the case of cash, to the provisions of Section 4.8. Notwithstanding anything else contained herein, the securities, property and cash delivered to the Custodian in respect of Shares held in connection with the International GDSs then outstanding, and any other deposited securities held as of the date hereof under the Original Deposit Agreement in respect of the International GDSs and defined as "Deposited Property" or "Deposited Shares" thereunder in respect of the International GDRs, shall, for all purposes, from and after the date hereof, be considered to be and treated as, Deposited Securities hereunder in all respects. The collateral delivered in connection with Pre-Release Transactions and/or Pre-Cancellation Sale Transactions in each case as described in Section 5.10 hereof, shall not constitute Deposited Securities.
Section 1.15 "Dollars" and "$" shall refer to the lawful currency of the United States.
Section 1.16 "DTC" shall mean The Depository Trust Company, a national clearinghouse and the central book-entry settlement system for securities traded in the United States and, as such, the custodian for the securities of DTC Participants (as hereinafter defined) maintained in DTC, and any successor thereto.
Section 1.17 "DTC Participant" shall mean any financial institution (or any nominee of such institution) having one or more participant accounts with DTC for receiving, holding and delivering the securities and cash held in DTC.
Section 1.18 "Eligible Securities" shall mean, collectively or individually as the context may require and unless otherwise specifically set forth herein, (a) with respect to Share ADSs (as such term is hereinafter defined), Shares, and (b) with respect to Temporary ADSs (as such term
is hereinafter defined), interests in the Certificate of Payment, in each case to the extent eligible for deposit hereunder at any time and from time to time from and after the date hereof.
Section 1.19 "Eligible Securities Registrar" shall mean President Securities Corp. or any other institution organized under the laws of the Republic of China appointed by the Company to carry out the duties of registrar for (a) the Shares and/or (b) any Certificates of Payment, and any successor thereto.
Section 1.20 "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as from time to time amended.
Section 1.21 "Foreign Currency" shall mean any currency other than Dollars.
Section 1.22 "Full Entitlement ADS(s)"; "Full Entitlement ADR(s)" and "Full Entitlement Deposited Securities" shall have the meaning given to such terms in Section 2.11 hereof.
Section 1.23 "Holder" shall mean the person in whose name a Receipt is registered on the books of the Depositary (or the Registrar, if any) maintained for such purpose. Holders of International GDSs shall, from and after the date hereof, by the terms of this Deposit Agreement automatically become Holders of ADRs issued hereunder. A Holder may or may not be a Beneficial Owner. If a Holder is not the Beneficial Owner of the ADSs evidenced by the Receipt registered in its name, such person shall be deemed to have all requisite authority to act on behalf of the Beneficial Owners of the ADSs evidenced by such Receipt.
Section 1.24 "Initial Deposit" shall mean the initial deposit of Shares or the single global Certificate of Payment, as the case may be, in connection with the Company's Offering (as hereinafter defined).
Section 1.25 "International GDSs" shall mean the International Global Depositary Shares issued under the Original Deposit Agreement and outstanding as of the date hereof, as described in the second introductory paragraph to this Deposit Agreement.
Section 1.26 "NT dollars" and "NT$" shall refer to New Taiwan Dollars, the lawful currency of the Republic of China.
Section 1.27 "Offering" shall mean the offering of ADSs in the United States as contemplated by the Underwriting Agreement, dated as of _________, 2000, by and among Goldman Sachs & Co. and Morgan Stanley Dean Witter, as representatives of the several underwriters (as set forth therein) and the Company and the Company's Prospectus, dated ______________, 2000 (as hereinafter defined).
Section 1.28 "Original Deposit Agreement" shall mean Deposit Agreement, dated as of July 13, 1995, as amended by Amendment No. 1 to Deposit Agreement, dated as of November 30, 1998, as further described in the second introductory paragraph to this Deposit Agreement.
Section 1.29 "Partial Entitlement ADS(s)"; "Partial Entitlement ADR(s)," and "Partial Entitlement Deposited Securities" shall have the meaning given to such terms in Section 2.11 hereof.
Section 1.30 "Pre-Release Transaction" shall have the meaning set forth in Section 5.10(a).
Section 1.31 "Principal Office" shall mean, when used with respect to the Depositary, the principal office of the Depositary at which at any particular time its depositary receipts business shall be administered, which, at the date of this Deposit Agreement, is located at 111 Wall Street, New York, New York 10043, U.S.A.
Section 1.32 "Prospectus" shall mean the Company's Prospectus, dated _______, 2000, filed under cover of the Company's Registration Statement on Form F-1 (Reg. No. 333-___), as filed with the Commission on ___________, 2000.
Section 1.33 "Receipt(s)"; "American Depositary Receipt(s)" and "ADR(s)" shall mean any series of the certificate(s) issued by the Depositary to evidence the American Depositary Shares issued under the terms of this Deposit Agreement, as such Receipts may be amended from time to time in accordance with the provisions of this Deposit Agreement. A Receipt may evidence any number of American Depositary Shares and may, in the case of American Depositary Shares held through a central depository such as DTC, be in the form of a "Balance Certificate." Unless otherwise specifically set forth herein, the term "Receipts" shall include the Temporary ADRs evidencing the Temporary ADSs issued hereunder. Notwithstanding anything else contained herein or therein, the depositary receipts issued and outstanding under the Original Deposit Agreement to evidence International GDSs shall, from and after the date hereof, be treated as Receipts issued hereunder and shall, from and after the date hereof, be subject to the terms hereof in all respects.
Section 1.34 "Registrar" shall mean the Depositary or, upon the request or with the approval of the Company, any bank or trust company having an office in the Borough of Manhattan, The City of New York, which shall be appointed by the Depositary to register issuances, transfers and cancellations of Receipts as herein provided, and shall include any co-registrar appointed by the Depositary for such purposes. Registrars (other than the Depositary) may be removed and substitutes appointed by the Depositary. Each Registrar (other than the Depositary) appointed pursuant to this Deposit Agreement shall be required to give notice in writing to the Depositary accepting such appointment and agreeing to be bound by the applicable terms of this Deposit Agreement.
Section 1.35 "Republic of China"; "ROC" and "Taiwan" shall mean the Republic of China.
Section 1.36 "Restricted ADRs" and "Restricted ADSs" shall mean any ADRs and ADSs issued pursuant to Section 2.13 and 5.11. Any such Restricted ADRs shall be held by the Holder thereof in certificated form and legended in accordance with applicable U.S. laws and shall be subject to the appropriate restrictions on sale, deposit, cancellation and transfer under such laws.
Section 1.37 "Restricted Securities" shall mean collectively or
individually, as the context may require, Eligible Securities, Deposited
Securities or ADSs, which (i) have been acquired directly or indirectly from the
Company or any of its Affiliates in a transaction or chain of transactions not
involving any public offering and are subject to resale limitations under the
Securities Act (as hereinafter defined) or the rules promulgated thereunder, or
(ii) are held directly or indirectly by an officer or director (or persons
performing similar functions) or other Affiliate of the Company, or (iii) are
subject to other restrictions on sale or deposit under (a) the laws of the
United States, (b) the laws of the Republic of China, (c) a shareholders
agreement, (d) the Articles of Incorporation of the Company, or (e) the
regulations of an applicable securities exchange unless, in each case, (x) such
Eligible Securities, Deposited Securities or ADSs are being sold to persons
other than an Affiliate of the Company in a transaction (i) covered by an
effective resale registration statement, or (ii) exempt from the registration
requirements of the Securities Act (as hereinafter defined), and (y) the
Eligible Securities, Deposited Securities or ADSs are not, when held by such
person(s), Restricted Securities.
Section 1.38 "Securities Act" shall mean the United States Securities Act of 1933, as from time to time amended.
Section 1.39 "SFC" shall mean the Republic of China Securities and Futures Commission, as further described in Section 2.3 hereof.
Section 1.40 "Shares" shall mean the Company's common shares, each having a par value of NT$10.00 per share, validly issued and outstanding and fully paid and may, if the Depositary so agrees after consultation with the Company, include evidence of the right to receive Shares (other than interests in any Certificate of Payment); provided that in no event shall Shares include evidence of the right to receive Shares with respect to which the full purchase price has not been paid or Shares as to which preemptive rights have theretofore not been validly waived or exercised; provided further, however, that, if there shall occur any change in par value, split-up, consolidation, reclassification, conversion or any other event described in Section 4.11 in respect of the Shares of the Company, the term "Shares" shall thereafter, to the maximum extent permitted by law, represent the successor securities resulting from such change in par value, split-up, consolidation, exchange, conversion, reclassification or event.
Section 1.41 "Share American Depositary Share(s)" and "Share ADS(s)" shall mean the rights and interests in deposited Shares granted to Holders and Beneficial Owners pursuant to the terms and conditions of this Deposit Agreement and the Share ADRs issued hereunder to evidence such Share ADSs. The International GDSs issued under the Original Deposit Agreement and outstanding as of the date hereof shall, from and after the date hereof, be deemed for all purposes to be Share ADSs issued hereunder. Share ADSs shall, unless otherwise specifically set forth herein, be deemed to be American Depositary Shares or ADSs, as the context may require, for all purposes under this Deposit Agreement.
Section 1.42 "Share American Depositary Receipt(s)" and "Share ADR(s)" shall mean the Receipts issued by the Depositary to evidence Share ADSs issued under the terms of this Deposit Agreement, as such Share ADRs may be amended from time to time in accordance with the provisions hereof. A Share ADR may evidence any number of Share ADSs and may, in the case of Share ADSs held through a central depository such as DTC, be in the form of a "Balance Certificate". Unless otherwise specifically set forth herein, the term "Share ADRs" shall, from and after the date hereof, include the International GDRs issued under the Original Deposit Agreement. Share ADRs shall, unless otherwise specifically set forth herein or in the applicable ADR(s), be deemed to be Receipts for all purposes under this Deposit Agreement.
Section 1.43 "Taiwan Securities Central Depository" shall mean the central depository for Shares in the Republic of China, and any successor thereto.
Section 1.44 "Taiwan Stock Exchange" and "TSE" shall mean the stock exchange in the Republic of China, upon which the Company's Shares are listed for trading and any successor stock exchange thereto.
Section 1.45 "Temporary ADS(s)" shall mean the rights and interests in any deposited Certificate of Payment granted to Holders and Beneficial Owners pursuant to the terms and conditions of this Deposit Agreement (including, without limitation, Section 2.12 hereof) and the applicable Temporary ADR(s) issued hereunder to evidence such Temporary ADSs. Temporary ADSs shall, unless otherwise specifically set forth herein or in the applicable Temporary ADR(s), be deemed to be American Depositary Shares or ADSs, as the context may require, for all purposes under this Deposit Agreement.
Section 1.46 "Temporary ADR(s)" shall mean the Receipts issued by the Depositary to evidence Temporary ADSs issued under the terms of this Deposit Agreement (including, without limitation, Section 2.12 hereof), as such Temporary ADRs may be amended from time to time in accordance with the terms hereof. A Temporary ADR may evidence any number of Temporary ADSs and may, in the case of Temporary ADSs held through a central depository such as DTC, be in the form of a "Balance Certificate". Temporary ADRs shall, unless otherwise specifically set forth herein or in the applicable Temporary ADR(s), be deemed to be Receipts for all purposes under this Deposit Agreement.
Section 1.47 "United States" shall have the meaning assigned to it in Regulation S as promulgated by the Commission under the Securities Act.
ARTICLE II
APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS;
DEPOSIT OF ELIGIBLE SECURITIES; EXECUTION
AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS
Section 2.1 Appointment of Depositary. The Company hereby appoints the Depositary as depositary for the Deposited Securities and hereby authorizes and directs the Depositary to act in accordance with the terms set forth in this Deposit Agreement. Each Holder and each Beneficial Owner, upon acceptance of any ADSs (or any interest therein) issued in accordance with the terms of this Deposit Agreement and each holder and each beneficial owner of International GDSs who continues to hold such securities from and after the date hereof, shall be deemed for all purposes to (a) be a party to and bound by the terms of this Deposit Agreement and (b) appoint the Depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in this Deposit Agreement (including, without limitation, Section 2.12 hereof), to adopt any and all procedures necessary to comply with applicable law and to take such action as the Depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of this Deposit Agreement (the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof).
Section 2.2 Form and Transferability of Receipts.
(a) Form. ADSs shall be evidenced by definitive Receipts which shall be engraved, printed, lithographed or produced in such other manner as may be agreed upon by the Company and the Depositary. Receipts may be issued under this Deposit Agreement in denominations of any whole number of ADSs. The Receipts shall be substantially in the form set forth in Exhibit A to this Deposit Agreement, with any appropriate insertions, modifications and omissions, in each case as otherwise contemplated in this Deposit Agreement or required by applicable law. Receipts shall be (i) dated, (ii) signed by the manual or facsimile signature of a duly authorized signatory of the Depositary, (iii) countersigned by the manual or facsimile signature of a duly authorized signatory of the Registrar, and (iv) registered in the books maintained by the Registrar for the registration of issuances and transfers of Receipts. No Receipt and no ADS evidenced thereby shall be entitled to any benefits under the Deposit Agreement or be valid or enforceable for any purpose against the Depositary or the Company, unless such Receipt shall have been so dated, signed, countersigned and registered. Receipts bearing the facsimile signature of a duly-authorized signatory of the Depositary or the Registrar, who at the time of signature was a duly authorized signatory of the Depositary or the Registrar, as the case may be, shall bind the Depositary, notwithstanding the fact that such signatory has ceased to be so authorized prior to the delivery of such Receipt by the Depositary. The Share ADRs and the Temporary ADRs shall each bear a separate and distinct CUSIP number that is
different from one another and from any CUSIP number that was, is or may be assigned to any depositary receipts previously or subsequently issued pursuant to any other arrangement between the Depositary (or any other depositary) and the Company and which are not Receipts issued hereunder.
(b) Legends. The Receipts may be endorsed with, or have incorporated in the text thereof, such legends or recitals not inconsistent with the provisions of the Deposit Agreement (i) as may be necessary to enable the Depositary to perform its obligations hereunder, (ii) as may be required to comply with any applicable laws or regulations, or with the rules and regulations of the New York Stock Exchange or of any other securities exchange or market upon which ADSs may be traded, listed or quoted, or to conform with any usage with respect thereto, (iii) as may be necessary to indicate any special limitations or restrictions to which any particular Receipts or ADSs are subject by reason of the date of issuance or type of the Deposited Securities or otherwise, or (iv) as may be required by any book-entry system in which the ADSs are held.
(c) Title. Subject to the limitations contained herein and in the Receipt, title to a Receipt (and to each ADS evidenced thereby) shall be transferable upon the same terms as a certificated security under the laws of the State of New York, provided that such Receipt has been properly endorsed or is accompanied by properly executed instruments of transfer. Notwithstanding any notice to the contrary, the Depositary and the Company may deem and treat the Holder of a Receipt (that is, the person in whose name a Receipt is registered on the books of the Depositary) as the absolute owner thereof for all purposes. Neither the Depositary nor the Company shall have any obligation nor be subject to any liability under this Deposit Agreement or any Receipt to any holder of a Receipt or any Beneficial Owner unless such holder is the Holder of such Receipt registered on the books of the Depositary or, in the case of a Beneficial Owner, such Beneficial Owner, or the Beneficial Owner's representative, is the Holder registered on the books of the Depositary.
(d) Book-Entry Systems. The Depositary shall make arrangements for the acceptance of the ADSs into DTC. A single ADR in the form of a "Balance Certificate" will (except as contemplated in Section 2.12) evidence the ADSs held through DTC and will be registered in the name of the nominee for DTC (currently "Cede & Co.") and will provide that it represents the aggregate amount of ADSs from time to time indicated in the records of the Depositary as being issued hereunder and that the aggregate amount of ADSs represented thereby may from time to time be increased or decreased by making adjustments on such records of the Depositary and of DTC or its nominee as hereinafter provided. As such, the nominee for DTC will be the only "Holder" of the ADR evidencing the ADSs held through DTC. Citibank, N.A. (or such other entity as is appointed by DTC or its nominee) may hold the "Balance Certificate" as custodian for DTC. Each Beneficial Owner of ADSs held through DTC must rely upon the procedures of DTC and the DTC Participants to exercise or be entitled to any rights attributable to such ADSs. The DTC Participants shall for all purposes be deemed to have all requisite power and authority to act on behalf of the Beneficial Owners of the ADSs held in the DTC Participants' respective accounts in DTC and the Depositary shall for all purposes be authorized to rely upon
any instructions and information given to it by DTC Participants on behalf of Beneficial Owners of ADSs. So long as ADSs are held through DTC or unless otherwise required by law, ownership of beneficial interests in the ADR registered in the name of the nominee for DTC will be shown on, and transfers of such ownership will be effected only through, records maintained by (i) DTC or its nominee (with respect to the interests of DTC Participants), or (ii) DTC Participants or their nominees (with respect to the interests of clients of DTC Participants).
Section 2.3 Deposit with Custodian. The Depositary and the Company have been advised that under Republic of China law, as in effect as of the date hereof, no deposits of Eligible Securities may be made in the NYSE-listed ADR Facility, and no ADSs may be issued against such deposits, without receipt of specific approval of the Republic of China Securities and Futures Commission (the "SFC"), except in connection with (i) the distribution of additional Eligible Securities in connection with dividends on or free distributions of Eligible Securities, (ii) the exercise by Holders of their preemptive rights applicable to Eligible Securities evidenced by ADSs in the event of capital increases for cash, or (iii) the purchase, as permitted hereunder, directly by any person or through the Depositary of Shares on the TSE for deposit in the ADR Facility, provided that the total number of ADSs outstanding after an issuance described in clause (iii) does not exceed the number of issued ADSs previously approved by the SFC in connection with the Offering (plus any ADSs created pursuant to clauses (i) and (ii) above), and subject to any adjustment in the number of Eligible Securities represented by each ADS. The Depositary and the Company have been advised that under ROC law, as in effect as of the date hereof, issuances under clause (iii) above will be permitted only to the extent that previously issued ADSs have been canceled and the Eligible Securities withdrawn from the ADR Facility upon cancellation of such ADSs have been sold on the TSE. Except as contemplated by Section 2.13 hereof, the Depositary will not accept any Shares for deposit pursuant to clause (iii) unless it receives satisfactory opinions of ROC and U.S. counsel to the Company to the effect that such Eligible Securities may lawfully be deposited pursuant to the Deposit Agreement and are not Restricted Securities. The laws of the Republic of China applicable to the deposit of Eligible Securities may change from time to time. There can be no assurances that current law will continue in effect or that future changes of Republic of China law will not adversely affect the ability to deposit Eligible Securities hereunder.
The Initial Deposit(s) of Shares into the ADR Facilities will be made, by or on behalf of the Company or the investors (or nominees for the investors) acquiring Shares and/or ADSs in the Offering, by the delivery to the Custodian of a Certificate of Payment evidencing the irrevocable right to receive the physical share certificates representing the Shares registered in the name of the nominee of the Depositary as representative of the Holders, as instructed by the Depositary. Subject to the terms and conditions of this Deposit Agreement, upon such Initial Deposit(s), the Depositary shall execute and deliver ADRs evidencing the ADSs representing the Deposited Securities constituting the Initial Deposit(s) in the manner provided in Sections 2.5 and 2.12.
Subject to applicable laws and regulations of the Republic of China and to the terms and conditions of this Deposit Agreement and applicable law, Eligible Securities or evidence of rights to receive Eligible Securities (other than Restricted Securities) may be deposited by any person (including the Depositary in its individual capacity but subject, however, in the case of the Company or any Affiliate of the Company, to Section 5.7 hereof) at any time, whether or not the transfer books of the Company or the Eligible Securities Registrar, if any, are closed, by Delivery of the Eligible Securities to the Custodian. Every deposit of Eligible Securities shall be accompanied by the following: (A) (i) in the case of Eligible Securities represented by certificates issued in registered form, appropriate instruments of transfer or endorsement, in a form satisfactory to the Custodian, (ii) in the case of Eligible Securities represented by certificates in bearer form, the requisite coupons and talons pertaining thereto, and (iii) in the case of Eligible Securities delivered by book-entry transfer, confirmation of such book-entry transfer to the Custodian or that irrevocable instructions have been given to cause such Eligible Securities to be so transferred, (B) such certifications and payments (including, without limitation, the Depositary's fees and related charges) and evidence of such payments (including, without limitation, stamping or otherwise marking such Eligible Securities by way of receipt) as may be reasonably required by the Depositary or the Custodian in accordance with the provisions of this Deposit Agreement and applicable law, (C) if the Depositary so requires, a written order directing the Depositary to execute and deliver to, or upon the written order of, the person(s) stated in such order a Receipt or Receipts for the number of American Depositary Shares representing the Eligible Securities so deposited, (D) evidence reasonably satisfactory to the Depositary (which may be an opinion of counsel) that all necessary approvals have been granted by, or there has been compliance with the rules and regulations of, any applicable governmental agency in the Republic of China, and (E) if the Depositary so requires, (i) an agreement, assignment or instrument reasonably satisfactory to the Depositary or the Custodian which provides for the prompt transfer by any person in whose name the Eligible Securities are or have been recorded to the Custodian of any distribution, or right to subscribe for additional Eligible Securities or to receive other property in respect of any such deposited Eligible Securities or, in lieu thereof, such indemnity or other agreement as shall be reasonably satisfactory to the Depositary or the Custodian and (ii) if the Eligible Securities are registered in the name of the person on whose behalf they are presented for deposit, a proxy or proxies entitling the Custodian to exercise voting rights in respect of the Eligible Securities for any and all purposes until the Eligible Securities so deposited are registered in the name of the Depositary, the Custodian or any nominee.
Except as contemplated by Section 2.13, without limiting any other provision of this Deposit Agreement, the Depositary shall instruct the Custodian not to, and neither the Depositary nor the Custodian, nor any nominee, agent or person acting on their behalf shall knowingly, accept for deposit (a) any Restricted Securities nor (b) any fractional Eligible Securities nor (c) a number of Eligible Securities which upon application of the ADS-to-Eligible Securities ratio would give rise to fractional ADSs. No Eligible Securities shall be accepted for deposit unless accompanied by evidence, if any is required by the Depositary, that is reasonably satisfactory to the Depositary or the Custodian that all conditions to such deposit have been satisfied by the
person depositing such Eligible Securities under the laws and regulations of the Republic of China and any necessary governmental approval has been granted in the Republic of China, if any. The Depositary may issue ADSs against evidence of rights to receive Eligible Securities from the Company, any agent of the Company or any custodian, registrar, transfer agent, clearing agency or other entity involved in ownership or transaction records in respect of the Eligible Securities. Such evidence of rights may consist of, without limitation, written specific guarantees of ownership of Eligible Securities furnished by the Company or any such custodian, registrar, transfer agent, clearing agency or other entity involved in ownership or transaction records in respect of the Eligible Securities.
Section 2.4 Registration and Safekeeping of Deposited Securities. The Depositary shall instruct the Custodian upon each Delivery of certificates representing registered Eligible Securities being deposited hereunder with the Custodian (or other Deposited Securities pursuant to Article IV hereof), together with the other documents above specified, to promptly present such certificate(s), together with the appropriate instrument(s) of transfer or endorsement, duly stamped, to the Eligible Securities Registrar for transfer and registration of the Eligible Securities (as soon as transfer and registration can be accomplished and at the expense of the person for whom the deposit is made) in the name of the Depositary, the Custodian or a nominee of either. Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or a nominee in each case on behalf of the Holders and Beneficial Owners, at such place or places as the Depositary or the Custodian shall determine.
Without limitation of the foregoing, neither the Depositary nor the Custodian, nor any nominee, agent or person acting on their behalf shall knowingly accept for deposit under this Deposit Agreement any Eligible Securities required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such Eligible Securities, or any Eligible Securities the deposit of which would violate any provisions of the Articles of Incorporation of the Company. In addition, and without limitation of the foregoing, the Depositary and the Custodian will comply with written instructions of the Company not to accept for deposit any Shares identified in such instructions at such times and under such circumstances as may reasonably be specified in such instructions in order to facilitate the Company's compliance with the securities laws of the United States and other jurisdictions.
Section 2.5 Execution and Delivery of Receipts. The Depositary has made
arrangements with the Custodian to confirm to the Depositary (i) that a deposit
of Eligible Securities has been made pursuant to Section 2.3 hereof, (ii) that
such Deposited Securities have been recorded in the name of the Depositary, the
Custodian or a nominee of either on the shareholders' register maintained by or
on behalf of the Company by the Eligible Securities Registrar if registered
Eligible Securities have been deposited or if deposit is made by book-entry
transfer, confirmation of such transfer in the books of the Taiwan Securities
Central Depository, (iii) that all required documents have been received, and
(iv) the person(s) to whom or upon whose order American Depositary Shares are
deliverable in respect thereof and the number of American Depositary Shares to
be so delivered thereby. Such notification may be made by first
class airmail letter postage prepaid, cable, telex, SWIFT message or, at the risk and expense of the person making the deposit, by facsimile or other means of electronic transmission with confirmation of receipt. Upon receiving such notice from the Custodian, the Depositary subject to the terms and conditions of this Deposit Agreement, applicable law and the provisions of the Articles of Incorporation of the Company and the Eligible Securities, shall issue the ADSs representing the Eligible Securities so deposited to or upon the order of the person(s) named in the notice delivered to the Depositary and shall execute and deliver at its Principal Office Receipt(s) registered in the name(s) requested by such person(s) and evidencing the aggregate number of ADSs to which such person(s) are entitled, but only upon payment to the Depositary of the charges of the Depositary for accepting a deposit, issuing ADSs and executing and delivering such Receipt(s) (as set forth in Section 5.9 and Exhibit B hereto) and all taxes and governmental charges and fees payable in connection with such deposit and the transfer of the Eligible Securities and the issuance of the Receipt(s). The Depositary shall only issue ADSs in whole numbers and deliver ADRs evidencing whole numbers of ADSs. Nothing herein shall prohibit any Pre-Release Transaction upon the terms set forth in this Deposit Agreement.
Section 2.6 Transfer, Combination and Split-Up of Receipts.
(a) Transfer. The Registrar shall promptly register the transfer of Receipts (and of the ADSs represented thereby) on the transfer books maintained for such purpose and the Depositary shall promptly cancel such Receipts and execute new Receipts evidencing the same aggregate number and type of ADSs as those evidenced by the Receipts canceled by the Depositary, shall cause the Registrar to countersign such new Receipts and shall promptly Deliver such new Receipts to or upon the order of the person entitled thereto, if each of the following conditions has been satisfied: (i) the Receipts have been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a transfer thereof, (ii) the surrendered Receipts have been properly endorsed or are accompanied by proper instruments of transfer (including signature guarantees in accordance with standard securities industry practice), (iii) the surrendered Receipts have been duly stamped (if required by the laws of the State of New York or of the United States), and (iv) all applicable fees and charges of, and reasonable expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B hereto) have been paid, subject, however, in each case, to the terms and conditions of the applicable Receipts, of this Deposit Agreement and of applicable law, in each case as in effect at the time thereof.
(b) Combination and Split-Up. The Registrar shall register the split-up or combination of Receipts (and of the ADSs represented thereby) on the books maintained for such purpose and the Depositary shall cancel such Receipts and execute new Receipts for the number of ADSs requested, but in the aggregate not exceeding the number of the same type of ADSs evidenced by the Receipts canceled by the Depositary, shall cause the Registrar to countersign such new Receipts and shall Deliver such new Receipts to or upon the order of the Holder thereof, if each of the following conditions has been satisfied: (i) the Receipts have been duly
Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a split-up or combination thereof, and (ii) all applicable fees and charges of, and reasonable expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B hereto) have been paid, subject, however, in each case, to the terms and conditions of the applicable Receipts, of this Deposit Agreement and of applicable law, in each case as effect at the time thereof.
(c) Co-Transfer Agents. The Depositary may appoint one or more co-transfer agents for the purpose of effecting transfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Holders or persons entitled to such Receipts and will be entitled to protection and indemnity to the same extent as the Depositary. Such co-transfer agents may be removed and substitutes appointed by the Depositary. Each co-transfer agent appointed under this Section 2.6 (other than the Depositary) shall give notice in writing to the Depositary accepting such appointment and agreeing to be bound by the applicable terms of this Deposit Agreement.
Section 2.7 Surrender of ADSs and Withdrawal and Sale of Deposited Securities.
(a) ROC Requirements. The Depositary and the Company have been advised that under ROC law, as in effect as of the date hereof, a Holder wishing to withdraw Deposited Securities from the ADR facility is required to appoint an eligible agent in the Republic of China to open (i) a securities trading account with a local brokerage firm after receiving an approval from the TSE and (ii) a bank account (the securities trading account and the bank account, collectively, the "Accounts"), to pay ROC taxes, remit funds, exercise shareholders' rights and perform such other functions as may be designated by such withdrawing Holder. In addition, such withdrawing Holder is also required to appoint a custodian bank to hold the securities in safekeeping, make confirmations and settle trades and report all relevant information. Without making such appointment and the opening of such Accounts, the withdrawing Holder would be unable to hold or subsequently sell the Deposited Securities withdrawn from the ADR Facilities on the TSE or otherwise. The laws of the Republic of China applicable to the withdrawal of Deposited Securities may change from time to time. There can be no assurances that current law will remain in effect or that future changes of Republic of China law will not adversely affect the ability of Holders to withdraw Deposited Securities hereunder.
(b) Sale of Deposited Securities. Upon surrender of Receipts at the Principal Office and upon payment of any fees, reasonable expenses, taxes or other governmental charges as provided hereunder, subject to the terms of this Deposit Agreement and the Company's Articles of Incorporation, and the transfer restrictions applicable to the Deposited Securities, if any, Holders may request that the Deposited Securities represented by such Holders' Receipts be sold on such Holder's behalf. Any Holder requesting a sale of Deposited Securities may be required by the Depositary to deliver, or cause to be delivered, to the Depositary a written order
requesting the Depositary to sell, or cause to be sold, such Deposited Securities. Any such sale of Deposited Securities will be conducted in accordance with applicable ROC law through a securities company in the ROC on the TSE or in such other manner as is or may be permitted under applicable ROC law. Any such sale of Deposited Securities will be at the expense and risk of the Holder requesting such sale. Any Holder requesting the Depositary to sell the Deposited Securities represented by such Holder's ADSs may be required to enter into a separate agreement to cover the terms of the sale of such Deposited Securities.
Upon receipt of any proceeds from any such sale, the Depositary shall, subject to any restrictions imposed by ROC law and regulations, and as provided hereunder, convert or cause to be converted any such proceeds into U.S. dollars and distribute any such proceeds to the Holders entitled thereto after deduction or payment of any fees, reasonable expenses, taxes or governmental charges (including, without limitation, any ROC and U.S. taxes) incurred in connection with such sale, as provided under this Deposit Agreement. Any such sale may be subject to ROC taxation on capital gains, if any, and will be subject to a securities transaction tax in the ROC. The ROC does not, as of the date hereof, impose tax on capital gains arising from ROC securities transactions, but there can be no assurance that a capital gains tax on ROC securities transactions will not be imposed in the future or as to the manner in which any ROC capital gains tax in respect of a sale of Deposited Securities would be imposed or calculated.
(c) Withdrawal of Deposited Securities. The Holder of ADSs shall be entitled to Delivery (at the Custodian's designated office) of the Deposited Securities at the time represented by the ADS(s) upon satisfaction of each of the following conditions: (i) the Holder (or a duly authorized attorney of the Holder) has duly Delivered ADSs to the Depositary at its Principal Office (and if applicable, the Receipts evidencing such ADSs) for the purpose of withdrawal of the Deposited Securities represented thereby, (ii) if so required by the Depositary, the Receipts Delivered to the Depositary for such purpose have been properly endorsed in blank or are accompanied by proper instruments of transfer in blank (including signature guarantees in accordance with standard securities industry practice), (iii) if so required by the Depositary, the Holder of the ADSs has executed and delivered to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be Delivered to or upon the written order of the person(s) designated in such order, (iv) the Holder has delivered to the Depositary the certification contemplated in Exhibit C hereof, duly completed by or on behalf of the Beneficial Owner(s) of the ADSs surrendered for withdrawal (unless the Depositary is otherwise instructed by the Company), and (v) all applicable fees and charges of, and reasonable expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B hereof) have been paid, subject, however, in each case, to the terms and conditions of the Receipts evidencing the surrendered ADSs, of the Deposit Agreement, of the Company's Articles of Incorporation and of any applicable laws and regulations of the Republic of China and of the United States and the rules of the Taiwan Securities Central Depository, and to any provisions of or governing the Deposited Securities, in each case as in effect at the time thereof.
Upon satisfaction of each of the conditions specified above, the Depositary (i) shall cancel the ADSs Delivered to it (and, if applicable, the Receipts evidencing the ADSs so Delivered), (ii) shall direct the Registrar to record the cancellation of the ADSs so Delivered on the books maintained for such purpose, and (iii) shall direct the Custodian to Deliver (without unreasonable delay) at the Custodian's designated office the Deposited Securities represented by the ADSs so canceled together with any certificate or other document of title for the Deposited Securities, or evidence of the electronic transfer thereof (if available), as the case may be, to or upon the written order of the person(s) designated in the order delivered to the Depositary for such purpose, subject however, in each case, to the terms and conditions of the Deposit Agreement, of the Receipts evidencing the ADSs so canceled, of the Articles of Incorporation of the Company, of applicable laws and regulations of the Republic of China and of the United States and of the rules of the Taiwan Securities Central Depositary, and to the terms and conditions of or governing the Deposited Securities, in each case as in effect at the time thereof.
The Depositary shall not accept for surrender ADSs representing less than a whole number of Eligible Securities. In the case of the Delivery to it of ADSs representing a number other than a whole number of Eligible Securities, the Depositary shall cause ownership of the appropriate whole number of Eligible Securities to be Delivered in accordance with the terms hereof, and shall, at the discretion of the Depositary, either (i) return to the person surrendering such ADSs the number of ADSs representing any remaining fractional Eligible Security, or (ii) sell or cause to be sold the fractional Eligible Security represented by the ADS(s) so surrendered and remit the proceeds of such sale (net of (a) applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to the person surrendering the ADSs. In addition, trading restrictions on the TSE may result in the price per Eligible Security or on any lot of any type of Eligible Security other than an integral multiple of 1,000 Eligible Securities being lower than the price of Eligible Securities in lots of integral multiples of 1,000 Eligible Securities.
Notwithstanding anything else contained in any Receipt or the Deposit Agreement, the Depositary may make delivery at the Principal Office of the Depositary of (i) any cash dividends or cash distributions, or (ii) any proceeds from the sale of any distributions of Securities or rights, which are at the time held by the Depositary in respect of the Deposited Securities represented by the ADSs surrendered for cancellation and withdrawal. At the request, risk and expense of any Holder so surrendering ADSs, and for the account of such Holder, the Depositary shall direct the Custodian to forward (to the extent permitted by law) any cash or other property (other than securities) held by the Custodian in respect of the Deposited Securities represented by such ADSs to the Depositary for delivery at the Principal Office of the Depositary. Such direction shall be given by letter or, at the request, risk and expense of such Holder, by air courier, cable, telex or facsimile transmission.
Section 2.8 Additional Limitations on Execution and Delivery, Transfer, etc. of Receipts; Suspension of Delivery, Transfer, etc.
(a) Additional Requirements. As a condition precedent to the execution and delivery, registration, registration of transfer, split-up, combination or surrender of any Receipt, the delivery of any distribution thereon, or the withdrawal of any Deposited Securities, the Depositary or the Custodian may require (i) payment from the depositor of Eligible Securities or presenter of ADSs or of a Receipt of a sum sufficient to reimburse it for any tax or other governmental charges and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Eligible Securities being deposited or withdrawn) and payment of any applicable fees and charges of the Depositary as provided in Section 5.9 and Exhibit B hereof, (ii) the production of proof satisfactory to it as to the identity and genuineness of any signature or any other matter contemplated by Section 3.1 hereof, and (iii) compliance with (A) any laws or governmental regulations relating to the execution and delivery of Receipts or American Depositary Shares or to the deposit of Eligible Securities or the withdrawal of Deposited Securities and (B) such reasonable regulations as the Depositary and the Company may establish consistent with the provisions of the applicable Receipt, this Deposit Agreement and applicable law.
(b) Additional Limitations. The issuance of ADSs against deposits of Eligible Securities generally or against deposits of particular Eligible Securities may be suspended, or the deposit of particular Eligible Securities may be refused, or the registration of transfer of Receipts in particular instances may be refused, or the registration of transfers of Receipts generally may be suspended, during any period when the transfer books of the Company, the Depositary, a Registrar or the Eligible Securities Registrar are closed or if any such action is deemed necessary or advisable by the Depositary or the Company, in good faith, at any time or from time to time because of any requirement of law, any government or governmental body or commission or any securities exchange on which the ADSs or Eligible Securities are listed, or under any provision of this Deposit Agreement or the applicable Receipt(s) or, under any provision of, or governing, the Deposited Securities, or because of a meeting of shareholders of the Company or for any other reason, subject, in all cases, to Section 7.8 hereof.
(c) Regulatory Restrictions. Notwithstanding any provision of this Deposit Agreement or any Receipt(s) to the contrary, Holders are entitled to surrender outstanding ADSs to withdraw the Deposited Securities at any time subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Eligible Securities in connection with voting at a shareholders' meeting or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities, and (iv) other circumstances specifically contemplated by Section I.A.(1) of the General Instructions to Form F-6 (as such General Instructions may be amended from time to time).
Section 2.9 Lost Receipts, etc. In case any Receipt shall be mutilated, destroyed, lost, or stolen, the Depositary shall execute and deliver a new Receipt of like tenor at the expense of the Holder (a) in the case of a mutilated Receipt, in exchange of and substitution for such mutilated Receipt upon cancellation thereof, or (b) in the case of a destroyed, lost or stolen Receipt, in lieu of and in substitution for such destroyed, lost, or stolen Receipt, after the Holder thereof (i) has submitted to the Depositary a written request for such exchange and substitution before the Depositary has notice that the Receipt has been acquired by a bona fide purchaser, (ii) has provided such security or indemnity (including an indemnity bond) as may be required by the Depositary to save it and any of its agents harmless, and (iii) has satisfied any other reasonable requirements imposed by the Depositary, including, without limitation, evidence satisfactory to the Depositary of such destruction, loss or theft of such Receipt, the authenticity thereof and the Holder's ownership thereof.
Section 2.10 Cancellation and Destruction of Surrendered Receipts; Maintenance of Records. All Receipts surrendered to the Depositary shall be canceled by the Depositary. Canceled Receipts shall not be entitled to any benefits under this Deposit Agreement or be valid or enforceable against the Depositary for any purpose. The Depositary is authorized to destroy Receipts so canceled, provided the Depositary maintains a record of all destroyed Receipts. Any ADSs held in book-entry form (i.e., through accounts at DTC) shall be deemed canceled when the Depositary causes the number of ADSs evidenced by the Balance Certificate to be reduced by the number of ADSs surrendered (without the need to physically destroy the Balance Certificate). The Depositary agrees to maintain records of all Receipts surrendered and Deposited Securities withdrawn, substitute Receipts delivered and canceled or destroyed Receipts in accordance with procedures ordinarily followed by such transfer agents located in The City of New York, or as required by the laws or regulations governing the Depositary. Upon the reasonable request of the Company, the Depositary shall provide a copy of such records to the Company.
Section 2.11 Partial Entitlement ADSs. In the event any Eligible Securities are deposited which entitle the holders thereof to receive a per-Deposited Security distribution or other entitlement in an amount different from the Deposited Securities then on deposit (the Deposited Securities then on deposit collectively, "Full Entitlement Deposited Securities" and the Deposited Securities with different entitlement collectively, "Partial Entitlement Deposited Securities"), the Depositary shall (i) cause the Custodian to hold Partial Entitlement Deposited Securities separate and distinct from Full Entitlement Deposited Securities, and (ii) subject to the terms of this Deposit Agreement, issue ADSs and deliver ADRs representing Partial Entitlement Deposited Securities which are separate and distinct from the ADSs and ADRs representing Full Entitlement Deposited Securities, by means of separate CUSIP numbering and legending (if necessary) ("Partial Entitlement ADSs/ADRs" and "Full Entitlement ADSs/ADRs", respectively). If and when the Company informs the Depositary in writing that the Partial Entitlement Eligible Securities become Full Entitlement Eligible Securities, the Depositary shall (a) give notice thereof to Holders of Partial Entitlement ADSs and give Holders of Partial Entitlement ADRs the opportunity to exchange such Partial Entitlement ADRs for Full Entitlement ADRs, (b) cause the Custodian to transfer the Partial Entitlement Deposited
Securities into the account of the Full Entitlement Deposited Securities, and
(c) take such actions as are necessary to remove the distinctions between (i)
the Partial Entitlement ADRs and ADSs, on the one hand, and (ii) the Full
Entitlement ADRs and ADSs on the other. Holders and Beneficial Owners of Partial
Entitlement ADSs shall only be entitled to the entitlements of Partial
Entitlement Deposited Securities. Holders and Beneficial Owners of Full
Entitlement ADSs shall be entitled only to the entitlements of Full Entitlement
Deposited Securities. All provisions and conditions of this Deposit Agreement
shall apply to Partial Entitlement ADRs and ADSs to the same extent as Full
Entitlement ADRs and ADSs, except as contemplated by this Section 2.11. The
Depositary is authorized to take any and all other actions as may be necessary
(including, without limitation, making the necessary notations on Receipts) to
give effect to the terms of this Section 2.11. The Company agrees to give timely
written notice to the Depositary if any Eligible Securities issued or to be
issued are Partial Entitlement Eligible Securities and shall assist the
Depositary with the establishment of procedures enabling the identification of
Partial Entitlement Eligible Securities upon Delivery to the Custodian.
Section 2.12 Temporary ADSs. In the event that, in determining the
rights and obligations of parties hereto with respect to any Temporary ADSs, any
conflict arises between (a) the terms of this Deposit Agreement (other than this
Section 2.12) and (b) the terms of (i) the Temporary ADSs issued hereunder as
set forth in this Section 2.12 or (ii) the applicable Temporary ADR, the terms
and conditions set forth in this Section 2.12 or the applicable Temporary ADR
shall be controlling and shall govern the rights and obligations of the parties
to this Deposit Agreement pertaining to the Certificate of Payment, the
Temporary ADSs and the Temporary ADRs.
Whenever the Company proposes to issue any Certificate of Payment
eligible for deposit hereunder (in connection with the Offering or otherwise),
the Company shall timely notify the Depositary thereof and provide the
Depositary with written instructions to the effect that, inter alia, (i) the
Certificate of Payment has been or is to be issued pursuant to a bona fide
purchase of Shares from the Company, (ii) the Certificate of Payment is not, and
shall not be deemed to be upon its deposit, and the Shares issuable pursuant to
the terms of the Certificate of Payment will not be, Restricted Securities,
(iii) a description of the rights (if any) to any distribution upon Deposited
Securities to be made to Holders of Temporary ADSs representing such
Certificates of Payment upon the terms set forth in Article IV hereof, and (iv)
the date established by the Company upon which the Company shall convert or
cause to be converted the Certificate of Payment into Shares on its records and
on the records of the Eligible Securities Registrar.
Subject always to the laws and regulations of the Republic of China, upon deposit of any Certificate of Payment hereunder and payment to the Depositary of the charges of the Depositary for accepting a deposit, issuing ADSs and issuing and delivering Receipts (as set forth in Section 5.9 and Exhibit B hereto), the Depositary shall (i) cause the Custodian to hold such Certificate of Payment separate and distinct from the Shares, any other Certificate(s) of Payment and any other Deposited Securities and (ii) issue and deliver Temporary ADSs representing interests in the Certificate of Payment so deposited. The Temporary ADSs so issued shall be identified and
treated separately and distinctly from any other ADSs representing Deposited Securities hereunder by means, inter alia, of separate CUSIP numbering and legending (if necessary). The Depositary may issue Temporary ADSs in one or multiple series as the Depositary in its sole discretion deems necessary and appropriate. No Temporary ADS shall be fungible with any other ADSs issued hereunder.
The Depositary shall deliver Temporary ADSs in book-entry form only. No
certificated Temporary ADRs will be issued except for a "Balance Certificate"
evidencing all Temporary ADSs held in DTC, which shall be substantially in the
form of Temporary ADR set forth in Exhibit A hereto, except as may be necessary
to identify and treat the Temporary ADSs as separate and distinct from any other
ADSs issued under the terms of this Deposit Agreement. The Depositary shall make
arrangements for the acceptance of such Temporary ADSs into DTC upon the terms
set forth in Section 2.2(d) hereof. The Temporary ADSs and the Temporary ADRs
evidenced thereby are identical to and confer all of the rights and obligations
set forth herein relating to Receipts and ADSs represented thereby except that
(i) in accordance with the applicable laws and regulations of the Republic of
China, Holders of Temporary ADRs will have no right to withdraw the Deposited
Securities represented by their Temporary ADSs, (ii) Temporary ADRs shall bear
separate CUSIP numbers that shall be different from any CUSIP number that is or
may be assigned to the other ADSs issued hereunder, (iii) neither Temporary ADSs
nor interests in any Certificate of Payment shall be eligible for any
Pre-Cancellation Sale Transactions or Pre-Release Transactions described in
Section 5.10 hereof and (iv) in the event that the Company makes any
distributions upon Deposited Securities upon the terms of Article IV of this
Deposit Agreement, the Depositary shall make distributions to Holders of
Temporary ADSs on the basis of the distribution(s) received from the Company in
respect of the Certificate(s) of Payment corresponding to the series of
Temporary ADSs held by such Holder. Nothing herein shall impose any obligation
upon the Depositary to make any distributions to Holders of any series of
Temporary ADSs on the same basis as Holders of Share ADSs or any other Series of
Temporary ADSs issued hereunder.
The Company undertakes to make Shares available in exchange for any
specified Certificate of Payment, as soon as possible after the issuance of the
Certificate of Payment and to provide timely notice thereof to the Depositary.
Upon receipt of such notice from the Company, the Depositary shall instruct the
Custodian to surrender any such Certificate of Payment then eligible for
exchange to the Company against delivery of Shares to the Depositary in exchange
therefor. Upon receipt by the Depositary of (i) notice of the exchange of Shares
for such Certificate of Payment and (ii) confirmation from the Company that the
Shares so received rank in all respects pari passu with the Deposited Securities
evidenced by Share ADSs, the Depositary shall give notice thereof to the
applicable Holders of Temporary ADSs and thereafter Temporary ADSs shall be
eligible for exchange into Share ADSs. Interests in Temporary ADSs in DTC will
be automatically exchanged for beneficial interests in Share ADSs as follows:
with no further action by Holders, the Depositary shall instruct DTC to
automatically transfer any position held by a DTC participant under the CUSIP
number assigned to the Temporary ADSs to the CUSIP number assigned to the Share
ADSs. Holders and Beneficial Owners of such Temporary ADSs
shall thereafter be Holders and Beneficial Owners of Share ADSs issued hereunder and shall have all the rights and obligations specified in this Deposit Agreement and in the Receipts pertaining to Share ADSs. The Depositary will charge no fee for the cancellation of the Temporary ADSs and issuance of Share ADSs in exchange therefor.
Notwithstanding anything in the Deposit Agreement to the contrary, the Depositary shall have no obligation to any party to exchange Temporary ADSs for Share ADSs as provided herein unless and until, upon delivery by the Depositary of the related Certificate of Payment, the Company shall have delivered Shares in respect thereof to the Depositary.
Section 2.13 Restricted ADRs and Restricted ADSs. The Depositary shall, at the request and expense of the Company, establish procedures enabling the deposit hereunder of Shares that are Restricted Securities in order to enable the holder of such Shares to hold its ownership interests in such Restricted Securities in the form of ADSs issued under the terms hereof (such Shares, "Restricted Shares"). Upon receipt of a written request from the Company to accept Restricted Shares for deposit hereunder, the Depositary agrees to establish procedures permitting the deposit of such Restricted Shares and the issuance of Restricted ADSs representing such deposited Restricted Shares (such ADSs, "Restricted ADSs", and the ADRs evidencing such Restricted ADSs, the "Restricted ADRs"). The Company shall assist the Depositary in the establishment of such procedures and agrees that it shall take all commercially reasonable steps necessary and satisfactory to the Depositary to insure that the establishment of such procedures does not violate the provisions of the Securities Act or any other applicable laws. The depositors of such Restricted Shares and the holders of the Restricted ADSs may be required prior to the deposit of such Restricted Shares, the transfer of the Restricted ADRs and the Restricted ADSs evidenced thereby or the withdrawal of the Restricted Shares represented by Restricted ADSs to provide such written certifications or agreements as the Depositary or the Company may require. The Company shall provide to the Depositary in writing the legend(s) to be affixed to the Restricted ADRs, which legends shall (i) be in a form reasonably satisfactory to the Depositary and (ii) contain the specific circumstances under which the Restricted ADRs and the Restricted ADSs represented thereby may be transferred or the Restricted Shares withdrawn. The Restricted ADSs issued upon the deposit of Restricted Shares shall be separately identified on the books of the Depositary and the Restricted Shares so deposited shall be held separate and distinct from the other Deposited Securities held hereunder. The Restricted Shares and the Restricted ADSs shall not be eligible for Pre-Release Transactions or Pre-Cancellation Sales Transactions described in Section 5.10 hereof. The Restricted ADSs shall not be eligible for inclusion in any book-entry settlement system, including, without limitation, DTC, and shall not in any way be fungible with the ADSs issued under the terms hereof that are not Restricted ADSs. The Restricted ADRs and the Restricted ADSs evidenced thereby shall be transferrable only by the holder thereof upon delivery to the Depositary of (i) all documentation otherwise contemplated by this Deposit Agreement and (ii) an opinion of counsel satisfactory to the Depositary setting forth, inter alia, the conditions upon which the Restricted ADR presented is, and the Restricted ADSs evidenced thereby are, transferrable by the holder thereof under applicable securities laws and the transfer restrictions contained in the legend set forth on the
Restricted ADR presented for transfer. Except as set forth in the Section 2.13, and except as required by applicable law, the Restricted ADRs and the Restricted ADSs evidenced thereby shall be treated as ADRs and ADSs issued and outstanding under the terms of this Deposit Agreement.
ARTICLE III
CERTAIN OBLIGATIONS OF HOLDERS
AND BENEFICIAL OWNERS OF ADSS
Section 3.1 Proofs, Certificates and Other Information. Any person
presenting Eligible Securities for deposit, any Holder and any Beneficial Owner
may be required, and every Holder and Beneficial Owner agrees, from time to time
to provide to the Depositary and the Custodian such proof of citizenship or
residence, taxpayer status, payment of all applicable taxes or other
governmental charges, exchange control and any other applicable regulatory
approval, legal or beneficial ownership of ADSs and Deposited Securities,
compliance with applicable laws, the terms of this Deposit Agreement or the
Receipt(s) evidencing the ADS(s) and the provisions of, or governing, the
Deposited Securities, to execute such certifications and to make such
representations and warranties, and to provide such other information and
documentation (or, in the case of Eligible Securities in registered form
presented for deposit, such information relating to the registration on the
books of the Company or of the Eligible Securities Registrar) as the Depositary
or the Custodian may deem necessary or proper or as the Company may reasonably
require by written request to the Depositary consistent with its obligations
under this Deposit Agreement and the applicable Receipt(s). The Depositary and
the Registrar, as applicable, may, and at the reasonable written request of the
Company shall, withhold the execution or delivery or registration of transfer of
any Receipt or the distribution or sale of any dividend or distribution of
rights or of the proceeds thereof or, to the extent not limited by the terms of
Section 7.8 hereof, the delivery of any Deposited Securities, or may refuse to
adjust its records, until such proof or other information is filed or such
certifications are executed, or such representations are made, or such other
documentation or information provided, in each case to the Depositary's, the
Registrar's and the Company's satisfaction. The Depositary shall provide the
Company, in a timely manner, with copies or originals if necessary and
appropriate of (i) any such proofs of citizenship or residence, taxpayer status,
or exchange control approval which it receives from Holders and Beneficial
Owners, and (ii) any other information or documents which the Company may
reasonably request and which the Depositary shall request and receive from any
Holder or Beneficial Owner or any person presenting Eligible Securities for
deposit or ADSs for cancellation, transfer or withdrawal. Nothing herein shall
obligate the Depositary to (i) obtain any information for the Company if not
provided by the Holders or Beneficial Owners, or (ii) verify or vouch for the
accuracy of the information so provided by the Holders or Beneficial Owners.
Section 3.2 Liability for Taxes and Other Charges. If any tax or other governmental charge shall become payable by the Depositary or the Custodian with respect to any ADR or any
Deposited Securities or American Depositary Shares, such tax or other governmental charge shall be payable by the Holders and Beneficial Owners to the Depositary. The Company, the Custodian and/or the Depositary may withhold or deduct from any distributions made in respect of Deposited Securities and may sell for the account of a Holder and/or Beneficial Owner any or all of the Deposited Securities and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, the Holder and the Beneficial Owner remaining liable for any deficiency. The Custodian may refuse the deposit of Eligible Securities and the Depositary may refuse to issue ADSs, to deliver ADRs, register the transfer, split-up or combination of ADRs and (subject to Section 7.8) the withdrawal of Deposited Securities until payment in full of such tax, charge, penalty or interest is received. Every Holder and Beneficial Owner agrees to indemnify the Depositary, the Company, the Custodian, and any of their agents, officers, employees and Affiliates for, and to hold each of them harmless from, any claims with respect to taxes (including applicable interest and penalties thereon) arising from any tax benefit obtained for such Holder and/or Beneficial Owner.
Section 3.3 Representations and Warranties on Deposit of Eligible Securities.
(a) Deposit of Shares. Each person depositing Shares under this Deposit Agreement shall be deemed thereby to represent and warrant that (i) such Shares and the certificates therefor are duly authorized, validly issued, fully paid, non-assessable and legally obtained by such person, (ii) all preemptive (and similar) rights, if any, with respect to such Shares have been validly waived or exercised, (iii) the person making such deposit is duly authorized so to do, (iv) the Shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the American Depositary Shares issuable upon such deposit will not be, Restricted Securities and (v) the Shares presented for deposit have not been stripped of any rights or entitlements. Such representations and warranties shall survive the deposit and withdrawal of Shares, the issuance and cancellation of American Depositary Shares in respect thereof and the transfer of such American Depositary Shares.
(b) Deposit of Certificate(s) of Payment. Whenever the Company shall deposit any Certificate of Payment under this Deposit Agreement the Company shall be deemed thereby to represent and warrant that (i) such Certificate of Payment is, and the Shares to be received in exchange for the Certificate of Payment will be, duly authorized, validly issued, fully paid, non-assessable and legally obtained, (ii) all preemptive (and similar) rights, if any, with respect to such Certificate of Payment has been, and with respect to the Shares to be received in exchange for the Certificate of Payment will have been, validly waived or exercised, (iii) the Company has duly authorized the issuance of the Shares to be delivered in exchange for the Payment Certificate so presented for deposit, (iv) the Certificate of Payment presented for deposit is, and the Shares to be deposited upon the exchange of the Participation Certificates for Shares will be, free and clear of any lien, encumbrance, security interest, change, mortgage or adverse claim, and are not, and the Temporary ADSs issuable upon such deposit will not be, Restricted Securities and (v) the Certificate of Payment presented for deposit has not been, and the Shares to be
deposited upon the exchange for the Certificate of Payment will not have been, stripped of any rights or entitlements. Such representations and warranties shall survive the deposit of any Certificate of Payment, the issuance and cancellation of Temporary ADSs in respect thereof and the transfer of such Temporary ADSs.
If any such representations or warranties are false in any way, the Depositary shall be authorized, at the cost and expense of the Company, to take any and all actions necessary to correct the consequences thereof.
Section 3.4 Compliance with Information Requests. Notwithstanding any other provision of this Deposit Agreement or any Receipt(s), each Holder and Beneficial Owner agrees to comply with requests from the Company pursuant to applicable U.S. and Republic of China laws or regulations, the rules and requirements of the TSE, and any other stock exchange on which the Eligible Securities or ADSs are, or will be, registered, traded or listed or the Articles of Incorporation of the Company, which are made to provide information, inter alia, as to the capacity in which such Holder or Beneficial Owner owns American Depositary Shares (and Eligible Securities or Deposited Securities, as the case may be) and regarding the identity of any other person(s) interested in such American Depositary Shares and the nature of such interest and various other matters, whether or not they are Holders and/or Beneficial Owners at the time of such request. The Depositary agrees to use its reasonable efforts to forward, upon the request of the Company and at the Company's expense, any such request from the Company to the Holders and to forward to the Company any such responses to such requests received by the Depositary.
Section 3.5 Ownership Restrictions. Notwithstanding any other provision in this Deposit Agreement or any Receipt, the Company may restrict transfers of the Shares, Eligible Securities or securities convertible into Shares where the Company informs the Depositary that such transfer might result in ownership of Shares exceeding limits imposed by applicable law, the SFC, the TSE or the Articles of Incorporation of the Company. The Company may also restrict, in such manner as it deems appropriate, transfers of the American Depositary Shares where such transfer may result in the total number of Shares, Deposited Securities, or securities convertible into Shares represented by the American Depositary Shares owned by a single Holder or Beneficial Owner to exceed any such limits. The Company may, in its sole discretion but subject to applicable law, instruct the Depositary to take action with respect to the ownership interest of any Holder or Beneficial Owner in excess of the limits set forth in the preceding sentence, including, but not limited to, the imposition of restrictions on the transfer of American Depositary Shares, the removal or limitation of voting rights or the mandatory sale or disposition on behalf of a Holder or Beneficial Owner of the Deposited Securities represented by the American Depositary Shares held by such Holder or Beneficial Owner in excess of such limitations, if and to the extent such disposition is permitted by applicable law and the Articles of Incorporation of the Company.
ARTICLE IV
THE DEPOSITED SECURITIES
Section 4.1 Cash Distributions. Subject always to the laws and regulations of the Republic of China, whenever the Depositary receives confirmation from the Custodian of the receipt of any cash dividend or other cash distribution on any Deposited Securities, or receives proceeds from the sale of any Deposited Securities or any entitlements held in respect of Deposited Securities under the terms hereof, the Depositary will (i) if at the time of receipt thereof any amounts received in a Foreign Currency can in the judgment of the Depositary (pursuant to Section 4.8) be converted on a practicable basis into Dollars transferable to the United States, promptly convert or cause to be converted such cash dividend, distribution or proceeds into Dollars (on the terms described in Section 4.8), (ii) if applicable, establish the ADS Record Date upon the terms described in Section 4.9, and (iii) distribute promptly the amount thus received (net of (a) the applicable fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes withheld) to the Holders entitled thereto as of the ADS Record Date (if applicable) in proportion to the number of American Depositary Shares representing such Deposited Securities held as of the ADS Record Date (if applicable). The Depositary shall distribute only such amount, however, as can be distributed without attributing to any Holder a fraction of one cent, and any balance not so distributed shall be held by the Depositary (without liability for interest thereon) and shall be added to and become part of the next sum received by the Depositary for distribution to Holders of ADSs outstanding at the time of the next distribution. If the Company, the Custodian or the Depositary is required to withhold and does withhold from any cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, duties or other governmental charges, the amount distributed to Holders on the American Depositary Shares representing such Deposited Securities shall be reduced accordingly. Such withheld amounts shall be forwarded by the Company, the Custodian or the Depositary to the relevant governmental authority. Evidence of payment thereof by the Company shall be forwarded by the Company to the Depositary upon request. The Depositary or the Custodian, as the case may be, will forward to the Company or its agent such information from its records as the Company may reasonably request to enable the Company or its agent to file necessary reports with governmental agencies, and the Depositary or the Custodian, as the case may be, or the Company or its agent may file any such reports necessary to obtain benefits under the applicable tax treaties for Holders of ADSs.
Section 4.2 Distribution in Eligible Securities. Subject always to the laws and regulations of the Republic of China, if any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Eligible Securities, the Company shall cause such Eligible Securities Shares to be deposited with the Custodian and registered, as the case may be, in the name of the Depositary, the Custodian or their respective nominees. Upon receipt of confirmation of such deposit from the Custodian, the Depositary shall establish the ADS Record Date upon the terms described in Section 4.9 and either (i) the Depositary shall, subject to Section 5.9 hereof and the laws and regulations of the Republic of China, distribute to the
Holders as of the ADS Record Date in proportion to the number of American
Depositary Shares held as of the ADS Record Date, additional American Depositary
Shares (of the applicable series), which represent in the aggregate the number
of Eligible Securities received as such dividend, or free distribution, subject,
however, in each case, to the other terms of this Deposit Agreement (including,
without limitation, the limitations set forth in Article II hereof and (a) the
applicable fees and charges of, and reasonable expenses incurred by, the
Depositary and (b) taxes), or (ii) if additional American Depositary Shares are
not so distributed, each American Depositary Share issued and outstanding after
the ADS Record Date shall, to the extent permissible by law, thenceforth also
represent rights and interests in the additional integral number of Shares
distributed upon the Deposited Securities represented thereby (subject, however,
in each case, to the laws and regulations of the Republic of China and net of
(a) the applicable fees and charges of, and reasonable expenses incurred by, the
Depositary and (b) taxes). In lieu of delivering fractional American Depositary
Shares, the Depositary shall sell the number of Eligible Securities or American
Depositary Shares, as the case may be, represented by the aggregate of such
fractions and distribute the net proceeds upon the terms described in Section
4.1. In the event that (x) the Depositary determines that any distribution in
property (including Eligible Securities) is subject to any tax or other
governmental charges which the Depositary is obligated to withhold, or (y) if
the Company in the fulfillment of its obligation under Section 5.7 hereof, has
furnished an opinion of U.S. counsel determining that Eligible Securities must
be registered under the Securities Act or other laws in order to be distributed
to Holders (and no such registration statement has been declared effective), or
(z) the deposit of Eligible Securities is not permitted under the laws or
regulations of the Republic of China, the Depositary may dispose of all or a
portion of such property (including Eligible Securities and rights to subscribe
therefor) in such amounts and in such manner, including by public or private
sale, as the Depositary deems necessary and practicable, and the Depositary
shall distribute the net proceeds of any such sale (after deduction of such (a)
taxes and (b) fees and charges of, and reasonable expenses incurred by, the
Depositary) to Holders entitled thereto upon the terms described in Section 4.1.
The Depositary shall hold and/or distribute any unsold balance of such property
in accordance with the provisions of this Deposit Agreement.
Section 4.3 Elective Distributions in Cash or Eligible Securities. Subject always to the laws and regulations of the Republic of China, whenever the Company intends to distribute a dividend payable at the election of the holders of Eligible Securities in cash or in additional Eligible Securities, the Company shall give timely notice thereof to the Depositary prior to the proposed distribution stating whether or not it wishes such elective distribution to be made available to Holders of ADSs. Upon receipt of notice indicating that the Company wishes such elective distribution to be made available to Holders of ADSs, the Depositary shall consult with the Company to determine, and the Company shall assist the Depositary in its determination, whether it is lawful and reasonably practicable to make such elective distribution available to the Holders of ADSs. The Depositary shall make such elective distribution available to Holders only if (i) the Depositary shall have determined that such distribution is reasonably practicable and (ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7. If the above conditions are not satisfied, the Depositary shall, to the extent permitted by law,
distribute to the Holders, on the basis of the same determination as is made in the Republic of China in respect of the Deposited Securities for which no election is made, either cash upon the terms described in Section 4.1 or additional ADSs representing such additional Eligible Securities upon the terms described in Section 4.2. If the above conditions are satisfied, the Depositary shall establish an ADS Record Date (on the terms described in Section 4.9) and establish procedures to enable Holders to elect the receipt of the proposed dividend in cash or in additional ADSs. The Company shall assist the Depositary in establishing such procedures to the extent necessary. If a Holder elects to receive the proposed dividend in cash, the dividend shall be distributed upon the terms described in Section 4.1, or in ADSs, the dividend shall be distributed upon the terms described in Section 4.2. Nothing herein shall obligate the Depositary to make available to Holders a method to receive the elective dividend in Eligible Securities (rather than ADSs). There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of Deposited Securities.
Section 4.4 Distribution of Rights to Purchase Additional ADSs.
(a) Distribution to ADS Holders. Subject always to the laws and regulations of the Republic of China, whenever the Company intends to distribute to the holders of the Deposited Securities rights to subscribe for Eligible Securities, the Company shall give timely notice thereof to the Depositary stating whether or not it wishes such rights to be made available to Holders of ADSs. Upon receipt of a notice indicating that the Company wishes such rights to be made available to Holders of ADSs, the Depositary shall consult with the Company to determine, and the Company shall assist the Depositary in its determination, whether it is lawful and reasonably practicable to make such rights available to the Holders. The Depositary shall make such rights available to Holders only if (i) the Company shall have timely requested that such rights be made available to Holders, (ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7, and (iii) the Depositary shall have determined that such distribution of rights is reasonably practicable. In the event any of the conditions set forth above are not satisfied or if the Company requests that the rights not be made available to Holders of ADSs, the Depositary shall proceed with the sale of the rights as contemplated in Section 4.4(b) below. In the event all conditions set forth above are satisfied, the Depositary shall establish an ADS Record Date (upon the terms described in Section 4.9) and establish procedures to (x) distribute rights to purchase additional ADSs (by means of warrants or otherwise), (y) to enable the Holders to exercise such rights (upon payment of the subscription price and of the applicable (a) fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes), and (z) to deliver ADSs upon the valid exercise of such rights. The Company shall assist the Depositary to the extent necessary in establishing such procedures. Nothing herein shall obligate the Depositary to make available to the Holders a method to exercise rights to subscribe for Eligible Securities (rather than ADSs).
(b) Sale of Rights. If (i) the Company does not timely request the Depositary to make the rights available to Holders or requests that the rights not be made available to
Holders, (ii) the Depositary fails to receive satisfactory documentation within the terms of Section 5.7 or determines it is not lawful or not reasonably practicable to make the rights available to Holders, or (iii) any rights made available are not exercised and appear to be about to lapse, the Depositary shall determine in its discretion but after consultation with the Company whether it is lawful and reasonably practicable to sell such rights, in a riskless principal capacity, at such place and upon such terms (including public or private sale) as it may deem practical. The Company shall assist the Depositary to the extent necessary to determine such legality and practicability. The Depositary shall, upon such sale, convert and distribute proceeds of such sale (net of applicable (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) upon the terms set forth in Section 4.1.
(c) Lapse of Rights. If the Depositary is unable to make any rights available to Holders upon the terms described in Section 4.4(a) or to arrange for the sale of the rights upon the terms described in Section 4.4(b), the Depositary shall allow such rights to lapse.
The Depositary shall not be responsible for (i) any failure to determine that it may be lawful or practicable to make such rights available to Holders in general or any Holders in particular, (ii) any foreign exchange exposure or loss incurred in connection with such sale, or exercise, or (iii) the content of any materials forwarded to the Holders on behalf of the Company in connection with the rights distribution.
Notwithstanding anything to the contrary in this Section 4.4, if
registration (under the Securities Act or any other applicable law) of the
rights or the securities to which any rights relate may be required in order for
the Company to offer such rights or such securities to Holders and to sell the
securities represented by such rights, the Depositary will not distribute such
rights to the Holders (i) unless and until a registration statement under the
Securities Act (or other applicable law) covering such offering is in effect or
(ii) unless the Company furnishes the Depositary with opinions of counsel for
the Company in the United States and counsel to the Company in any other
applicable country in which rights would be distributed, in each case
satisfactory to the Depositary, to the effect that the offering and sale of such
securities to Holders and Beneficial Owners are exempt from, or do not require
registration under, the provisions of the Securities Act or any other applicable
laws.
In the event that the Company, the Depositary or the Custodian shall be required to withhold and does withhold from any distribution of property (including rights) an amount on account of taxes or other governmental charges, the amount distributed to the Holders of American Depositary Shares representing such Deposited Securities shall be reduced accordingly. In the event that the Depositary determines that any distribution in property (including Eligible Securities and rights to subscribe therefor) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, the Depositary may dispose of all or a portion of such property (including Eligible Securities and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable to pay any such taxes or charges.
There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to receive or exercise rights on the same terms and conditions as the holders of Deposited Securities or be able to exercise such rights. Nothing herein shall obligate the Company to file any registration statement in respect of any rights or Eligible Securities or other securities to be acquired upon the exercise of such rights.
Section 4.5 Distributions Other Than Cash, Eligible Securities or Rights to Purchase Eligible Securities. (a) Whenever the Company intends to distribute to the holders of Deposited Securities property other than cash, Eligible Securities or rights to purchase additional Eligible Securities, the Company shall give timely notice thereof to the Depositary and shall indicate whether or not it wishes such distribution to be made to Holders of ADSs. Upon receipt of a notice indicating that the Company wishes such distribution to be made to Holders of ADSs, the Depositary shall consult with the Company, and the Company shall assist the Depositary, to determine whether such distribution to Holders is lawful and reasonably practicable. The Depositary shall not make such distribution unless (i) the Company shall have requested the Depositary to make such distribution to Holders, (ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7, and (iii) the Depositary shall have determined that such distribution is lawful and reasonably practicable.
(b) Upon receipt of satisfactory documentation and the request of the Company to distribute property to Holders of ADSs and after making the requisite determinations set forth in (a) above, the Depositary shall distribute the property so received to the Holders of record, as of the ADS Record Date, in proportion to the number of ADSs held by them respectively and in such manner as the Depositary may deem practicable for accomplishing such distribution (i) upon receipt of payment or net of the applicable fees and charges of, and reasonable expenses incurred by, the Depositary, and (ii) net of any taxes withheld. The Depositary may dispose of all or a portion of the property so distributed and deposited, in such amounts and in such manner (including by public or private sale) as the Depositary may deem practicable or necessary to satisfy any taxes (including applicable interest and penalties) or other governmental charges applicable to the distribution.
(c) If (i) the Company does not request the Depositary to make such distribution to Holders or requests the Depositary not to make such distribution to Holders, (ii) the Depositary does not receive satisfactory documentation within the terms of Section 5.7, or (iii) the Depositary determines that all or a portion of such distribution is not reasonably practicable, the Depositary shall sell or cause such property to be sold in a public or private sale, at such place or places and upon such terms as it may deem practicable and shall (i) cause the proceeds of such sale, if any, to be converted into Dollars and (ii) distribute the proceeds of such conversion received by the Depositary (net of applicable (a) fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes) to the Holders as of the ADS Record Date upon the terms of Section 4.1. If the Depositary is unable to sell such property, the Depositary may dispose of such property in any way it deems reasonably practicable under the circumstances.
Section 4.6 Distributions with Respect to Deposited Securities in Bearer Form. Subject always to the laws and regulations of the Republic of China and to the terms of this Article IV, distributions in respect of Deposited Securities that are held by the Depositary in bearer form shall be made to the Depositary for the account of the respective Holders of Receipts with respect to which any such distribution is made upon due presentation by the Depositary or the Custodian to the Company of any relevant coupons, talons, or certificates. The Company shall promptly notify the Depositary of such distributions. The Depositary or the Custodian shall promptly present such coupons, talons or certificates, as the case may be, in connection with any such distribution.
Section 4.7 Redemption. If the Company intends to exercise any right of redemption in respect of any of the Deposited Securities, the Company shall give timely notice thereof to the Depositary which notice shall set forth the particulars of the proposed redemption. Upon receipt of (i) such notice and (ii) satisfactory documentation given by the Company to the Depositary within the terms of Section 5.7, and only if the Depositary shall have determined that such proposed redemption is reasonably practicable, the Depositary shall deliver to each Holder a notice setting forth the intended exercise by the Company of the redemption rights and any other particulars set forth in the Company's notice to the Depositary. The Depositary shall instruct the Custodian to present to the Company the Deposited Securities in respect of which redemption rights are being exercised against payment of the applicable redemption price. Upon receipt of confirmation from the Custodian that the redemption has taken place and that funds representing the redemption price have been received, the Depositary shall convert, transfer, and distribute the proceeds (net of applicable (a) fees and charges of, and the expenses incurred by, the Depositary, and (b) taxes), retire ADSs and cancel ADRs upon delivery of such ADSs by Holders thereof and the terms set forth in Sections 4.1 and 6.2 hereof. If less than all outstanding Deposited Securities are redeemed, the ADSs to be retired will be selected by lot or on a pro rata basis, as may be determined by the Depositary. The redemption price per ADS shall be the per Deposited Security amount received by the Depositary upon the redemption of the Deposited Securities represented by American Depositary Shares (subject to the terms of Section 4.8 hereof and the applicable fees and charges of, and reasonable expenses incurred by, the Depositary, and taxes) multiplied by the number of Deposited Securities represented by each ADS redeemed.
Section 4.8 Conversion of Foreign Currency. Subject to any restrictions imposed by ROC law and regulations, including, without limitation, receipt of foreign exchange approval from the Central Bank of China for conversion of funds from and/or into NT dollars whenever the Depositary or the Custodian shall receive Foreign Currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, which in the judgment of the Depositary can at such time be converted on a practicable basis, by sale or in any other manner that it may determine in accordance with applicable law, into Dollars transferable to the United States and distributable to the Holders entitled thereto, the Depositary shall, subject to the laws and regulations of the Republic of China, convert or cause to be converted, by sale or in any other manner that it may determine, such Foreign Currency into Dollars, and shall distribute such Dollars (net of any applicable fees, any reasonable and customary expenses
incurred in such conversion and any reasonable expenses incurred on behalf of the Holders in complying with currency exchange control or other governmental or regulatory requirements) in accordance with the terms of the applicable sections of this Deposit Agreement. If the Depositary shall have distributed warrants or other instruments that entitle the holders thereof to such Dollars, the Depositary shall distribute such Dollars to the holders of such warrants and/or instruments upon surrender thereof for cancellation, in either case without liability for interest thereon. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Holders on account of any application of exchange restrictions or otherwise.
If such conversion or distribution generally or with regard to a particular Holder can be effected only with the approval or license of any government or agency thereof, the Depositary shall have authority to file such application for approval or license, if any, as it may deem appropriate. If at any time the Depositary shall determine that in its judgment the conversion of any Foreign Currency and the transfer and distribution of proceeds of such conversion received by the Depositary is not practical or lawful, or if any approval or license of any governmental authority or agency thereof that is required for such conversion, transfer and distribution is denied or, in the opinion of the Depositary, not obtainable at a reasonable cost or within a reasonable period, the Depositary may, in its discretion, (i) make such conversion and distribution in Dollars to the Holders for whom such conversion, transfer and distribution is lawful and practicable, (ii) distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) to Holders for whom this is lawful and practicable or (iii) hold (or cause the Custodian to hold) such Foreign Currency (without liability for interest thereon) for the respective accounts of the Holders entitled to receive the same.
Section 4.9 Fixing of ADS Record Date. Whenever the Depositary shall receive notice of the fixing of a record date by the Company for the determination of holders of Deposited Securities entitled to receive any distribution (whether in cash, Eligible Securities, rights, or other entitlement distribution), or whenever for any reason the Depositary causes a change in the number of Deposited Securities that are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meeting, or solicitation of consents or of proxies, of holders of Deposited Securities, or whenever the Depositary shall find it necessary or convenient in connection with the giving of any notice, solicitation of any consent or any other matter, the Depositary shall fix a record date (the "ADS Record Date") for the determination of the Holders of Receipts who shall be entitled to receive such distribution, to give instructions for the exercise of voting rights at any such meeting, to give or withhold such consent, to receive such notice or solicitation or to otherwise take action, or to exercise the rights of Holders with respect to such changed number of Deposited Securities represented by each American Depositary Share. The Depositary shall establish the ADS Record Date as closely as possible to the applicable record date for the Deposited Securities (if any) set by the Company in the Republic of China. Subject to applicable law and the provisions of Section 4.1 through 4.8 and to the other terms and conditions of this Deposit Agreement, only the Holders of Receipts at the close of business in New York on such ADS Record Date shall be entitled to receive such
distribution, to give such voting instructions, to receive such notice or solicitation, or otherwise take action. The Depositary shall promptly notify the New York Stock Exchange, Inc. of any action to fix an ADS Record Date or to close the transfer books for the ADSs.
Section 4.10 Voting of Deposited Securities.
(a) Voting by Shareholders. The ROC Company Law and the Articles of Incorporation of the Company, in each case, as in effect on the date hereof, provide that: (i) a holder of Shares (including holders of interests in any Certificate of Payment evidencing the irrevocable right to receive Shares) is entitled to one vote for each Share held, except that the number of votes of a holder of more than 3% of the total outstanding Shares is discounted by the Company by a factor of 1% of that portion of the Shares held in excess of 3% (e.g., a holder of 10% of the total outstanding Shares would be permitted to exercise voting rights only with respect of a 9.93% of such Shares), (ii) the election of directors and supervisors takes place by means of cumulative voting and (iii) a shareholder must, as to all matters subject to a vote of shareholders (other than the election of directors and supervisors), exercise the voting rights for all Shares held by such shareholder in the same manner (e.g., a holder of 1,000 Shares cannot split his/her votes but must vote all 1,000 Shares in the same manner except in the event or cumulative voting for an election of directors and supervisors). The voting rights attaching to the Deposited Securities must be exercised by, or on behalf of, the Depositary, as representative of the Holders, collectively in the same manner, except in the case of an election of directors and supervisors, which shall be on a cumulative basis. Deposited Securities which have been withdrawn from the ADR Facilities and timely transferred on the Company's register of shareholders to a person other than the Depositary may be voted by the registered holder(s) thereof directly, subject, in each case, to the limitations of ROC Law and the Articles of Incorporation of the Company. Holders may not receive sufficient advance notice of shareholders' meetings to enable them to timely withdraw the Deposited Securities and vote at such meetings and may not be able to re-deposit the withdrawn securities under the terms of the Deposit Agreement.
(b) Voting by ADS Holders. Holders of ADSs have no individual voting rights with respect to the Deposited Securities represented by their ADSs. Each Holder shall be deemed, by acceptance of ADSs or acquisition of any beneficial interest therein, to have authorized and directed the Depositary, without liability, to appoint the Chairman of the Company (or his/her designate), as representative of the Depositary, the Custodian or the nominee who is registered in the ROC as representative of the Holders in respect of the Deposited Securities (the "Registered Holder"), to vote the Shares or other Deposited Securities in accordance with the terms hereof.
The Company agrees to timely notify the Depositary of any proposed shareholders' meeting and to provide to the Depositary in New York, at least 24 calendar days before any shareholders' meeting, sufficient copies as the Depositary may reasonably request of English language translations of the Company's notice of shareholders' meeting and the agenda of the materials to be voted on (in the form the Company generally makes available to holders of Shares in the ROC), including, without limitation, a list of candidates proposed by the Company for an election of directors or supervisors (such materials collectively, the "Shareholder Notice"). As soon as practicable after receipt by the Depositary of the requisite number of Shareholder
Notices, the Depositary shall establish the ADS Record Date (upon the terms of
Section 4.9 hereof) and shall, at the Company's expense and, provided no U.S.
legal prohibitions exist, deliver to Holders as of the applicable ADS Record
Date, (i) the Shareholder Notice, (ii) a depositary notice setting forth the
manner in which Holders of ADSs may instruct the Depositary to cause the
Deposited Securities represented by their ADSs to be voted under the terms of
this Deposit Agreement including, a description of the Management Proxy (as
defined below), together with a form of voting instructions and/or other means
to provide voting instructions (the depositary notice and the related materials
prepared by the Depositary collectively, the "Depositary Notice"). The
Depositary is under no obligation to deliver the Shareholder Notice and the
Depositary Notice to Holders if the Company has failed to provide to the
Depositary in New York the requisite number of Shareholder Notices at least 24
calendar days prior to the date of any shareholders' meeting. If the Depositary
has not delivered the Shareholder Notice or Depositary Notice to Holders, it
will endeavor to cause all Deposited Securities represented by ADRs to be
present at the relevant Shareholders' meeting insofar as practicable and
permitted under applicable law but will not cause the Shares or other Deposited
Securities to be voted; provided, however, that the Depositary may determine, at
its sole discretion, to send such Shareholder Notice and Depositary Notice to
Holders and/or cause the Shares or other Deposited Securities to be voted as it
deems appropriate. There can be no assurance that Holders generally or any
Holder in particular will receive Shareholder Notices and Depositary Notices
with sufficient time to enable the return of voting instructions to the
Depositary in a timely manner.
Notwithstanding anything else contained in this Deposit Agreement, the Depositary shall not have any obligation to take any action with respect to any meeting, or solicitation of consents or proxies, of holders of Shares or other Deposited Securities if the taking of such action would violate U.S. laws.
(c) Voting of Deposited Securities Upon ADS Holders' Instructions. If Holders of ADSs together holding at least 51% of all the ADSs (including Temporary ADSs) outstanding as of the relevant ADS Record Date shall instruct the Depositary, prior to the date established for such purpose by the Depositary, to vote in the same manner in respect of one or more resolutions to be proposed at a shareholders' meeting (including resolutions for the election directors and/or supervisors), the Depositary shall notify to the Chairman of the Company (or his/her designate) and appoint the Chairman of the Company (or his/her designate) as the representative of the Depositary and the Registered Holders to attend such shareholders' meeting and vote all Deposited Securities evidenced by ADSs then outstanding (including Temporary ADSs) in the manner so instructed by such Holders. If voting instructions are received by the Depositary on or before the date established by the Depositary for the receipt of such instructions from any Holder as of the ADS Record Date, which are signed but without further indication as to voting instructions, the Depositary shall deem such Holder to have instructed a vote in favor of the items set forth in such instructions. The Depositary and Custodian shall not have any obligation to monitor, and shall not incur any liability for, the actions, or the failure to act, of the Chairman of the Company (or his/her designate) as representative of the Registered Holder.
(d) Management Proxy. If, for any reason (other than a failure by the Company to supply the requisite number of Shareholder Notices to the Depositary within the requisite time period provided in this Section 4.10, the Depositary has not, prior to the date established for such purpose by the Depositary received instructions from Holders together holding at least 51% of all ADSs (including Temporary ADSs) outstanding at the relevant ADS Record Date, to vote in the same manner in respect of any resolution (including resolutions for the election of directors and/or supervisors), then, subject to the following paragraph, the Holders shall be deemed to have authorized and directed the Depositary to give a discretionary proxy (a "Management Proxy") to the Chairman of the Company (or his/her designate) as the representative of the Registered Holder to attend and vote at such meeting all the Deposited Securities represented by ADSs then outstanding (including Temporary ADSs) in his or her discretion. In such circumstances, the Chairman of the Company (or his/her designate) shall be free to exercise the votes attaching to the Deposited Securities in any manner he or she wishes, which may not be in the interests of the Holders.
The Depositary's grant of a Management Proxy in the manner and circumstances described in the preceding paragraph shall be subject to the receipt by the Depositary prior to each shareholders' meeting of an opinion of ROC counsel addressed to, and in form and substance satisfactory to, the Depositary to the effect that under ROC law (i) the arrangements relating to the Management Proxy are permissible, and (ii) the Depositary will not be deemed to be authorized to exercise any discretion when causing the voting in accordance with this Section 4.10 and will not be subject to any potential liability under ROC law for losses arising from such voting. In the event the Depositary does not receive such opinion, the Depositary will not grant the Management Proxy but will cause the Deposited Securities to be present at the shareholders' meeting to the extent practicable and permitted by applicable law but will not cause the Deposited Securities to be voted or the Management Proxy to be granted.
The Depositary shall not, and the Depositary shall ensure that the Custodian and its nominees do not, vote or attempt to exercise the right to vote that attaches to the Shares or other Deposited Securities, other than in accordance with instructions given in accordance with this Section 4.10. The terms of this Section 4.10 may be amended from time to time in accordance with the terms of this Deposit Agreement. By continuing to hold ADSs after the effective time of such amendment all Holders and Beneficial Owners shall be deemed to have agreed to the terms of this Section 4.10 as so amended.
Section 4.11 Changes Affecting Deposited Securities. Upon any change in nominal or par value, split-up, cancellation, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or the Custodian in exchange for, or in conversion of or replacement of or otherwise in respect of, such Deposited Securities shall, to the extent permitted by law, be treated as new Deposited Securities under this Deposit Agreement, and the Receipts shall, subject to the provisions of this Deposit Agreement and applicable law, evidence American Depositary Shares
representing the right to receive such additional or replacement securities, as
applicable. The Depositary may, with the Company's approval, and shall, if the
Company shall so request, subject to the terms of the Deposit Agreement and
receipt of an opinion of counsel to the Company provided pursuant to Section 5.7
hereof and satisfactory to the Depositary that such distributions are not in
violation of any applicable laws or regulations, execute and deliver additional
Receipts as in the case of a dividend of Eligible Securities, or call for the
surrender of outstanding Receipts to be exchanged for new Receipts, in either
case, as well as in the event of newly deposited Shares, with necessary
modifications to the form of Receipt contained in Exhibit A hereto, specifically
describing such new Deposited Securities or corporate change. The Company agrees
to, jointly with the Depositary, amend the Registration Statement on Form F-6 as
filed with the Commission to permit the issuance of such new form of Receipts.
Notwithstanding the foregoing, in the event that any security so received may
not be lawfully distributed to some or all Holders, the Depositary may, with the
Company's approval, and shall, if the Company requests, subject to receipt of an
opinion of Company's counsel satisfactory to the Depositary that such action is
not in violation of any applicable laws or regulations, sell such securities at
public or private sale, at such place or places and upon such terms as it may
deem proper and may allocate the net proceeds of such sales (net of (a) fees and
charges of, and reasonable expenses incurred by, the Depositary and (b) taxes)
for the account of the Holders otherwise entitled to such securities upon an
averaged or other practicable basis without regard to any distinctions among
such Holders and distribute the net proceeds so allocated to the extent
practicable as in the case of a distribution received in cash pursuant to
Section 4.1. The Depositary shall not be responsible for (i) any failure to
determine that it may be lawful or feasible to make such securities available to
Holders in general or to any Holder in particular, (ii) any foreign exchange
exposure or loss incurred in connection with such sale, or (iii) any liability
to the purchaser of such securities.
Section 4.12 Available Information. From and after the date hereof, the Company is subject to the periodic reporting requirements of the Exchange Act and accordingly files certain information with the Commission. These reports and documents can be inspected and copied at the public reference facilities maintained by the Commission located at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at the Commission's New York City office located at Seven World Trade Center, 13th Floor, New York, New York 10048.
Section 4.13 Reports. The Depositary shall make available for inspection by Holders at its Principal Office any reports and communications, including any proxy soliciting materials, received from the Company which are both (a) received by the Depositary, the Custodian, or the nominee of either of them as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary shall also mail to Holders copies of such reports when furnished by the Company pursuant to Section 5.6.
Section 4.14 List of Holders. Promptly upon written request by the Company, the Depositary shall furnish to it a list, as of a recent date, of the names, addresses and holdings of American Depositary Shares of all Holders.
Section 4.15 Taxation. The Depositary will, and will instruct the Custodian to, forward to the Company or its agents such information from its records as the Company may reasonably request to enable the Company or its agents to file the necessary tax reports with governmental authorities or agencies. The Depositary, the Custodian or the Company and its agents may file such reports as are necessary to reduce or eliminate applicable taxes on dividends and on other distributions in respect of Deposited Securities under applicable tax treaties or laws for the Holders and Beneficial Owners. In accordance with instructions from the Company and to the extent practicable, the Depositary or the Custodian will take reasonable administrative actions to obtain tax refunds, reduced withholding of tax at source on dividends and other benefits under applicable tax treaties or laws with respect to dividends and other distributions on the Deposited Securities. As a condition to receiving such benefits, Holders and Beneficial Owners of American Depositary Shares may be required from time to time, and in a timely manner, to file such proof of taxpayer status, residence and beneficial ownership (as applicable), to execute such certificates and to make such representations and warranties, or to provide any other information or documents, as the Depositary or the Custodian may deem necessary or proper to fulfill the Depositary's or the Custodian's obligations under applicable law. The Holders and Beneficial Owners shall indemnify the Depositary, the Company, the Custodian and any of their respective directors, employees, agents and Affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained.
If the Company (or any of its agents) withholds from any distribution any amount on account of taxes or governmental charges, or pays any other tax in respect of such distribution (i.e., stamp duty tax, capital gains or other similar tax), the Company shall (and shall cause such agent to) remit promptly to the Depositary information about such taxes or governmental charges withheld or paid, and, if so requested, the tax receipt (or other proof of payment to the applicable governmental authority) therefor, in each case, in a form satisfactory to the Depositary. The Depositary shall, to the extent required by U.S. law, report to Holders any taxes withheld by it or the Custodian, and, if such information is provided to it by the Company, any taxes withheld by the Company. The Depositary and the Custodian shall not be required to provide the Holders with any evidence of the remittance by the Company (or its agents) of any taxes withheld, or of the payment of taxes by the Company, except to the extent the evidence is provided by the Company to the Depositary. Neither the Depositary nor the Custodian shall be liable for the failure by any Holder or Beneficial Owner to obtain the benefits of credits on the basis non-U.S. tax paid against such Holder's or Beneficial Owner's income tax liability.
The Depositary is under no obligation to provide the Holders and Beneficial Owners with any information about the tax status of the Company. The Depositary shall not incur any liability for any tax consequences that may be incurred by Holders and Beneficial Owners on account of their ownership of the American Depositary Shares, including without limitation, tax consequences resulting from the Company (or any of its subsidiaries) being treated as a "Foreign
Personal Holding Company," or as a "Passive Foreign Investment Company" (in each case as defined in the U.S. Internal Revenue Code and the regulations issued thereunder) or otherwise.
ARTICLE V
THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY
Section 5.1 Maintenance of Office and Transfer Books by the Registrar. Until termination of this Deposit Agreement in accordance with its terms, the Registrar shall maintain in the Borough of Manhattan, The City of New York, an office and facilities for the execution and delivery, registration of issuances, registration of transfers, combination and split-up of Receipts, the surrender of Receipts for the purpose of withdrawal of Deposited Securities in accordance with the provisions of this Deposit Agreement.
The Registrar shall keep books for the registration of issuances and transfers of Receipts which at all reasonable times shall be open for inspection by the Company and by the Holders of such Receipts, provided that such inspection shall not be, to the Registrar's knowledge, for the purpose of communicating with Holders of such Receipts in the interest of a business or object other than the business of the Company or other than a matter related to this Deposit Agreement or the Receipts.
The Registrar may close the transfer books with respect to the
Receipts, at any time or from time to time, when deemed necessary or advisable
by it in good faith in connection with the performance of its duties hereunder,
or at the reasonable written request of the Company subject, in all cases, to
Section 7.8 hereof.
If any Receipts or the American Depositary Shares evidenced thereby are listed on one or more stock exchanges or automated quotation systems in the United States, the Depositary shall act as Registrar or, with the written approval of the Company, which approval shall not be unreasonably withheld, appoint a Registrar or one or more co-registrars for registration of Receipts and transfers, combinations and split-ups, and to countersign such Receipts in accordance with any requirements of such exchanges or systems. Such Registrar or co-registrars may be removed and a substitute or substitutes appointed by the Depositary after consultation with the Company or upon the reasonable request of the Company.
Section 5.2 Exoneration. Neither the Depositary nor the Company shall be obligated to do or perform any act which is inconsistent with the provisions of this Deposit Agreement or incur any liability (i) if the Depositary or the Company shall be prevented or forbidden from, or delayed in, doing or performing any act or thing required by the terms of this Deposit Agreement, by reason of any provision of any present or future law or regulation of the United States, the Republic of China or any other country, or of any other governmental authority or regulatory authority or stock exchange, or on account of the possible criminal or civil penalties or restraint, or by reason of any provision, present or future of the Articles of Incorporation of the Company
or any provision of or governing any Deposited Securities, or by reason of any
act of God or war or other circumstances beyond its control (including, without
limitation, nationalization, expropriation, currency restrictions, work
stoppage, strikes, civil unrest, revolutions, rebellions, explosions and
computer failure), (ii) by reason of any exercise of, or failure to exercise,
any discretion provided for in this Deposit Agreement or in the Articles of
Incorporation of the Company or provisions of or governing Deposited Securities,
(iii) for any action or inaction in reliance upon the advice or information from
legal counsel, accountants, any person presenting Shares for deposit, any
Holder, any Beneficial Owner or authorized representative thereof, or any other
person believed by it in good faith to be competent to give such advice or
information, (iv) for the inability by a Holder or Beneficial Owner to benefit
from any distribution, offering, right or other benefit which is made available
to holders of Deposited Securities but is not, under the terms of this Deposit
Agreement, made available to Holders of American Depositary Shares or (v) for
any consequential or punitive damages for any breach of the terms of this
Deposit Agreement.
The Depositary, its controlling persons, its agents, any Custodian and the Company, its controlling persons and its agents may rely and shall be protected in acting upon any written notice, request or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.
No disclaimer of liability under the Securities Act is intended by any provision of this Deposit Agreement.
Section 5.3 Standard of Care. The Company and its agents assume no obligation and shall not be subject to any liability under this Deposit Agreement or the Receipts to Holders or Beneficial Owners or other persons, except that the Company and its agents agree to perform their obligations specifically set forth in this Deposit Agreement without negligence or bad faith.
The Depositary and its agents assume no obligation and shall not be subject to any liability under this Deposit Agreement or the Receipts to Holders or Beneficial Owners or other persons, except that the Depositary and its agents agree to perform their obligations specifically set forth in this Deposit Agreement without negligence or bad faith. The Depositary and the Company undertake to perform such duties and only such duties as are specifically set forth in this Deposit Agreement, and no implied covenants and obligations should be read into this Deposit Agreement against the Depositary or the Company or their respective agents.
Without limitation of the foregoing, neither the Depositary, nor the Company, nor any of their respective controlling persons, or agents, shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity reasonably satisfactory to it against all expense (including reasonable fees and disbursements of counsel) and liability be furnished as often as may be required (and no
Custodian shall be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary).
The Depositary and its agents shall not be liable for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any vote is cast or the effect of any vote, provided that any such action or omission is in good faith and in accordance with the terms of this Deposit Agreement. The Depositary shall not incur any liability for any failure to determine that any distribution or action may be lawful or reasonably practicable, for the content of any information submitted to it by the Company for distribution to the Holders or for any inaccuracy of any translation thereof, for any investment risk associated with acquiring an interest in the Deposited Securities, for the validity or worth of the Deposited Securities or for any tax consequences that may result from the ownership of ADSs, Shares or Deposited Securities, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of this Deposit Agreement, for the failure or timeliness of any notice from the Company or for the failure of the Company to exchange any Certificate of Payment into Shares. The Depositary shall not be obligated in any way to monitor or enforce the obligations of the Company, including, without limitation, in respect of any Certificate of Payment, the conversion of such Certificate of Payment into Shares.
Section 5.4 Resignation and Removal of the Depositary; Appointment of Successor Depositary. The Depositary may at any time resign as Depositary hereunder by written notice of resignation delivered to the Company, such resignation to be effective on the earlier of (i) the 60th day after delivery thereof to the Company (whereupon the Depositary shall be entitled to take the actions contemplated in Section 6.2 hereof), or (ii) the appointment by the Company of a successor depositary and its acceptance of such appointment as hereinafter provided.
The Depositary may at any time be removed by the Company by written
notice of such removal, which removal shall be effective on the earlier of (i)
the 60th day after delivery thereof to the Depositary (whereupon the Depositary
shall be entitled to take the actions contemplated in Section 6.2 hereof), or
(ii) upon the appointment by the Company of a successor depositary and its
acceptance of such appointment as hereinafter provided.
In case at any time the Depositary acting hereunder shall resign or be
removed, the Company shall use its best efforts to appoint a successor
depositary, which shall be a bank or trust company having an office in the
Borough of Manhattan, The City of New York. Every successor depositary shall be
required by the Company to execute and deliver to its immediate predecessor and
to the Company an instrument in writing accepting its appointment hereunder, and
thereupon such successor depositary, without any further act or deed (except as
required by applicable law), shall become fully vested with all the rights,
powers, duties and obligations of its immediate predecessor (other than as
contemplated in Sections 5.8 and 5.9). The immediate predecessor depositary,
upon payment of all sums due it and on the written request of the Company shall,
(i) execute and deliver an instrument transferring to such successor all rights
and powers of such predecessor hereunder (other than as contemplated in Sections
5.8 and 5.9),
(ii) duly assign, transfer and deliver all right, title and interest to the Deposited Securities to such successor, and (iii) deliver to such successor a list of the Holders of all outstanding Receipts and such other information relating to Receipts and Holders thereof as the successor may reasonably request. Any such successor depositary shall promptly mail notice of its appointment to such Holders.
Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.
Section 5.5 The Custodian. The Depositary has initially appointed Citibank, N.A., Taipei Branch as Custodian for the purpose of this Deposit Agreement. The Custodian or its successors in acting hereunder shall be subject at all times and in all respects to the direction of the Depositary for the Shares for which the Custodian acts as custodian and shall be responsible solely to it. If any Custodian resigns or is discharged from its duties hereunder with respect to any Deposited Securities and no other Custodian has previously been appointed hereunder, the Depositary shall promptly appoint a substitute custodian that is organized under the laws of the Republic of China. The Depositary shall require such resigning or discharged Custodian to deliver the Deposited Securities held by it, together with all such records maintained by it as Custodian with respect to such Deposited Securities as the Depositary may request, to the Custodian designated by the Depositary. Whenever the Depositary determines, in its discretion, that it is appropriate to do so, it may appoint an additional custodian with respect to any Deposited Securities, or discharge the Custodian with respect to any Deposited Securities and appoint a substitute custodian, which shall thereafter be Custodian hereunder with respect to the Deposited Securities. Immediately upon any such change, the Depositary shall give notice thereof in writing to all Holders of Receipts, each other Custodian and the Company.
Upon the appointment of any successor depositary, any Custodian then acting hereunder shall, unless otherwise instructed by the Depositary, continue to be the Custodian of the Deposited Securities without any further act or writing, and shall be subject to the direction of the successor depositary. The successor depositary so appointed shall, nevertheless, on the written request of any Custodian, execute and deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete power and authority to act on the direction of such successor depositary.
Section 5.6 Notices and Reports. On or before the first date on which the Company gives notice, by publication or otherwise, of any meeting of holders of Deposited Securities, or of any adjourned meeting of such holders, or of the taking of any action by such holders other than at a meeting, or of the taking of any action in respect of any cash or other distributions or the offering of any rights in respect of Deposited Securities, the Company shall transmit to the Depositary and the Custodian a copy of the notice thereof in the English language but otherwise in the form given or to be given to holders of Deposited Securities. The Company shall also furnish to the Custodian and the Depositary a summary, in English, of any applicable provisions
or proposed provisions of the Articles of Incorporation of the Company that may be relevant or pertain to such notice of meeting or be the subject of a vote thereat. The Depositary shall arrange, at the request of the Company and at the Company's expense, for the mailing of copies thereof to all Holders or make such notices, reports and other communications available to all Holders on a basis similar to that for holders of Deposited Securities or on such other basis as the Company may advise the Depositary or as may be required by any applicable law, regulation or stock exchange requirement. The Company has delivered to the Depositary and the Custodian a copy of the Company's Articles of Incorporation along with the provisions of or governing the Deposited Securities, and promptly upon any amendment thereto or change therein, the Company shall deliver to the Depositary and the Custodian a copy of such amendment thereto or change therein. The Depositary may rely upon such copy for all purposes of this Deposit Agreement.
The Depositary will, at the expense of the Company, make available a copy of any such notices, reports or communications issued by the Company and delivered to the Depositary for inspection by the Holders of the Receipts evidencing the American Depositary Shares governed by such provisions at the Depositary's Principal Office, at the office of the Custodian and at any other designated transfer office.
Section 5.7 Issuance of Additional Eligible Securities, ADSs, etc. The
Company agrees that in the event it or any of its Affiliates proposes (i) an
issuance, sale or distribution of additional Eligible Securities (ii) an
offering of rights to subscribe for Eligible Securities, (iii) an issuance of
securities convertible into or exchangeable for Eligible Securities, (iv) an
issuance of rights to subscribe for securities convertible into or exchangeable
for Eligible Securities, (v) an elective dividend of cash or Eligible
Securities, (vi) a redemption of Deposited Securities, (vii) a meeting of
holders of Deposited Securities, or solicitation of consents or proxies,
relating to any reclassification of securities, merger or consolidation or
transfer of assets, or (viii) any reclassification, recapitalization,
reorganization, merger, consolidation or sale of assets which affects the
Deposited Securities, it will obtain legal advice and take all steps necessary
to ensure that the application of the proposed transaction to Holders and
Beneficial Owners does not violate the laws and regulations of the Republic of
China and the registration provisions of the Securities Act, or any other
applicable laws (including, without limitation, the Investment Company Act of
1940, as amended, the Exchange Act or the securities laws of the states of the
United States). In support of the foregoing, the Company will, at the request of
the Depositary, furnish to the Depositary (a) a written opinion of U.S. counsel
(reasonably satisfactory to the Depositary) stating whether or not application
of such transaction to Holders and Beneficial Owners (1) requires a registration
statement under the Securities Act to be in effect or (2) is exempt from the
registration requirements of the Securities Act and (b) an opinion of ROC
counsel stating that (1) making the transaction available to Holders and
Beneficial Owners does not violate the laws or regulations of the Republic of
China; provided however, that no such opinion shall be required in the event of
an issuance of Eligible Securities as a bonus, share split or similar event or
(2) all requisite regulatory consents and approvals have been obtained in the
Republic of China. If the filing of a registration statement is required, the
Depositary shall not have any obligation to proceed with the transaction unless
it shall have received evidence
reasonably satisfactory to it that such registration statement has been declared effective. If, being so advised by counsel, the Company determines that a transaction is required to be registered under the Securities Act, the Company will either (i) register such transaction to the extent necessary, (ii) alter the terms of the transaction to avoid the registration requirements of the Securities Act or (iii) direct the Depositary to take specific measures, in each case as contemplated in this Deposit Agreement, to prevent such transaction from violating the registration requirements of the Securities Act.
The Company agrees with the Depositary that neither the Company nor any of its Affiliates will at any time (i) deposit any Eligible Securities, either upon original issuance or upon a sale of Eligible Securities previously issued and reacquired by the Company or by any such Affiliate, or (ii) issue additional Eligible Securities, rights to subscribe for such Eligible Securities, securities convertible into or exchangeable for Eligible Securities or rights to subscribe for such securities, unless such transaction and the securities issuable in such transaction are exempt from registration under the Securities Act and, if applicable, the Exchange Act or have been registered under the Securities Act and, if applicable, the Exchange Act (and such registration statement has been declared effective).
Notwithstanding anything else contained in this Deposit Agreement, nothing in this Deposit Agreement shall be deemed to obligate the Company to file any registration statement in respect of any proposed transaction.
Section 5.8 Indemnification. The Depositary agrees to indemnify the Company and its directors, officers, employees, agents and Affiliates against, and hold each of them harmless from, any direct loss, liability, tax, charge or expense of any kind whatsoever (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted by the Depositary under the terms hereof due to the negligence or bad faith of the Depositary.
The Company agrees to indemnify the Depositary, the Custodian and any of their respective directors, officers, employees, agents and Affiliates against, and hold each of them harmless from, any direct loss, liability, tax, charge or expense of any kind whatsoever (including, but not limited to, the reasonable fees and expenses of counsel) that may arise (a) out of or in connection with any offer, issuance, sale, resale, transfer, deposit or withdrawal of Receipts, American Depositary Shares, the Eligible Securities or Deposited Securities, as the case may be, (b) out of or as a result of any offering documents in respect thereof or (c) out of acts performed or omitted, including, but not limited to, any delivery by the Depositary on behalf of the Company of information regarding the Company in connection with this Deposit Agreement, the Receipts, the American Depositary Shares, the Eligible Securities, or any Deposited Securities, in any such case (i) by the Depositary, the Custodian or any of their respective directors, officers, employees, agents and Affiliates, except to the extent such loss, liability, tax, charge or expense is due to the negligence or bad faith of any of them, or (ii) by the Company or any of its directors, officers, employees, agents and Affiliates except to the extent
that such liability or expense arises out of or is based upon an untrue statement of material fact or omission that is made in reliance upon and in conformity with information relating to the Depositary or the Custodian, as the case may be, furnished in writing to the Company by the Depositary or the Custodian expressly for use in any document relating to the ADSs.
The obligations set forth in this Section shall survive the termination of this Deposit Agreement and the succession or substitution of any party hereto.
Any person seeking indemnification hereunder (an "indemnified person") shall notify the person from whom it is seeking indemnification (the "indemnifying person") of the commencement of any indemnifiable action or claim promptly after such indemnified person becomes aware of such commencement (provided that the failure to make such notification shall not affect such indemnified person's rights to seek indemnification except to the extent the indemnifying person is materially prejudiced by such failure) and shall consult in good faith with the indemnifying person as to the conduct of the defense of such action or claim that may give rise to an indemnity hereunder, which defense shall be reasonable in the circumstances. No indemnified person shall compromise or settle any action or claim that may give rise to an indemnity hereunder without the consent of the indemnifying person, which consent shall not be unreasonably withheld.
Section 5.9 Fees and Charges of Depositary. Holders, Beneficial Owners and persons depositing Eligible Securities or surrendering ADSs for cancellation and withdrawal of Deposited Securities shall be required to pay to the Depositary the Depositary's fees and related charges identified as payable by them respectively in the Fee Schedule attached hereto as Exhibit B. All fees and charges so payable may, at any time and from time to time, be changed by agreement between the Depositary and the Company, but, in the case of fees and charges payable by Holders and Beneficial Owners, only in the manner contemplated in Section 6.1. The Depositary shall provide, without charge, a copy of its latest fee schedule to anyone upon request.
The Company agrees to promptly pay to the Depositary such other fees and charges and to reimburse the Depositary for such reasonable out-of-pocket expenses as the Depositary and the Company may agree to in writing from time to time. Responsibility for payment of such charges may at any time and from time to time be changed by agreement between the Company and the Depositary. Unless otherwise agreed, the Depositary shall present its statement for such expenses and fees or charges to the Company once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.
The right of the Depositary to receive payment of fees, charges and expenses as provided above shall survive the termination of this Deposit Agreement. As to any Depositary, upon the resignation or removal of such Depositary as described in Section 5.4 hereof, such right shall extend for those fees, charges and expenses incurred prior to the effectiveness of such resignation or removal.
Section 5.10 Pre-Release Transactions. Subject to the further terms and
provisions of this Section 5.10, the Depositary, its Affiliates and their
agents, on their own behalf, may own and deal in any class of securities of the
Company and its Affiliates and in ADSs. In its capacity as Depositary, the
Depositary shall not lend Deposited Securities or ADSs; provided, however, that,
subject to Republic of China law and regulations, the Depositary may (i) issue
ADSs prior to the receipt of Eligible Securities pursuant to Section 2.3 and
(ii) deliver Deposited Securities upon the receipt of ADSs for cancellation upon
withdrawal of Deposited Securities pursuant to Section 2.7, including ADSs which
were issued under (i) above but for which Eligible Securities may not have been
received (each such transaction a "Pre-Release Transaction"). The Depositary may
receive ADSs in lieu of Eligible Securities under (i) above. Each Pre-Release
Transaction will be (a) subject to a written agreement whereby the person or
entity (the "Applicant") to whom ADSs are to be delivered (w) represents that at
the time of the Pre-Release Transaction the Applicant or its customer owns the
Eligible Securities that are to be delivered by the Applicant under such
Pre-Release Transaction, (x) agrees to indicate the Depositary as owner of such
Eligible Securities in its records and to hold such Eligible Securities in trust
for the Depositary until such Eligible Securities or ADSs are delivered to the
Depositary or the Custodian, (y) unconditionally guarantees to deliver to the
Depositary or the Custodian, as applicable, such Eligible Securities or ADSs,
and (z) agrees to any additional restrictions or requirements that the
Depositary deems appropriate, (b) at all times fully collateralized with cash,
United States government securities or such other collateral as the Depositary
deems appropriate, (c) terminable by the Depositary on not more than five (5)
business days' notice and (d) subject to such further indemnities and credit
regulations as the Depositary deems appropriate. The Depositary will normally
limit the number of ADSs and Eligible Securities involved in such Pre-Release
Transactions at any one time to thirty percent (30%) of the ADSs outstanding
(without giving effect to ADSs outstanding under (i) above), provided, however,
that the Depositary reserves the right to change or disregard such limit from
time to time as it deems appropriate.
The Depositary may also set limits with respect to the number of ADSs and Eligible Securities involved in Pre-Release Transactions with any one person on a case by case basis as it deems appropriate. The Depositary may retain for its own account any compensation received by it in conjunction with the foregoing. Collateral provided pursuant to (b) above, but not the earnings thereon, shall be held for the benefit of the Holders (other than the Applicant). Neither Temporary ADSs nor any interest in any Payment Certificate shall be eligible for Pre-Release Transactions hereunder.
Section 5.11 Restricted Securities Owners. The Company agrees to advise in writing each of the persons or entities who, to the knowledge of the Company, holds Restricted Securities that, except as contemplated by Section 2.13 hereof, such Restricted Securities are ineligible for deposit hereunder and, to the extent practicable, shall require each of such persons to represent in writing that such person will not deposit Restricted Securities hereunder.
ARTICLE VI
AMENDMENT AND TERMINATION
Section 6.1 Amendment/Supplement. The Receipts outstanding at any time, the provisions of this Deposit Agreement and the form of Receipt attached hereto and to be issued under the terms hereof may at any time and from time to time be amended or supplemented by written agreement between the Company and the Depositary in any respect which they may deem necessary or desirable without the prior written consent of the Holders or Beneficial Owners. Any amendment or supplement which shall impose or increase any fees or charges (other than charges in connection with foreign exchange control regulations, and taxes and other governmental charges, delivery and other such expenses), or which shall otherwise materially prejudice any substantial existing right of Holders or Beneficial Owners, shall not, however, become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment or supplement shall have been given to the Holders of outstanding Receipts. The parties hereto agree that any amendments or supplements which (i) are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the American Depositary Shares to be registered on Form F-6 under the Securities Act or (b) the American Depositary Share(s) to be traded solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to materially prejudice any substantial rights of Holders or Beneficial Owners. Every Holder and Beneficial Owner at the time any amendment or supplement so becomes effective shall be deemed, by continuing to hold such American Depositary Share(s), to consent and agree to such amendment or supplement and to be bound by this Deposit Agreement and the Receipt as amended and supplemented thereby. In no event shall any amendment or supplement impair the right of the Holder to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law. Notwithstanding the foregoing, if any governmental body should adopt new laws, rules or regulations which would require an amendment or supplement of this Deposit Agreement to ensure compliance therewith, the Company and the Depositary may amend or supplement this Deposit Agreement and the Receipts at any time in accordance with such changed laws, rules or regulations. Such amendment or supplement to this Deposit Agreement and the Receipts in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance with such laws, rules or regulations.
Section 6.2 Termination. The Depositary shall, at any time at the written direction of the Company, terminate this Deposit Agreement by mailing notice of such termination to the Holders of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. If 60 days shall have expired after (i) the Depositary shall have delivered to the Company a written notice of its election to resign, or (ii) the Company shall have delivered to the Depositary a written notice of the removal of the Depositary, and in either case a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.4, the Depositary may terminate this Deposit Agreement by mailing notice of such termination
to the Holders of all Receipts then outstanding at least 30 days prior to the date fixed for such termination. On and after the date of termination of this Deposit Agreement, the Holder of a Receipt will, upon surrender of such Receipt at the Principal Office of the Depositary, upon the payment of the charges of the Depositary for the surrender of Receipts referred to in Section 2.7 and subject to the conditions and restrictions set forth therein and subject always to the restrictions on withdrawal as may be in effect under the laws and regulations of the Republic of China, and upon payment of any applicable taxes or governmental charges, be entitled to Delivery, to him or upon his order, of the amount of Deposited Securities represented by such Receipt. If any Receipts shall remain outstanding after the date of termination of this Deposit Agreement, the Registrar thereafter shall discontinue the registration of transfers of Receipts, and the Depositary shall suspend the distribution of dividends to the Holders thereof, and shall not give any further notices or perform any further acts under this Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in this Deposit Agreement, and shall continue to deliver Deposited Securities, subject to the conditions and restrictions set forth in Section 2.7, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, or charging, as the case may be, in each case, the charges of the Depositary for the surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of this Deposit Agreement and any applicable taxes or governmental charges or assessments).
At any time after the expiration of six months from the date of termination of this Deposit Agreement, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, in an unsegregated account, without liability for interest for the pro rata benefit of the Holders whose Receipts have not theretofore been surrendered, such Holders thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under this Deposit Agreement with respect to the Receipts, the Deposited Securities and the American Depositary Shares, except to account for such net proceeds and other cash (after deducting, or charging, as the case may be, in each case, the charges of the Depositary for the surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of this Deposit Agreement and any applicable taxes or governmental charges or assessments). Upon the termination of this Deposit Agreement, the Company shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary under Sections 5.8, 5.9 and 7.6 hereof.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Counterparts. This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts together
shall constitute one and the same agreement. Copies of this Deposit Agreement shall be maintained with the Depositary and shall be open to inspection by any Holder during business hours.
Section 7.2 No Third-Party Beneficiaries. This Deposit Agreement is for the exclusive benefit of the parties hereto (and their successors) and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person, except to the extent specifically set forth in this Deposit Agreement. Nothing in this Deposit Agreement shall be deemed to give rise to a partnership or joint venture among the parties nor establish a fiduciary or similar relationship among the parties. The parties hereto acknowledge and agree that (i) the Depositary and its Affiliates may at any time have multiple banking relationships with the Company and its Affiliates, (ii) the Depositary and its Affiliates may be engaged at any time in transactions in which parties adverse to the Company or the Holders or Beneficial Owners may have interests and (iii) nothing contained in this Agreement shall (a) preclude the Depositary or any of its Affiliates from engaging in such transactions or establishing or maintaining such relationships, (b) obligate the Depositary or any of its Affiliates to disclose such transactions or relationships or to account for any profit made or payment received in such transactions or relationships.
Section 7.3 Severability. In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.
Section 7.4 Holders and Beneficial Owners as Parties; Binding Effect. The Holders and Beneficial Owners from time to time of American Depositary Shares shall be parties to the Deposit Agreement and shall be bound by all of the terms and conditions thereof and of any Receipt by acceptance thereof of any beneficial interest therein. Holders and Beneficial Owners of International GDSs issued under the Original Deposit Agreement as heretofore in effect shall, from and after the date hereof, have all the rights and be subject to all the obligations of Holders and Beneficial Owners of ADSs hereunder.
Section 7.5 Notices. Any and all notices to be given to the Company
shall be deemed to have been duly given if personally delivered or sent by mail,
air courier or cable, telex or facsimile transmission, confirmed by letter,
addressed to Advanced Semiconductor Engineering, Inc., 26 Chin Third Road,
Nantze Export Processing Zone, Nantze Kaohsiung, the Republic of China,
Attention: Chairman of the Board of Directors (facsimile number:
011-8867-361-3094), or to any other address which the Company may specify in
writing to the Depositary.
Any and all notices to be given to the Depositary shall be deemed to have been duly given if personally delivered or sent by mail, air courier or cable, telex or facsimile transmission, confirmed by letter, addressed to Citibank, N.A., 111 Wall Street, New York, New York 10043, U.S.A. Attention: ADR Department, or to any other address which the Depositary may specify in writing to the Company.
Any and all notices to be given to the Custodian shall be deemed to have been duly given if personally delivered or sent by mail, air courier or cable, telex or facsimile transmission, confirmed by letter, addressed to Citibank, N.A. - Taipei Branch, Citicorp Center, 52 Min Sheng East Road, Section 4, Taipei, the Republic of China or to any other address which the Custodian may specify in writing to the Company.
Any and all notices to be given to any Holder shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission, confirmed by letter, addressed to such Holder at the address of such Holder as it appears on the transfer books for Receipts of the Depositary, or, if such Holder shall have filed with the Depositary a written request that notices intended for such Holder be mailed to some other address, at the address specified in such request. Notice to Holders shall be deemed to be notice to Beneficial Owners for all purposes of this Deposit Agreement.
Delivery of a notice sent by mail, air courier or cable, telex or facsimile transmission shall be deemed to be effective at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post-office letter box or delivered to an air courier service. The Depositary or the Company may, however, act upon any cable, telex or facsimile transmission received by it from the other or from any Holder, notwithstanding that such cable, telex or facsimile transmission shall not subsequently be confirmed by letter as aforesaid.
Section 7.6 Governing Law and Jurisdiction. This Deposit Agreement and the Receipts shall be interpreted in accordance with, and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by, the laws of the State of New York without reference to the principles of choice of law thereof. Notwithstanding anything contained in this Deposit Agreement, any Receipt or any present or future provisions of the laws of the State of New York, the rights of holders of Deposited Securities and the obligations and duties of the Company in respect of the holders of Deposited Securities, as such, shall be governed by the laws of the Republic of China (or, if applicable, such other laws as may govern the Deposited Securities).
Except as set forth in the following paragraph of this Section 7.6, the
Company and the Depositary agree that the federal or state courts in The City of
New York shall have jurisdiction to hear and determine any suit, action or
proceeding and to settle any dispute between them that may arise out of or in
connection with this Deposit Agreement and, for such purposes, each irrevocably
submits to the non-exclusive jurisdiction of such courts. The Company hereby
irrevocably designates, appoints and empowers CT Corporation System Inc. (the
"Agent") with offices currently at 111 Eighth Avenue, New York, New York 10011
as its authorized agent to receive and accept for and on its behalf, and on
behalf of its properties, assets and revenues, service by mail of any and all
legal process, summons, notices and documents that may be served in any suit,
action or proceeding brought against the Company in any federal or state court
as described in the preceding sentence or in the next paragraph of this Section
7.6. If for any reason
the Agent shall cease to be available to act as such, the Company agrees to
designate a new agent in New York on the terms and for the purposes of this
Section 7.6 reasonably satisfactory to the Depositary. The Company further
hereby irrevocably consents and agrees to the service of any and all legal
process, summons, notices and documents in any suit, action or proceeding
against the Company, by service by mail of a copy thereof upon the Agent
(whether or not the appointment of such Agent shall for any reason prove to be
ineffective or such Agent shall fail to accept or acknowledge such service),
with a copy mailed to the Company by registered or certified air mail, postage
prepaid, to its address provided in Section 7.5 hereof. The Company agrees that
the failure of the Agent to give any notice of such service to it shall not
impair or affect in any way the validity of such service or any judgment
rendered in any action or proceeding based thereon.
Notwithstanding the foregoing, the Depositary and the Company unconditionally agree that in the event that a Holder or Beneficial Owner brings a suit, action or proceeding against (a) the Company, (b) the Depositary in its capacity as Depositary under this Deposit Agreement or (c) against both the Company and the Depositary, in any such case, in any state or federal court of the United States, and the Depositary or the Company have any claim, for indemnification or otherwise, against each other arising out of the subject matter of such suit, action or proceeding, then the Company and the Depositary may pursue such claim against each other in the state or federal court in the United States in which such suit, action, or proceeding is pending and, for such purposes, the Company and the Depositary irrevocably submit to the non-exclusive jurisdiction of such courts. The Company agrees that service of process upon the Agent in the manner set forth in the preceding paragraph shall be effective service upon it for any suit, action or proceeding brought against it as described in this paragraph.
The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any actions, suits or proceedings brought in any court as provided in this Section 7.6, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, and agrees not to plead or claim, any right of immunity from legal action, suit or proceeding, from set off or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution or judgment, from execution of judgment, or from any other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, and consents to such relief and enforcement against it, its assets and its revenues in any jurisdiction, in each case with respect to any matter arising out of, or in connection with, the Deposit Agreement, any Receipt or the Deposited Securities.
No disclaimer of liability under the Securities Act is intended by any provision of the Deposit Agreement. The provisions of this Section 7.6 shall survive any termination of this Deposit Agreement, in whole or in part.
Section 7.7 Assignment. Subject to the provisions of Section 5.4 hereof, this Deposit Agreement may not be assigned by either the Company or the Depositary.
Section 7.8 Compliance with U.S. Securities Laws. Notwithstanding anything in this Deposit Agreement to the contrary, the withdrawal or delivery of Deposited Securities will not be suspended by the Company or the Depositary except as would be permitted by Instruction I.A.(1) of the General Instructions to Form F-6 Registration Statement, as amended from time to time, under the Securities Act.
Section 7.9 Titles and References. All references in this Deposit Agreement to exhibits, articles, sections, subsections, and other subdivisions refer to the exhibits, articles, sections, subsections and other subdivisions of this Deposit Agreement unless expressly provided otherwise. The words "this Deposit Agreement", "herein", "hereof", "hereby", "hereunder", and words of similar import refer to the Deposit Agreement as a whole as in effect between the Company, the Depositary and the Holders and Beneficial Owners of ADSs and not to any particular subdivision unless expressly so limited. Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires. Titles to sections of this Deposit Agreement are included for convenience only and shall be disregarded in construing the language contained in this Deposit Agreement. References to applicable laws and regulations shall refer to the applicable laws and regulations in effect at the relevant time of determination, unless otherwise required by such laws or regulations.
IN WITNESS WHEREOF, ADVANCED SEMICONDUCTOR ENGINEERING, INC. and CITIBANK, N.A. have duly executed this Deposit Agreement as of the day and year first above set forth and all Holders and Beneficial Owners shall become parties hereto upon acceptance by them of American Depositary Shares evidenced by Receipts issued in accordance with the terms hereof, or upon acquisition of any beneficial interest therein.
ADVANCED SEMICONDUCTOR ENGINEERING, INC.
By:_______________________________
Name:
Title:
CITIBANK, N.A.
By:_______________________________
Name:
Title:
EXHIBIT A
[FORM OF RECEIPT] Number _____________ CUSIP NUMBER: _______ [American Depositary Shares (each American Depositary Share representing [FIVE (5)] Fully Paid common shares, each having a par value of NT$10.00 per share)] [Temporary American Depositary Shares (each Temporary American Depositary Share representing an undivided interest if a global certificate of payment, each interest representing the irrevocable right to receive [five (5)] common shares, each having a par value of NT$10.00 per share)] |
AMERICAN DEPOSITARY RECEIPT
FOR
AMERICAN DEPOSITARY SHARES
representing
[DEPOSITED [COMMON SHARES]
[INTERESTS IN THE DEPOSITED CERTIFICATE OF PAYMENT
of
ADVANCED SEMICONDUCTOR ENGINEERING, INC.
(Incorporated under the laws of The Republic of China)
CITIBANK, N.A., a national banking association organized and existing under the laws of the United States of America, as depositary (the "Depositary"), hereby certifies that _____________is the owner of ______________ American Depositary Shares (hereinafter
"ADS"), representing deposited [COMMON SHARES] [INTERESTS IN A GLOBAL CERTIFICATE OF PAYMENT REPRESENTING THE IRREVOCABLE RIGHT TO RECEIVE COMMON SHARES], par value NT$10.00 per share, including evidence of rights to receive such [COMMON SHARES (THE "SHARES")] [INTERESTS IN THE CERTIFICATE OF PAYMENT (THE "CERTIFICATE OF PAYMENT)] (such [SHARES][CERTIFICATE OF PAYMENT] are hereafter called "Eligible Securities") of Advanced Semiconductor Engineering, Inc., a corporation incorporated under the laws of The Republic of China (the "Company"). As of the date of the Deposit Agreement (as hereinafter defined), each ADS represents [FIVE (5)][AN INTEREST IN A GLOBAL CERTIFICATE OF PAYMENT, EACH INTEREST REPRESENTING THE IRREVOCABLE RIGHT TO RECEIVE FIVE (5) SHARES] deposited under the Deposit Agreement with the Custodian, which at the date of execution of the Deposit Agreement is Citibank, N.A., Taipei Branch (the "Custodian"). The ratio of American Depositary Shares to Eligible Securities is subject to amendment as provided in Article IV of the Deposit Agreement. The Depositary's Principal Office is located at 111 Wall Street, New York, New York 10043, U.S.A.
(1) The Deposit Agreement. This American Depositary Receipt is one of an issue of American Depositary Receipts ("Receipts"), all issued and to be issued upon the terms and conditions set forth in the Deposit Agreement, dated as of [DATE], 2000 (as amended from time to time, the "Deposit Agreement"), by and among the Company, the Depositary, and all Holders and Beneficial Owners from time to time of American Depositary Shares ("ADSs") evidenced by Receipts issued thereunder, each of whom by accepting an ADS (or an interest therein) agrees to become a party thereto and becomes bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights and obligations of Holders and Beneficial Owners of Receipts and the rights and duties of the Depositary in respect of the Eligible Securities deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Eligible Securities and held thereunder (such Eligible Securities, securities, property and cash are herein called "Deposited Securities"). Copies of the Deposit Agreement are on file at the Principal Office of the Depositary and with the Custodian.
The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and the Articles of Incorporation of the Company (as in effect on the date of the signing of the Deposit Agreement) and are qualified by and subject to the detailed provisions of the Deposit Agreement and the Articles of Incorporation, to which reference is hereby made. All capitalized terms used herein which are not otherwise defined herein shall have the meanings ascribed thereto in the Deposit Agreement. The Depositary makes no representation or warranty as to the validity or worth of the Deposited Securities. The Depositary has made arrangements for the acceptance of the ADSs into DTC. Each Beneficial Owner of ADSs held through DTC must rely on the procedures of DTC and the DTC Participants to exercise and be entitled to any rights attributable to such ADSs.
(2) Surrender of Receipts and Withdrawal of Deposited Securities.
(a) ROC Requirements. The Depositary and the Company have been advised that under ROC law, as in effect as of the date hereof, a Holder wishing to withdraw Deposited Securities from the ADR facility is required to appoint an eligible agent in the Republic of China to open a
securities trading account with a local brokerage firm after receiving an approval from the TSE and a bank account (the securities trading account and the bank account, collectively, the "Accounts"), to pay ROC taxes, remit funds, exercise stockholders' rights and perform such other functions as may be designated by such withdrawing Holder. In addition, such withdrawing Holder is also required to appoint a custodian bank to hold the securities in safekeeping, make confirmations and settle trades and report all relevant information. Without making such appointment and the opening of such Accounts, the withdrawing Holder would be unable to hold or subsequently sell the Deposited Securities withdrawn from the ADR Facilities on the TSE or otherwise. The laws of the Republic of China applicable to the withdrawal of Deposited Securities may change from time to time. There can be no assurance that current law will remain in effect or that future changes of Republic of China law will not adversely affect the ability of Holders to withdraw Deposited Securities hereunder.
(b) Sale of Deposited Securities. Upon surrender of Receipts at the Principal Office and upon payment of any fees, reasonable expenses, taxes or other governmental charges as provided hereunder, subject to the terms of this Deposit Agreement and the Company's Articles of Incorporation, and the transfer restrictions applicable to the Deposited Securities, if any, Holders may request that the Deposited Securities represented by such Holders' Receipts be sold on such Holder's behalf. Any Holder requesting a sale of Deposited Securities may be required by the Depositary to deliver, or cause to be delivered, to the Depositary a written order requesting the Depositary to sell, or cause to be sold, such Deposited Securities. Any such sale of Deposited Securities will be conducted in accordance with applicable ROC law through a securities company in the ROC on the TSE or in such other manner as is or may be permitted under applicable ROC law. Any such sale of Deposited Securities will be at the expense and risk of the Holder requesting such sale. Any Holder requesting the Depositary to sell the Deposited Securities represented by such Holder's ADSs may be required to enter into a separate agreement to cover the terms of the sale of such Deposited Securities.
Upon receipt of any proceeds form any such sale, the Depositary shall, subject to any restrictions imposed by ROC law and regulations, and as provided hereunder and under the Deposit Agreement, convert or cause to be converted any such proceeds into U.S. dollars and distribute any such proceeds to the Holders entitled thereto after deduction or payment of any fees, reasonable expenses, taxes or governmental charges (including, without limitation, any ROC and U.S. taxes) incurred in connection with such sale, as provided under the Deposit Agreement. Any such sale may be subject to ROC taxation on capital gains, if any, and will be subject to a securities transaction tax in the ROC. The ROC does not, as of the date hereof, impose tax on capital gains arising from ROC securities transactions, but there can be no assurance that a capital gains tax on ROC securities transactions will not be imposed in the future or as to the manner in which any ROC capital gains tax in respect of a sale of Deposited Securities would be imposed or calculated.
(c) Withdrawal of Deposited Securities. The Holder of ADSs shall be entitled to Delivery (at the Custodian's designated office) of the Deposited Securities at the time represented
by the ADS(s) upon satisfaction of each of the following conditions: (i) the
Holder (or a duly authorized attorney of the Holder) has duly Delivered ADSs to
the Depositary at its Principal Office (and if applicable, the Receipts
evidencing such ADSs) for the purpose of withdrawal of the Deposited Securities
represented thereby, (ii) if so required by the Depositary, the Receipts
Delivered to the Depositary for such purpose have been properly endorsed in
blank or are accompanied by proper instruments of transfer in blank (including
signature guarantees in accordance with standard securities industry practice),
(iii) if so required by the Depositary, the Holder of the ADSs has executed and
delivered to the Depositary a written order directing the Depositary to cause
the Deposited Securities being withdrawn to be Delivered to or upon the written
order of the person(s) designated in such order, (iv) the Holder has delivered
to the Depositary the certification contemplated in Exhibit C to the Deposit
Agreement, duly completed by or on behalf of the Beneficial Owner(s) of the ADSs
surrendered for withdrawal (unless the Depositary is otherwise instructed by the
Company), and (v) all applicable fees and charges of, and reasonable expenses
incurred by, the Depositary and all applicable taxes and governmental charges
(as are set forth in Section 5.9 of, and Exhibit B to, the Deposit Agreement)
have been paid, subject, however, in each case, to the terms and conditions of
the Receipts evidencing the surrendered ADSs, of the Deposit Agreement, of the
Company's Articles of Incorporation and of any applicable laws and regulations
of the Republic of China and the United States and the rules of the Taiwan
Securities Central Depository, and to any provisions of or governing the
Deposited Securities, in each case as in effect at the time thereof.
Upon satisfaction of each of the conditions specified above, the Depositary (i) shall cancel the ADSs Delivered to it (and, if applicable, the Receipts evidencing the ADSs so Delivered), (ii) shall direct the Registrar to record the cancellation of the ADSs so Delivered on the books maintained for such purpose, and (iii) shall direct the Custodian to Deliver (without unreasonable delay) at the Custodian's designated office the Deposited Securities represented by the ADSs so canceled together with any certificate or other document of title for the Deposited Securities, or evidence of the electronic transfer thereof (if available), as the case may be, to or upon the written order of the person(s) designated in the order delivered to the Depositary for such purpose, subject however, in each case, to the terms and conditions of the Deposit Agreement, of the Receipts evidencing the ADSs so canceled, of the Articles of Incorporation of the Company, of applicable laws and regulations of the Republic of China and of the United States and of the rules of the Taiwan Securities Central Depositary, and to the terms and conditions of or governing the Deposited Securities, in each case as in effect at the time thereof.
The Depositary shall not accept for surrender ADSs representing less than a whole number of Eligible Securities. In the case of the Delivery to it of ADSs representing a number other than a whole number of Eligible Securities, the Depositary shall cause ownership of the appropriate whole number of Eligible Securities to be Delivered in accordance with the terms hereof, and shall, at the discretion of the Depositary, either (i) return to the person surrendering such ADSs the number of ADSs representing any remaining fractional Eligible Security, or (ii) sell or cause to be sold the fractional Eligible Security represented by the ADS(s) so surrendered and remit the proceeds of such sale (net of (a) applicable fees and charges of, and expenses
incurred by, the Depositary and (b) taxes withheld) to the person surrendering the ADSs. In addition, trading restrictions on the TSE may result in the price per Eligible Security or on any lot of any type of Eligible Security other than an integral multiple of 1,000 Eligible Securities being lower than the price of Eligible Securities in lots of integral multiples of 1,000 Eligible Securities.
Notwithstanding anything else contained in any Receipt or the Deposit Agreement, the Depositary may make delivery at the Principal Office of the Depositary of (i) any cash dividends or cash distributions, or (ii) any proceeds from the sale of any distributions of Securities or rights, which are at the time held by the Depositary in respect of the Deposited Securities represented by the ADSs surrendered for cancellation and withdrawal. At the request, risk and expense of any Holder so surrendering ADSs, and for the account of such Holder, the Depositary shall direct the Custodian to forward (to the extent permitted by law) any cash or other property (other than securities) held by the Custodian in respect of the Deposited Securities represented by such ADSs to the Depositary for delivery at the Principal Office of the Depositary. Such direction shall be given by letter or, at the request, risk and expense of such Holder, by cable, telex or facsimile transmission.
(3) Transfer, Combination and Split-Up of Receipts. The Registrar shall promptly register the transfer of this Receipt (and of the ADSs represented thereby) on the transfer books maintained for such purpose and the Depositary shall promptly cancel this Receipt and execute new Receipts evidencing the same aggregate number and type of ADSs as those evidenced by this Receipt when canceled, shall cause the Registrar to countersign such new Receipts, and shall promptly Deliver such new Receipts to or upon the order of the person entitled thereto, if each of the following conditions has been satisfied: (i) this Receipt has been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a transfer thereof, (ii) this Receipt has been properly endorsed or is accompanied by proper instruments of transfer (including signature guarantees in accordance with standard securities industry practice), (iii) this Receipt has been duly stamped (if required by the laws of the State of New York or of the United States), and (iv) all applicable fees and charges of, and reasonable expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 of, and Exhibit B to, the Deposit Agreement) have been paid, subject, however, in each case, to the terms and conditions of this Receipt, of the Deposit Agreement and of applicable law, in each case as in effect at the time thereof.
The Registrar shall register the split-up or combination of this Receipt (and of the ADSs represented hereby) on the books maintained for such purpose and the Depositary shall cancel this Receipt and execute new Receipts for the number of ADSs requested, but in the aggregate not exceeding the number of the same type of ADSs evidenced by this Receipt (when canceled), shall cause the Registrar to countersign such new Receipts, and shall Deliver such new Receipts to or upon the order of the Holder thereof, if each of the following conditions has been satisfied: (i) this Receipt has been duly Delivered by the Holder (or by a duly authorized attorney of the
Holder) to the Depositary at its Principal Office for the purpose of effecting a split-up or combination hereof, and (ii) all applicable fees and charges of, and reasonable expenses incurred by, the Depositary and all applicable taxes and government charges (as are set forth in Section 5.9 of, and Exhibit B to, the Deposit Agreement) have been paid, subject, however, in each case, to the terms and conditions of this Receipt, of the Deposit Agreement and of applicable law, in each case as in effect at the time thereof.
(4) Pre-Conditions to Registration, Transfer, Etc. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any Receipt, the delivery of any distribution thereon, or the withdrawal of any Deposited Securities, the Depositary or the Custodian may require (i) payment from the depositor of Eligible Securities or presenter of ADSs or of a Receipt of a sum sufficient to reimburse it for any tax or other governmental charges and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Eligible Securities being deposited or withdrawn) and payment of any applicable fees and charges of the Depositary as provided in the Deposit Agreement and in this Receipt, (ii) the production of proof satisfactory to it as to the identity and genuineness of any signature or any other matters contemplated in the Deposit Agreement, and (iii) compliance with (A) any laws or governmental regulations relating to the execution and delivery of Receipts or ADSs or to the withdrawal of Deposited Securities and (B) such reasonable regulations as the Depositary or the Company may establish consistent with the provisions of this Receipt and the Deposit Agreement and applicable law.
The issuance of ADSs against deposits of Eligible Securities generally or against deposits of particular Eligible Securities may be suspended, or the deposit of particular Eligible Securities may be refused, or the registration of transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts generally may be suspended, during any period when the transfer books of the Company, the Depositary, a Registrar or the Eligible Securities Registrar are closed or if any such action is deemed necessary or advisable by the Depositary or the Company, in good faith, at any time or from time to time because of any requirement of law, any government or governmental body or commission or any securities exchange upon which the Eligible Securities or ADSs are listed, or under any provision of the Deposit Agreement or this Receipt, or under any provision of, or governing, the Deposited Securities, or because of a meeting of shareholders of the Company or for any other reason, subject in all cases to Article (24) hereof. Notwithstanding any provision of the Deposit Agreement or this Receipt to the contrary, Holders are entitled to surrender outstanding ADSs to withdraw the Deposited Securities at any time subject only to (i) Temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Eligible Securities in connection with voting at a shareholders' meeting or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities, and (iv) other circumstances specifically contemplated by Section I.A.(l) of the General Instructions to Form F-6 (as such General Instructions may be amended from time to time).
(5) Compliance With Information Requests. Notwithstanding any other provision of the Deposit Agreement or this Receipt, each Holder and Beneficial Owner of the ADSs represented hereby agrees to comply with requests from the Company pursuant to applicable U.S. and Republic of China laws or regulations, the rules and requirements of the TSE, and of any stock exchange on which Eligible Securities or ADSs are, or will be, registered, traded or listed, or the Articles of Incorporation of the Company, which are made to provide information, inter alia, as to the capacity in which such Holder or Beneficial Owner owns ADSs (and Eligible Securities or Deposited Securities, as the case may be) and regarding the identity of any other person(s) interested in such ADSs and the nature of such interest and various other matters, whether or not they are Holders and/or Beneficial Owners at the time of such request.
(6) Ownership Restrictions. Notwithstanding any provision of this Receipt or of the Deposit Agreement, the Company may restrict transfers of the Shares, Eligible Securities or securities convertible into Shares where the Company informs the Depositary that such transfer might result in ownership of Shares exceeding limits imposed by applicable law, the SFC, the TSE or Articles of Incorporation of the Company. The Company may also restrict, in such manner as it deems appropriate, transfers of ADSs where such transfer may result in the total number of Shares, Deposited Securities or securities convertible into Shares represented by the ADSs owned by a single Holder or Beneficial Owner to exceed any such limits. The Company may, in its sole discretion but subject to applicable law, instruct the Depositary to take action with respect to the ownership interest of any Holder or Beneficial Owner in excess of the limits set forth in the preceding sentence, including but not limited to, the imposition of restrictions on the transfer of ADSs, the removal or limitation of voting rights or the mandatory sale or disposition on behalf of a Holder or Beneficial Owner of the Deposited Securities represented by the ADSs held by such Holder or Beneficial Owner in excess of such limitations, if and to the extent such disposition is permitted by applicable law and the Articles of Incorporation of the Company.
(7) Liability of Holder for Taxes and Other Charges. If any tax or other governmental charge shall become payable by the Depositary or the Custodian with respect to any Receipt or any Deposited Securities or ADSs, such tax or other governmental charge shall be payable by the Holders and Beneficial Owners to the Depositary. The Company, the Custodian and/or Depositary may withhold or deduct from any distributions made in respect of Deposited Securities and may sell for the account of a Holder and/or Beneficial Owner any or all of the Deposited Securities and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, the Holder and the Beneficial Owner hereof remaining liable for any deficiency. The Custodian may refuse the deposit of Eligible Securities and the Depositary may refuse to issue ADSs, to deliver ADRs, register the transfer, split-up or combination of ADRs and (subject to Article (24) hereof) the withdrawal of Deposited Securities until payment in full of such tax, charge, penalty or interest is received. Every Holder and Beneficial Owner agrees to indemnify the Depositary, the Company, the Custodian, and any of their agents, employees and Affiliates for, and hold each of then harmless from, any claims
with respect to taxes (including applicable interest and penalties thereon) arising from any tax benefit obtained for such Holder and/or Beneficial Owner.
(8) Representations and Warranties of Depositors. Each person depositing Eligible Securities under the Deposit Agreement shall be deemed thereby to represent and warrant that (i) such Eligible Securities and the certificates therefor are duly authorized, validly issued, fully paid, non-assessable and legally obtained by such person, (ii) all preemptive (and similar) rights, if any, with respect to such Eligible Securities have been validly waived or exercised, (iii) the person making such deposit is duly authorized so to do, (iv) the Eligible Securities presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim and are not, and the ADSs issuable upon such deposit will not be, Restricted Securities, and (v) the Eligible Securities presented for deposit have not been stripped of any rights or entitlements. Such representations and warranties shall survive the deposit and withdrawal of Eligible Securities, the issuance and cancellation of ADSs in respect thereof and the transfer of such ADSs.
If any such representations or warranties are false in any way, the Company and Depositary shall be authorized, at the cost and expense of the person depositing Eligible Securities, to take any and all actions necessary to correct the consequences thereof.
(9) Filing Proofs, Certificates and Other Information. Any person presenting Eligible Securities for deposit, and any Holder and any Beneficial Owner may be required, and every Holder and Beneficial Owner agrees, from time to time to provide to the Depositary and the Custodian such proof of citizenship or residence, taxpayer status, payment of all applicable taxes or other governmental charges, exchange control approval, legal or beneficial ownership of ADSs and Deposited Securities, compliance with applicable laws and the terms of the Deposit Agreement and the provisions of, or governing, the Deposited Securities, to execute such certifications and to make such representations and warranties, and to provide such other information and documentation (or, in the case of Eligible Securities in registered form presented for deposit, such information relating to the registration of Eligible Securities on the books of the Eligible Securities Registrar) as the Depositary or the Custodian may deem necessary or proper or as the Company may reasonably require by written request to the Depositary consistent with its obligations under the Deposit Agreement and this Receipt. The Depositary and the Registrar, as applicable, may, and at the reasonable written request of the Company shall, withhold the execution or delivery or registration of transfer of any Receipt or the distribution or sale of any dividend or other distribution of rights or of the proceeds thereof or, to the extent not limited by Article (24) hereof, the delivery of any Deposited Securities, or may refuse to adjust its records, until such proof or other information is filed or such certificates are executed, or such representations are made or such information and documentation are provided, in each case to the Depositary's, the Registrar's and the Company's satisfaction.
(10) Charges of Depositary. The Depositary shall charge the following fees for the services performed under the terms of the Deposit Agreement:
(i) to any person to whom ADSs are issued upon the
deposit of Eligible Securities, a fee not in excess
of U.S. $ 5.00 per 100 ADSs (or portion thereof) so
issued under the terms of the Deposit Agreement
(excluding issuances pursuant to paragraphs (iii) and
(iv) below);
(ii) to any person surrendering ADSs for cancellation and withdrawal of Deposited Securities, a fee not in excess of U.S. $ 5.00 per 100 ADSs (or portion thereof) so surrendered;
(iii) to any Holder of ADRs, a fee not in excess of U.S. $ 2.00 per 100 ADSs (or portion thereof) held for the distribution of cash proceeds (i.e., upon the sale of unexercised rights and other entitlements); no fee shall be payable for the distribution of cash dividends or the distribution of Eligible Securities pursuant to stock dividends or other free distributions of Eligible Securities as long as such fees are prohibited by the exchange upon which the ADSs are listed; and
(iv) to any Holder of ADRs, a fee not in excess of U.S. $ 5.00 per 100 ADSs (or portion thereof) issued pursuant to stock dividends or other free stock distributions or upon the exercise of rights.
In addition, Holders, Beneficial Owners, person depositing Eligible Securities for deposit and persons surrendering ADSs for cancellation and withdrawal of Deposited Securities will be required to pay the following charges:
(i) taxes (including applicable interest and penalties) and other governmental charges;
(ii) such registration fees as may from time to time be in effect for the registration of Deposited Securities on the share register and applicable to transfers of Deposited Securities to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively;
(iii) such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person depositing or withdrawing Deposited Securities or Holders and Beneficial Owners of ADSs;
(iv) the expenses and charges incurred by the Depositary in the conversion of foreign currency;
(v) such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Eligible Securities, Deposited Securities, ADSs and ADRs; and
(vi) the fees and expenses incurred by the Depositary in connection with the delivery of Deposited Securities.
Any other charges and expenses of the Depositary under the Deposit Agreement will be paid by the Company upon agreement between the Depositary and the Company. All fees and charges may, at any time and from time to time, be changed by agreement between the Depositary and Company but, in the case of fees and charges payable by Holders or Beneficial Owners, only in the manner contemplated by Article (22) of this Receipt. The Depositary will provide, without charge, a copy of its latest fee schedule to anyone upon request. The charges and expenses of the Custodian are for the sole account of the Depositary.
(11) Title to Receipts. It is a condition of this Receipt, and every successive Holder of this Receipt by accepting or holding the same consents and agrees, that title to this Receipt (and to each ADS evidenced hereby) shall be transferable upon the same terms as a certificated security under the laws of the State of New York, provided that the Receipt has been properly endorsed or is accompanied by proper instruments of transfer. Notwithstanding any notice to the contrary, the Depositary and the Company may deem and treat the Holder of this Receipt (that is, the person in whose name this Receipt is registered on the books of the Depositary) as the absolute owner thereof for all purposes. Neither the Depositary nor the Company shall have any obligation nor be subject to any liability under the Deposit Agreement or this Receipt to any holder of this Receipt or any Beneficial Owner unless such holder is the Holder of this Receipt registered on the books of the Depositary or, in the case of a Beneficial Owner, such Beneficial Owner or the Beneficial Owner's representative is the Holder registered on the books of the Depositary.
(12) Validity of Receipt. This Receipt (and the ADSs represented hereby) shall not be entitled to any benefits under the Deposit Agreement or be valid or enforceable for any purpose against the Depositary or the Company unless this Receipt has been (i) dated, (ii) signed by the manual or facsimile signature of a duly authorized signatory of the Depositary, (iii) countersigned by the manual or facsimile signature of a duly authorized signatory of the Registrar, and (iv) registered in the books maintained by the Registrar for the registration of issuances and transfers of Receipts. Receipts bearing the facsimile signature of a duly-authorized signatory of the Depositary or the Registrar, who at the time of signature was a duly authorized signatory of the Depositary or the Registrar, as the case may be, shall bind the Depositary, notwithstanding the fact that such signatory has ceased to be so authorized prior to the delivery of such Receipt by the Depositary.
(13) Available Information; Reports; Inspection of Transfer Books. The
Company is subject to the periodic reporting requirements of the Exchange Act
and accordingly files certain information with the Commission. These reports and
documents can be inspected and copied at the public reference facilities
maintained by the Commission located at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549 and at the Commission's New York City office located at
Seven World Trade Center, 13th Floor, New York, New York 10048. The Depositary
shall make available for inspection by Holders at its Principal Office any
reports and communications, including any proxy soliciting materials, received
from the Company which are both (a) received by the Depositary, the Custodian,
or the nominee of either of them as the holder of the Deposited Securities and
(b) made generally available to the holders of such Deposited Securities by the
Company.
The Registrar shall keep books for the registration of issuances and transfers of Receipts which at all reasonable times shall be open for inspection by the Company and by the Holders of such Receipts, provided that such inspection shall not be, to the Registrar's knowledge, for the purpose of communicating with Holders of such Receipts in the interest of a business or object other than the business of the Company or other than a matter related to the Deposit Agreement or the Receipts.
The Registrar may close the transfer books with respect to the Receipts, at any time or from time to time, when deemed necessary or advisable by it in good faith in connection with the performance of its duties hereunder, or at the reasonable written request of the Company subject, in all cases, to Article (24) hereof.
Dated: CITIBANK, N.A., as Depositary CITIBANK, N.A. Transfer Agent and Registrar By:_________________________ Authorized Signatory By:_______________________ Authorized Signatory |
The address of the Principal Office of the Depositary is 111 Wall Street, New York, New York 10043, U.S.A.
[FORM OF REVERSE OF RECEIPT]
SUMMARY OF CERTAIN ADDITIONAL PROVISIONS
OF THE DEPOSIT AGREEMENT
(14) Dividends and Distributions in Cash, Eligible Securities, etc. Subject always to the laws and regulations of the Republic of China, whenever the Depositary receives confirmation from the Custodian of receipt of any cash dividend or other cash distribution on any Deposited Securities, or receives proceeds from the sale of any Deposited Securities, rights securities or any entitlements held in respect of Deposited Securities under the Deposit Agreement, the Depositary will (i) if at the time of receipt thereof any amounts received in a Foreign Currency can, in the judgment of the Depositary (upon the terms of the Deposit Agreement), be converted on a practicable basis into Dollars transferable to the United States, promptly convert or cause to be converted such cash dividend, distribution or proceeds into Dollars (upon the terms of the Deposit Agreement), (ii) if applicable, establish the ADS Record Date upon the terms described in Article (16) hereof and in Section 4.9 of the Deposit Agreement, and (iii) will distribute promptly the amount thus received (net of (a) applicable fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes withheld) to the Holders entitled thereto as of the ADS Record Date (if applicable) in proportion to the number of ADS representing such Deposited Securities held as of the ADS Record Date (if applicable). The Depositary shall distribute only such amount, however, as can be distributed without attributing to any Holder a fraction of one cent, and any balance not so distributed shall be held by the Depositary (without liability for interest thereon) and shall be added to and become part of the next sum received by the Depositary for distribution to Holders of ADSs then outstanding at the time of the next distribution. If the Company, the Custodian or the Depositary is required to withhold and does withhold from any cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, duties or other governmental charges, the amount distributed to Holders on the ADSs representing such Deposited Securities shall be reduced accordingly. Such withheld amounts shall be forwarded by the Company to the relevant governmental authority.
If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Eligible Securities, the Company shall or cause such Eligible Securities to be deposited with the Custodian and registered, as the case may be, in the name of the Depositary, the Custodian or their respective nominees. Upon receipt of confirmation of such deposit from the Custodian, the Depositary shall, subject to and in accordance with the Deposit Agreement and the laws and regulations of the Republic of China, establish the ADS Record Date and either (i) the Depositary shall distribute to the Holders as of the ADS Record Date in proportion to the number of ADSs held as of the ADS Record Date, additional ADSs (or the applicable series), which represent in aggregate the number of Eligible Securities received as such dividend, or free distribution, subject, however, in each case, to the terms of the Deposit Agreement (including,
without limitation, the limitations set forth on the face of this Receipt and in Article II of the Deposit Agreement and (a) the applicable fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes), or (ii) if additional ADSs are not so distributed, each ADS issued and outstanding after the ADS Record Date shall, to the extent permissible by law, thenceforth also represent rights and interest in the additional integral number of Eligible Securities distributed upon the Deposited Securities represented thereby (subject, however, in each case, to the laws and regulations of the Republic of China and net (a) of the applicable fees and charges of, and the reasonable expenses incurred by, the Depositary, and (b) taxes). In lieu of delivering fractional ADSs, the Depositary shall sell the number of Eligible Securities or ADSs, as the case may be, represented by the aggregate of such fractions and distribute the net proceeds upon the terms set forth in the Deposit Agreement.
In the event that (X) the Depositary determines that any distribution in property (including Eligible Securities) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, or (Y) if the Company in the fulfillment of its obligations under the Deposit Agreement, has furnished an opinion of U.S. counsel determining that Eligible Securities must be registered under the Securities Act or other laws in order to be distributed to Holders (and no such registration statement has been declared effective) or (Z) the deposit of Eligible Securities is not permitted under the laws or regulations of the Republic of China, the Depositary may dispose of all or a portion of such property (including Eligible Securities and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable and the Depositary shall distribute the net proceeds of any such sale (after deduction of (a) taxes and fees and (b) charges of, and reasonable expenses incurred by, the Depositary) to Holders entitled thereto upon the terms of the Deposit Agreement. The Depositary shall hold and/or distribute any unsold balance of such property in accordance with the provisions of the Deposit Agreement.
Upon timely receipt of a notice indicating that the Company wishes an elective distribution to be made available to Holders upon the terms described in the Deposit Agreement, the Company and the Depositary shall determine whether such distribution is lawful and reasonably practicable. If so, the Depositary shall, subject to the terms and conditions of the Deposit Agreement, establish and ADS record date according to Article (16) hereof and establish procedures to enable the Holder hereof to elect to receive the proposed distribution in cash or in additional ADSs. If a Holder elects to receive the distribution in cash, the dividend shall be distributed as in the case of a distribution in cash. If the Holder hereof elects to receive the distribution in additional ADSs, the distribution shall be distributed as in the case of a distribution in Eligible Securities. If such elective distribution is not lawful or not reasonably practicable, the Depositary shall, to the extent permitted by law, distribute to Holders, on the basis of the same determination as is made in the Republic of China in respect of the Deposited Securities for which no election is made, either (x) cash or (y) additional ADSs representing such additional Eligible Securities, in each case, upon the terms described in the Deposit Agreement. Nothing herein or in the Deposit Agreement shall obligate the Depositary to make available to the Holder hereof a method to receive the elective distribution in Eligible Securities (rather than
ADSs). There can be no assurance that the Holder hereof will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of Deposited Securities.
Upon timely receipt by the Depositary of a notice indicating that the Company wishes rights to subscribe for additional Eligible Securities to be made available to Holders of ADSs, the Depositary upon consultation with the Company, shall determine, whether it is lawful and reasonably practicable to make such rights available to the Holders. The Depositary shall make such rights available to any Holders only if (i) the Company shall have timely requested that such rights be made available to Holders, (ii) the Depositary shall have received the documentation contemplated in the Deposit Agreement, and (iii) the Depositary shall have determined that such distribution of rights is reasonably practicable. If such conditions are not satisfied, the Depositary shall sell the rights as described below. In the event all conditions set forth above are satisfied, the Depositary shall establish an ADS Record Date (upon the terms described in the Deposit Agreement) and establish procedures (x) to distribute rights to purchase additional ADSs (by means of warrants or otherwise), (y) to enable the Holders to exercise the rights (upon payment of the subscription price and of the applicable (a) fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes), and (z) to deliver ADSs upon the valid exercise of such rights. Nothing herein or in the Deposit Agreement shall obligate the Depositary to make available to the Holders a method to exercise rights to subscribe for Eligible Securities (rather than ADSs). If (i) the Company does not timely request the Depositary to make the rights available to Holders or if the Company requests that the rights not be made available to Holders, (ii) the Depositary fails to receive the documentation required by the Deposit Agreement or determines it is not reasonably practicable to make the rights available to Holders, or (iii) any rights made available are not exercised and appear to be about to lapse, the Depositary shall determine whether it is lawful and reasonably practicable to sell such rights, in a riskless principal capacity, at such place and upon such terms (including public and private sale) as it may deem proper. The Depositary shall, upon such sale, convert and distribute proceeds of such sale (net of applicable fees and charges of, and reasonable expenses incurred by, the Depositary and taxes) upon the terms hereof and of the Deposit Agreement. If the Depositary is unable to make any rights available to Holders or to arrange for the sale of the rights upon the terms described above, the Depositary shall allow such rights to lapse. The Depositary shall not be responsible for (i) any failure to determine that it may be lawful or feasible to make such rights available to Holders in general or any Holders in particular, (ii) any foreign exchange exposure or loss incurred in connection with such sale or exercise, or (iii) the content of any materials forwarded to the ADR Holders on behalf of the Company in connection with the rights distribution.
Notwithstanding anything herein or in the Deposit Agreement to the contrary, if registration (under the Securities Act or any other applicable law) of the rights or the securities to which any rights relate may be required in order for the Company to offer such rights or such securities to Holders and to sell the securities represented by such rights, the Depositary will not distribute such rights to the Holders (i) unless and until a registration statement under the Securities Act (or other applicable law) covering such offering is in effect or (ii) unless the Company furnishes the Depositary with opinions of counsel for the Company in the United
States and counsel to the Company in any other applicable country in which rights would be distributed, in each case satisfactory to the Depositary, to the effect that the offering and sale of such securities to Holders and Beneficial Owners are exempt from, or do not require registration under, the provisions of the Securities Act or any other applicable laws. In the event that the Company, the Depositary or the Custodian shall be required to withhold and does withhold from any distribution of property (including rights) an amount on account of taxes or other governmental charges, the amount distributed to the Holders of ADSs representing such Deposited Securities shall be reduced accordingly. In the event that the Depositary determines that any distribution in property (including Eligible Securities and rights to subscribe therefor) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, the Depositary may dispose of all or a portion of such property (including Eligible Securities and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable to pay any such taxes or charges.
There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to exercise rights on the same terms and conditions as the holders of Eligible Securities or to exercise such rights. Nothing herein or in the Deposit Agreement shall obligate the Company to file any registration statement in respect of any rights or Eligible Securities or other securities to be acquired upon the exercise of such rights.
Upon receipt of a notice indicating that the Company wishes property other than cash, Eligible Securities or rights to purchase additional Eligible Securities, to be made to Holders of ADSs, the Depositary shall determine whether such distribution to Holders is lawful and reasonably practicable. The Depositary shall not make such distribution unless (i) the Company shall have requested the Depositary to make such distribution to Holders, (ii) the Depositary shall have received the documentation contemplated in the Deposit Agreement, and (iii) the Depositary shall have determined that such distribution is lawful and reasonably practicable. Upon satisfaction of such conditions, the Depositary shall distribute the property so received to the Holders of record, as of the ADS Record Date, in proportion to the number of ADSs held by them respectively and in such manner as the Depositary may deem practicable for accomplishing such distribution (i) upon receipt of payment or net of the applicable fees and charges of, and reasonable expenses incurred by, the Depositary, and (ii) net of any taxes withheld. The Depositary may dispose of all or a portion of the property so distributed and deposited, in such amounts and in such manner (including public or private sale) as the Depositary may deem practicable or necessary to satisfy any taxes (including applicable interest and penalties) or other governmental charges applicable to the distribution.
If the conditions above are not satisfied, the Depositary shall sell or cause such property to be sold in a public or private sale, at such place or places and upon such terms as it may deem proper and shall (i) cause the proceeds of such sale, if any, to be converted into Dollars and (ii) distribute the proceeds of such conversion received by the Depositary (net of (a) applicable fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes) to the Holders upon the terms hereof and of the Deposit Agreement. If the Depositary is unable to sell such
property, the Depositary may dispose of such property in any way it deems reasonably practicable under the circumstances.
(15) Redemption. Subject always to the laws and regulations of the Republic of China, upon timely receipt of notice from the Company that it intends to exercise its right of redemption in respect of any of the Deposited Securities, and a satisfactory opinion of counsel, and upon determining that such proposed redemption is practicable, the Depositary shall (to the extent practicable) deliver to each Holder a notice setting forth the Company's intention to exercise the redemption rights and any other particulars set forth in the Company's notice to the Depositary. Upon receipt of confirmation that the redemption has taken place and that funds representing the redemption price have been received, the Depositary shall convert, transfer, distribute the proceeds (net of applicable (a) fees and charges of, and reasonable expenses incurred by, the Depositary, and (b) taxes), retire ADSs and cancel ADRs upon delivery of such ADSs by Holders thereof upon the terms of the Deposit Agreement. If less than all outstanding Deposited Securities are redeemed, the ADSs to be retired will be selected by lot or on a pro rata basis, as may be determined by the Depositary. The redemption price per ADS shall be the dollar equivalent of per-Deposited Security amount received by the Depositary upon the redemption of the Deposited Securities represented by American Depositary Shares (subject to the terms of the Deposit Agreement and the applicable fees and charges of, and reasonable expenses incurred by, the Depositary, and taxes) multiplied by the number of Units or Deposited Securities represented by each ADS redeemed.
(16) Fixing of ADS Record Date. Whenever the Depositary shall receive notice of the fixing of a record date by the Company for the determination of holders of Deposited Securities entitled to receive any distribution (whether in cash, Eligible Securities, rights or other distribution), or whenever for any reason the Depositary causes a change in the number of Deposited Securities that are represented by each ADS, or whenever the Depositary shall receive notice of any meeting of, or solicitation of consents or proxies of, holders of Deposited Securities, or whenever the Depositary shall find it necessary or convenient in connection with the giving of any notice, or any other matter, the Depositary shall fix a record date ("ADS Record Date") for the determination of the Holders of Receipts who shall be entitled to receive such distribution, to give instructions for the exercise of voting rights at any such meeting, or to give or withhold such consent, or to receive such notice or solicitation or to otherwise take action, or to exercise the rights of Holders with respect to such changed number of Deposited Securities represented by each ADS. Subject to applicable law and the terms and conditions of this Receipt and the Deposit Agreement, only the Holders of Receipts at the close of business in New York on such ADS Record Date shall be entitled to receive such distributions, to give such instructions, to receive such notice or solicitation, or otherwise take action.
(17) Voting of Deposited Securities. (a) Voting by Shareholders. The following is a summary of certain rights of holders of Shares to vote at shareholders' meetings under ROC Company Law and the Articles of Incorporation of the Company, in each case, as in effect on the date hereof: (i) a holder of Shares (including holders of interests in any Certificate of Payment
evidencing the irrevocable right to receive Shares) is entitled to one vote for each Share held, except that the number of votes of a holder of more than 3% of the total outstanding Shares is discounted by the Company by a factor of 1% of that portion of the Shares held in excess of 3% (e.g., a holder of 10% of the total outstanding Shares would be permitted to exercise voting rights only with respect of a 9.93% of such Shares), (ii) the election of directors and supervisors takes place by means of cumulative voting, and (iii) a shareholder must, as to all matters subject to a vote of shareholders (other than the election of directors and supervisors), exercise the voting rights for all Shares held by such shareholder in the same manner (e.g., a holder of 1,000 Shares cannot split his/her votes but must vote all 1,000 Shares in the same manner except in the event of cumulative voting for an election of directors and supervisors). The voting rights attaching to the Deposited Securities must be exercised by, or on behalf of, the Depositary, as representative of the Holders, collectively in the same manner, including the election of directors and supervisors. Deposited Securities which have been withdrawn from the ADR Facilities and timely transferred on the Company's register of shareholders to a person other than the Depositary may be voted by the registered holder(s) thereof directly, subject, in each case, to the limitations of ROC law and the Articles of Incorporation of the Company. Holders may not receive sufficient advance notice of shareholders' meetings to enable them to timely withdraw the Deposited Securities and vote at such meetings and may not be able to re-deposit the withdrawn securities under the terms of the Deposit Agreement.
(b) Voting by ADS Holders. Holders of ADSs have no individual voting rights with respect to the Deposited Securities represented by their ADSs. Each Holder shall be deemed, by acceptance of ADSs or acquisition of any beneficial interest therein, to have authorized and directed the Depositary, without liability, to appoint the Chairman of the Company (or his/her designate), as representative of the Depositary, the Custodian or the nominee who is registered in the ROC as representative of the Holders in respect of the Deposited Securities (the "Registered Holder"), to vote the Deposited Securities in accordance with the terms hereof.
The Company agrees to timely notify the Depositary of any proposed shareholders' meeting and to timely provide to the Depositary in New York sufficient copies as the Depositary may reasonably request of English language translations of the Company's notice of shareholders' meeting and the agenda of the materials to be voted on (in the form the Company generally makes available to holders of Eligible Securities in the ROC), including, without limitation, a list of candidates proposed by the Company for an election of directors or supervisors (such materials collectively, the "Shareholder Notice"). As soon as practicable after receipt by the Depositary of the requisite number of Shareholder Notices, the Depositary shall establish the ADS Record Date (upon the terms of Article (16) hereof and Section 4.9 of the Deposit Agreement) and shall, at the Company's expense and provided no U.S. legal prohibitions exist, deliver to Holders as of the applicable ADS Record Date, (i) the Shareholder Notice, (ii) a depositary notice setting forth the manner in which Holders of ADSs may instruct the Depositary to cause the Deposited Securities represented by their ADSs to be voted under the terms of this Deposit Agreement including, a description of the Management Proxy (as defined below),
together with a form of voting instructions and/or other means to provide voting instructions (the depositary notice and the related materials prepared by the Depositary collectively, the "Depositary Notice"). The Depositary is under no obligation to mail the Shareholder Notice and the Depositary Notice to Holders if the Company has failed to provide to the Depositary in New York the requisite number of Shareholder Notices at least 24 calendar days prior to the date of any shareholders' meeting. If the Depositary has not delivered the Shareholder Notice or Depositary Notice to Holders, it will endeavor to cause all Deposited Securities represented by ADRs to be present at the relevant Shareholders' meeting insofar as practicable and permitted under applicable law but will not cause the Deposited Securities to be voted; provided, however, that the Depositary may determine, at its sole discretion, to send such Shareholder Notice and Depositary Notice to Holders and/or cause the Deposited Securities to be voted as it deems appropriate. There can be no assurance that Holders generally or any Holder in particular will receive Shareholder Notices and Depositary Notices with sufficient time to enable the return of voting instructions to the Depositary in a timely manner.
Notwithstanding anything else contained in the Deposit Agreement, the Depositary shall not have any obligation to take any action with respect to any meeting, or solicitation of consents or proxies, of holders of Deposited Securities if the taking of such action would violate U.S. laws.
(c) Voting of Deposited Securities Upon ADS Holders' Instructions. If Holders of ADSs together holding at least 51% of all the ADSs (including Temporary ADSs) outstanding as of the relevant ADS Record Date shall instruct the Depositary, prior to the date established for such purpose by the Depositary, to vote in the same manner in respect of one or more resolutions to be proposed at a shareholders' meeting (including resolutions for the election directors and/or supervisors), the Depositary shall notify to the Chairman of the Company (or his/her designate) and appoint the Chairman of the Company (or his/her designate) as the representative of the Depositary and the Registered Holders to attend such shareholders' meeting and vote all Deposited Securities evidenced by ADSs then outstanding (including Temporary ADSs) in the manner so instructed by such Holders. If voting instructions are received by the Depositary on or before the date established by the Depositary for the receipt of such instructions from any Holder as of the ADS Record Date, which are signed but without further indication as to voting instructions, the Depositary shall deem such Holder to have instructed a vote in favor of the items set forth in such instructions. The Depositary and Custodian shall not have any obligation to monitor, and shall not incur any liability for, the actions, or the failure to act, of the Chairman of the Company (or his/her designate) as representative of the Registered Holder.
(d) Management Proxy. If, for any reason (other than a failure by the Company to supply the requisite number of Shareholder Notices to the Depositary within the requisite time period provided in the Deposit Agreement, the Depositary has not, prior to the date established for such purpose by the Depositary received instructions from Holders together holding at least 51% of all ADSs (including Temporary ADSs) outstanding at the relevant ADS Record Date, to vote in the same manner in respect of any resolution (including resolutions for the election of directors and/or supervisors), then, subject to the following paragraph, the Holders
shall be deemed to have authorized and directed the Depositary to give a discretionary proxy (a "Management Proxy") to the Chairman of the Company (or his/her designate) as the representative of the Registered Holder to attend and vote at such meeting all the Deposited Securities represented by ADSs then outstanding (including Temporary ADSs) in his or her discretion. In such circumstances, the Chairman of the Company (or his or her designate) shall be free to exercise the votes attaching to the Deposited Securities in any manner he or she wishes, which may not be in the interests of the Holders.
The Depositary's grant of a Management Proxy in the manner and circumstances described in the preceding paragraph shall be subject to the receipt by the Depositary prior to each shareholders' meeting of an opinion of ROC counsel addressed to, and in form and substance satisfactory to, the Depositary. In the event the Depositary does not receive such opinion, the Depositary will not grant the Management Proxy but will cause the Deposited Securities to be present at the shareholders' meeting to the extent practicable and permitted by applicable law but will not cause the Deposited Securities to be voted or the Management Proxy to be granted.
The Depositary shall not, and the Depositary shall ensure that the Custodian and its nominees do not, vote or attempt to exercise the right to vote that attaches to the Shares or other Deposited Securities, other than in accordance with instructions given in accordance with Section 4.10 of the Deposit Agreement. The terms Section 4.10 of the Deposit Agreement may be amended from time to time in accordance with the terms of this Deposit Agreement. By continuing to hold ADSs after the effective time of such amendment all Holders and Beneficial Owners shall be deemed to have agreed to the terms of the Deposit Agreement as so amended.
(18) Changes Affecting Deposited Securities. Upon any change in nominal or par value, split-up, cancellation, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or the Custodian in exchange for, or in conversion of or replacement of or otherwise in respect of, such Deposited Securities shall, to the extent permitted by law, be treated as new Deposited Securities under the Deposit Agreement, and the Receipts shall, subject to the provisions of the Deposit Agreement and applicable law, evidence ADSs representing the right to receive such additional securities. The Depositary may, with the Company's approval, and shall, if the Company shall so request, subject to the terms of the Deposit Agreement and receipt of satisfactory documentation contemplated by the Deposit Agreement, execute and deliver additional Receipts as in the case of a dividend in Eligible Securities, or call for the surrender of outstanding Receipts to be exchanged for new Receipts, in either case, as well as in the event of newly deposited Eligible Securities, with necessary modifications to the form of Receipt contained herein, specifically describing such new Deposited Securities or corporate change. Notwithstanding the foregoing, in the event that any security so received may not be lawfully distributed to some or all Holders, the Depositary may, with the Company's approval, and shall if the Company requests, subject to receipt of satisfactory legal documentation contemplated in the
Deposit Agreement, sell such securities at public or private sale, at such place
or places and upon such terms as it may deem proper and may allocate the net
proceeds of such sales (net of (a) fees and charges of, and reasonable expenses
incurred by, the Depositary and (b) taxes) for the account of the Holders
otherwise entitled to such securities and distribute the net proceeds so
allocated to the extent practicable as in the case of a distribution received in
cash pursuant to the Deposit Agreement. The Depositary shall not be responsible
for (i) any failure to determine that it may be lawful or feasible to make such
securities available to Holders in general or any Holder in particular, (ii) any
foreign exchange exposure or loss incurred in connection with such sale, or
(iii) any liability to the purchaser of such securities.
(19) Exoneration. Neither the Depositary nor the Company shall be
obligated to do or perform any act which is inconsistent with the provisions of
the Deposit Agreement or incur any liability (i) if the Depositary or the
Company shall be prevented or forbidden from, or subjected to any civil or
criminal penalty or restraint on account of, or delayed in, doing or performing
any act or thing required by the terms of the Deposit Agreement and this
Receipt, by reason of any provision of any present or future law or regulation
of the United States, the Republic of China or any other country, or of any
other governmental authority or regulatory authority or stock exchange, or by
reason of any provision, present or future of the Articles of Incorporation of
the Company or any provision of or governing any Deposited Securities, or by
reason of any act of God or war or other circumstances beyond its control
(including, without limitation, nationalization, expropriation, currency
restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions,
explosions and computer failure), (ii) by reason of any exercise of, or failure
to exercise, any discretion provided for in this Deposit Agreement or in the
Articles of Incorporation of the Company or provisions of or governing Deposited
Securities, (iii) for any action or inaction in reliance upon the advice of or
information from legal counsel, accountants, any person presenting Eligible
Securities for deposit, any Holder, any Beneficial Owner or authorized
representative thereof, or any other person believed by it in good faith to be
competent to give such advice or information, (iv) for any inability by a Holder
or Beneficial Owner to benefit from any distribution, offering, right or other
benefit which is made available to holders of Deposited Securities but is not,
under the terms of this Deposit Agreement, made available to Holders of ADS or
(v) for any consequential or punitive damages for any breach of the terms of
this Deposit Agreement. The Depositary, its controlling persons, its agents, any
Custodian and the Company, its controlling persons and its agents may rely and
shall be protected in acting upon any written notice, request or other document
believed by it to be genuine and to have been signed or presented by the proper
party or parties. No disclaimer of liability under the Securities Act is
intended by any provision of the Deposit Agreement or this Receipt.
(20) Standard of Care. The Company and its agents assume no obligation and shall not be subject to any liability under this Deposit Agreement or the Receipts to Holders or Beneficial Owners or other persons, except that the Company and its agents agree to perform their obligations specifically set forth in this Deposit Agreement without negligence or bad faith. The Depositary and its agents assume no obligation and shall not be subject to any liability under this Deposit Agreement or the Receipts to Holders or Beneficial Owners or other persons, except that
the Depositary and its agents agree to perform their obligations specifically set forth in this Deposit Agreement without negligence or bad faith. The Depositary and the Company undertake to perform such duties and only such duties as are specifically set forth in the Deposit Agreement, and no implied covenants and obligations should be read into the Deposit Agreement or this Receipt against the Depositary or the Company or their respective agents. The Depositary and its agents shall not be liable for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any vote is cast or the effect of any vote, provided that any such action or omission is in good faith and in accordance with the terms of this Deposit Agreement. The Depositary shall not incur any liability for any failure to determine that any distribution or action may be lawful or reasonably practicable, for the content of any information submitted to it by the Company for distribution to the Holders or for any inaccuracy of any translation thereof, for any investment risk associated with acquiring an interest in the Deposited Securities, for the validity or worth of the Deposited Securities or for any tax consequences that may result from the ownership of ADSs, Shares or Deposited Securities, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of this Deposit Agreement, for the failure or timeliness of any notice from the Company or for the failure of the Company to exchange any Certificate of Payment into Shares. The Depositary shall not be obligated in any way to monitor or enforce the obligations of the Company, including, without limitation, in respect of any Certificate of Payment, the conversion of such Certificate of Payment into Shares.
(21) Resignation and Removal of the Depositary; Appointment of
Successor Depositary. The Depositary may at any time resign as Depositary under
the Deposit Agreement by written notice of resignation delivered to the Company,
such resignation to be effective on the earlier of (i) the 60th day after
delivery thereof to the Company, or (ii) upon the appointment of a successor
depositary and its acceptance of such appointment as provided in the Deposit
Agreement. The Depositary may at any time be removed by the Company by written
notice of such removal which notice shall be effective on the earlier of (i) the
60th day after delivery thereof to the Depositary, or (ii) upon the appointment
of a successor depositary and its acceptance of such appointment as provided in
the Deposit Agreement. In case at any time the Depositary acting hereunder shall
resign or be removed, the Company shall use its best efforts to appoint a
successor depositary, which shall be a bank or trust company having an office in
the Borough of Manhattan, The City of New York. Every successor depositary shall
execute and deliver to its immediate predecessor and to the Company an
instrument in writing accepting its appointment hereunder, and thereupon such
successor depositary, without any further act or deed (except as required by
applicable law), shall become fully vested with all the rights, powers, duties
and obligations of its immediate predecessor. The immediate predecessor
depositary, upon payment of all sums due it and on the written request of the
Company, shall (i) execute and deliver an instrument transferring to such
successor all rights and powers of such predecessor hereunder (other than as
contemplated in the Deposit Agreement), (ii) duly assign, transfer and deliver
all right, title and interest to the Deposited Securities to such successor, and
(iii) deliver to such successor a list of the Holders of all outstanding
Receipts and such other information relating to Receipts and Holders thereof as
the successor may reasonably request. Any such
successor depositary shall promptly mail notice of its appointment to such Holders. Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.
(22) Amendment/Supplement. This Receipt and any provisions of the Deposit Agreement may at any time and from time to time be amended or supplemented by written agreement between the Company and the Depositary in any respect which they may deem necessary or desirable without the prior written consent of the Holders or Beneficial Owners. Any amendment or supplement which shall impose or increase any fees or charges (other than the charges in connection with foreign exchange control regulations, and taxes and other governmental charges, delivery and other such expenses), or which shall otherwise materially prejudice any substantial existing right of Holders or Beneficial Owners, shall not, however, become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment or supplement shall have been given to the Holders of outstanding Receipts. The parties hereto agree that any amendments or supplements which (i) are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act or (b) the ADSs to be traded solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to materially prejudice any substantial rights of Holders or Beneficial Owners. Every Holder and Beneficial Owner at the time any amendment or supplement so becomes effective shall be deemed, by continuing to hold such ADS(s), to consent and agree to such amendment or supplement and to be bound by the Deposit Agreement as amended or supplemented thereby. In no event shall any amendment or supplement impair the right of the Holder to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law. Notwithstanding the foregoing, if any governmental body should adopt new laws, rules or regulations which would require amendment or supplement of the Deposit Agreement to ensure compliance therewith, the Company and the Depositary may amend or supplement the Deposit Agreement and this Receipt at any time in accordance with such changed laws, rules or regulations. Such amendment or supplement to the Deposit Agreement in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance with such laws, or rules or regulations.
(23) Termination. The Depositary shall, at any time at the written direction of the Company, terminate the Deposit Agreement by mailing notice of such termination to the Holders of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. If 60 days shall have expired after (i) the Depositary shall have delivered to the Company a written notice of its election to resign, or (ii) the Company shall have delivered to the Depositary a written notice of the removal of the Depositary, and in either case a successor depositary shall not have been appointed and accepted its appointment as provided in herein and in the Deposit Agreement, the Depositary may terminate the Deposit Agreement by mailing notice of such termination to the Holders of all Receipts then outstanding at least 30 days prior to
the date fixed for such termination. On and after the date of termination of the Deposit Agreement, the Holder will, upon surrender of such Holders' Receipt(s) at the Principal Office of the Depositary, upon the payment of the charges of the Depositary for the surrender of ADSs referred to in Article (10) hereof and in Exhibit B to the Deposit Agreement and subject to the conditions and restrictions set forth therein and subject always to the restrictions on withdrawal as may be in effect under the laws and regulations of the Republic of China, and upon payment of any applicable taxes or governmental charges, be entitled to Delivery, to him or upon his order, of the amount of Deposited Securities represented by such Receipt. If any Receipts shall remain outstanding after the date of termination of the Deposit Agreement, the Registrar thereafter shall discontinue the registration of transfers of Receipts, and the Depositary shall suspend the distribution of dividends to the Holders thereof, and shall not give any further notices or perform any further acts under the Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in the Deposit Agreement, and shall continue to deliver Deposited Securities, subject to the conditions and restrictions set forth in the Deposit Agreement, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, or charging, as the case may be, in each case the charges of the Depositary for the surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of the Deposit Agreement and any applicable taxes or governmental charges or assessments). At any time after the expiration of six months from the date of termination of the Deposit Agreement, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, in an unsegregated account, without liability for interest for the pro rata benefit of the Holders whose Receipts have not theretofore been surrendered, such Holders thereupon becoming general creditors of the Depositary with respect to such proceeds. After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement with respect to the Receipts, the Deposited Securities and the ADSs, except to account for such net proceeds and other cash (after deducting, or charging, as the case may be, in each case the charges of the Depositary for the surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of the Deposit Agreement and any applicable taxes or governmental charges or assessments). Upon the termination of the Deposit Agreement, the Company shall be discharged from all obligations under the Deposit Agreement except as set forth in the Deposit Agreement.
(24) Compliance with U.S. Securities Laws. Notwithstanding any provisions in this Receipt or the Deposit Agreement to the contrary, the withdrawal or delivery of Deposited Securities will not be suspended by the Company or the Depositary except as would be permitted by Section I.A.(1) of the General Instructions to the Form F-6 Registration Statement, as amended from time to time, under the Securities Act of 1933.
(25) Certain Rights of the Depositary; Limitations. Subject to the further terms and provisions of this Article (25) and Section 5.10 of the Deposit Agreement, the Depositary, its
Affiliates and their agents, on their own behalf, may own and deal in any class
of securities of the Company and its Affiliates and in ADSs. In its capacity as
Depositary, the Depositary shall not lend Deposited Securities or ADSs;
provided, however, that, subject to Republic of China law and regulations, the
Depositary may (i) issue ADSs prior to the receipt of Eligible Securities
pursuant to Section 2.3 of the Deposit Agreement and (ii) deliver Deposited
Securities upon the receipt of ADSs for cancellation upon withdrawal of
Deposited Securities pursuant to Section 2.7 of the Deposit Agreement, including
ADSs which were issued under (i) above but for which Eligible Securities may not
have been received (each such transaction a "Pre-Release Transaction"). The
Depositary may receive ADSs in lieu of Eligible Securities under (i) above. Each
such Pre-Release Transaction will be (a) subject to a written agreement whereby
the person or entity (the "Applicant") to whom ADSs are to be delivered (w)
represents that at the time of the Pre-Release Transaction the Applicant or its
customer owns the Eligible Securities that are to be delivered by the Applicant
under such Pre-Release Transaction, (x) agrees to indicate the Depositary as
owner of such Eligible Securities in its records and to hold such Eligible
Securities in trust for the Depositary until such Eligible Securities or ADSs
are delivered to the Depositary or the Custodian, (y) unconditionally guarantees
to deliver to the Depositary or the Custodian, as applicable, such Eligible
Securities or ADSs, and (z) agrees to any additional restrictions or
requirements that the Depositary deems appropriate, (b) at all times fully
collateralized with cash, United States government securities or such other
collateral as the Depositary deems appropriate, (c) terminable by the Depositary
on not more than five (5) business days' notice and (d) subject to such further
indemnities and credit regulations as the Depositary deems appropriate. The
Depositary will normally limit the number of ADSs and Eligible Securities
involved in such Pre-Release Transactions at any one time to thirty percent
(30%) of the ADSs outstanding (without giving effect to ADSs outstanding under
(i) above), provided, however, that the Depositary reserves the right to change
or disregard such limit from time to time as it deems appropriate.
The Depositary may also set limits with respect to the number of ADSs and Eligible Securities involved in Pre-Release Transactions with any one person on a case by case basis as it deems appropriate. The Depositary may retain for its own account any compensation received by it in conjunction with the foregoing. Collateral provided pursuant to (b) above, but not the earnings thereon, shall be held for the benefit of the Holders (other than the Applicant). Temporary ADSs and interests in any Certificate of Payment shall not be eligible for Pre-Release Transactions hereunder.
(ASSIGNMENT AND TRANSFER SIGNATURE LINES)
FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and transfer(s) unto ______________________________ whose taxpayer identification number is _______________________ and whose address including postal zip code is ________________, the within Receipt and all rights thereunder, hereby irrevocably constituting and appointing ________________________ attorney-in-fact to transfer said Receipt on the books of the Depositary with full power of substitution in the premises.
Dated: Name:________________________________ By: Title: NOTICE: The signature of the Holder to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatsoever. If the endorsement be executed by an attorney, executor, administrator, trustee or guardian, the person executing the endorsement must give his/her full title in such capacity and proper evidence of authority to act in such capacity, if not on file with the Depositary, must be forwarded with this Receipt. All endorsements or assignments of Receipts must be guaranteed by a member of a Medallion Signature Program approved by the Securities Transfer Association, Inc. |
SIGNATURE GUARANTEED
LEGENDS
[THE RECEIPTS ISSUED IN RESPECT OF PARTIAL ENTITLEMENT AMERICAN
DEPOSITARY SHARES SHALL BEAR THE FOLLOWING LEGEND ON THE FACE OF THE RECEIPT: "THIS RECEIPT EVIDENCES AMERICAN DEPOSITARY SHARES REPRESENTING PARTIAL ENTITLEMENT [COMMON SHARES] [INTERESTS IN THE CERTIFICATE OF PAYMENT] OF ADVANCED SEMICONDUCTOR ENGINEERING, INC., AND AS SUCH DO NOT ENTITLE THE HOLDERS THEREOF TO THE SAME PER-SECURITY ENTITLEMENT AS OTHER [COMMON SHARES] [INTERESTS IN THE CERTIFICATE OF PAYMENT] (WHICH ARE "FULL ENTITLEMENT" [COMMON SHARES] [INTERESTS IN THE CERTIFICATE OF PAYMENT]) ISSUED AND OUTSTANDING AT SUCH TIME. THE AMERICAN DEPOSITARY SHARES REPRESENTED BY THIS RECEIPT SHALL ENTITLE HOLDERS TO DISTRIBUTIONS AND ENTITLEMENTS IDENTICAL TO OTHER AMERICAN DEPOSITARY SHARES WHEN THE [COMMON SHARES] [INTERESTS IN THE CERTIFICATE OF PAYMENT] REPRESENTED BY SUCH AMERICAN DEPOSITARY SHARES BECOME "FULL ENTITLEMENT" [COMMON SHARES] [INTERESTS IN THE CERTIFICATE OF PAYMENT].
EXHIBIT B
FEE SCHEDULE
DEPOSITARY FEES AND RELATED CHARGES
All capitalized terms used but not otherwise defined herein shall have the meaning given to such terms in the Deposit Agreement.
I. DEPOSITARY FEES
The Company, the Holders, the Beneficial Owners and the persons depositing Shares or surrendering ADSs for cancellation agree to pay the following fees of the Depositary:
------------------------------------------------------------------------------------------------------------------- SERVICE RATE BY WHOM PAID ------------------------------------------------------------------------------------------------------------------- (1) ISSUANCE OF ADSs UPON UP TO $5.00 PER 100 ADSs (OR PERSON FOR WHOM DEPOSITS ARE DEPOSIT OF ELIGIBLE FRACTION THEREOF) ISSUED. MADE OR PERSON RECEIVING ADSs. SECURITIES (EXCLUDING ISSUANCES AS A RESULT OF DISTRIBUTIONS DESCRIBED IN PARAGRAPHS 3(b) AND (5) BELOW). ------------------------------------------------------------------------------------------------------------------- (2) DELIVERY OF DEPOSITED UP TO $5.00 PER 100 ADSs (OR PERSON SURRENDERING ADSs OR SECURITIES, PROPERTY AND FRACTION THEREOF) SURRENDERED. MAKING WITHDRAWAL. CASH AGAINST SURRENDER OF ADSs. ------------------------------------------------------------------------------------------------------------------- (3) DISTRIBUTION OF (a) CASH NO FEE, SO LONG AS PROHIBITED BY PERSON TO WHOM DISTRIBUTION IS DIVIDENDS OR (b) ADSs THE EXCHANGE UPON WHICH THE MADE. PURSUANT TO STOCK ADSs ARE LISTED. DIVIDENDS (OR OTHER DISTRIBUTION OF STOCK). ------------------------------------------------------------------------------------------------------------------- (4) DISTRIBUTION OF CASH UP TO $2.00 PER 100 ADSs (OR PERSON TO WHOM DISTRIBUTION IS PROCEEDS (i.e., UPON SALE FRACTION THEREOF) HELD. MADE. OF RIGHTS OR OTHER ENTITLEMENTS). ------------------------------------------------------------------------------------------------------------------- (5) DISTRIBUTION OF ADSs UP TO $5.00 PER 100 ADSs (OR PERSON TO WHOM DISTRIBUTION IS PURSUANT TO EXERCISE OF FRACTION THEREOF) ISSUED. MADE. RIGHTS. ------------------------------------------------------------------------------------------------------------------- |
II. CHARGES
Holders, Beneficial Owners, persons depositing Eligible Securities for deposit and persons surrendering ADSs for cancellation and for the purpose of withdrawing Deposited Securities shall be responsible for the following charges:
(i) taxes (including applicable interest and penalties) and other governmental charges;
(ii) such registration fees as may from time to time be in effect for the registration of Deposited Securities on the share register and applicable to transfers of Deposited Securities to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively;
(iii) such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person depositing Eligible Securities or Holders and Beneficial Owners of ADSs;
(iv) the expenses and charges incurred by the Depositary in the conversion of foreign currency;
(v) such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Eligible Securities, Deposited Securities, ADSs and ADRs; and
(vi) the fees and expenses incurred by the Depositary in connection with the delivery of Deposited Securities.
FORM OF CERTIFICATION UPON WITHDRAWAL.
EXHIBIT C
Certification and Agreement of Persons Surrendering ADSs for the Purpose of Withdrawal Deposited Securities Pursuant to Section 2.7 of the Deposit Agreement
Citibank, N.A.
ADR Department
111 Wall Street
New York, New York 10043
Re: Advanced Semiconductor Engineering, Inc.
We refer to the Deposit Agreement, dated as of [DATE], 2000 (the "Deposit Agreement"), among ADVANCED SEMICONDUCTOR ENGINEERING, INC. (the "Company"), CITIBANK, N.A., as Depositary, and Holders and Beneficial Owners from time to time of American Depositary Shares (the "ADSs") evidenced by American Depositary Receipts (the "Receipts") issued thereunder. Capitalized terms used but not defined herein shall have the meanings given them in the Deposit Agreement. We are providing the information herein to enable the Company to comply with its reporting obligations under the laws and regulations of the Republic of China and understand that the Company will rely upon the information provided herein for such purpose.
1. We are surrendering ADSs or giving withdrawal instructions through DTC in accordance with the terms of the Deposit Agreement for the purpose of withdrawal of the Deposited Securities represented by the ADSs (the "Shares") pursuant to Section 2.7 of the Deposit Agreement.
2. We certify (or if we are acting for the account of another person, such person has confirmed to us that it certifies) that:
(PLEASE CHECK THE APPLICABLE BOX IN (a) BELOW AND FILL IN THE
MISSING INFORMATION IN (b) BELOW, AS APPROPRIATE)
[POINTING HAND GRAPHIC]
(a) / / We are (it is) a "Related Person" of the Company (as defined below).
or
/ / We are (it is) NOT a "Related Person" of the Company (as defined below).
AND
[POINTING HAND GRAPHIC]
(b)(i) We will own ____________________ Shares of the Company, after (fill in) cancellation of the ADSs surrendered hereby (do not include Shares represented by ADSs included in (b)(ii) below);
and
(ii) We will own ____________________ ADSs representing Shares of the (fill in) Company, after cancellation of the ADSs surrendered hereby.
3. We certify (or if we are acting for the account of another person, such person has confirmed to us that it certifies) that:
(i) We are (or the person for the account of which we are acting is) the Beneficial Owner of the ADSs hereby surrendered to the Depositary for withdrawal of the Shares represented thereby;
AND
(ii) We hereby certify that the following information is true and correct:
Name of Beneficial Owner of ADSs:
Address of Beneficial Owner of ADSs:
Nationality of Beneficial Owner of ADSs: ____________________
Number of ADSs surrendered hereby: _________________________
Number of Shares withdrawn hereby: __________________________
Date: _______________________________________________________
4. If we are a broker-dealer, we further certify that we are acting for the account of our customer and that our customer has confirmed the accuracy of the representations contained in paragraphs 1 through 3 hereof that are applicable to it.
Very truly yours,
[NAME OF CERTIFYING ENTITY]
By: _____________________________
Name
Title:
A person or entity is deemed to be a "Related Person" of the Company if the person or entity is:
(a) (i) a company of which the chairman of the board of directors or the general manager serves as the chairman of the board of directors or the chairman of the Company, or the spouse or member of the immediate second family of the chairman of the board of directors or general manager of the Company;
(ii) a non-profit organization of which the funds donated from the Company exceeds one-third of the non-profit organization's total funds;
(iii) a director, supervisor or general manager, vice-general manager, assistant vice-general manager, or departmental head reporting to the general manager;
(iv) the spouse of a director, supervisor or general manager of the Company; or
(v) a member of the immediate or second immediate families of the Company's chairman of the board of directors or general manager.
OR
(b) a person or entity that has control or influence over the Company.
TABLE OF CONTENTS
PAGE ---- ARTICLE I.........................................................................................................2 DEFINITIONS...................................................................................................2 Section 1.1 "Affiliate"...................................................................2 Section 1.2 "American Depositary Share(s)" and "ADS(s)"...................................2 Section 1.3 "ADS Record Date".............................................................3 Section 1.4 "Applicant"...................................................................3 Section 1.5 "Beneficial Owner"............................................................3 Section 1.6 "Business Day"................................................................3 Section 1.8 "Commission"..................................................................3 Section 1.9 "Company".....................................................................3 Section 1.10 "Custodian"...................................................................3 Section 1.11 "Deliver" and "Delivery"......................................................4 Section 1.12 "Deposit Agreement"...........................................................4 Section 1.13 "Depositary"..................................................................4 Section 1.14 "Deposited Securities"........................................................4 Section 1.15 "Dollars" and "$".............................................................4 Section 1.16 "DTC".........................................................................4 Section 1.17 "DTC Participant".............................................................4 Section 1.18 "Eligible Securities".........................................................5 Section 1.19 "Eligible Securities Registrar"...............................................5 Section 1.20 "Exchange Act"................................................................5 Section 1.21 "Foreign Currency"............................................................5 Section 1.22 "Full Entitlement ADS(s)"; "Full Entitlement ADR(s)" and "Full Entitlement Deposited Securities"...................................5 Section 1.23 "Holder"......................................................................5 Section 1.24 "Initial Deposit".............................................................5 Section 1.25 "International GDSs"..........................................................5 Section 1.26 "NT dollars" and "NT$"........................................................5 Section 1.27 "Offering"....................................................................5 Section 1.28 "Original Deposit Agreement"..................................................6 Section 1.29 "Partial Entitlement ADS(s)"; "Partial Entitlement ADR(s)," and "Partial Entitlement Deposited Securities"................................6 Section 1.30 "Pre-Release Transaction".....................................................6 Section 1.31 "Principal Office"............................................................6 Section 1.32 "Prospectus"..................................................................6 Section 1.33 "Receipt(s)"; "American Depositary Receipt(s)" |
and "ADR(s)"..................................................................6 Section 1.34 "Registrar"...................................................................6 Section 1.35 "Republic of China"; "ROC" and "Taiwan".......................................7 Section 1.36 "Restricted ADRs" and "Restricted ADSs".......................................7 Section 1.37 "Restricted Securities".......................................................7 Section 1.38 "Securities Act"..............................................................7 Section 1.39 "SFC".........................................................................7 Section 1.40 "Shares"......................................................................7 Section 1.41 "Share American Depositary Share(s)" and "Share ADS(s)".......................8 Section 1.42 "Share American Depositary Receipt(s)" and "Share ADR(s)".....................8 Section 1.43 "Taiwan Securities Central Depository"........................................8 Section 1.44 "Taiwan Stock Exchange" and "TSE".............................................8 Section 1.45 "Temporary ADS(s)"............................................................8 Section 1.46 "Temporary ADR(s)"............................................................8 Section 1.47 "United States"...............................................................9 ARTICLE II........................................................................................................9 APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS; DEPOSIT OF ELIGIBLE SECURITIES; EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS.........................................................9 Section 2.1 Appointment of Depositary.....................................................9 Section 2.2 Form and Transferability of Receipts..........................................9 (a) Form..................................................................9 (b) Legends..............................................................10 (c) Title................................................................10 (d) Book-Entry Systems...................................................10 Section 2.3 Deposit with Custodian.......................................................11 Section 2.4 Registration and Safekeeping of Deposited Securities.........................13 Section 2.5 Execution and Delivery of Receipts...........................................13 Section 2.6 Transfer, Combination and Split-Up of Receipts...............................14 (a) Transfer.............................................................14 (b) Combination and Split-Up.............................................14 (c) Co-Transfer Agents...................................................15 Section 2.7 Surrender of ADSs and Withdrawal and Sale of Deposited Securities.................................................15 (a) ROC Requirements........................................................15 (b) Sale of Deposited Securities............................................15 (c) Withdrawal of Deposited Securities......................................16 Section 2.8 Additional Limitations on Execution and Delivery, Transfer, etc. of Receipts; Suspension of Delivery, Transfer, etc................................................................17 (a) Additional Requirements..............................................17 |
(b) Additional Limitations...............................................18 (c) Regulatory Restrictions..............................................18 Section 2.9 Lost Receipts, etc...........................................................18 Section 2.10 Cancellation and Destruction of Surrendered Receipts; Maintenance of Records.......................................................19 Section 2.11 Partial Entitlement ADSs.....................................................19 Section 2.12 Temporary ADSs...............................................................20 Section 2.13 Restricted ADRs and Restricted ADSs..........................................22 ARTICLE III......................................................................................................23 CERTAIN OBLIGATIONS OF HOLDERS AND BENEFICIAL OWNERS OF ADSs...........................................................................23 Section 3.1 Proofs, Certificates and Other Information...................................23 Section 3.2 Liability for Taxes and Other Charges........................................23 Section 3.3 Representations and Warranties on Deposit of Eligible Securities..........................................................24 (a) Deposit of Shares.......................................................24 (b) Deposit of Certificate(s) of Payment....................................24 Section 3.4 Compliance with Information Requests.........................................25 Section 3.5 Ownership Restrictions.......................................................25 ARTICLE IV.......................................................................................................25 THE DEPOSITED SECURITIES................................................................................25 Section 4.1 Cash Distributions...........................................................25 Section 4.2 Distribution in Eligible Securities..........................................26 Section 4.3 Elective Distributions in Cash or Eligible Securities........................27 Section 4.4 Distribution of Rights to Purchase Additional ADSs.....................................................28 (a) Distribution to ADS Holders..........................................28 (b) Sale of Rights.......................................................28 (c) Lapse of Rights......................................................29 Section 4.5 Distributions Other Than Cash, Eligible Securities or Rights to Purchase Eligible Securities.................................................30 Section 4.6 Distributions with Respect to Deposited Securities in Bearer Form...............................................................30 Section 4.7 Redemption...................................................................31 Section 4.8 Conversion of Foreign Currency...............................................31 Section 4.9 Fixing of ADS Record Date....................................................32 Section 4.10 Voting of Deposited Securities...............................................33 (a) Voting by Shareholders...............................................33 (b) Voting by ADS Holders................................................33 (c) Voting of Deposited Securities Upon |
ADS Holders' Instructions............................................34 (d) Management Proxy.....................................................35 Section 4.11 Changes Affecting Deposited Securities.......................................35 Section 4.12 Available Information........................................................36 Section 4.13 Reports......................................................................36 Section 4.14 List of Holders..............................................................36 Section 4.15 Taxation.....................................................................37 ARTICLE V........................................................................................................38 THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY...........................................................38 Section 5.1 Maintenance of Office and Transfer Books by the Registrar....................38 Section 5.2 Exoneration..................................................................38 Section 5.3 Standard of Care.............................................................39 Section 5.4 Resignation and Removal of the Depositary; Appointment of Successor Depositary.........................................................40 Section 5.5 The Custodian................................................................41 Section 5.6 Notices and Reports..........................................................41 Section 5.7 Issuance of Additional Eligible Securities, ADSs, etc........................42 Section 5.8 Indemnification..............................................................43 Section 5.9 Fees and Charges of Depositary...............................................44 Section 5.10 Pre-Release Transactions. ..................................................44 Section 5.11 Restricted Securities Owners.................................................45 ARTICLE VI.......................................................................................................45 AMENDMENT AND TERMINATION...............................................................................45 Section 6.1 Amendment/Supplement.........................................................45 Section 6.2 Termination..................................................................46 ARTICLE VII......................................................................................................47 MISCELLANEOUS...........................................................................................47 Section 7.1 Counterparts.................................................................47 Section 7.2 No Third-Party Beneficiaries.................................................47 Section 7.3 Severability.................................................................48 Section 7.4 Holders and Beneficial Owners as Parties; Binding Effect.....................48 Section 7.5 Notices......................................................................48 Section 7.6 Governing Law and Jurisdiction...............................................49 Section 7.7 Assignment...................................................................50 Section 7.8 Compliance with U.S. Securities Laws.........................................50 Section 7.9 Titles and References........................................................51 EXHIBIT A.......................................................................................................A-1 |
EXHIBIT B.......................................................................................................B-1 EXHIBIT C.......................................................................................................C-1 |
EXHIBIT 5.1
28 August 2000
Ref. No.: 00-0402
A01727/15-8
Advanced Semiconductor Engineering, Inc.
26 Chin Third Road
Nantze Export Processing Zone
Nantze
Kaohsiung, Taiwan
Republic of China
RE: ADVANCED SEMICONDUCTOR ENGINEERING, INC.
Dear Ladies and Gentlemen:
We are acting as special Republic of China ("ROC") counsel for Advanced Semiconductor Engineering, Inc. (the "Company"), a company limited by shares organized under the laws of the ROC, in connection with the preparation and filing with the United States Securities and Exchange Commission registration statement under the United States Securities Act of 1933, as amended (the "Securities Act"), and the offering of American Depositary Shares ("ADSs"), each ADS representing five common shares, par value NT$10 per share (the "Common Shares"), of the Company. The ADSs and the underlying Common Shares are being registered pursuant to a Registration Statement on Form F-1 under the Securities Act (the "Registration Statement").
We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents and records of the Company as we have deemed necessary as a basis for the opinions hereinafter expressed. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, accuracy and completeness of all documents submitted to us as copies and the authenticity of the originals of such latter documents. As to matters of fact material to this opinion, we have made due inquiries with and relied on the statements of officers and other representatives of the Company, public officials or others.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a company limited by shares under the laws of the ROC.
2. The Common Shares underlying the ADSs have been duly authorized, and will be issued, fully-paid and non-assessable when the purchase price for such common shares is duly paid.
3. Subject to the conditions and qualifications described in the Registration Statements, the section of the prospectus included in the Registration Statement entitled "Taxation - ROC Taxation", insofar as it relates to the ROC tax consequences currently applicable to the U.S. Holders described therein, accurately reflects the material ROC tax consequences of the ownership and disposal of ADSs.
We hereby consent to the use of this opinion in, and the filing hereof as
an Exhibit to, the above-mentioned Registration Statement and to the reference
to our name under the headings "Risk Factors", "Taxation", "Enforceability of
Civil Liabilities" and "Validity of Securities" in the prospectus included in
such Registration Statement. In giving such consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Act or the regulations promulgated thereunder.
Sincerely yours,
LEE AND LI
By /s/ PAUL S. P. HSU |
EXHIBIT 8.2
August 28, 2000
Re: ADVANCED SEMICONDUCTOR ENGINEERING, INC.
Advanced Semiconductor Engineering, Inc.
26 Chin Third Road
Nantze Export Processing Zone
Nantze, Kaohsiung, Taiwan
Republic of China
Dear Sirs:
We have acted as special United States counsel for Advanced Semiconductor Engineering, Inc., a corporation incorporated under the laws of the Republic of China (the "COMPANY"), in connection with the preparation and filing with the Securities and Exchange Commission (the "COMMISSION") under the Securities Act of 1933, as amended, of the Company's registration statement on Form F-1 (the "REGISTRATION STATEMENT") relating to the public offering of American depositary shares ("ADSs"), each ADS representing five of the Company's common shares, par value NT$10 per share (the "COMMON SHARES"). The ADSs will be issued in accordance with the provisions of a deposit agreement to be entered into by and among the Company, Citibank, N.A., as the depositary, and the holders and beneficial owners from time to time of ADSs.
On the basis of the foregoing, we are of the opinion that the "TAXATION -- UNITED STATES FEDERAL INCOME TAXATION" section of the prospectus included in the Registration Statement, insofar as it relates to United States Federal income tax matters currently applicable to the U.S. holders of the ADSs discussed therein, accurately reflects the material tax consequences of the acquisition, ownership and disposition of the ADSs.
Advanced Semiconductor Engineering, Inc. 2 August 28, 2000
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the captions "TAXATION -- UNITED STATES FEDERAL INCOME TAXATION" and "LEGAL MATTERS" in the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ DAVIS POLK & WARDWELL |
EXHIBIT 10.4
MANUFACTURING SERVICES AGREEMENT
This Manufacturing Services Agreement (the "AGREEMENT") is entered into on July 3, 1999 by and between Motorola, Inc., with offices at 3501 Ed Bluestein Blvd., Austin, Texas 78762 and at 6501 William Cannon Drive West, Austin, Texas 78735, ("MOTOROLA"), Advanced Semiconductor Engineering, Inc., with offices at Room 1901, Taiwan World Trade Center International Bldg., 19th Floor, No. 333 Keelung Road, Section 1, Taipei, Taiwan, Republic of China ("ASE INC.") and ASE (Chung Li) Inc., with offices at _______________ ("ASE (CHUNG LI)") and, collectively with ASE Inc., "ASE"). Each of Motorola and ASE is a "Party".
W I T N E S S E T H:
WHEREAS, Motorola designs and develops semiconductor products which it sells to the commercial market, and wishes to contract with a third party for the assembly, test and associated services regarding certain of these products;
WHEREAS, ASE has the capacity and skill to perform the assembly, test and associated services on high quality semiconductor products in volume; and
WHEREAS, Motorola and ASE desire to establish a strategic supplier relationship in which ASE will utilize the capacity at its final semiconductor manufacturing operation and facilities of ASE (Chung Li) located at Chung Li, Taiwan (the "CHUNG LI FACILITY") and, subject to the terms and conditions of this Agreement, the facilities of ASE Inc. located at Kaohsiung, Taiwan (the "ASE KAOHSIUNG FACILITY") and the facilities of ASE Test, Inc. located at Kaohsiung, Taiwan (the "ASE TEST KAOHSIUNG FACILITY") on a priority basis to perform the assembly, test and associated services on certain semiconductor products for Motorola;
NOW, THEREFORE, Motorola and ASE agree to enter this Agreement to accomplish the foregoing premises in accordance with the following terms and conditions:
1. PURPOSE OF THIS AGREEMENT
The purpose of this Agreement is to provide the terms and conditions which shall be applicable to the assembly, test and associated services provided to Motorola by ASE, upon the purchase of the Chung Li Facility from Motorola by ASE (Chung Li).
This Agreement does not limit in any way Motorola's right to perform the Work (as defined below) or to have others to perform the same or similar Work on the Contract Products (as defined below) for any reason.
ASE shall commence performing services for Motorola on the date hereof, and shall complete the services within the time and monetary limitations specified from time to time by Motorola pursuant to the terms hereof. If in the course of performing the Work ASE determines that it shall be unable to complete it within the time and monetary limitations specified pursuant to the terms hereof, ASE shall notify Motorola promptly of such determination in writing.
2. DEFINITIONS
"ASE FACILITY" means the Chung Li Facility and, subject to the terms and conditions of this Agreement, ASE Kaohsiung Facility, the ASE Test Kaohsiung Facility and any other ASE facility in Taiwan.
"CONTRACT PRODUCTS" means, collectively, those Motorola-designed products which are described in the Supplements (as defined below) to this Agreement.
"DIE" means an integrated circuit chip as cut (diced) from a finished wafer.
"SCRAP" means any die or device, in any stage of the Work and regardless of its functionality, that is not in conformity with the requirements of this Agreement for the Contract Products.
"SPECIFICATIONS" means the technical specifications provided by Motorola for each of the Contract Products.
"SUPPLEMENT" means a written appendix to this Agreement, as amended from time to time pursuant to Subsection 16(B) hereof, which is agreed to by the Parties as indicated by their signatures thereon. Each Supplement shall set forth the prices to be paid by Motorola for the Contract Products.
"TECHNICAL INFORMATION" means the information identified as technical information in any Supplement, which is used in relation to the Contract Products described in the same Supplement.
"WAFER" means a crystalline substrate for integrated circuit fabrication which, when fully processed, consists of a number of finished Die.
"WORK" means specified assembly, test and associated services to be provided by ASE on finished Die owned by Motorola for the manufacture of the Contract Products.
Capitalized terms not defined herein shall have the meanings attributed to them in the Asset Purchase Agreement.
3. DURATION AND TERMINATION
The Agreement shall become effective on the date hereof and, subject to earlier termination in accordance with Section 30 hereof, it shall continue to be in full force and effect for five (5) years.
4. MANUFACTURING SITE RESTRICTION
All Work performed by ASE shall take place at the Chung Li Facility or, once they are qualified, at the ASE Kaohsiung Facility or the ASE Test Kaohsiung Facility. Motorola agrees to commence qualification procedures of the ASE Kaohsiung Facility and the ASE Test Kaohsiung Facility to perform the Work within a reasonable period of time following the effective date of this Agreement. ASE shall pay for the qualification of the ASE Kaohsiung Facility, the ASE Test Kaohsiung Facility and any other additional ASE facility.
5. COORDINATION
(A) Each Party shall designate a coordinator (the "COORDINATOR") to represent that Party in the implementation of this Agreement. Either Party may change its Coordinator by written notice to the other Party.
(B) ASE shall identify to Motorola an account team dedicated to the implementation of this Agreement, which team shall include, at a minimum, an account executive, an account manager, a customer service representative and engineering support personnel.
(C) Motorola shall have the right to assign, from time to time, its employees (the "MOTOROLA EMPLOYEES") at the ASE Facility to perform work in connection with this Agreement. ASE shall grant the Motorola Employees full access to the areas of the ASE Facility where the Contract Products are manufactured or located. ASE shall provide the Motorola Employees with designated and secure office space and full access to conference rooms and food, rest and parking facilities. ASE shall allow the Motorola Employees to be active participants on problem-solving teams with respect to the manufacture of the Contract Products. While at an ASE Facility, the Motorola Employees shall abide
by the policies and regulations of ASE, and Motorola shall, at ASE's reasonable request, replace or reassign any such employees who fail to do so.
(D) The Parties shall plan and schedule, at a minimum, semi-annual business reviews. The reviews shall focus on the current and forecast business activities, feedback on performance and factory metrics, key improvement programs and activities focused on enhancing the relationship between the Parties, and a review of the status of open issues and action items. These reviews are agreed to be a key activity of the Parties.
6. BAILMENT OR CONSIGNMENT OF MOTOROLA PROPERTY TO ASE
(A) As used in this Agreement, the term "Bailed Property" shall mean and include any and all Die, material, components or equipment owned by Motorola and provided to ASE under bailment or consignment for the performance of the Work. Title to the Bailed Property shall at all times remain vested in Motorola, but the risk of loss and damage to any item of the Bailed Property shall pass to ASE during such time as the item is in ASE's possession or control.
(B) ASE agrees that it shall, at all times, keep all of the Bailed Property within the relevant ASE Facility unless otherwise authorized in writing in advance by Motorola. Motorola shall have the right to enter an ASE Facility at any time during ASE's regular business hours to inspect and account for the Bailed Property.
(C) ASE agrees to develop, implement and utilize procedures to fully account for the Bailed Property as it is transferred between the Parties, and to comply with Motorola's reasonable instructions regarding inventory accounting and security procedures.
(D) If any equipment owned by Motorola is provided as Bailed Property to ASE, during any transfer the transferor shall provide a list identifying each item of equipment by description, serial number and the Motorola asset number (if any) and shall obtain the signature of the transferee to evidence the receipt of such item(s). Upon any transfer, the transferee shall be responsible for inspecting the item(s) of equipment and notifying the transferor in writing immediately, but in any event no later than five (5) calendar days thereafter, of any and every item which is not in good and proper working condition. ASE shall return all Bailed Property to Motorola FOB ASE's dock in its original condition, less ordinary wear and tear, upon expiration or termination of this Agreement.
(E) Unless otherwise mutually agreed, ASE shall be responsible for any maintenance and repair of any equipment provided as Bailed Property while it is in ASE's possession or control, but ASE shall not make any alterations or modifications to any such equipment without prior written consent by Motorola. Titles to all additions, parts, accessories, improvements and attachments to any equipment which is Bailed Property, whether provided by ASE or Motorola, shall immediately vest in Motorola and shall be deemed thereafter to constitute a part of the Bailed Property. Notwithstanding the foregoing, attachments provided by ASE which, in both parties reasonable opinion, may be readily removed without reducing the value of the Bailed Property shall remain the property of ASE.
(F) ASE shall use all Bailed Property solely for the performance of the Work, in a careful and proper manner and in compliance with all applicable laws, rules and regulations relating to the possession and use of the Bailed Property. ASE shall be liable for Motorola's damages (except special, indirect or consequential damages) which result from ASE's violation of this Subsection 6(F).
(G) Motorola may take possession of any equipment that is Bailed Property at any time such item(s) have not been utilized by ASE for any reason for a period of five (5) consecutive calendar days to meet any unfilled requirement for the Work, whether because of any events or conditions set forth in Section 27 hereof or otherwise. If the failure of ASE to so utilize any item of the Bailed Property is caused by a final adjudication of bankruptcy or insolvency of ASE, Motorola shall be entitled to take possession of the Bailed Property immediately and without notice. If any of the preceding situations arises ASE shall, upon Motorola's instruction, properly prepare for immediate shipment and delivery of such items of the Bailed Property to any location designated by Motorola, F.O.B. ASE's dock.
7. SPECIFICATIONS AND REQUIREMENTS FOR THE WORK
(A) Upon the commencement of this Agreement, ASE agrees that the Work shall conform to such product qualification, vendor qualification, equipment qualification, processing, quality control, reliability, yield reporting and inspection specifications and requirements as existed immediately prior to the purchase of the Chung Li Facility from Motorola by ASE, and as are incorporated in Motorola specifications 12MRB18841C, 12MWS70485A, 12MRHO2030A and 12AAQSM120.
*
(B) Motorola may change any specifications or requirements by providing written notice to ASE. If any such change, in ASE's opinion, is incompatible with ASE'S existing equipment, or would adversely affect ASE's existing productivity rates or material costs at the relevant ASE Facility, Motorola, upon prompt notice by ASE, and ASE shall in good faith negotiate a reasonable and mutually acceptable solution.
(C) Unless otherwise agreed, ASE shall provide a written notice to Motorola * prior to making any changes that may affect any of the Contract Products. In addition, ASE shall, upon request, provide reliability and other data concerning such changes in sufficient detail to allow determination by Motorola as to (i) the effect of such changes on the Contract Products and (ii) whether requalification of the Contract Products by or for customers requiring process control is required. Motorola shall have the right to approve such changes if customer approval is required.
(D) If ASE is required to apply Motorola's name, trademark, logo or similar information (collectively, the "MARKS") on any Contract Products, ASE agrees that it shall not acquire or claim any right, title or interest thereto, nor shall it use any of the Marks in any other manner except as has been specifically authorized in writing by Motorola. All Marks shall remain the property of Motorola.
8. CAPACITY PLANNING AND FORECASTING
(A) As a condition to the execution of this Agreement, Motorola shall
provide ASE with a written forecast for the total monthly volume of the Contract
Products, itemized by package type and pin count, that Motorola plans to order
from ASE during *
After the end of each subsequent month, Motorola shall provide ASE with an
update to the forecast (a " * Forecast"), which is to be used
by ASE to allocate capacity for the Work. The * Forecast
shall establish the minimum capacity of ASE to be available to Motorola during
each month of the immediately following * period, upon the
acceptance thereof by ASE. The absence of any notice of objection to a
* Forecast given by ASE within seven (7) calendar days of the date
of receipt shall be deemed as acceptance by ASE. Motorola makes no
representation or warranty with respect to the accuracy of any
* Forecast.
(B) Using the * Forecasts, ASE will provide sufficient capacity for * of the Work specified for each month. ASE will place orders for materials using such suppliers and
upon such lead times as Motorola and ASE shall mutually agree. If Motorola's
forecasts for any Contract Products significantly decrease, and such decrease
results, after * , in more than * of inventory of unique
materials purchased by ASE to support Motorola's requirements, and which
inventory cannot be used for any other ASE customer, then Motorola will purchase
the inventory above * from ASE * , provided
that ASE had purchased reasonable quantities of such materials based on
Motorola's forecasts. It is ASE's intention to work with its suppliers and with
Motorola to allocate certain of such risks among all parties to the extent
practicable, and it is understood by the parties that the provisions of this
Section 8(B) are subject to review by the parties concurrently with the issuance
of any new pricing Supplement pursuant to Section 16 of this Agreement.
(C) ASE and Motorola shall negotiate in good faith on the financial obligation of each Party with respect to, and delivery times for, any capital equipment required by ASE to support Motorola's requirements if such equipment is unique to Motorola's specifications and cannot be used without material modification or expenditure by ASE to support other customers. Such negotiation shall include good faith attempts of the Parties to find alternative uses for such equipment. This Subsection shall not apply to capital equipment additions within the contemplation of the Parties prior to the effective date of this Agreement, which includes ASE's approved * for the Chung Li Facility and another * planned to support Motorola's MAPBGA ramp-up.
(D) ASE agrees to use commercially reasonable efforts to accommodate mix and option changes required by Motorola's business needs.
(E) If the Work required is either significantly more or significantly less than that specified by the * month forecast, Motorola shall communicate such information to ASE as soon as such information is available.
9. ORDER PLACEMENT AND DELIVERY
(A) Blanket purchase orders for Contract Products shall periodically be placed by Motorola with ASE. The sole purpose of the blanket purchase order is to establish the price for each Contract Product, as set forth in the Supplements to this Agreement and any new Contract Products added to this Agreement, and to provide a purchase order number which ASE's invoices shall reference. All preprinted terms and conditions contained in the blanket purchase orders, including the aggregate purchase prices, are superceded by the terms and conditions of this Agreement and the Supplements hereto. Motorola's actual orders for the Contract Products shall also be placed with ASE periodically. The actual orders shall provide details regarding specific Contract Products, mix,
* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
quantities, shipping instructions and requested shipment dates. ASE agrees to comply with the requested shipment dates unless it advises Motorola otherwise within seven (7) calendar days following its receipt of the actual orders. ASE shall use its commercially reasonable efforts to deliver the exact quantity of the Contract Products ordered. ASE shall adopt Motorola's Demand Driven Production Requirements (DDPR) system for piece part forecasting and, unless otherwise mutually agreed, ASE shall adopt Motorola's Contract House Accounts Payable System (CHAPS) for inventory accounting and payment.
(B) "ON-TIME DELIVERIES" means as deliveries made no more than
* days before or on ASE's scheduled delivery dates. Time is of the
essence in delivery. ASE shall establish a system to ensure all deliveries to be
made on time.
(C) If * per cent * on-time deliveries are not achieved, ASE agrees to take appropriate corrective actions, including communication of the delivery problems to Motorola. ASE shall also take a systematic approach to develop, evaluate and monitor adherence to established on-time delivery requirements. ASE will notify Motorola when the on-time delivery requirement will not be met. ASE and Motorola will in good faith negotiate the compensation to be paid by ASE to Motorola, if any, for actual, direct damages incurred by Motorola as a result of such late delivery. ASE agrees to implement Supplier Managed Inventory with Motorola so that Contract Products will be provided on a demand-pull basis.
10. CANCELLATIONS AND SCHEDULE CHANGES
(A) ASE may cancel a firm order * if it terminates this Agreement on the basis of an uncured payment default by Motorola as provided in Subsection 30(A) hereof.
(B) Delivery schedule changes may be made by mutual agreement. Motorola
is not obligated to accept any unscheduled deliveries of Contract Products;
however, ASE may ship ahead of Motorola's requested schedule up to a maximum of
* calendar days early.
11. SHIPMENT AND ACCEPTANCE
(A) ASE shall ship the Contract Products to the destinations identified by Motorola. Motorola shall acknowledge to ASE the receipt of each shipment of Contract Products, stating the quantity and type of, and any damages existing at delivery to, such Contract Products within * of receipt at Motorola's ultimate destination. At Motorola's request, ASE shall hold the contained
Contract Products and delay shipment for up to thirty (30) calendar days. ASE shall certify to Motorola with each shipment that the Contract Products therein have successfully passed applicable testing and meet all specifications. Acceptance testing of the Contract Products delivered to Motorola shall be performed by Motorola within * of receipt.
(B) If Motorola rejects any Contract Products, Motorola and ASE shall confer to determine the reason for the rejection. ASE shall immediately exercise commercially reasonable efforts to develop and implement a corrective action plan for any errors, including manufacturing errors or defects, identified in its systems. All properly rejected Contract Products that are confirmed by ASE to be nonconforming may be returned to ASE for a refund at the purchase price stated in the applicable Supplement, plus Motorola's shipping cost, or may be retained by Motorola subject to a mutually agreed credit issued by ASE to be applied to future orders by Motorola. Title and risk of loss or damage to return merchandise authorization (RMA) material shall pass to ASE ExWorks (EXW) (Incoterms 1990) Motorola's dock.
12. SCRAP
(A) The scrap rates for the Scrap of each type of the Contract Products shall not exceed the corresponding average rates experienced by Motorola at the Chung Li Facility during 1999 while Motorola owned the Facility. Motorola represents that such average scrap rates are true and correct and have resulted from its normal course of business. ASE shall credit Motorola, at Motorola's selling price for the relevant Contract Product, for Scrap in excess of the applicable average rate. ASE shall use commercially reasonable efforts to continually reduce Scrap rates for Contract Products.
(B) ASE shall dispose of any Scrap in accordance with applicable laws and Motorola's written instructions. Upon request, ASE shall ship all Scrap to Motorola separately from any of the Contract Products or Bailed Property in clearly-marked boxes so as to identify the items contained therein. Motorola shall pay for all reasonable shipping costs with respect to such scrap.
13. PACKAGING
(A) All packaging of the Contract Products shall consist of anti-static materials and shall be resistant to any damage which may result in failure to meet specifications. ASE shall notify Motorola in writing and in advance of changes in existing packaging, even if such changes are within Motorola's specifications.
(B) Unless otherwise directed in writing by Motorola, ASE shall make no reference and place no identification in its packaging of any goods, boxes, or containers which would indicate that ASE is the manufacturer of the goods contained therein.
14. RELIABILITY DATA
(A) ASE agrees to provide reliability data which demonstrates the ability of the manufacturing processes used for assembling and testing the Contract Products to meet Motorola's reliability criteria. Any exceptions to these criteria shall be reviewed on a product-by-product basis. Motorola shall have the right to use the reliability data concerning the Contract Products for the sole purposes of preparing sales and promotional information concerning the Contract Products for Motorola's actual or potential customers. ASE's reliability testing methods and conditions shall be subject to review by Motorola from time to time, and any changes thereto requested by Motorola shall be mutually agreed before implementation.
(B) ASE agrees to maintain records regarding all Contract Products provided to Motorola for three (3) years after shipment. Such records shall be in a hard copy format, unless and except to the extent Motorola consents to another form of storage, which consent shall not be unreasonably withheld. All Contract Products shall be traceable throughout the entire process of the Work. The records shall include quality control data, process deviation notes, assembly records, deviations, burn-in conditions, final test data and finished goods top side date codes. ASE shall maintain lot history records for a period of three (3) years. All lot history records are the property of ASE but shall also be considered confidential information of Motorola. Motorola shall have access to the lot history records concerning all Motorola Contract Products at any time during ordinary business hours.
(C) ASE agrees to provide, upon request, timely failure analyses on the Contract Products that are beyond either Motorola's analysis capability or which are returned for the purposes of feedback and correlation. Motorola agrees to provide timely failure analysis data to ASE for the sole purposes of feedback and correlation.
(D) To avoid delays in the processing of the Contract Products, ASE shall notify Motorola of any known failure mechanisms and defects which are, or are suspected to be, present in any completed Contract Product. Motorola shall make reasonable efforts to assist ASE in its efforts to correct such failure mechanisms and/or defects.
15. QUALITY
(A) ASE shall take all actions required to obtain and maintain QS9000 certification or recertification for the Facility as soon as practicable, but in any event no later than December 31, 1999, and Motorola shall assist ASE in this effort.
(B) ASE agrees to implement regular quality system reviews for all Contract Products with Motorola. Motorola shall provide the details of such reviews to ASE in writing at least one month in advance.
(C) ASE agrees to nurture a quality culture within each ASE Facility. Quality systems shall include online Statistical Process Control (SPC) with statistically valid limits. ASE shall nurture a culture which responds to established limits and shall cease production if these limits are exceeded. ASE shall strive for excellence in quality with continuous improvement methods.
16. PRICES
(A) Subject to Section 18, pricing for the Contract Products under this Agreement shall be specified in the Supplements to this Agreement. Prices shall be in U.S. dollars and shall be EXW. (Incoterms 1990) ASE's dock. The Supplement covering the * period is attached hereto as Annex A.
*
(B)
*
If either Party desires to renegotiate the prices on an
anniversary date of the date hereof, it shall notify the other Party at least
sixty (60) calendar days prior to such date. The relevant factors in
renegotiating the prices shall include market prices for the services provided
by ASE, the *
and the benefit to ASE of Motorola's efforts to improve ASE's
manufacturing process to meet. Motorola's stringent quality standards.
*
industry standard, and that, barring exceptional circumstances, prices per pin count will generally decrease over time.
(C)
*
ASE shall establish an internal review process to assure compliance with this Subsection 16(C), and shall certify its compliance to Motorola at least quarterly, both verbally, with an opportunity for Motorola to ask questions, and, if requested, in the form of a written letter to Motorola.
(D) Motorola shall have the right to cause ASE to appoint an independent certified public accounting firm (the "Auditor") selected by ASE and approved by Motorola, which approval shall not be unreasonably withheld, to audit ASE's compliance with Subsection 16(C) hereof. The Auditor shall only have access to information that is reasonably necessary to verify ASE's compliance with Subsection 16(C) hereof, and must maintain the confidentiality of such information.
*
17. PAYMENT TERMS
Unless otherwise mutually agreed, ASE shall invoice Motorola on or after delivery of any Contract Products, and shall submit all invoices to Motorola's Accounts Payable department at Motorola, Inc., Procurement Financial Services, P.O. Box 20922, Phoenix, Arizona 85036 (telephone (602) 952-3828), or such other address as Motorola may provide. Motorola shall make payments to ASE no later than * after receipt of invoice.
18. COST REDUCTION EFFORTS
(A) Motorola and ASE agree to form a joint cost reduction task force
focused on continuous cost improvements for Work on Contract Products,
materials, and equipment. Demonstrated cost reductions resulting from joint
efforts shall result in immediate prices decreases to Motorola of
* of the cost savings if such cost reductions are implemented by
ASE for other customers, or of * of the cost savings if
limited to Work on Contract Products.
(B) If, in the reasonable opinion of both parties, Motorola is solely
responsible for cost reductions associated with the performance of the Work, ASE
shall immediately reduce the prices of the affected Contract Products by
* of the per unit cost savings derived from such reduction.
If such cost reduction results from the use of Motorola's Confidential
Information (as defined in Section 23 hereof), ASE shall use such Confidential
Information only with respect to the Work, and not any other work or services
for other customers or suppliers unless, and only to the extent Motorola
licenses such use.
(C) Motorola agrees in good faith to work with its suppliers who have Supplier Managed Inventory Agreements with Motorola to obtain the benefits of such agreements for ASE.
19. WARRANTIES
(A) ASE warrants that, at the time of delivery of Contract Products to
Motorola and for a period * following the date thereof, all
such Contract Products shall (i) be clear of any liens and encumbrances, (ii) be
free from any defects in material and workmanship attributed to the Work and
(iii) conform to all written specifications relating thereto.
(B) With respect to defective units, ASE shall either rework the units
if returned, replace the units
* . All costs
associated with such returns, replacements, rework and corrections shall be
borne by ASE, including all labor, materials, installation, repair, service,
transportation and other charges. ASE expressly assumes all risks of loss or
damage to the units returned by Motorola while such units are in transit.
(C) In the event that repeated field failures occur with respect to a Contract Product, or a significant field failure occurs which requires immediate attention, ASE and Motorola shall discuss a solution in good faith.
(D) ASE hereby represents and warrants that none of the Contract Products shall be manufactured with, or contain, Class 1 ozone depleting substances.
(E) To the extent that the performance of the Work depends on certain information technology that processes, provides and/or receives date data, ASE represents and warrants that it will use commercially reasonable efforts to ensure that the Work shall not be materially interrupted or adversely impacted by "year 2000 problems" associated with ASE's operations.
(F) All warranties shall survive the acceptance and payment by Motorola.
20. INDEMNITY
(A) ASE agrees to indemnify, defend and hold harmless Motorola, its officers, agents and employees from any and all claims, costs, attorney fees, fines, and similar expenses of whatsoever kind or character, including, but not limited to, those resulting from injury or death to persons or damage to property to the extent due to any negligence or willful misconduct of ASE, its officers, employees, subcontractors, or agents acting on ASE's behalf in connection with ASE's obligations under this Agreement.
(B) Motorola agrees to indemnify, defend and hold harmless ASE, its officers, agents and employees from any and all claims, costs, attorney fees, fines, and similar expenses of whatsoever kind or character, including, but not limited to, those resulting from injury or death to persons or damage to property to the extent due to any negligence or willful misconduct of Motorola, its officers, employees, subcontractors, or agents acting on Motorola's behalf in connection with Motorola's obligations under this Agreement.
(C) ASE agrees to defend, at its expense and with counsel chosen by it, any suits brought against Motorola based upon the claim that any of the Work infringes or violates any patent, mask work, copyright, trade secret, or other intellectual property right other than those alleged infringements or violations instructed or requested by Motorola, and to pay all liabilities, costs, and damages finally determined in any such suit against Motorola. Motorola shall promptly notify ASE in writing of any such suit and shall provide reasonable assistance to ASE in connection with defending such suit. If the use and sale of any of the Contract Products is enjoined as a result of such suit, ASE, at its option and at no expense to Motorola, shall either obtain for Motorola the right to use and sell the Contract Products or shall substitute an equivalent method for performing the Work which is acceptable to and qualified by Motorola. This Subsection (C) does not extend to any suit based upon any infringement or alleged infringement of any patent, copyright, mask work, trade secret or any other intellectual property right (i) caused by any article of Motorola's design or formula, or (ii) the use of any manufacturing process licensed to ASE by Motorola.
(D) Motorola agrees to defend, at its expense and with counsel chosen by it, any suits brought against ASE based upon the claim that any of the Contract Products produced by ASE for Motorola infringes any patent, mask work, copyright, trade secret or other intellectual property right, if such infringement arises from compliance by ASE with Motorola's specifications or formula, and to
pay all liabilities, costs, and damages finally determined in any such suit against ASE. ASE shall promptly notify Motorola in writing of any such suit and shall provide reasonable assistance to Motorola in connection with defending such suit.
(E) THE FOREGOING PROVISIONS STATE THE ENTIRE LIABILITY OF EITHER PARTY WITH RESPECT TO INFRINGEMENT OF PATENT, COPYRIGHTS, MASK WORKS, TRADE SECRETS, OR ANY OTHER INTELLECTUAL PROPERTY RIGHT CLAIMS OF ANY TYPE. WITHOUT LIMITING THE OBLIGATIONS OF EITHER PARTY UNDER SUCH FOREGOING PROVISIONS, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER AGAINST THE COUNTERPARTY (INCLUDING, WITHOUT LIMITATION, LOST PROFITS) ARISING FROM INFRINGEMENT OR ALLEGED INFRINGEMENT OF PATENT, COPYRIGHTS, MASK WORKS, TRADE SECRETS, OR ANY OTHER INTELLECTUAL PROPERTY RIGHT.
21. INSURANCE
(A) At all times during the term of this Agreement, ASE shall maintain, in full force and effect and at its sole expense, the following forms of insurance:
(1) at least * of insurance to cover any loss, theft or damage to the Contract Products or the Bailed Property in the amount of the full replacement cost thereof, and shall name Motorola as the loss payee;
(2) public liability and property damage liability insurance, under the comprehensive general liability form, with limits of liability of no less than * , including contractual liability coverage for the indemnity obligations specified in Section 20 hereof and a products/completed operations endorsement; and
(3) excess liability insurance, under the umbrella form, with a limit of liability of not less than * per occurrence.
(B) ASE shall name Motorola as an additional insured under the liability insurance policies specified in Subsections 21(A)(2) and 21(A)(3) and Motorola will bear the cost of naming Motorola as an additional insured to the extent such cost exceeds * . In addition, ASE's insurance must be designated as primary. A certificate of insurance evidencing the required coverages and confirming that Motorola is identified as a loss payee or additional
insured as specified herein shall, upon request, be provided to Motorola prior to the commencement of any Work. ASE shall provide Motorola with written notice no later than thirty (30) calendar days prior to any expiration, termination or cancellation of any policy.
(C) Notwithstanding the foregoing, * giving ASE written notice of said additional requirements subject to the prior written consent of ASE, which will not be unreasonably withheld. *
(D) The procurement and maintenance of insurance specified in this
Section 21 shall not limit or affect any liability of ASE under this Agreement.
22. RECORDS AND AUDITS
ASE shall implement and utilize such records, procedures and systems as may be specified by Motorola in writing from time to time to document, record and account for (i) the performance of the Work, (ii) the location and use of and adequate security for the Bailed Property, (iii) compliance with Motorola's quality control and reliability processes and specifications, (iv) proper documentation of shipment, delivery, invoicing and payment history and (v) other similar matters. ASE agrees to permit representatives of Motorola at reasonable times to inspect, audit and copy such books, records and documentation.
23. CONFIDENTIALITY/NON-DISCLOSURE AGREEMENT
(A) Pursuant to this Agreement, one Party may furnish to the other Party software, data, designs, drawings, tracings, plans, layouts, specifications, samples, equipment and other written information which is confidential and proprietary to the disclosing Party (collectively, the "Confidential Information"). All Confidential Information, as delivered in written form, shall be marked "CONFIDENTIAL" or an equivalent thereof by the disclosing Party. Any Confidential Information which is furnished orally shall be confirmed in writing as being Confidential Information within thirty (30) calendar days of being so furnished.
(B) It is agreed that for a period of five (5) years after receipt of Confidential Information, the receiving Party shall: (i) restrict the dissemination of such Confidential Information to (a) those employees who need to use the Confidential Information in the performance of the Work and (b) those to whom
the receiving Party is legally compelled to disclose; and (ii) use the same degree of care as for its own information of like importance, but at least use reasonable care, in safeguarding against unauthorized disclosure of such Confidential Information. ASE agrees to have an appropriate non-disclosure agreement signed by each of its employees who may be exposed to Motorola's Confidential Information.
(C) Notwithstanding any other provisions of this Agreement,
Confidential Information shall not include any information which: (i) is now
available or becomes available to the public otherwise than as a result of a
breach of this Agreement by the receiving Party, (ii) is released in writing by
the disclosing Party, (iii) is lawfully obtained from a third party or parties,
(iv) is known to the receiving Party prior to such disclosure by the disclosing
party, (v) is at any time developed by the receiving Party prior to such
disclosure or (vi) is at any time developed by the receiving Party independently
of such disclosure or disclosures by the disclosing Party.
(D) The Parties shall not disclose the existence of this Agreement or any of the terms hereof to third parties, except (i) when requested or required by any legal or other regulatory authority to disclose such information and (ii) as may be necessary to enforce the terms hereof.
(E) Each Party agrees not to disclose to the other Party any confidential or proprietary information of third parties unless authorized to do so.
(F) For the purposes of Section 30 hereof, any breach of the provisions in this Section 23 shall be a material breach under this Agreement.
(G) It is expressly understood that any drawings, blueprints, descriptions, resumes, documents, tapes or any other media transferred by the disclosing Party hereunder, and all copies, modifications and derivatives thereof, shall remain the property of the disclosing Parry, and the receiving Party is authorized to use those materials only in accordance with the terms and conditions of this Agreement.
(H) ASE agrees that Motorola's past, present and future costs of material and equipment shall be considered Confidential Information of Motorola, whether or not so marked and provided in writing in connection with Subsection 23(A) hereof.
24. INVENTIONS
(A) All discoveries, improvements, inventions and trade secrets created or conceived during the performance of this Agreement *
(B) All discoveries, improvements, inventions and trade secrets created or conceived during the performance of this Agreement *
(C) All discoveries, improvements, inventions and trade secrets created or conceived during the performance of this Agreement jointly by Motorola and ASE personnel shall be the joint property of Motorola and ASE, each Party having an equal and undivided one-half (1/2) joint interest therein (the "JOINTLY-OWNed IP"). Each Party may assign, license or otherwise transfer a portion or all of its rights under any such Jointly-owned IP without the consent of the other Party and without accounting to the other Party, and the Parties shall cooperate with each other in executing all necessary documents to give effect to the foregoing.
(D) * Motorola shall notify ASE in writing whether or not, and in which jurisdictions, Motorola elects to file such patent applications; ASE shall have the right to file patent applications in all other jurisdictions. Each Party, at its own expense, shall cooperate fully with the filing Party as may be necessary for the proper preparation, filing and prosecution of each such patent application and the maintenance, renewal and defense of each patent covering such discovery, improvement or invention.
(E) The IP Expenses for preparing each joint patent application shall become by the Party that prepares and files the application. Before filing, the filing Party shall request the other Party to indicate whether it will agree to pay * of all IP Fees and Translating Expenses, if any, in a particular jurisdiction or group of jurisdictions. In the event that the non-filing Party does not notify the requesting Party within * in writing that it will pay * of all IP Fees and Translating Expenses or if one Party desires to obtain intellectual property protection for specific Joint-owned IP (such as filing for patent protection in a certain country) and the other Party does not wish to obtain such protection, (i) the filing Party shall control and pay the cost of
such prosecution, (ii) but both Parties will remain joint owners and (iii) the
filing shall reflect the Parties as joint owners. For the purposes of this
Subsection 24(E): (i) "IP FEES" shall mean fees or other charges required to be
paid to a governmental agency, office or entity to secure and maintain
intellectual property rights and include filing fees, registration fees, issue
fees, maintenance fees, annual taxes and annuities; (ii) "IP EXPENSES" shall
mean fees, costs or other charges related to securing and maintaining
intellectual property rights other than IP Fees and Translating Expenses; and
(iii) "TRANSLATING EXPENSES" shall mean fees, costs or other charges related to
translating patent applications.
25. DATA RIGHTS
ASE hereby assigns to Motorola all rights in software, reports, drawings, sketches, formulas, notes, notebooks and designs prepared for the performance of the Work. All rights, title and interest shall vest immediately in Motorola upon preparation, shall be the sole property of Motorola and shall not be disclosed by ASE to any third party.
26. SECURITY
ASE agrees to take all necessary precautions to secure the areas of the Facility associated with the performance of the Work and the storage of the Bailed Property. Motorola shall have the right to audit ASE's security practices, policies, procedures and measures as they relate to the performance of the Work, and to specify such changes as may be reasonably required to protect the Work or the Bailed Property. ASE shall immediately report to Motorola any breaches or suspected breaches of its security, but such reporting shall not relieve ASE of its responsibilities hereunder.
27. FORCE MAJEURE
Neither Party shall be liable for failures or delays in fulfilling its obligations hereunder owing to any cause beyond its reasonable control, including, but not limited to, acts of God, governmental orders or restriction, war, threat of war, warlike conditions, fire, hostilities, sanctions, revolution, riot, looting, strike, lockout, interruption of transportation or inability to obtain necessary labor, materials or equipment. ASE shall notify Motorola promptly of any interruptions in the Work or difficulties relating to the Facility that may affect the availability of the Contract Products.
28. ASSIGNMENT
(A) ASE shall not assign, sublicense, delegate, subcontract or otherwise transfer this Agreement or any rights or obligations arising under this Agreement without the prior written approval of Motorola, which shall not be unreasonably withheld. *
(B) Should any business unit of Motorola's Semiconductor Products Sector as it existed on March 11, 1999 subsequently be separated from Motorola, whether due to a sale, a spin-off or other arrangements (a "BUSINESS UNIT"), ASE agrees to extend the same terms and conditions of this Agreement (including all Supplements hereto) to such Business Unit if it so requests. ASE further agrees to extend the same terms and conditions of this Agreement and all Supplements hereto to Affiliates where "AFFILIATES" means any other person or entity controlled by or under common Control with Motorola where "CONTROL" means direct or indirect, legal or beneficial, ownership of 50% or more of the voting control of such person or entity it they so request. Purchases of Contract Products by Business Units or Related Business Units shall be considered as qualifying purchases for the purposes of Subsection 2.09(b)(ii) of the Asset Purchase Agreement.
(C) Other than as provided in Subsection 28(B), Motorola shall not assign, sublicense, delegate, subcontract or otherwise transfer this Agreement or any rights or obligations arising under this Agreement without the prior written approval of ASE, which shall not be unreasonably withheld.
29. NOTICES
(A) In any case where a notice or another form of communication is to be given or made pursuant to any provision of this Agreement, such notice or communication shall be deemed to be received when given or made as follows: (i) if by hand delivery, on the day delivered; or (ii) if by telex, cable, fax or telegraph, on the next business day following the date sent.
(B) All notices specifically required to be given under the terms of this Agreement shall be delivered to the following addresses, as applicable:
To ASE:
Advanced Semiconductor Engineering, Inc.
Room 1901
Taiwan World Trade Center International Trade Bldg.
19th Floor
No. 333 Keelung Road
Section 1
Taipei, Taiwan
Republic of China
To Motorola:
Jim Duckworth
Director of Supply Management
Semiconductor Products Sector
Motorola, Inc.
7700 West Parmer Lane
Maildrop PL03
Austin, TX 78729
With a copy to:
Cindi Moreland
Director, Motorola SPS Corporate Law Department
Motorola, Inc.
6501 William Cannon Drive West
Austin, TX 78735
30. TERMINATION
(A) If either Party defaults on any of the material obligations or
conditions of this Agreement and such default remains uncured for
* after written notice to the defaulting Party specifying the
nature of the default, the non-defaulting Party shall have the right to
terminate this Agreement by giving written notice of termination to the
defaulting Party; in such case, this Agreement shall terminate on the
* after provision of such termination notice. The defaulting
Party shall have the right to cure any such default through but not after the
date of termination. In the event of a cure of default, the cure shall be
retroactive to the date of the notice of default. In order to cure any default
of a payment obligation of this Agreement, the defaulting party shall pay
* annual interest on the amount of the obligation, appropriately
prorated for the time between when the obligation was due and when it is paid.
(B) Either Party shall have the right to terminate this Agreement by
giving written notice of termination to the other Party at any time upon or
after: (i) the filing by the other Party of a petition in bankruptcy or
insolvency; (ii) any adjudication that the other Party is bankrupt or insolvent;
(iii) the filing by the other Party under any law relating to bankruptcy or
insolvency; (iv) the appointment of a receiver for all or substantially all of
the property of the other Party; (v) an assignment or attempted assignment for
the benefit of creditors by the other Party; or (vi) the institution of any
proceedings for the liquidation or winding up of the other Party's business or
for the termination of its corporate charter. In any such case this Agreement
shall terminate on the tenth (10th) calendar day after provision of the
termination notice.
(C) In the event of a direct or indirect taking over, or an assumption of control, of Motorola or ASE, Inc. by a third party, the non-acquired Party shall have the right to terminate this Agreement immediately at any time thereafter upon giving written notice.
(D) Either Party shall have the right to terminate this Agreement if, in its sole judgment, official United States or Taiwan government policy, directives or rulings have been put into affect that substantially affect or change the economic viability of this Agreement and the Parties have not been able to renegotiate this Agreement in a mutually satisfactory manner within a reasonable period of time following such event. No Party shall make any claims or demands against any other Party for any damages, losses, expenses or costs, if any, incurred as a result of termination of this Agreement pursuant to this Subsection 30(D).
(E) If any of the events and conditions set forth in Section 27 has continued for more than * the non-affected Party may terminate this Agreement immediately upon written notice.
(F) If Motorola terminates this Agreement on the ground of a default by ASE, Motorola may, at its sole discretion, cancel the delivery of all unshipped, and shipped but unaccepted, Contract Products.
(G) Within one (1) month following the termination of this Agreement, ASE shall return or destroy to Motorola each item of Technical Information and Confidential Information delivered or disclosed to ASE hereunder, and provide a certification that, through its best efforts, and to the best of its knowledge, the original and all copies, in whole or in part, in any form, of the Technical Information and Confidential Information, have been destroyed or returned to Motorola.
(H) The provisions of this Section and Sections 6, 19, 20, 23, 24, 32, 34, 35, 38, and 39 shall survive the expiration or termination of this Agreement.
31. TRANSLATION
Notwithstanding any translation of this Agreement, the English language version shall be determinative.
32. ENVIRONMENTAL MATTERS
ASE shall indemnify and hold Motorola harmless from and against any liability, claim, damage, injury, expense, suit or cause of action, including but not limited to reasonable attorneys fees, arising from or caused by any toxic or hazardous substances or chemicals, as those terms are defined by the environmental health or safety laws or regulations of Taiwan, Republic of China, the country in which each ASE facility is located which are (i) used in the performance of the Work, (ii) present in the Scrap disposed of or destroyed by ASE (other than in accordance with Motorola's instructions) or (iii) present at such ASE Facility during the term of this Agreement. ASE shall comply with all applicable laws and have all necessary permits, operating licenses or authorizations necessary to operate such ASE Facility under applicable environmental safety or health laws or regulations in the country in which such ASE Facility is located.
33. OTHER OBLIGATIONS
(A) In connection with this Agreement, ASE agrees to comply with all applicable laws, rules, regulations and orders of any duly constituted authority, including, but not limited to, those relating to taxes, insurance, environmental regulation, transportation, country of origin and other customs requirements and occupational safety and health.
(B) Each of Motorola and ASE covenants that:
(1) it shall not request, induce, solicit or accept any bribe, kickback or illegal payment from any employee of the other Party;
(2) it shall not offer or provide any gift or gratuity to any employee of the other Party (including, but not limited to, Christmas presents, money, property, services, free trips, commissions, kickbacks, paid vacation, special discounts on a product or service, or entertainment) which could be viewed as an attempt to influence the business relationship between the Parties;
(3) it shall not solicit, encourage or participate in any activity in which the funds and assets of the other Party, would not be properly and accurately records on the books and records of the other Party in accordance with generally accepted accounting principles and practices (such as creation of false or artificial entries), or in any payment made on behalf of Motorola which would be approved or made with the intention or understanding that any part of such payment is to be used for any purpose other than that described by the documents supporting the payment (such as issuance of an invoice or other document which inaccurately reflects a transaction);
(4) it does not presently and shall not employ any employee of the other Party in any way, directly or indirectly, which could compromise such employee's loyalty to the other Party; and
(5) it does not presently have any employee of the other Party, or person who has a close personal relationship with an employee of the other Party, who has a financial interest in its business (including employment) to the extent that a conflict of interest may exist or be created, and it shall not allow such a situation to arise while the Agreement is in effect.
(C) ASE * and * the due and punctual payment or performance, as applicable, by * of the obligations, covenants, and agreements of ASE under this Agreement, and hereby waives any defense, including any suretyship defenses or offset, which it otherwise might have or assert in the event of enforcement of such * .
(D) Motorola shall have the right to deduct or offset any money due under this Agreement against any money then due and payable to Motorola by ASE under any other agreement between the parties, including, without limitation, the Asset Purchase Agreement and the agreement under which ASE purchased Motorola's final manufacturing and rest operations in Korea.
34. EXPORT CONTROL AND GOVERNMENT APPROVAL
The Parties acknowledge that they must comply with all applicable rules and laws in connection with this Agreement, including, but not limited to, those relating to restrictions on export and to approval of agreements. Each Party shall be responsible for obtaining and maintaining all approvals and licenses, including export licenses, permits and governmental authorizations from the appropriate governmental authorities as may be required to enable such Party to fulfill its
obligations under this Agreement. Each Party agrees to give reasonable assistance to the other in obtaining any such approvals, expert licenses, permits or governmental authorizations. Each Party agrees that, unless prior written authorization is obtained from the United States Bureau of Export Administration, it shall not export, re-export, or transship, directly or indirectly, any products or technical information that would be in contravention of the Export Administration Regulations then in effect as published by the United States Department of Commerce.
35. NON-SOLICITATION OF EMPLOYEES
(A) During the term of this Agreement neither Motorola nor ASE shall solicit any employee of the other for employment, either directly through any of its employees, * .
(B) Before making an offer of employment to any individual who is employed by Motorola during the term of this Agreement, ASE shall provide notice of its intent to make such an offer to Motorola's designated manager, and ASE and Motorola shall then discuss the circumstances which led to ASE's potential employment offer and the impact on their business relationship should any offer be made by ASE and accepted by such individual.
(C) ASE agrees that if it hires any Motorola employee without
Motorola's consent, ASE will *
that such individual was in most recently when
employed at Motorola. The parties agree that such amount
* to hire a qualified
* individual.
36. SECTION TITLES
Section titles as to the subject matter of particular sections herein are for convenience only and are in no way to be construed as part of this Agreement or as a limitation of the scope of the particular sections to which they refer.
37. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.
* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.
38. APPLICABLE LAW
The laws of the United States and, where applicable, the state of New York, shall govern this Agreement, except for that body of law known as conflicts of laws. The Parties expressly agree that the UN Convention for the International Sale of Goods shall not apply.
39. DISPUTE RESOLUTION
(A) The Parties shall attempt to settle any claim or controversy
arising out of this Agreement through consultation and negotiation in good faith
and a spirit of mutual cooperation. If those attempts fail, the dispute shall be
mediated by a mutually acceptable mediator to be chosen by the Parties within
* after written notice by one of the Parties
demanding mediation. Neither Party may unreasonably withhold its consent to the
selection of a mediator, and the Parties shall share the costs of the mediation
equally. By mutual agreement, however, the Parties may postpone mediation until
each has completed some specified but Limited discovery about the dispute. The
Parties may also agree to replace mediation with non-binding alternative dispute
resolution, such as neutral fact-finding or a mini-trial. Disputes relating to
the intellectual property of either Party shall not be subject to mediation or
alternative dispute resolution.
(B) Any dispute which cannot be resolved through negotiation or mediation within * of the initial demand by either Party shall then be finally resolved by a court within the state of New York. The use of alternative dispute resolution shall not be construed under the doctrines of laches, waiver or estoppel to affect adversely the rights of either Party. Nothing in this Subsection 39(B) shall prevent either Party from resorting to judicial proceedings if: (i) good faith efforts to resolve the dispute under these procedures have been unsuccessful, or (ii) interim relief from a court is necessary to prevent serious and irreparable injury to one Party or to others.
(C) EXCEPT AS MAY BE OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, LOST PROFITS) REGARDLESS OF THE LEGAL THEORY ON WHICH ANY SUCH CLAIM MAY BE MADE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.
40. EXCLUSIVE AGREEMENT
This Agreement contains the complete and exclusive statement of the agreement and understanding of Motorola and ASE relating to the subject matter of this Agreement, and it supersedes all other agreements, understandings, communications, and proposals, oral or written, between the parties. Any amendment of this Agreement must be in writing and signed by authorized representatives of Motorola and ASE.
41. SEVERABILITY
If any provision of this Agreement should become fully or partially invalid or unenforceable for any reason whatsoever, or violate any applicable law, this Agreement is to be considered divisible as to such provision and such provision deleted from this Agreement, and the remainder of this Agreement shall be valid and binding as if such provision were not included herein. A new provision shall be substituted for any such deleted provision which shall come as close to what the parties intended, as far as legally possible, according to the sense and purpose of this Agreement.
42. WAIVER
The failure of any Party to enforce, at any time, or for any period of time, any provision of this Agreement, to exercise any election or option provided herein, or to require, at any time, performance of any of the provisions hereof, shall not be construed to be a waiver of such provision, or in any way affect the validity of this Agreement, or any part thereof, or the right of any Party thereafter to enforce each and every such provision.
43. INDEPENDENT CONTRACTOR
It is agreed that ASE is an independent contractor for the performance of the Work under this Agreement and that Motorola shall have no control over the methods and means of accomplishment thereof, except as specifically set forth in this Agreement. There is no relationship of agency, partnership, joint venture, employment or franchise between the Parties. ASE is the sole employer and principal of any and all persons performing Work under this Agreement, and is obligated to perform all requirements of an employer under applicable law, ASE employees and agents shall not be construed to be employees of Motorola, nor be entitled to participate in the profit sharing, pension, or other plans established for the benefit of Motorola's employees,
44. ENTIRE AGREEMENT
(A) This Agreement, which includes the Supplements and other attachments hereto, supersedes all prior discussions and writings and constitutes the entire and only contract between the Parties relating to the Work, and it may not be changed, altered or amended except in writing and signed by duly authorized representatives of all of the Parties.
(B) If any inconsistencies arise between the terms of this Agreement, a purchase order or any other agreement entered into between the Parties, the order of precedence in determining the rights and obligations of the Parties shall be: (i) the Asset Purchase Agreement; (ii) this Agreement; (iii) the Supplements; and (iv) the relevant firm orders.
IN WITNESS WHEREOF, the Parties hereto execute this Agreement to be effective on the date first referenced above.
Advanced Semiconductor Engineering, Inc. Motorola, Inc. Name: /s/ JASON CHANG Name: /s/ PATRICK CHOY -------------------------- ---------------------------- Jason Chang Patrick Choy Title: Chairman Title: Corporate-Vice President Date: Date: -------------------------- ---------------------------- ASE (Chung Li) Inc. Name: /s/ JASON CHANG -------------------------- Jason Chang Title: Chairman Date: -------------------------- |
Avg. Excluding Service & Freight CPF CPF Pkg # of 1999 Q199 Prop 1999 1999 Q199 Prop 1999 Desc Pins Budget Actual Fee Prop Budget Actual Fee Budget --------------------------------------------------------------------------------------- * |
Including Sector & Freight Excluding Sector & Freight Q199 99 BUD Prop Fee Q199 99 BUD Prop Fee Pkg @ 99 @ 99 @ 99 @ 99 @ 99 @ 99 Desc Run Rate Run Rate Run Rate Run Rate Run Rate Run Rate --------------------------------------------------------------------------- * ________________________ * Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
Supplement Page 1
D=C/B X A A B C D INTL COST CLC COST CLC COST PKG DESC/ PKG CODE 10 U/C PER 10 2PC BY UNIT COST PER UNIT COST PER UNIT COST PER UNIT ------------------------------------------------------------------------------------------------------- 95.01% * _________________________ * Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
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EXHIBIT 10.5
MANUFACTURING SERVICES AGREEMENT
This Manufacturing Services Agreement (the "AGREEMENT") is entered into on July 3, 1999 by and between Motorola, Inc., with offices at 3501 Ed Bluestein Blvd., Austin, Texas 78762 and at 6501 William Cannon Drive West, Austin, Texas 78735, ("MOTOROLA"), Advanced Semiconductor Engineering, Inc., with offices at Room 1901, Taiwan World Trade Center International Bldg., 19th Floor, No. 333 Keelung Road, Section 1, Taipei, Taiwan, Republic of China (" ASE INC.") and ASE (Korea) Ltd., a Korean company ("ASE KOREA") and, collectively with ASE Inc., "ASE"). Each of Motorola and ASE is a "Party".
WITNESSETH:
WHEREAS, Motorola designs and develops semiconductor products which it sells to the commercial market, and wishes to contract with a third party for the assembly, test and associated services regarding certain of these products;
WHEREAS, ASE has the capacity and skill to perform the assembly, test and associated services on high quality semiconductor products in volume; and
WHEREAS, Motorola and ASE desire to establish a strategic supplier relationship in which ASE will utilize the capacity at its final semiconductor manufacturing operation and facilities of ASE Korea located at Paju, Korea (the "PAJU FACILITY") on a priority basis to perform the assembly, test and associated services on certain semiconductor products for Motorola;
NOW, THEREFORE, Motorola and ASE agree to enter this Agreement to accomplish the foregoing premises in accordance with the following terms and conditions:
1. PURPOSE OF THIS AGREEMENT
The purpose of this Agreement is to provide the terms and conditions which shall be applicable to the assembly, test and associated services provided to Motorola by ASE, upon the purchase of the Paju Facility from Motorola by ASE Korea
This Agreement does not limit in any way Motorola's right to perform the Work (as defined below) or to have others to perform the same or similar Work on the Contract products (as defined below) for any reason.
ASE shall commence performing services for Motorola on the date hereof, and shall complete the services within the time and monetary limitations specified
from time to time by Motorola pursuant to the terms hereof. If in the course of performing the Work ASE determines that it shall be unable to complete it within the time and monetary limitations specified pursuant to the terms hereof, ASE shall notify Motorola promptly of such determination in writing.
2. DEFINITIONS
"ASE FACILITY" means the Paju Facility.
"CONTRACT PRODUCTS" means, collectively, those Motorola-designed products which are described in the Supplements (as defined below) to this Agreement.
"DIE" means an integrated circuit chip as cut (diced) from a finished wafer.
"SCRAP" means any die or device, in any stage of the Work and regardless of its functionality, that is not in conformity with the requirements of this Agreement for the Contract Products.
"SPECIFICATIONS" means the technical specifications provided by Motorola for each of the Contract Products.
"SUPPLEMENT" means a written appendix to this Agreement, as amended from time to time pursuant to Subsection 16(B) hereof, which is agreed to by the Parties as indicated by their signatures thereon. Each Supplement shall set forth the prices to be paid by Motorola for the Contract Products.
"TECHNICAL INFORMATION" means the information identified as technical information in any Supplement, which is used in relation to the Contract Products described in the same Supplement.
"WAFER" means a crystalline substrate for integrated circuit fabrication which, when fully processed, consists of a number of finished Die.
"WORK" means specified assembly, test and associated services to be provided by ASE on finished Die owned by Motorola for the manufacture of the Contract Products.
Capitalized terms not defined herein shall have the meanings attributed to them in the Asset Purchase Agreement.
3. DURATION AND TERMINATION
The Agreement shall become effective on the date hereof and, subject to earlier termination in accordance with Section 30 hereof, it shall continue to be in full force and effect for five (5) years.
4. MANUFACTURING SITE RESTRICTION
All Work performed by ASE shall take place at the Paju Facility.
5. COORDINATION
(A) Each Party shall designate a coordinator (the "COORDINATOR")
to represent that Party in the implementation of this Agreement. Either Party
may change its Coordinator by written notice to the other Party.
(B) ASE shall identify to Motorola an account team dedicated to the implementation of this Agreement, which team shall include, at a minimum, an account executive, an account manager, a customer service representative and engineering support personnel.
(C) Motorola shall have the right to assign, from time to time, its employees (the "MOTOROLA EMPLOYEES") at the ASE Facility to perform work in connection with this Agreement. ASE shall grant the Motorola Employees full access to the areas of the ASE Facility where the Contract Products are manufactured or located. ASE shall provide the Motorola Employees with designated and secure office space and full access to conference rooms and food, rest and parking facilities. ASE shall allow the Motorola Employees to be active participants on problem-solving teams with respect to the manufacture of the Contract Products. While at an ASE Facility, the Motorola Employees shall abide by the policies and regulations of ASE, and Motorola shall, at ASE's reasonable request, replace or reassign any such employees who fail to do so.
(D) The Parties shall plan and schedule, at a minimum, semi-annual business reviews. The reviews shall focus on the current and forecast business activities, feedback on performance and factory metrics, key improvement programs and activities focused on enhancing the relationship between the Parties, and a review of the status of open issues and action items. These reviews are agreed to be a key activity of the Parties.
6. BAILMENT OR CONSIGNMENT OF MOTOROLA PROPERTY TO ASE
(A) As used in this Agreement, the term "BAILED PROPERTY" shall mean and include any and all Die, material, components or equipment owned by
Motorola and provided to ASE under bailment or consignment for the performance of the Work. Title to the Bailed Property shall at all times remain vested in Motorola, but the risk of loss and damage to any item of the Bailed Property shall pass to ASE during such time as the item is in ASE's possession or control.
(B) ASE agrees that it shall, at all times, keep all of the Bailed Property within the relevant ASE Facility unless otherwise authorized in writing in advance by Motorola. Motorola shall have the right to enter an ASE Facility at any time during ASE's regular business hours to inspect and account for the Bailed Property.
(C) ASE agrees to develop, implement and utilize procedures to fully account for the Bailed Property as it is transferred between the Parties, and to comply with Motorola's reasonable instructions regarding inventory accounting and security procedures.
(D) If any equipment owned by Motorola is provided as Bailed Property to ASE, during any transfer the transferor shall provide a list identifying each item of equipment by description, serial number and the Motorola asset number (if any) and shall obtain the signature of the transferee to evidence the receipt of such item(s). Upon any transfer, the transferee shall be responsible for inspecting the item(s) of equipment and notifying the transferor in writing immediately, but in any event no later than five (5) calendar days thereafter, of any and every item which is not in good and proper working condition. ASE shall return all Bailed Property to Motorola FOB ASE's dock in its original condition, less ordinary wear and tear, upon expiration or termination of this Agreement.
(E) Unless otherwise mutually agreed, ASE shall be responsible for any maintenance and repair of any equipment provided as Bailed Property while it is in ASE's possession or control, but ASE shall not make any alterations or modifications to any such equipment without prior written consent by Motorola. Titles to all additions, parts, accessories, improvements and attachments to any equipment which is Bailed Property, whether provided by ASE or Motorola, shall immediately vest in Motorola and shall be deemed thereafter to constitute a part of the Bailed Property. Notwithstanding the foregoing, attachments provided by ASE which, in both parties' reasonable opinion, may be readily removed without reducing the value of the Bailed Property shall remain the property of ASE.
(F) ASE shall use all Bailed Property solely for the performance of the Work, in a careful and proper manner and in compliance with all applicable laws, rules and regulations relating to the possession and use of the Bailed Property. ASE shall be liable for Motorola's damages (except special, indirect or
consequential damages) which result from ASE's violation of this Subsection 6(F).
(G) Motorola may take possession of any equipment that is Bailed Property at any time such item(s) have not been utilized by ASE for any reason for a period of five (5) consecutive calendar days to meet any unfilled requirement for the Work, whether because of any events or conditions set forth in Section 27 hereof or otherwise. If the failure of ASE to so utilize any item of the Bailed Property is caused by a final adjudication of bankruptcy or insolvency of ASE, Motorola shall be entitled to take possession of the Bailed Property immediately and without notice. If any of the preceding situations arises ASE shall, upon Motorola's instruction., properly prepare for immediate shipment and delivery of such items of the Bailed Property to any location designated by Motorola, F.O.B. ASE's dock.
7. SPECIFICATIONS AND REQUIREMENTS FOR THE WORK
(A) Upon the commencement of this Agreement, ASE agrees that the
Work shall conform to such product qualification, vendor qualification,
equipment qualification, processing, quality control, reliability, yield
reporting and inspection specifications and requirements as existed immediately
prior to the purchase of the Paju Facility from Motorola by ASE, and as are
incorporated in Motorola specifications 12MRB18841C, 12MWS70485A, 12MRH02030A
and 12AAQSM120.
*
.
(B) Motorola may change any specifications or requirements by providing written notice to ASE. If any such change, in ASE's opinion, is incompatible with ASE's existing equipment, or would adversely affect ASE's existing productivity rates or material costs at the relevant ASE Facility, Motorola, upon prompt notice by ASE, and ASE shall in good faith negotiate a reasonable and mutually acceptable solution.
(C) Unless otherwise agreed, ASE shall provide a written notice to Motorola * prior to making any changes that may affect any of the Contract Products. In addition, ASE shall, upon request, provide reliability and other data concerning such changes in sufficient detail to allow determination by Motorola as to (i) the effect of such changes on the Contract Products and (ii) whether requalification of the Contract Products by or for customers requiring process control is required. Motorola shall have the right to approve such changes if customer approval is required.
* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.
(D) If ASE is required to apply Motorola's name, trademark, logo or similar information (collectively, the "MARKS") on any Contract Products, ASE agrees that it shall not acquire or claim any right, title or interest thereto, nor shall it use any of the Marks in any other manner except as has been specifically authorized in writing by Motorola. All Marks shall remain the property of Motorola.
8. CAPACITY PLANNING AND FORECASTING
(A) As a condition to the execution of this Agreement, Motorola
shall provide ASE with a written forecast for the total monthly volume of the
Contract Products, itemized by package type and pin count, that Motorola plans
to order from ASE during *
. After the end of each subsequent month, Motorola shall provide ASE with
an update to the forecast (a " * Forecast"), which is to be
used by ASE to allocate capacity for the Work. The Twelve Month Rolling
Forecast shall establish the minimum capacity of ASE to be available to
Motorola during each month of the immediately following *
period, upon the acceptance thereof by ASE. The absence of any notice of
objection to a Twelve Month Rolling Forecast given by ASE within *
of the date of receipt shall be deemed as acceptance by ASE.
Motorola makes no representation or warranty with respect to the accuracy of
any * Forecast.
(B) Using the * Forecasts, ASE will provide sufficient
capacity for * of the Work specified
for each month. ASE will place orders for materials using such suppliers and
upon such lead times as Motorola and ASE shall mutually agree. If Motorola's
forecasts for any Contract Products significantly decrease, and such decrease
results, after * , in more than * of inventory of
unique materials purchased by ASE to support Motorola's requirements, and which
inventory cannot be used for any other ASE customer, then Motorola will
purchase the inventory above * from ASE * ,
provided that ASE had purchased reasonable quantities of such materials based
on Motorola's forecasts. It is ASE's intention to work with its suppliers and
with Motorola to allocate certain of such risks among all parties to the extent
practicable, and it is understood by the parties that the provisions of this
Section 8(B) are subject to review by the parties concurrently with the
issuance of any new pricing Supplement pursuant to Section 16 of this
Agreement.
(C) ASE and Motorola shall negotiate in good faith on the financial obligation of each Party with respect to, and delivery times for, any capital equipment required by ASE to support Motorola's requirements if such equipment
is unique to Motorola's specifications and cannot be used without material modification or expenditure by ASE to support other customers. Such negotiation shall include good faith attempts of the Parties to find alternative uses for such equipment. This Subsection shall not apply to capital equipment additions within the contemplation of the Parties prior to the effective date of this Agreement, which includes ASE's commitment to expend a minimum of * for the Paju Facility.
(D) ASE agrees to use commercially reasonable efforts to accommodate mix and option changes required by Motorola's business needs.
(E) If the Work required is either significantly more or significantly less than that specified by the * month forecast, Motorola shall communicate such information to ASE as soon as such information is available.
9. ORDER PLACEMENT AND DELIVERY
(A) Blanket purchase orders for Contract Products shall periodically be placed by Motorola with ASE. The sole purpose of the blanket purchase order is to establish the price for each Contract Product, as set forth in the Supplements to this Agreement and any new Contract Products added to this Agreement, and to provide a purchase order number which ASE's invoices shall reference. All preprinted terms and conditions contained in the blanket purchase orders, including the aggregate purchase prices, are superceded by the terms and conditions of this Agreement and the Supplements hereto. Motorola's actual orders for the Contract Products shall also be placed with ASE periodically. The actual orders shall provide details regarding specific Contract Products, mix, quantities, shipping instructions and requested shipment dates. ASE agrees to comply with the requested shipment dates unless it advises Motorola otherwise within seven (7) calendar days following its receipt of the actual orders. ASE shall use its commercially reasonable efforts to deliver the exact quantity of the Contract Products ordered. ASE shall adopt Motorola's Demand Driven Production Requirements (DDPR) system for piece part forecasting and, unless otherwise mutually agreed, ASE shall adopt Motorola Contract House Accounts Payable System (CHAPS) for inventory accounting and payment.
(B) "ON-TIME DELIVERIES" means deliveries made no more than
* days before or on ASE's scheduled delivery dates. Time is of the
essence in delivery. ASE shall establish a system to ensure all deliveries to
be made on time.
(C) If * per cent * on-time deliveries are not achieved, ASE agrees to take appropriate corrective actions, including
* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.
communication of the delivery problems to Motorola. ASE shall also take a systematic approach to develop, evaluate and monitor adherence to established on-time delivery requirements. ASE will notify Motorola when the on-time delivery requirement will not be met. ASE and Motorola will in good faith negotiate the compensation to be paid by ASE to Motorola, if any, for actual, direct damages incurred by Motorola as a result of such late delivery. ASE agrees to implement Supplier Managed Inventory with Motorola so that Contract Products will be provided on a demand-pull basis.
10. CANCELLATIONS AND SCHEDULE CHANGES
(A) ASE may cancel a firm order * if it terminates this Agreement on the basis of an uncured payment default by Motorola as provided in Subsection 30(A) hereof.
(B) Delivery schedule changes may be made by mutual agreement. Motorola is not obligated to accept any unscheduled deliveries of Contract Products; however, ASE may ship ahead of Motorola's requested schedule up to a maximum of * calendar days early.
11. SHIPMENT AND ACCEPTANCE
(A) ASE shall ship the Contract Products to the destinations
identified by Motorola. Motorola shall acknowledge to ASE the receipt of each
shipment of Contract Products, stating the quantity and type of, and any
damages existing at delivery to, such Contract Products within *
* of receipt at Motorola's ultimate destination. At Motorola's
request, ASE shall hold the Contract Products and delay shipment for up to
* . ASE shall certify to Motorola with each shipment
that the Contract Products contained therein have successfully passed
applicable testing and meet all specifications. Acceptance testing of the
Contract Products delivered to Motorola shall be performed by Motorola within
* of receipt.
(B) If Motorola rejects any Contract Products, Motorola and ASE shall confer to determine the reason for the rejection. ASE shall immediately exercise commercially reasonable efforts to develop and implement a corrective action plan for any errors, including manufacturing errors or defects, identified in its systems. All properly rejected Contract Products that are confirmed by ASE to be nonconforming may be returned to ASE for a refund at the purchase price stated in the applicable Supplement, plus Motorola's shipping cost, or may be retained by Motorola subject to a mutually agreed credit issued by ASE to be applied to future orders by Motorola. Title and risk of loss or damage to return merchandise
authorization (RMA) material shall pass to ASE ExWorks (EXW) (Incoterms 1990) Motorola's dock.
12. SCRAP
(A) The scrap rates for the Scrap of each type of the Contract Products shall not exceed the corresponding average rates experienced by Motorola at the Paju Facility during 1999 while Motorola owned the Facility. Motorola represents that such average scrap rates are true and correct and have resulted from its normal course of business. ASE shall credit Motorola, at Motorola's selling price for the relevant Contract Product, for Scrap in excess of the applicable average rate. ASE shall use commercially reasonable efforts to continually reduce Scrap rates for Contract Products.
(B) ASE shall dispose of any Scrap in accordance with applicable laws and Motorola's written instructions. Upon request, ASE shall ship all Scrap to Motorola separately from any of the Contract Products or Bailed Property in clearly-marked boxes so as to identify the items contained therein. Motorola shall pay for all reasonable shipping costs with respect to such scrap.
13. PACKAGING
(A) All packaging of the Contract Products shall consist of anti-static materials and shall be resistant to any damage which may result in failure to meet specifications. ASE shall notify Motorola in writing and in advance of changes in existing packaging, even it such changes are within Motorola's specifications.
(B) Unless otherwise directed in writing by Motorola, ASE shall make no reference and place no identification in its packaging of any goods, boxes or containers which would indicate that ASE is the manufacturer of the goods contained therein.
14. RELIABILITY DATA
(A) ASE agrees to provide reliability data which demonstrates the ability of the manufacturing processes used for assembling and testing the Contract Products to meet Motorola's reliability criteria. Any exceptions to these criteria shall be reviewed on a product-by-product basis. Motorola shall have the right to use the reliability data concerning the Contract Products for the sole purposes of preparing sales and promotional information concerning the Contract Products for Motorola's actual or potential customers. ASE's reliability testing methods and conditions shall be subject to review by Motorola from time to time,
and any changes thereto requested by Motorola shalt be mutually agreed before implementation.
(B) ASE agrees to maintain records regarding all Contract Products provided to Motorola for three (3) years after shipment. Such records shall be in a hard copy format, unless and except to the extent Motorola consents to another form of storage, which consent shall not be unreasonably withheld. All Contract Products shall be traceable throughout the entire process of the Work. The records shall include quality control data, process deviation notes, assembly records, deviations, burn-in conditions, final test data and finished goods top side date codes. ASE shall maintain lot history records for a period of three (3) years. All lot history records are the property of ASE but shall also be considered confidential information of Motorola. Motorola shall have access to the lot history records concerning all Motorola Contract Products at any time during ordinary business hours.
(C) ASE agrees to provide, upon request, timely failure analyses on the Contract Products that are beyond either Motorola's analysis capability or which are returned for the purposes of feedback and correlation. Motorola agrees to provide timely failure analysis data to ASE for the sole purposes of feedback and correlation.
(D) To avoid delays in the processing of the Contract Products, ASE shall notify Motorola of any known failure mechanisms and defects which are, or are suspected to be, present in any completed Contract Product. Motorola shall make reasonable efforts to assist ASE in its efforts to correct such failure mechanisms and/or defects.
15. QUALITY
(A) ASE shall take all actions required to obtain and maintain QS9000 certification or recertification for the Facility as soon as practicable, but in any event no later than December 31, 1999, and Motorola shall assist ASE in this effort.
(B) ASE agrees to implement regular quality system reviews for all Contract Products with Motorola. Motorola shall provide the details of such reviews to ASE in writing at least one month in advance.
(C) ASE agrees to nurture a quality culture within each ASE Facility. Quality systems shall include online Statistical Process Control (SPC) with statistically valid limits. ASE shall nurture a culture which responds to established
limits and shall cease production if these limits are exceeded. ASE shall strive for excellence in quality with continuous improvement methods.
16. PRICES
(A) Subject to Section 18, pricing for the Contract Products
under this Agreement shall be specified in the Supplements to this Agreement.
Prices shall be in U.S. dollars and shall be EXW, (Incoterms 1990) ASE's dock.
The Supplement covering the * period is attached hereto as Annex
A.
(B) *
If either Party desires to renegotiate the prices on an anniversary date of the date hereof, it shall notify the other Party at least sixty (60) calendar days prior to such date. The relevant factors in renegotiating the prices shall include market prices for the services provided by ASE, the * and the benefit to ASE of Motorola's efforts to improve ASE's manufacturing process to meet Motorola stringent quality standards.
*
(C)
*
ASE shall establish an internal review process to assure compliance with this Subsection 16(C), and shall certify its compliance to Motorola at least quarterly, both verbally, with an opportunity for Motorola to ask questions, and, if requested, in the form of a written letter to Motorola.
(D) Motorola shall have the right to cause ASE to appoint an independent certified public accounting firm (the "AUDITOR") selected by ASE and approved by Motorola, which approval shall not be unreasonably withheld, to audit ASE's compliance with Subsection 16(C) hereof. The Auditor shall only have access to information that is reasonably necessary to verity ASE's compliance with Subsection 16(C) hereof, and must maintain the confidentiality of such information.
*
*
17. PAYMENT TERMS
Unless otherwise mutually agreed, ASE shall invoice Motorola on or after delivery of any Contract Products, and shall submit all invoices to Motorola's Accounts Payable department at Motorola, Inc., Procurement Financial Services, P.O. Box 20922, Phoenix, Arizona 85036 (telephone (602) 952-3828), or such other address as Motorola may provide. Motorola shall make payments to ASE no later than * after receipt of invoice.
18. COST REDUCTION EFFORTS
(A) Motorola and ASE agree to form a joint cost reduction task force focused on continuous cost improvements for Work on Contract Products, materials, and equipment. Demonstrated cost reductions resulting from joint efforts shall result in immediate price decreases to Motorola of * of the cost savings if such cost reductions are implemented by ASE for other customers, or * of the cost savings if limited to Work on Contract Products.
(B) If, in the reasonable opinion of both parties, Motorola is solely responsible for cost reductions associated with the performance of the Work, ASE shall immediately reduce the prices of the affected Contract Products by * of the per unit cost savings derived from such reduction. If such cost reduction results from the use of Motorola's Confidential Information (as defined in Section 23 hereof), ASE shall use such Confidential Information only with respect to the Work, and not any other work or services for other customers or suppliers unless, and only to the extent, Motorola licenses such use.
(C) Motorola agrees in good faith to work with its suppliers who have Supplier Managed Inventory Agreements with Motorola to obtain the benefits of such agreements for ASE.
19. WARRANTIES
(A) ASE warrants that, at the time of delivery of Contract Products to Motorola and for a period * following the date thereof, all such Contract Products shall: (i) be clear of any liens and encumbrances, (ii) be free from any defects in material and workmanship attributed to the Work and (iii) conform to all written specifications relating thereto.
(B) With respect to defective units, ASE shall either rework the units if returned, replace the units, * All costs associated with such returns, replacements, rework and corrections shall be borne by ASE, including all labor, materials, installation, repair, service, transportation and other charges. ASE expressly assumes all risks of loss or damage to the units returned by Motorola while such units are in transit.
(C) In the event that repeated field failures occur with respect to a Contract Product, or a significant field failure occurs which requires immediate attention, ASE and Motorola shall discuss a solution in good faith.
(D) ASE hereby represents and warrants that none of the Contract Products shall be manufactured with, or contain, Class 1 ozone depleting substances.
(E) To the extent that the performance of the Work depends on certain information technology that processes, provides and/or receives date data, ASE represents and warrants that it will use commercially reasonable efforts to ensure that the Work shall not be materially interrupted or adversely impacted by "year 2000 problems" associated with ASE's operations.
(F) All warranties shall survive the acceptance and payment by Motorola.
20. INDEMNITY
(A) ASE agrees to indemnify, defend and hold harmless Motorola, its officers, agents and employees from any and all claims, costs, attorney fees, fines, and similar expenses of whatsoever kind or character, including, but not limited to, those resulting from injury or death to persons or damage to property to the extent due to any negligence or willful misconduct of ASE, its officers, employees, subcontractors, or agents acting on ASE's behalf in connection with ASE's obligations under this Agreement.
(B) Motorola agrees to indemnify, defend and hold harmless ASE, its officers, agents and employees from any and all claims, costs, attorney fees, fines, and similar expenses of whatsoever kind or character, including, but not limited to, those resulting from injury or death to persons or damage to property to the extent due to any negligence or willful misconduct of Motorola, its officers, employees, subcontractors, or agents acting on Motorola's behalf in connection with Motorola's obligations under this Agreement.
(C) ASE agrees to defend, at its expense and with counsel chosen by it, any suits brought against Motorola based upon the claim that any of the Work infringes or violates any patent, mask work, copyright, trade secret, or other intellectual property right other than those alleged infringements or violations instructed or requested by Motorola, and to pay all liabilities, costs, and damages finally determined in any such suit against Motorola. Motorola shall promptly notify ASE in writing of any such suit and shall provide reasonable assistance to ASE in connection with defending such suit. If the use and sale of any of the Contract Products is enjoined as a result of such suit, ASE, at its option and at no expense to Motorola, shall either obtain for Motorola the right to use and sell the Contract Products or shall substitute an equivalent method for performing the Work which is acceptable to and qualified by Motorola. This Subsection (C) does not extend to any suit based upon any infringement or alleged infringement of any patent, copyright, mask work, trade secret or any other intellectual property right (i) caused by any article of Motorola's design or formula, or (ii) the use of any manufacturing process licensed to ASE by Motorola.
(D) Motorola agrees to defend, at its expense and with counsel chosen by it, any suits brought against ASE based upon the claim that any of the Contract Products produced by ASE for Motorola infringes any patent, mask work, copyright, trade secret or other intellectual property right, if such infringement arises from compliance by ASE with Motorola's specifications or formula, and to pay all liabilities, costs, and damages finally determined in any such suit against ASE. ASE shall promptly notify Motorola in writing of any such suit and shall provide reasonable assistance to Motorola in connection with defending such suit.
(E) THE FOREGOING PROVISIONS STATE THE ENTIRE LIABILITY OF EITHER PARTY WITH RESPECT TO INFRINGEMENT OF PATENT, COPYRIGHTS, MASK WORKS, TRADE SECRETS, OR ANY OTHER INTELLECTUAL PROPERTY RIGHT CLAIMS OF ANY TYPE. WITHOUT LIMITING THE OBLIGATIONS OF EITHER PARTY UNDER SUCH FOREGOING PROVISIONS, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER AGAINST THE COUNTERPARTY (INCLUDING, WITHOUT LIMITATION, LOST PROFITS) ARISING FROM INFRINGEMENT OR ALLEGED INFRINGEMENT OF PATENT, COPYRIGHTS, MASK WORKS, TRADE SECRETS, OR ANY OTHER INTELLECTUAL PROPERTY RIGHT.
21. INSURANCE
(A) At all times during the term of this Agreement, ASE shall maintain, in full force and effect and at its sole expense, the following forms of insurance:
(1) at least * of insurance to cover any loss, theft or damage to the Contract Products or the Bailed Property in the amount of the full replacement cost thereof, and shall name Motorola as the loss payee;
(2) public liability and property damage liability insurance, under the comprehensive general liability form, with limits of liability of no less than *, including contractual liability coverage for the indemnity obligations specified in Section 20 hereof and a products/completed operations endorsement; and
(3) excess liability insurance, under the
umbrella form, with a limit of liability of not less than
* per occurrence.
(B) ASE shall name Motorola as an additional insured under the liability insurance policies specified in Subsections 21(A)(2) and 21(A)(3) and Motorola will bear the cost of naming Motorola as an additional insured to the extent such cost exceeds * . In addition, ASE's insurance must be designated as primary. A certificate of insurance evidencing the required coverages and confirming that Motorola is identified as a loss payee or additional insured as specified herein shall, upon request, be provided to Motorola prior to the commencement of any Work. ASE shall provide Motorola with written notice no later than thirty (30) calendar days prior to any expiration, termination or cancellation of any policy.
(C) * giving ASE written notice of said additional requirements subject to the prior written consent of ASE, which will not be unreasonably withheld. *
(D) The procurement and maintenance of insurance specified in this Section 21 shall not limit or affect liability of ASE under this Agreement.
22. RECORDS AND AUDITS
ASE shall implement and utilize such records, procedures and systems
as may be specified by Motorola in writing from time to time to document,
record and account for (i) the performance of the Work, (ii) the location and
use of and adequate security for the Bailed Property, (iii) compliance with
Motorola's quality control and reliability processes and specifications, (iv)
proper documentation of shipment, delivery, invoicing and payment history and
(v) other similar matters. ASE agrees to permit representatives of Motorola at
reasonable times to inspect, audit and copy such books, records and
documentation.
23. CONFIDENTIALITY/NON-DISCLOSURE AGREEMENT
(A) Pursuant to this Agreement, one Party may furnish to the other Party software, data, designs, drawings, tracings, plans, layouts, specifications, samples, equipment and other written information which is confidential and proprietary to the disclosing Party (collectively, the "Confidential Information"). All Confidential Information, as delivered in written form, shall be marked "CONFIDENTIAL" or an equivalent thereof by the disclosing Party. Any Confidential Information which is furnished orally shall be confirmed in writing as being Confidential Information within thirty (30) calendar days of being so furnished.
(B) It is agreed that for a period of five (5) years after receipt of Confidential Information, the receiving Party shall: (i) restrict the dissemination of such Confidential Information to (a) those employees who need to use the Confidential Information in the performance of the Work and (b) those to whom the receiving Party is legally compelled to disclose; and (ii) use the same degree of care as for its own information of like importance, but at least use reasonable care, in safeguarding against unauthorized disclosure of such Confidential Information. ASE agrees to have an appropriate nondisclosure agreement signed by each of its employees who may be exposed to Motorola's Confidential Information.
(C) Notwithstanding any other provisions of this Agreement,
Confidential Information shall not include any information which: (i) is now
available or becomes available to the public otherwise than as a result of a
breach of this Agreement by the receiving Party, (ii) is released in writing by
the disclosing Party, (iii) is lawfully obtained from a third party or parties,
(iv) is known to the receiving Party prior to such disclosure by the disclosing
Party, (v) is at any time developed by the receiving Party prior to such
disclosure or (vi) is at any time developed by the receiving Party
independently of such disclosure or disclosures by the disclosing Party.
(D) The Parties shall not disclose the existence of this Agreement or any of the terms hereof to third parties, except (i) when requested or required by any legal or other regulatory authority to disclose such information and (ii) as may be necessary to enforce the terms hereof.
(E) Each Party agrees not to disclose to the other Party any confidential or proprietary information of third parties unless authorized to do so.
(F) For the purposes of Section 30 hereof, any breach of the provisions in this Section 23 shall be a material breach under this Agreement.
(G) It is expressly understood that any drawings, blueprints, descriptions, resumes, documents, tapes or any other media transferred by the disclosing Party hereunder, and all copies, modifications and derivatives thereof, shall remain the property of the disclosing Party, and the receiving Party is authorized to use those materials only in accordance with the terms and conditions of this Agreement.
(H) ASE agrees that Motorola's past, present and future costs of material and equipment shall be considered Confidential Information of Motorola, whether or not so marked and provided in writing in connection with Subsection 23(A) hereof.
24. INVENTIONS
(A) All discoveries, improvements, inventions and trade secrets created or conceived during the performance of this Agreement *
(B) All discoveries, improvements, inventions and trade secrets created or conceived during the performance of this Agreement *
(C) All discoveries, improvements, inventions and trade secrets created or conceived during the performance of this Agreement jointly by Motorola and ASE personnel shall be the joint property of Motorola and ASE, each Party having an equal and undivided one-half (1/2) joint interest therein (the "JOINTLY-OWNED IP"). Each Party may assign, license or otherwise transfer a portion or all of its rights under any such Jointly-owned IP without the consent of the other Party and
without accounting to the other Party, and the Parties shall cooperate with each other in executing all necessary documents to give effect to the foregoing.
(D)
*
. Motorola shall notify ASE in writing whether or not, and in which jurisdictions, Motorola elects to file such patent applications; ASE shall have the right to file patent applications in all other jurisdictions. Each Party, at its own expense, shall cooperate fully with the filing Party as may be necessary for the proper preparation, filing and prosecution of each such patent application and the maintenance, renewal and defense of each patent covering such discovery, improvement or invention.
(E) The IP Expenses for preparing each joint patent application
shall be borne by the Party that prepares and files the application. Before
filing, the filing Party shall request the other Party to indicate whether it
will agree to pay * of all IP Fees and Translating Expenses, if
any, in a particular jurisdiction or group of jurisdictions. In the event that
the non-filing Party does not notify the requesting Party within *
in writing that it will pay * of all IP Fees and
Translating Expenses or if one Party desires to obtain intellectual property
protection for specific Joint-owned IP (such as filing for patent protection in
a certain country) and the other Party does not wish to obtain such protection,
(i) the filing Party shall control and pay the cost of such prosecution, (ii)
but both Parties will remain joint owners and (iii) the filing shall reflect
the Parties as joint owners. For the purposes of this Subsection 24(E): (i) "IP
Fees" shall mean fees or other charges required to be paid to a governmental
agency, office or entity to secure and maintain intellectual property rights
and include filing fees, registration fees, issue fees, maintenance fees,
annual taxes and annuities; (ii) "IP Expenses" shall mean fees, costs or other
charges related to securing and maintaining intellectual property rights other
than IP Fees and Translating Expenses; and (iii) "Translating Expenses" shall
mean fees, costs or other charges related to translating patent applications.
25. DATA RIGHTS
ASE hereby assigns to Motorola all rights in software, reports, drawings, sketches, formulas, notes, notebooks and designs prepared for the performance of the Work. All rights, title and interest shall vest immediately in Motorola upon preparation, shall be the sole property of Motorola and shall not be disclosed by ASE to any third party.
26. SECURITY
ASE agrees to take all necessary precautions to secure the areas of the Facility associated with the performance of the Work and the storage of the Bailed Property. Motorola shall have the right to audit ASE's security practices, policies, procedures and measures as they relate to the performance of the Work, and to specify such changes as may be reasonably required to protect the Work or the Bailed Property. ASE shall immediately report to Motorola any breaches or suspected breaches of its security, but such reporting shall not relieve ASE of its responsibilities hereunder.
27. FORCE MAJEURE
Neither Party shall be liable for failures or delays in fulfilling its obligations hereunder owing to any cause beyond its reasonable control, including, but not limited to, acts of God, governmental orders or restriction, war, threat of war, warlike conditions, fire, hostilities, sanctions, revolution, riot, looting, strike, lockout, interruption of transportation or inability to obtain necessary labor, materials or equipment. ASE shall notify Motorola promptly of any interruptions in the Work or difficulties relating to the Facility that may affect the availability of the Contract Products.
28. ASSIGNMENT
(A) ASE shall not assign, sublicense, delegate, subcontract or otherwise transfer this Agreement or any rights or obligations arising under this Agreement without the prior written approval of Motorola, which shall not be unreasonably withheld.
*
(B) Should any business unit of Motorola's Semiconductor Products Sector as it existed on March 11, 1999 subsequently be separated from Motorola, whether due to a sale, a spin-off or other arrangements (a "Business Unit"), ASE agrees to extend the same terms and conditions of this Agreement (including all Supplements hereto) to such Business Unit if it so requests. ASE further agrees to extend the same terms and conditions of this Agreement and all Supplements hereto to Affiliates where "Affiliates" means any other person or entity controlling, controlled by or under common Control with Motorola where "Control" means direct or indirect, legal or beneficial ownership of 50% or more of the voting control of such person or entity if they so request.
(C) Other than as provided in Subsection 28(B), Motorola shall not assign, sublicense, delegate, subcontract or otherwise transfer this Agreement or any rights or obligations arising under this Agreement without the prior written approval of ASE, which shall not be unreasonably withheld.
29. NOTICES
(A) In any case where a notice or another form of communication
is to be given or made pursuant to any provision of this Agreement, such notice
or communication shall be deemed to be received when given or made as follows:
(i) if by hand delivery, on the day delivered; or (ii) if by telex, cable, fax
or telegraph, on the next business day following the date sent.
(B) All notices specifically required to be given under the terms of this Agreement shall be delivered to the following addresses, as applicable:
To ASE:
Advanced Semiconductor Engineering, Inc.
Room 1901
Taiwan World Trade Center International Trade Bldg.
19th Floor
No. 333 Keelung Road
Section 1
Taipei, Taiwan
Republic of China
To Motorola:
Jim Duckworth
Director of Supply Management
Semiconductor Products Sector
Motorola, Inc.
7700 West Parmer Lane
Maildrop PL03
Austin, TX 78729
With a copy to:
Cindi Moreland
Director, Motorola SPS Corporate Law Department
Motorola, Inc.
6501 William Cannon Drive
West Austin, TX 78735
30. TERMINATION
(A) If either Party defaults on any of the material obligations
or conditions of this Agreement and such default remains uncured for
* after written notice to the defaulting Party specifying the
nature of the default the non-defaulting Party shall have the right to
terminate this Agreement by giving written notice of termination to the
defaulting Party; in such case, this Agreement shall terminate on the
* after provision of such termination notice. The defaulting
Party shall have the right to cure any such default through but not after the
date of termination. In the event of a cure of default, the cure shall be
retroactive to the date of the notice of default. In order to cure any default
of a payment obligation of this Agreement, the defaulting party shall pay
* annual interest on the amount of the obligation, appropriately
prorated for the time between when the obligation was due and when it is paid.
(B) Either Party shall have the right to terminate this Agreement by giving written notice of termination to the other Party at any time upon or after: (i) the filing by the other Party of a petition in bankruptcy or insolvency; (ii) any adjudication that the other Party is bankrupt or insolvent; (iii) the filing by the other Party under any law relating to bankruptcy or insolvency; (iv) the appointment of a receiver for all or substantially all of the property of the other Party; (v) an assignment or attempted assignment for the benefit of creditors by the other Party; or (vi) the institution of any proceedings for the liquidation or winding up of the other Party's business or for the termination of its corporate charter. In any such case this Agreement shall terminate on the tenth (10th) calendar day after provision of the termination notice.
(C) In the event of a direct or indirect taking over, or an assumption of control, of Motorola or ASE, Inc. by a third party, the non-acquired Party shall have the right to terminate this Agreement immediately at any time thereafter upon giving written notice.
(D) Either Party shall have the right to terminate this Agreement if, in its sole judgment, official United States or Korean government policy, directives
* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.
or rulings have been put into effect that substantially affect or change the economic viability of this Agreement and the Parties have not been able to renegotiate this Agreement in a mutually satisfactory manner within a reasonable period of time following such event. No Party shall make any claims or demands against any other Party for any damages, losses, expenses or costs, if any, incurred as a result of termination of this Agreement pursuant to this Subsection 30(D).
(E) If any of the events and conditions set forth in Section 27 has continued for more than * , the non-affected Party may terminate this Agreement immediately upon written notice.
(F) If Motorola terminates this Agreement on the ground of a default by ASE, Motorola may, at its sole discretion, cancel the delivery of all unshipped, and shipped but unaccepted, Contract Products.
(G) Within one (1) month following the termination of this Agreement, ASE shall return or destroy to Motorola each item of Technical Information and Confidential Information delivered or disclosed to ASE hereunder, and provide a certification that, through its best efforts, and to the best of its knowledge, the original and all copies, in whole or in part, in any form, of the Technical Information and Confidential Information, have been destroyed or returned to Motorola.
(H) The provisions of this Section and Sections 6, 19, 20, 23, 24, 32, 34, 35, 38, and 39 shall survive the expiration or termination of this Agreement.
31. TRANSLATION
Notwithstanding any translation of this Agreement, the English language version shall be determinative.
32. ENVIRONMENTAL MATTERS
ASE shall indemnify and hold Motorola harmless from and against any liability, claim, damage, injury, expense, suit or cause of action, including but not limited to reasonable attorneys fees, arising from or caused by any toxic or hazardous substances or chemicals, as those terms are defined by the environmental health or safety laws or regulations of Taiwan, Republic of China, the country in which each ASE facility is located which are (i) used in the performance of the Work, (ii) present in the Scrap disposed of or destroyed by ASE (other than in accordance with Motorola's instructions) or (iii) present at such ASE Facility during the term of this Agreement. ASE shall comply with all applicable laws and have all necessary permits, operating licenses or
authorizations necessary to operate such ASE Facility under applicable environmental safety or health laws or regulations in the country in which such ASE Facility is located.
33. OTHER OBLIGATIONS
(A) In connection with this Agreement, ASE agrees to comply with all applicable laws, rules, regulations and orders of any duly constituted authority, including, but not limited to, those relating to taxes, insurance, environmental regulation, transportation, country of origin and other customs requirements and occupational safety and health.
(B) Each of Motorola and ASE covenants that:
(1) it shall not request, induce, solicit or accept any bribe, kickback or illegal payment from any employee of the other Party;
(2) it shall not offer or provide any gift or gratuity to any employee of the other Party (including, but not limited to, Christmas presents, money, property, services, free trips, commissions, kickbacks, paid vacation, special discounts on a product or service, or entertainment) which could be viewed as an attempt to influence the business relationship between the Parties;
(3) it shall not solicit, encourage or participate in any activity in which the funds and assets of the other Party would not be properly and accurately recorded on the books and records of the other Party in accordance with generally accepted accounting principles and practices (such as creation of false or artificial entries), or in any payment made on behalf of Motorola which would be approved or made with the intention or understanding that any part of such payment is to be used for any purpose other than that described by the documents supporting the payment (such as issuance of an invoice or other document which inaccurately reflects a transaction);
(4) it does not presently and shall not employ any employee of the other party in any way, directly or indirectly, which could compromise such employee's loyalty to the other Party; and
(5) it does not presently have any employee of the other Party, or person who has a close personal relationship with an employee of the other Party, who has a financial interest in its business (including employment) to the extent that a conflict of interest may exist or be created, and it shall not allow such a situation to arise while the Agreement is in effect.
(C) ASE * and * the due and punctual payment or performance, as applicable, by * of the obligations, covenants, and agreements of ASE under this Agreement, and hereby waives any defense, including any suretyship defenses or offset, which it otherwise might have or assert in the event of enforcement of such *
(D) Motorola shall have the right to deduct or offset any money due under this Agreement against any money then due and payable to Motorola by ASE under any other agreement between the parties, including, without limitation, the Asset Purchase Agreement and the agreement under which ASE purchased Motorola's final manufacturing and test operations in Korea.
34. EXPORT CONTROL AND GOVERNMENT APPROVAL
The Parties acknowledge that they must comply with all applicable rules and laws in connection with this Agreement including, but not limited to, those relating to restrictions on export and to approval of agreements. Each Party shall be responsible for obtaining and maintaining all approvals and licenses, including export licenses, permits and governmental authorizations from the appropriate governmental authorities as may be required to enable such Party to fulfill its obligations under this Agreement. Each Party agrees to give reasonable assistance to the other in obtaining any such approvals, export licenses, permits or governmental authorizations. Each Party agrees that, unless prior written authorization is obtained from the United States Bureau of Export Administration, it shall not export, re-export, or transship, directly or indirectly, any products or technical information that would be in contravention of the Export Administration Regulations then in effect as published by the United States Department of Commerce.
35. NON-SOLICITATION OF EMPLOYEES
(A) During the term of this Agreement neither Motorola nor ASE shall solicit any employee of the other for employment, either directly through any of its employees, *
(B) Before making an offer of employment to any individual who is employed by Motorola during the term of this Agreement, ASE shall provide notice of its intent to make such an offer to Motorola's designated manager, and ASE and Motorola shall then discuss the circumstances which led to ASE's potential employment offer and the impact on their business relationship should any offer be made by ASE and accepted by such individual.
(C) ASE agrees that if it hires any Motorola employee without Motorola's consent, ASE will * that such individual was in most recently when employed at Motorola. The parties agree that such amount * to hire a qualified * individual. 36. SECTION TITLES Section titles as to the subject matter of particular sections herein |
are for convenience only and are in no way to be construed as part of this Agreement or as a limitation of the scope of the particular sections to which they refer.
37. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.
38. APPLICABLE LAW
The laws of the United States and, where applicable, the state of New York, shall govern this Agreement, except for that body of law known as conflicts of laws. The Parties expressly agree that the UN Convention for the International Sale of Goods shall not apply.
39. DISPUTE RESOLUTION
(A) The Parties shall attempt to settle any claim or controversy arising out of this Agreement through consultation and negotiation in good faith and a spirit of mutual cooperation. If those attempts fail, the dispute shall be mediated by a mutually acceptable mediator to be chosen by the Parties within * after written notice by one of the Parties demanding mediation. Neither Party may unreasonably withhold its consent to the selection of a mediator, and the Parties shall share the costs of the mediation equally. By mutual agreement, however, the Parties may postpone mediation until each has completed
some specified but limited discovery about the dispute. The Parties may also agree to replace mediation with non-binding alternative dispute resolution, such as neutral fact-finding or a minitrial. Disputes relating to the intellectual property of either Party shall not be subject to mediation or alternative dispute resolution.
(B) Any dispute which cannot be resolved through negotiation or mediation within * of the initial demand by either Party shall then be finally resolved by a court within the state of New York. The use of alternative dispute resolution shall not be construed under the doctrines of laches, waiver or estoppel to affect adversely the rights of either Party. Nothing in this Subsection 39(B) shall prevent either Party from resorting to judicial proceedings if: (i) good faith efforts to resolve the dispute under these procedures have been unsuccessful, or (ii) interim relief from a court is necessary to prevent serious and irreparable injury to one Party or to others.
(C) EXCEPT AS MAY BE OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, LOST PROFITS) REGARDLESS OF THE LEGAL THEORY ON WHICH ANY SUCH CLAIM MAY BE MADE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
40. EXCLUSIVE AGREEMENT
This Agreement contains the complete and exclusive statement of the agreement and understanding of Motorola and ASE relating to the subject matter of this Agreement, and it supersedes all other agreements, understandings, communications, and proposals, oral or written, between the parties. Any amendment of this Agreement must be in writing and signed by authorized representatives of Motorola and ASE.
41. SEVERABILITY
If any provision of this Agreement should become fully or partially invalid or unenforceable for any reason whatsoever, or violate any applicable law, this Agreement is to be considered divisible as to such provision and such provision deleted from this Agreement, and the remainder of this Agreement shall be valid and binding as if such provision were not included herein. A new provision shall be substituted for any such deleted provision which shall come as close to what the parties intended, as far as legally possible, according to the sense and purpose of this Agreement.
42. WAIVER
The failure of any Party to enforce, at any time, or for any period of time, any provision of this Agreement, to exercise any election or option provided herein, or to require, at any time, performance of any of the provisions hereof, shall not be construed to be a waiver of such provision, or in any way affect the validity of this Agreement, or any part thereof, or the right of any Party thereafter to enforce each and every such provision.
43. INDEPENDENT CONTRACTOR
It is agreed that ASE is an independent contractor for the performance of the Work under this Agreement and that Motorola shall have no control over the methods and means of accomplishment thereof, except as specifically set forth in this Agreement. There is no relationship of agency, partnership, joint venture, employment or franchise between the Parties. ASE is the sole employer and principal of any and all persons performing Work under this Agreement, and is obligated to perform all requirements of an employer under applicable law. ASE employees and agents shall not be construed to be employees of Motorola, nor be entitled to participate in the profit sharing, pension, or other plans established for the benefit of Motorola's employees.
44. ENTIRE AGREEMENT
(A) This Agreement, which includes the Supplements and other attachments hereto, supersedes all prior discussions and writings and constitutes the entire and only contract between the Parties relating to the Work, and it may not be changed, altered or amended except in writing and signed by duly authorized representatives of all of the Parties.
(B) If any inconsistencies arise between the terms of this
Agreement, a purchase order or any other agreement entered into between the
Parties, the order of precedence in determining the rights and obligations of
the Parties shall be: (i) the Asset Purchase Agreement; (ii) this Agreement;
(iii) the Supplements; and (iv) the relevant firm orders.
IN WITNESS WHEREOF, the Parties hereto execute this Agreement to be effective on the date first referenced above.
Advanced Semiconductor Engineering, Inc. Motorola, Inc. Name: /s/ JASON CHANG Name: /s/ PATRICK CHOY ------------------------------- ----------------------- Title: Jason Chang, Chairman Title: Patrick Choy, ------------------------------- Corporate Vice President ----------------------- Date: Date: ------------------------------- ----------------------- ASE Korea Ltd. Name: /s/ JOSEPH TUNG ---------------------- Title: Joseph Tung, Director ---------------------- Date: ---------------------- |
Korea Factory Summary -- Factory Cost & Unit Volume Most realistic numbers reflected variability
Total Cost Volume Unit Cost ------------------------------------------------------------------------------------------------------------------------------------ 1H2000 1H2000 2H99 1H200 Q498 Q199 2H99 Qnty Qnty Q498 Q199 2H99 Qnty Qnty Q498 Q199 Units Qnty Pkg Description Total $ Total $ Total $ Total $ Units Units Units Units CLC CLC CLC CLC ------------------------------------------------------------------------------------------------------------------------------------ * * * * * * * * * * * * * * * * * * * * * * * * * * |
EXHIBIT 10.6
IMMUNITY AGREEMENT
THIS AGREEMENT is effective as of the 25th day of January, 1994 by and between MOTOROLA, INC., a Delaware corporation having an office at 3102 North 56th Street, Phoenix, Arizona 85018, (hereinafter called "MOTOROLA"), and ASE, Incorporated, a corporation of Kaohsiung Taiwan, ROC having an office at Kaohsiung, Taiwan and Penang, Malaysia, (hereinafter called "ASSEMBLY HOUSE").
WHEREAS, MOTOROLA owns and has, or may have patents issued, and applications for patents pending, in various countries of the world which relate to ball grid array (BGA) PACKAGEs (as hereinafter defined), and
WHEREAS, ASSEMBLY HOUSE owns and has, or may have, rights in various patents issued, and applications for patents pending, in various countries of the world which may relate to BGA PACKAGEs, and
WHEREAS, ASSEMBLY HOUSE and MOTOROLA are engaged in continuing research, development and engineering in regard to BGA PACKAGES and have programs for the patenting of inventions resulting therefrom; and
WHEREAS, MOTOROLA is interested in proliferating BGA PACKAGEs as a standard in the semiconductor industry; and
WHEREAS, ASSEMBLY HOUSE is interested in providing the service of making BGA PACKAGEs for semiconductor manufacturers including those who are competitors of MOTOROLA;
NOW THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, it is agreed as follows:
Section 1 - DEFINITIONS
1.1 SUBSIDIARY(IES) means a corporation, company, or other entity more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly by a party hereto, but such corporation, company, or other entity shall be deemed to be a SUBSIDIARY only so long as such ownership or control exists.
1.2 SEMICONDUCTIVE MATERIAL means any material whose conductivity is intermediate to that of metals and insulaters at room temperature and whose conductivity, over some temperature range, increases with increases in temperature. Such material shall include but not be limited to refined products, reaction products, reduced products, mixtures and compounds.
1.3 INTEGRATED CIRCUIT STRUCTURE means an integral unit consisting primarily of a plurality of active and/or passive circuit elements associated on, or in, a unitary body of SEMICONDUCTIVE MATERIAL for performing electrical or electronic functions.
1.4 BGA PACKAGE means a housing for an INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs in which the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs are mounted on one side of a substrate of printed circuit board material or the like and are wire bonded to the substrate, plastic overlies the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs, and pads for receiving solder balls or the like and providing electrical contacts to the integrated circuit device are mounted on the substrate on the side opposite to that on which the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs are mounted. Some BGA packages may have some pads which are not electrically connected to the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs.
1.5 MOTOROLA PATENTS means all classes or types of patents, utility models, design patents and applications for the aforementioned of all countries of the world relating to BGA PACKAGEs and enhancements thereto which, prior to the date of expiration or termination of this Agreement, are:
(i) issued, published or filed, and which arises out of inventions made solely by one or more employees of MOTOROLA or a SUBSIDIARY thereof, or
(ii) acquired by MOTOROLA or a SUBSIDIARY thereof,
and under which and to the extent to which and subject to the
conditions under which MOTOROLA or a SUBSIDIARY thereof may have, as of
the EFFECTIVE DATE of this Agreement, or may thereafter during the term
of this Agreement acquire, the right to grant licenses or rights of the
scope granted herein without the payment of royalties or other
consideration to third persons, except for payments to third persons
(a) for inventions made by said third persons while engaged by MOTOROLA
or a SUBSIDIARY thereof, and (b) as consideration for the acquisition
of such patents, utility models, design patents and applications.
1.6 ASSEMBLY HOUSE PATENTS means all classes or types of patents, utility models, design patents and applications for the aforementioned of all countries of the world relating to BGA PACKAGEs and enhancements thereto which, prior to the date of expiration or termination of this Agreement, are:
(i) issued, published or filed, and which arise out of inventions made solely by one or more employees of ASSEMBLY HOUSE or a SUBSIDIARY thereof, or
(ii) acquired by ASSEMBLY HOUSE or a SUBSIDIARY thereof,
and under which and to the extent to which and subject to the conditions under which ASSEMBLY HOUSE or a SUBSIDIARY thereof may have, as of the EFFECTIVE DATE of this Agreement, or may thereafter during the term of this Agreement acquire, the right to grant licenses or rights of the scope granted herein without the payment of royalties or other consideration to third persons, except for payments to third persons (a) for inventions made by said third persons while engaged by ASSEMBLY HOUSE
or a SUBSIDIARY thereof and (b) as consideration for the acquisition of such patents, utility models, design patents and applications.
1.7 EFFECTIVE DATE means the date of the last signature hereto.
Section 2 - MUTUAL RELEASES
2.1 MOTOROLA hereby releases, acquits and forever discharges ASSEMBLY HOUSE and its SUBSIDIARIES for any time prior to the EFFECTIVE DATE, from any and all claims or liability for infringement or alleged infringement of any MOTOROLA PATENTS for which immunity from suit is herein granted by MOTOROLA.
2.2 ASSEMBLY HOUSE and its SUBSIDIARIES hereby releases, acquits and forever discharges MOTOROLA and it SUBSIDIARIES for any time prior to the EFFECTIVE DATE, from any and all claims or liability for infringement or alleged infringement of any ASSEMBLY HOUSE PATENTS for which immunity from suit is herein granted by ASSEMBLY HOUSE to MOTOROLA.
Section 3 - IMMUNITY FROM SUIT
3.1 MOTOROLA hereby grants to ASSEMBLY HOUSE and its SUBSIDIARIES, for the term of this Agreement, immunity from suit under MOTOROLA PATENTS for making BGA PACKAGES, with or without solder balls or the like, for another and for ASSEMBLY HOUSE internal use. In no event shall the immunity from suit apply to MOTOROLA PATENTS which are infringed by the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs independent of being packaged in BGA PACKAGES.
3.2 ASSEMBLY HOUSE and its SUBSIDIARIES hereby grant to MOTOROLA and its SUBSIDIARIES, for the term of this Agreement, immunity from suit under ASSEMBLY HOUSE PATENTS for making and/or having made BGA PACKAGES, with or without solder balls or the like, and for the subsequent sale and use thereof. In no event shall the immunity from suit apply to ASSEMBLY HOUSE PATENTS which are infringed by the INTEGRATED CIRCUIT STRUCTURE or STRUCTUREs independent of being packaged in BGA PACKAGEs.
3.3 No licenses under any copyrights or mask work rights of either MOTOROLA or ASSEMBLY HOUSE or a SUBSIDIARY thereof, are granted under this Agreement.
Section 4 - PAYMENTS
4.1 In partial consideration of the rights granted by MOTOROLA under
Section 3, for the period beginning on the EFFECTIVE DATE and extending
to December 31, 2002, ASSEMBLY HOUSE agrees to pay MOTOROLA a royalty
based on the total number of pads on BGA PACKAGEs made by ASSEMBLY
HOUSE and its SUBSIDIARIES, and shipped and invoiced to customers of
ASSEMBLY HOUSE or its SUBSIDIARIES, excluding those made for MOTOROLA
and excluding returns.
4.1.1 *
4.1.2 *
4.2 A payment for 1993 shall be made by February 28, 1994 and shall be determined by the total number of pads on BGA PACKAGEs subject to the immunity from suit of section 3.1 made, shipped and invoiced during 1993 to customers of ASSEMBLY HOUSE or its SUBSIDIARIES excluding those made for MOTOROLA and excluding returns.
4.3 Payments for years subsequent to 1993 shall be on a quarterly basis. Within forty-five (45) days after each calendar quarter ending March 31, June 30, September 30, and December 31, ASSEMBLY HOUSE shall pay to MOTOROLA the royalties payable hereunder for the respective calendar quarter ending on such date as determined above.
4.4 Any payment hereunder which shall be delayed for more than thirty (30)
days beyond the due date shall be subject to an interest charge of one
(1) percent per month on the unpaid balance payable in United States
currency until paid. The foregoing payment of interest shall not affect
MOTOROLA's right to terminate in accordance with Section 5.
4.5 ASSEMBLY HOUSE shall keep full, clear and accurate records with respect to BGA PACKAGEs. MOTOROLA shall have the right through a mutually agreed upon independent auditor to examine and audit no more than once a year at a mutually agreeable time all such records and such other records and accounts as may under recognized accounting practices contain information hearing upon the amount of royalty payable to MOTOROLA under this Agreement. Prompt adjustment shall be made to compensate for any errors or omissions disclosed by such examination or audit. Neither such right to examine and audit nor the right to receive such adjustment shall be affected by any statement to the contrary appearing on a check or otherwise.
4.6 Within forty-five (45) days after 1993 and thereafter within forty-five
(45) days after each calendar quarter ending March 31, June 30,
September 30, December 31 and continuing thereafter until all royalties
payable hereunder shall have been reported and paid. ASSEMBLY HOUSE
shall furnish to MOTOROLA a detailed and complete written statement,
certified by a responsible officer of ASSEMBLY HOUSE as showing all BGA
PACKAGEs which were either manufactured, sold, leased, put into use, or
otherwise disposed of during such periods, and the amount payable
thereon. If no such BGA PACKAGEs have been manufactured, sold, leased,
put into use, or otherwise disposed of, that fact shall be shown on
such statement.
4.7 Payments hereunder are to be made to MOTOROLA's New York City account at CITIBANK 38491386, 1 Citicorp Center, 399 Park Avenue, New York, New York 10043. Notice of payments shall be sent by ASSEMBLY HOUSE to MOTOROLA's address in Section 6.9.
* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.
Section 5 - TERM AND TERMINATION AND ASSIGNABILITY
5.1 The term of this Agreement shall be from the EFFECTIVE DATE until December 31, 2002 unless earlier terminated as elsewhere provided in this Agreement.
5.2 In the event of any breach of this Agreement by either party hereto
(including ASSEMBLY HOUSE's obligation to make payments under Section
4), if such breach is not corrected within forty-five (45) days after
written notice describing such breach, this Agreement may be
terminated forthwith by further written notice to that effect from the
party noticing the breach.
5.3 Either party hereto shall also have the right to terminate this Agreement forthwith by giving written notice of termination to the other party at any time, upon or after:
5.3.1 the filing by such other party of a petition in bankruptcy or insolvency; or 5.3.2 any adjudication that such other party is bankrupt or insolvent; or 5.3.3 the filing by such other party of any legal action or document seeking reorganization, readjustment or arrangement of its business under any law relating to bankruptcy or insolvency; or 5.3.4 the appointment of a receiver for all or substantially all of the property of such other party; or 5.3.5 the making by such other party of any assignment for the benefit of creditors; or 5.3.6 the institution of any proceedings for the liquidation or winding up of such other party's business or for the termination of its corporate charter. |
5.4 In the event of termination of this Agreement by one party pursuant to
Section 5.2, the immunity and rights granted to or for the benefit of
that one party hereto and its SUBSIDIARIES under MOTOROLA PATENTS or
ASSEMBLY HOUSE PATENTS, as the case may be, depending upon who is the
party doing the terminating, shall survive such termination and shall
extend for the full term of this Agreement, but the immunity and rights
granted to or for the benefit of the other party shall terminate as of
the date termination takes effect.
5.5 At such time as is mutually agreeable, at the written request of either
party hereto to the other party hereto, but in no event less than six
(6) months prior to the expiration of this Agreement, the parties
hereto shall discuss the possible extension of or the renewal of the
term of this Agreement, including the possible amendment of the
provisions thereof.
5.6 The rights or privileges provided for in this Agreement may be assigned or transferred by either party only with the prior written consent of the other party and with the authorization or approval of any governmental authority as then may be required, except to a successor in ownership of all or substantially all of the assets of the
assigning party. Such successor, before such assignment or transfer is effective, shall expressly assume in writing to the other party the performance of all of the terms and conditions of this Agreement to be performed by the assigning party.
Section 6 - MISCELLANEOUS PROVISIONS
6.1 Each of the parties hereto represents and warrants that it has the right to grant to or for the benefit of the other the immunity and rights granted hereunder in Sections 2 and 3.
6.2 Nothing contained in this Agreement shall be construed as: 6.2.1 restricting the right of MOTOROLA or any of its SUBSIDIARIES to make, use, sell, lease or otherwise dispose of any particular product or products not herein licensed; 6.2.2 restricting the right of ASSEMBLY HOUSE or any of its SUBSIDIARIES to make, use, sell, lease or otherwise dispose of any particular product or products not herein licensed; 6.2.3 an admission by ASSEMBLY HOUSE of, or a warranty or representation by MOTOROLA as to, the validity and/or scope of the MOTOROLA PATENTS, or a limitation on ASSEMBLY HOUSE to contest, in any proceeding, the validity and/or scope thereof; 6.2.4 an admission by MOTOROLA of, or a warranty or representation by ASSEMBLY HOUSE as to, the validity and/or scope of the ASSEMBLY HOUSE PATENTS, or a limitation on MOTOROLA to contest, in any proceeding, the validity and/or scope thereof; 6.2.5 conferring any license or other right, by implication, ostoppel or otherwise, under any patent application, patent or patent right, except as herein expressly granted under the MOTOROLA PATENTS, and the ASSEMBLY HOUSE PATENTS; 6.2.6 conferring any license or right with respect to any trademark, trade or brand name, a corporate name of either party or any of their respective SUBSIDIARIES, or any other name or mark, or contraction, abbreviation or simulation thereof; 6.2.7 imposing on MOTOROLA any obligation to institute any suit or action for infringement of any MOTOROLA PATENTS, or to defend any suit or action brought by a third party which challenges or concerns the validity of any MOTOROLA PATENTS; 6.2.8 imposing upon ASSEMBLY HOUSE any obligation to institute any suit or action for infringement of any ASSEMBLY HOUSE PATENTS, or to defend any suit or action brought by a third party which challenges or concerns the validity of any ASSEMBLY HOUSE PATENTS; |
6.2.9 imposing on either party any obligation to file any patent application or to secure any patent or maintain any patent in force; or 6.2.10 an obligation on either party to furnish any manufacturing or technical information under this Agreement except as the same is specifically provided for herein. |
6.3 No express or implied waiver by either of the parties to this Agreement of any breach of any term, condition or obligation of this Agreement by the other party shall be construed as a waiver of any subsequent breach of that term, condition or obligation or of any other term, condition or obligation of this Agreement of the same or of a different nature.
6.4 Anything contained in this Agreement to the contrary notwithstanding, the obligations of the parties hereto shall be subject to all laws, both present and future, of any Government having jurisdiction over either party hereto, and to orders or regulations of any such Government, or any department, agency, or court thereof, and acts of war, acts of public enemies, strikes, or other labor disturbances, fires, floods, acts of God, or any causes of like or different kind beyond the control of the parties, and the parties hereto shall be excused from any failure to perform any obligation hereunder to the extent such failure is caused by any such law, order, regulation, or contingency but only so long as said law, order, regulation or contingency continues.
6.5 The captions used in this Agreement are for convenience only, and are not to be used in interpreting the obligations of the parties under this Agreement.
6.6 This Agreement and the performance of the parties hereunder shall be construed in accordance with and governed by the laws of the State of Illinois.
6.7 If any term, clause, or provision of this Agreement shall be judged to be invalid, the validity of any other term, clause, or provision shall not be affected; and such invalid term, clause, or provision shall be deemed deleted from this Agreement.
6.8 This Agreement sets forth the entire Agreement and understanding between the parties as to the subject matter hereof and merges all prior discussions between them, and neither of the parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set forth on or subsequent to the date hereof in writing and signed by a proper and duly authorized officer or representative of the party to be bound thereby.
6.9 All notices required or permitted to be given hereunder shall be in writing and shall be valid and sufficient if dispatched by registered airmail, postage prepaid, in any post office in the United States, addressed as follows:
6.9.1 If to MOTOROLA: Motorola Inc. 1303 East Algonquin Road Schaumburg, Illinois 60196 Attention: Vice President for Patents, Trademarks & Licensing 6.9.2 If to ASE: ASE, Incorporated 7855 South River Parkway, Suite 106 Tempe, Arizona 85284 Attention: Jim Kelley, Vice President of Marketing and Sales 6.9.3 The date of receipt of such a notice shall be the date for the commencement of the running of the period provided for in such notice, or the date at which such notice takes effect, as the case may be. |
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate.
MOTOROLA, INC. ASE, INC. /s/ GARY M. JOHNSON /s/ WALT DELAUDER ------------------------------------ ------------------------------------- Gary Johnson Walt DeLauder Sr. Vice President & General Manager President ASE (US) Logic and Analog Technologies Group Semiconductor Products Sector Date: 7 Jan. 94 Motorola, Inc. -------------------------------- Date: 1/20/94 ------------------------------- |
/s/ JAMES W. GILLMAN ------------------------------------ James W. Gillman Corporate Vice President, Patents, Trademarks, and Licensing Motorola, Inc. Date: 1/25/94 ------------------------------ |
Exhibit 10.7
COMMISSION AGREEMENT
PARTIES: GARDEX INTERNATIONAL LIMITED ("GARDEX")
(a British Virgin Islands Corporation)
ADVANCED SEMICONDUCTOR ENGINEERING, INC. ("ASE")
(a Taiwan Corporation)
DATE: December 28, 1997
AGREEMENT
1. Services to be rendered. ASE herby retains GARDEX to provide the sales services to ASE as a Sales Agency with the following terms.
To be non-exclusive world-wide sales agent for all present and future products and services to be specified by ASE in writing with the following authority:
(a). Identify customers for ASE products and services;
(b). Within such limitations relating to price, delivery and other key terms as ASE may from time to time specify in writing, and subject to acceptance by ASE (by telex or otherwise) negotiate sales contracts as ASE's agent;
(c). Monitor contract performance by the customer, including acceptance of delivery, payment, etc.
2. Compensation to GARDEX. For services hereunder, ASE shall monthly compensation to GARDEX in respect of net export sales (outside of Taiwan), pay as follows:
(a). For monthly export sales amount of less than US$ 3.0 million, 3% of the sales amount.
(b). For monthly export sales amount of more than US$ 3.0 million, the compensation is the total of the amount calculated per (a) above plus 2.5% of the sales amount over US$ 3.0 million.
The above scheme of compensation payment is applicable from Jan. 1998 to Dec. 1999. Compensation payment thereafter is subject to further negotiation on a yearly basis between ASE and GARDEX.
All payments to GARDEX shall be in US dollars.
Currency conversions, where necessary, shall be based on prevailing free-market rates of the time the payment is earned (not at the time of payment) as quoted in the Wall Street Journal or other authoritative source.
3. Term of Agreement. This agreement is effective from January 1, 1998 and shall expire on December 31, 1999 unless earlier terminated by (i) mutual agreement, or (ii) ASE on at least 30 days' prior written notice with or without cause. Neither expiration nor termination of this Agreement shall terminate the obligation of ASE to pay GARDEX for services rendered with respect to sales following such date that result from orders received prior to such date.
4. Representative and Covenants.
(a). GARDEX agree to use its best efforts to perform its obligations hereunder and to give priority to ASE over all customers of GARDEX in terms of management time, and efforts. GARDEX will not enter into any management consulting, sales, agency or similar relationship, nor engage in activities, that would result in a conflict with GARDEX's duties under this Agreement.
(b). Each party will provide to the other on a regular basis such documentation as may reasonably be required to enable the other party to be assured of compliance with this Agreement, and shall permit the other party to inspect its books of account and other records at such a reasonable time as the other party may request.
(c). All confidential information received or learned by GARDEX relating to ASE's business and products shall be kept in confidence by GARDEX and neither used by GARDEX nor disclosed to any other person for any purpose outside this Agreement.
(d). GARDEX shall make use of ASE trademarks only as ASE may authorize from time to time, and GARDEX disclaims forever any proprietary rights to or interest in such trademarks.
5. Governing Law and Jurisdiction. This Agreement shall be governed and construed under the laws of Republic of China unless the parties agree in writing to voluntary arbitration the Courts in the Republic of China shall have exclusive jurisdiction to hear and decide any case or controversy arising out of this Agreement.
Each party consents to in personam jurisdiction over it by such courts and to service of process by registered mail sent to its principal business address.
ADVANCED SEMICONDUCTOR ENGINEERING, INC.
BY: /s/ K.J. Chin ------------------------------------ GARDEX INTERNATIONAL LIMITED BY: /s/ R. Nicholls ------------------------------------ |
Exhibit 10.8
SERVICE AGREEMENT
PARTIES: ASE (U.S.) INC. ("ASE US")
(a California corporation)
Advances Semiconductor Engineering, Inc. ("ASE")
(a Taiwan Corporation)
DATE: December 15, 1998
ASE Inc. ("ASE") hereby retains ASE US to be its Service Agent to provide after sales service and sales support ("Services") to its Europe and North America customers ("Customers") for present and future products and services as specified by ASE as follows
1. Service to be rendered
(a) To facilitate market information collection, Customer and business identification, and Customer inquiry dissemination, and;
(b) To liaise with ASE and Customers re price, delivery and other key terms of the sales contract as ASE may from time to time specify in writing, and;
(c) To monitor sales contract performance by the Customers, including acceptance of delivery, payments, etc., and;
(d) To provide after sales services including problem solving, capacity planning coordination and other items as may necessary.
2. Compensation to ASE US
For services hereunder, ASE will monthly compensate ASE US as follows:
(a) 55% of ASE US's monthly incurred services associated cost and expenses (excluding bonus) plus 15%. In any event, the total monthly compensation amount should not be lower than USD220,000 or be higher than USD400,000.
(b) Upon payment request, ASE US is to submit detailed monthly expense report certified by its Financial Manager for accuracy, and;
(c) The compensation agreement is valid for one year and is subject to annual revision accepted by both parties.
3. Compensation from ASE US
ASE US agrees to pay a reasonable portion of ASE employee's traveling expenses incurred in the United States or Europe, when the trip is deemed necessary by ASE to assist ASE US in providing its services hereunder.
4. Term of Agreement
This Agreement is effective from January 1, 1999 and shall expire on
December 31, 1999, unless earlier terminated by (i) mutual agreement or
(ii) ASE on at least 30 days' prior written notice with or without causes.
5. Representations and Covenants
(a) ASE US agrees to perform its obligations hereunder the extent permissible by the law and the sales contracts between ASE and the Customers.
ASE US will not enter into any contract or agreement, nor engage in any activities, that would result in a conflict with ASE US's duties under this Agreement.
With the terms of this agreement, ASE US shall not have the authority to make any commitments whatsoever on behalf of ASE, as agent or otherwise, or to bind ASE in any respect.
(b) Each party will provide to the other on a regular basis such information as may be required to enable the other party to be assured of compliance with this Agreement.
(c) Unless required by laws, all confidential information received or learned by ASE US relating to ASE or its business and products shall be kept in confidence by ASE US and neither used by ASE US nor disclosed to others for any purpose inconsistent with this Agreement.
(d) ASE US shall use ASE trademark only as ASE may authorize from time to time, and ASE US shall not claim any proprietary right to or interest in such trademarks.
6. Miscellaneous
This Agreement shall be governed by the laws of the Republic of China ("ROC"). In case of any disputes arising from or in connection with this Agreement, the parties hereto consent to submit to the non-exclusive jurisdiction of the Taipei District Court.
Without the prior written consent of ASE, ASE US shall not assign or transfer any of its rights or obligations hereunder to any other person.
This agreement can be amended or modified only in writing signed by the parties hereto. Any communication or notice made hereunder shall be in writing and sent by way of (i) hand delivery, (ii) postage prepaid registered air mail, or (iii) facsimile to the address as follows:
ASE US: ASE: Address: Address: 2880 Zonker Road, Suite 106, 26, Chin 3rd Rd. Nantze EPZ, San Jose, CA 95134, USA Kaohsiung, Taiwan, R.O.C. Telefax No.: 408-432-0440 Telefax No.: 886-7-361-3094 |
The notice or communication shall become effective (i) upon delivery if sent by hand delivery, (ii) upon the dispatch if sent by facsimile and confirmed by writing and (iii) upon the late five days later than the post date if sent by air mail.
This Agreement shall in no event be construed to establish a sales agency relationship between ASE and ASE US.
IN WITNESS WHEREOF, the parties hereto hereby have duly executed and delivered this Agreement as of the date and year first written above.
ASE ASE US By /s/ K.J. Chin By /s/ Y.C. Hsu ----------------------- ------------------------------ Name: K.J. Chin Name: Y.C. Hsu Title: General Manager/EVP Title: General Manager |
Exhibit 10.11
COMMISSION AGREEMENT
PARTIES: GARDEX INTERNATIONAL LIMITED ("GARDEX")
(a British Virgin Islands Corporation)
ASE Electronics (M) Sdn Bhd ("ASEM")
(a Malaysia Corporation)
DATE: December 28, 1997
AGREEMENT
1. Services to be rendered. ASEM hereby retains GARDEX to provide the sales services to ASEM as a Sales Agency with the following terms.
To be non-exclusive world-wide sales agent for all present and future products and services to be specified by ASEM in writing with the following authority:
(a). Identify customers for ASEM products and services;
(b). Within such limitations relating to price, delivery and other key terms as ASEM may from time to time specify in writing, and subject to acceptance by ASEM (by telex or otherwise) negotiate sales contracts as ASEM's agent;
(c). Monitor contract performance by the customer, including acceptance of delivery, payment, etc.
2. Compensation to GARDEX. For services hereunder, ASEM shall monthly compensation to GARDEX in respect of net export sales (outside of Taiwan), pay as follows:
(a). For monthly export sales amount of less than US$3.0 million, 1% of the sales amount.
(b). For monthly export sales amount of more than US$3.0 million, the compensation is the total of the amount calculated per (a) above plus 0.5% of the sales amount over US$3.0 million.
The above scheme of compensation payment is applicable from Jan. 1998 to Dec. 1999. Compensation payment thereafter is subject to further negotiation on a yearly basis between ASEM and GARDEX.
All payments to GARDEX shall be in US dollars.
Currency conversions, where necessary, shall be based on prevailing free-market rates of the time the payment is earned (not at the time of payment) as quoted in the Wall Street Journal or other authoritative source.
3. Term of Agreement. This agreement is effective from January 1, 1998 and shall expire on December 31, 1999 unless earlier terminated by (i) mutual agreement, or (ii) ASEM on at least 30 days' prior written notice with or without cause. Neither expiration nor termination of this Agreement shall terminate the obligation of ASEM to pay GARDEX for services rendered with respect to sales following such date that result from orders received prior to such date.
4. Representative and Covenants.
(a). GARDEX agree to use its best efforts to perform its obligations hereunder and to give priority to ASEM over all other customers of GARDEX in terms of management time, and efforts. GARDEX will not enter into any management consulting, sales, agency or similar relationship, nor engage in activities, that would result in a conflict with GARDEX's duties under this Agreement.
(b). Each party will provide to the other on a regular basis such documentation as may reasonably be required to enable the other party to be assured of compliance with this Agreement, and shall permit the other party to inspect its books of account and other records at such a reasonable time as the other party may request.
(c). All confidential information received or learned by GARDEX relating to ASEM's business and products shall be kept in confidence by GARDEX and neither used by GARDEX nor disclosed to any other person for any purpose outside this Agreement.
(d). GARDEX shall make use of ASEM trademarks only as ASEM may authorize from time to time, and GARDEX disclaims forever any proprietary rights to or interest in such trademarks.
5. Governing Law and Jurisdiction. This Agreement shall be governed and construed under the laws of Malaysia unless the parties agree in writing to voluntary arbitration the Courts in the Malaysia shall have exclusive jurisdiction to hear and decide any case or controversy arising out of this Agreement.
Each party consents to in personam jurisdiction over it by such courts and to service of process by registered mail sent to its principal business address.
ASE ELECTRONICS (M) SDN BHD.
BY: /s/ David Hsiang ---------------- David Hsiang |
GARDEX INTERNATIONAL LIMITED.
BY: /s/ R. Nicholls ---------------- |
Exhibit 10.12
SERVICE AGREEMENT
PARTIES: ASE (U.S.) INC. ("ASE US")
(a California corporation)
ASE Electronics Sdn Bhd (Malaysia) ("ASEM")
(a Malaysia Corporation)
DATE: December 22, 1997
ASE Electronics ("ASEM") herby retains ASE US to be its Service Agent to provide after sales service and sales support ("Services") to its Europe and North America customers ("Customers") for present and future products and services as specified by ASEM as follows:
1. Service to be rendered
(a) To facilitate market information collection, Customer and business identification, and Customer inquiry dissemination, and;
(b) To liaise with ASEM and Customers re price, delivery and other key terms of the sales contract as ASEM may from time to time specify in writing, and;
(c) To monitor sales contract performance by the Customers, including acceptance of delivery, payments, etc., and;
(d) To provide after sales services including problem solving, capacity planning coordination and other items as may necessary.
2. Compensation to ASE US
For services hereunder, ASEM will monthly compensate ASE US as follows:
(a) 30% of ASE US's monthly incurred services associated cost and expenses (excluding Compensation from ASE US as specified in item 3) plus 15%. In any event, the total monthly compensation amount should not be lower than USD125,000 or be higher than USD200,000.
(b) Upon payment request, ASE US is to submit detailed monthly expense report certified by its Financial Manager for accuracy, and;
(c) The compensation agreement is valid for one year and is subject to annual revision accepted by both parties.
3. Compensation from ASE US
ASE US agrees to pay a reasonable portion of ASEM employee's traveling expenses incurred in the United States or Europe, when the trip is deemed necessary by ASEM to assist ASE US in providing its services hereunder.
4. Term of Agreement
This Agreement is effective from January 1, 1998 and shall expire on
December 31, 1998, unless earlier terminated by (i) mutual agreement or
(ii) ASEM on at lest 30 days' prior written notice with or without causes.
5. Representations and Covenants
(a) ASE US agrees to perform its obligations hereunder the extent permissible by the law and the sales contracts between ASEM and the Customers.
ASE US will not enter into any contract or agreement, nor engage in any activities, that would result in a conflict with ASE US's duties under this Agreement.
With the terms of this agreement, ASE US shall not have the authority to make any commitments whatsoever on behalf of ASEM, as agent or otherwise, or to bind ASEM in any respect.
(b) Each party will provide to the other on a regular basis such information as may be required to enable the other party to be assured of compliance with this Agreement.
(c) Unless required by laws, all confidential information received or learned by ASE US relating to ASEM or its business and products shall be kept in confidence by ASE US and neither used by ASE US nor disclosed to others for any purpose inconsistent with this Agreement.
(d) ASE US shall use ASEM trademark only as ASEM may authorize from time to time, and ASE US shall not claim any proprietary right to or interest in such trademarks.
6. Miscellaneous
This Agreement shall be governed by the laws of the Republic of China ("ROC"). In case of any disputes arising from or in connection with this Agreement, the parties hereto consent to submit to the non-exclusive jurisdiction of the Taipei District Court.
Without the prior written consent of ASEM, ASE US shall not assign or transfer any of its rights or obligations hereunder to any other person.
This Agreement can be amended or modified only in writing signed by the parties hereto. Any communication or notice made hereunder shall be in writing and sent by way of (i) hand delivery, (ii) postage prepaid registered air mail, or (iii) facsimile to the address as follows:
ASE US: ASEM: Address: Address: 2880 Zanker Road, Suite 106, Phase 4, Bayan Lepas Free Trade Zone San Jose, CA 95134, USA 11900 Penang, Malaysia Telefax No.: 408-432-0440 Telefax No.: 604-6448422 |
The notice or communication shall become effective (i) upon delivery if sent by hand delivery, (ii) upon the dispatch if sent by facsimile and confirmed by writing and (iii) upon the date five days later than the post date if sent by air mail.
This Agreement shall in no event be construed to establish a sales agency relationship between ASEM and ASE US.
IN WITNESS WHEREOF, the parties hereto hereby have duly executed and delivered this Agreement as of the date and year first written above.
ASEM ASE US By /s/ David Hsiang By /s/ Y.C. Hsu --------------------- ------------------ Name: David Hsiang Name: Y.C. Hsu Title: Vice President Title: General Manager |
Exhibit 10.13
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
VIII. Procedures for Employee Dividend Reinvestment and Cash Purchases of Shares.
1. Purpose:
According to the labor capital integration and employee profit sharing and share holding policies, every shareholders' meeting shall follow this procedure when determining the shares and warrants issuable to the employees who participate in the Dividend Reinvestment Plan and the Cash Purchase of Shares.
2. Distribution Recipient:
Every current employee of the company that is employed before December 31 of each year, excluding employees of the Overseas Reinvestment Company, while including the employees who work at the Not-for-Profit Units that produced the Consolidated Financial Statement, and who are deemed to be the employees of this company, are eligible to participate in the Employee Reinvestment Plan & Cash Purchase of Shares.
All employees employed two months before the Record Day of share purchase year have rights to purchase shares. The contract workers are not eligible for the Employee Dividend Reinvestment Plan or Cash Purchase of Shares.
3. Employee Dividend Calculation Procedure:
Employee Dividend = (After Tax Profit of the Fiscal Year - Amount Paid for Losses of Previous Years - Retained Earning required by the Company Law - Legal Retained Earnings - Special Retained Earnings According to the Articles of Association and Shareholder Meeting Resolution) * 5%.
Such Employee Dividend Distribution amounts are subject to partial withholding by the resolution of the Board of Directors for purpose of equity investment and for cash distribution reserves. The remaining
amount for the employee dividend distribution is further subject to the approval of the shareholders' meetings.
4. Employee Share Cash Purchase Procedure:
Pursuant to Article 267 of the Company Law, the Board of Directors or shareholders' meeting shall resolve to reserve 10-15% of the newly offered shares for the employees to purchase when a cash investment to equity is being processed.
5. Not-for-Profit Units Distribution Ratio Calculation Procedure:
1). The share distribution ratio for each Not-for-Profit Unit:
The shares shall be distributed to each Not-for-Profit Unit based on the extent to which it contributed to the after tax profit or reinvestment profit of the company.
2). Share Distribution Procedure for Not-for-Profit Unit that incurs losses or has un-recovered losses from previous years.
Reduction of dividend for parent company employees as a result of losses incurred by subsidiaries will be recorded until the same amount is paid to the parent company employees when the subsidiaries earn a profit.
3). The number of shares that each Not-for-Profit Unit can purchase for its employees shall be determined by the resolution of the Board of Directors.
6. This procedure, as well as its amendments, shall be executed after the approval of the Board of Directors.
Note
(1) The Employee Dividend Distribution is subject to the reductions required by the Company Law and the company's Articles of Association.
(2) Individual Points = Points for Attendance + Points for Seniority + Points for Ranks + Point for Special Circumstances.
(3) The total number of shares distributable should be determined pursuant to the share numbers of employee dividend reinvestment approved by the shareholders' meeting and the Securities Regulatory Committee.
(4) Share distribution shall be rounded to 10 shares. Share numbers fewer than 10 will be distributed to the Welfare's Committee to be added to the Employees' Welfare Fund.
VII. Share Distribution Method
Calculation of points will be based on attendance, seniority, rank, and
special circumstances. Points for each of the above category will be
calculated separately and then aggregated to determine the number of shares
each employee is entitled.
1. Attendance
1). Points for Attendance.
From January 1 to December 31, for each day at work, 6
points for day shift, 7 points for night shift.
2). Points for Absence.
No points will be deducted for military leaves, public
holidays, funeral leaves, and annual vacations.
Points deducted for the absence of each work day of 8 hours
are as follows:
Absence Day Shift Night Shift ------- --------- ----------- Marriage or Maternity Leave 9 10.5 Sick Days or Unpaid Leaves 18 21 Personal Days 36 42 No Shows 90 105 |
3). The overall points deducted for absence will be shared by all employees.
2. Seniority 15 points for each month at work. Time less than a month is counted as one full month. The maximum seniority is 25 years.
3. Rank
Rank I II III IV V Points 750 1,500 2,500 3,500 4,500 Rank VI VII VIII VIIII X Points 5,500 7,000 8,000 9,000 15,000 |
Count the number of months for time less than one year, Time less than a month is considered one full month.
4. Points for Special Circumstances
1). Points shall be calculated as follows for merits and mistakes to provide incentives and penalties to all employees.
---------------------------------------------------------------------------- Honors Points Disciplinary Points Credited Actions Deducted ---------------------------------------------------------------------------- First 300 First 300 Honor Level ---------------------------------------------------------------------------- Second 100 Second 100 Honor Level ---------------------------------------------------------------------------- Third 30 Third 30 Honor Level ---------------------------------------------------------------------------- |
2). Company improvement activities such as Reward Policy Promotion, QCC activities, Proposal Reward, TCM Promotion/Internal Teacher Award will be addressed separately and to have points credited in forms of Special Circumstance Points once approved by director.
5. Points for Periodical Evaluation
Points shall be awarded or deducted to an employee that holds a rank of I to VIII, on basis of the employee's quarterly evaluations in that year, in order to provide incentives and penalties according to an employee's performance.
A-50 points credited
B-25 points credited
D-100 points deducted
E-200 points deducted
Points for Periodical Evaluation has been included in the Employee Share Option Plan since 1988.
Exhibit 10.14
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
PUBLIC UNIT PRICE RENTAL FACILITY EXHIBIT LAND LEASE TOTAL AREA (NT$/m(2)/PER (NT$/PER CONSTRUCTION LEASE DATE OF NO. AGREEMENTS PROPERTY (m(2)) MONTH) MONTH) FEE PERIOD LEASE 10.14 (88) Nan- Nantze Export 11,348 11.50 130,502 0 1999.10.1- 1999.10.5 Er-Jian- Processing Zone, 2009.9.30 Tse-No. Hoping Section, 19 Sub-Section II, District 1, No. 713 and 717 (Property No. CL051) |
Exhibit 10.15
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
PUBLIC UNIT PRICE RENTAL FACILITY EXHIBIT LAND LEASE TOTAL AREA (NT$/m(2)/PER (NT$/PER CONSTRUCTION LEASE DATE OF NO. AGREEMENTS PROPERTY (m(2)) MONTH) MONTH) FEE PERIOD LEASE 10.15 (88) Nan- Nantze Export 13,011 11.50 149,626 36,300 1999.9.1- 1999.8.30 Er-Jian- Processing Zone, 2009.8.31 Tse-No. Hoping Section, 18 Sub-Section II, District 5, No. 117 (Property No. CL098) |
Exhibit 10.16
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
PUBLIC LEASE DATE OF TOTAL UNIT PRICE RENTAL FACILITY PERIOD LEASE EXHIBIT LAND LEASE AREA (NT$/m(2)/PER (NT$/PER CONSTRUCTION NO. AGREEMENTS PROPERTY (m(2)) MONTH) MONTH) FEE 10.16 (87) Nan-Di- Nantze Export Processing Zone, 2,842 11.50 32,683 0 1998.4.1- 1998.3.31 Tse-No. 110 Hoping Section, Sub-Section II, 2008.3.31 No. 722 (Property No. CL041) |
Exhibit 10.17
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
PUBLIC TOTAL UNIT PRICE RENTAL FACILITY EXHIBIT LAND LEASE AREA (NT$/m(2)/PER (NT$/PER CONSTRUCTION LEASE DATE OF NO. AGREEMENTS PROPERTY (m(2)) MONTH) MONTH) FEE PERIOD LEASE 10.17 (86) Nan-Di- Nantze Export Processing Zone, 1,362 11.50 15,663 0 1997.10.1- 1997.9.30 Tse-No. 44 Hoping Section, Sub-Section II, 2007.9.30 District 4, No. 607 (Property No. AL112) |
Exhibit 10.18
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
PUBLIC UNIT PRICE RENTAL FACILITY EXHIBIT LAND LEASE TOTAL AREA (NT$/m(2)/PER (NT$/PER CONSTRUCTION LEASE DATE OF NO. AGREEMENTS PROPERTY (m(2)) MONTH) MONTH) FEE PERIOD LEASE 10.18 (86) Nan- Nantze Export 2,655 11.50 30,532 0 1997.10.1~ 1997.9.30 Di-Tse- Processing Zone, 2007.9.30 No. 45 Hoping Section, Sub-Section II District 3, No. 625,626,627 and 629 (Property No. CL071) |
Exhibit 10.19
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
PUBLIC UNIT PRICE RENTAL FACILITY EXHIBIT LAND LEASE TOTAL AREA (NT$/m(2)/PER (NT$/PER CONSTRUCTION LEASE DATE OF NO. AGREEMENTS PROPERTY (m(2)) MONTH) MONTH) FEE PERIOD LEASE 10.19 (86) Nan- Nantze Export 6,946 11.50 79,879 0 1997.8.1- (No Date) Di-Tse- Processing Zone, 2007.7.31 No. 35 Hoping Section, Sub-Section II, District 3, No. 634 and 635 (Property No. CL009) |
Exhibit 10.20
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
PUBLIC UNIT PRICE RENTAL FACILITY EXHIBIT LAND LEASE TOTAL AREA (NT$/m(2)/PER (NT$/PER CONSTRUCTION LEASE DATE OF NO. AGREEMENTS PROPERTY (m(2)) MONTH) MONTH) FEE PERIOD LEASE ------- ---------- -------- ------ ----------- -------- ------------ ------ ------- 10.20 (84) Nan-Di- Nantze Export Processing Zone, 9,504 11.50 109,296 26,516 1996.1.1- 1995.12.19 Tse-No.38 Hoping Section, Sub-Section II, 2005.12.31 District 5, No. 723 (Property No. CL091) |
Exhibit 10.21
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX 1
PUBLIC UNIT PRICE RENTAL FACILITY EXHIBIT LAND LEASE TOTAL AREA (NT$/m(2)/PER (NT$/PER CONSTRUCTION LEASE DATE OF NO. AGREEMENTS PROPERTY (M(2)) MONTH) MONTH) FEE PERIOD LEASE ------- ---------- -------- ------ ----------- -------- ------------ ------ ------- 10.21 (84) Nan-Di- Nantze Export Processing Zone, 2,534 11.50 29,141 0 1995.1.1- 1995.12.4 Tse-No.37 Hoping Section, Sub-Section II, 2005.10.31 District 3, No. 667 (Property No. CL008) |
Exhibit 10.22
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
PUBLIC UNIT PRICE RENTAL FACILITY EXHIBIT LAND LEASE TOTAL AREA (NT$/m(2)/PER (NT$/PER CONSTRUCTION LEASE DATE OF NO. AGREEMENTS PROPERTY (m(2)) MONTH) MONTH) FEE PERIOD LEASE ------- ---------- -------- ------ ----------- -------- ------------ ------ ------- 10.22 (84) Nan-Di- Nantze Export Processing Zone, 1,710 11.50 19,665 0 1995.7.1- 1995.6.27 Tse-No.24 Hoping Section, Sub-Section II, 2005.6.30 District 4, No. 600 (Property No. AL039) |
Exhibit 10.23
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
Public Unit Price Rental Facility Exhibit Land Lease Total Area (NT$/m(2)/per (NT$/per Construction Lease Date of No. Agreements Property (m(2)) month) month) Fee Period Lease -------- ------------ ------------------------- ----------- ------------- -------- ------------ --------- --------- 10.23* (84) Nan-Di Nantze Export Processing 11,348 11.50 130,502 0 1999.7.1- 1995.6.27 Tse-No. 25 Zone, Hoping Section, Sub- 2005.6.30 Section II, District 1, No. 713 and 717 (Property No. CL051) |
* Replaced by Lease 10.14
Exhibit 10.24
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
ANNEX I
Public Unit Price Rental Facility Exhibit Land Lease Total Area (NT$/m(2)/per (NT$/per Construction Lease Date of No. Agreements Property (m(2)) month) month) Fee Period Lease -------- ------------ ------------------------- ----------- ------------- -------- ------------ --------- --------- 10.24 (83) Nan-Di Nantze Export Processing 3,238 11.50 37,237 0 1994.8.1- 1994.7.29 Tse-No. 38 Zone, Hoping Section, Sub- 2004.7.31 Section II, District 3, No. 625, 626, 627 and 629 (Property No. CL088) |
Exhibit 10.25
I, Joseph Tung, certify that set forth below is a fair and accurate English translation of the required document included as an exhibit to this Registration Statement.
By: /s/ JOSEPH TUNG ------------------------------ Title: Chief Financial Officer Dated: August 28, 2000 |
(English Translation Summary)
MINISTRY OF ECONOMIC AFFAIRS
EXPORT PROCESSING ZONES ADMINISTRATION (EPZA)
NANTZE EXPORT PROCESSING ZONE
LAND LEASE AGREEMENTS
I. See Annex I for a description of lease details.
II. General Provisions:
The land in the Kaohsiung Nantze Export Processing Zone on which ASE Inc.'s packaging and testing facilities are located is leased from the Ministry of Economic Affairs, Export Processing Zones Administration.
The term under all lease agreements between EPZA and ASE Inc. is 10 years. The usage of leased land is limited to office, factory, warehouse, and operational space. No sublease or lending of the land is allowed. The usage, rental payment schedule, default penalty, public construction fee, deposit, minimum dimension and other construction requirements are stipulated by the regulations of the Ministry of Economic Affairs. The EPZA may adjust the rental when the government reevaluates the land price.
The lease agreements are renewable by 3 months prior written application with the EPZA. After the termination of the lease agreement, ASE Inc. should return the buildings on the land and the buildings will be sold to any other enterprises as approved by the EPZA within 6 months.
The regulation of Ministry of Economics Affairs in connection with the lease in the Nantze Export Processing Zone may change from time to time. There can be no assurance that current regulations will continue in effect or that future changes will not have an adverse effect upon the availability of the lease above.
EXHIBIT 10.25
Annex 1
Public Unit Price Rental Facility Exhibit Land Lease Total Area (NT$/m(2)/per (NT$/per Construction Lease Date of No. Agreements Property (m(2)) month) month) Fee Period Lease ------- ------------ -------- ---------- ------------- -------- ------------ --------- -------- 10.25 (83) Nan-Di- Nantze Export Processing Zone, 10,280 11.50 118,220 0 1994.4.6- 1994.4.1 Tse-No. 14 Boping Section, Sub-Section II, 2004.4.5 District 3, No. 630, 631, 632 and 633 (Property No. CL060) |
Exhibit 21.1
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;
(2) ASE Holding Electronics (Philippines) Inc., a corporation organized under the laws of the Philippines;
(3) ASE Holding (Singapore) Pte. Limited, a corporation organized under the laws of Singapore; and
(4) ASE Investment Inc. (Labuan), a holding company organized under the laws of Malaysia.
B. ASE Marketing Services Ltd., a corporation organized under the laws of Hong Kong.
C. ASE Investment Inc., a corporation organized under the laws of the Republic of China.
D ASE Capital Inc., a corporation organized under the laws of the Republic of China.
E. ASE (Chung Li) Inc., a corporation organized under the laws of the Republic of China.
F. ASE (Korea) Inc., a corporation organized under the laws of Korea.
G. ASE Technologies, Inc., a corporation organized under the laws of the Republic of China, and its subsidiaries ASE Tech. Inc. and Transmonde Inc., both organized under the laws of the state of California, U.S.A.
H. J&R Holding Limited, and its wholly-owned subsidiary J&R Industrial Inc., both organized under the laws of Bermuda. J&R Holding Limited has a subsidiary, ASE Test Limited.
(1) ASE Test Limited has four wholly-owned subsidiaries:
(a) ASE Test Inc., a corporation organized under the laws of the Republic of China;
(b) ASE Test Holdings Ltd, a corporation organized under the laws of Singapore, and its majority owned subsidiary, ISE Labs, Inc., a corporation organized under the laws of the state of California, U.S.A.
(c) ASE Test Finance Limited, a corporation organized under the laws of Mauritius; and
(d) ASE Electronics (M) Sdn Bhd, Inc., a corporation organized under the laws of Malaysia.
I. Advanced Semiconductor Engineering, Inc. has a controlling interest in the following companies:
(1) ASE Material Inc., a corporation organized under the laws of the Republic of China; and
(2) Universal Scientific Industrial Co. Ltd., a corporation organized
under the laws of the Republic of China.
Exhibit 23.1
[T.N. SOONG LETTERHEAD]
To the Board of Directors of Advanced Semiconductor Engineering, Inc.:
As independent public accountants, we hereby consent to the use of our report (and to all references to our Firm) dated January 31, 2000 (as presented on page F2) included in or made a part of the F-1 and F-4 registration statements.
/s/ T.N. Soong August 28, 2000 |
Exhibit 23.2
The Board of Directors
Advanced Semiconductor Engineering, Inc.
We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the prospectus.
/S/ KPMG CERTIFIED PUBLIC ACCOUNTANTS Taipei, Taiwan August 28, 2000 |
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Advanced Semiconductor Engineering, Inc. (the "COMPANY") and each person whose signature appears below constitutes and appoints Mr. Jason C.S. Chang, Chairman of the Company, and Joseph H.S. Tung, Chief Financial Officer of the Company, and any other person acting in such capacity, and each of them, true and lawful attorneys-in-fact and agents of the Company and each such person with full power of substitution, for and in the name, place and stead of the Company and each such person, in any and all capacities, to take the following actions:
1. To sign in the name of such person, and to file with the United States Securities and Exchange Commission (the "COMMISSION"), Registration Statements on Form F-1, Form F-4 and Form F-6 under the Securities Act of 1933, as amended, and a Registration Statement on Form 8-A under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")(collectively the "REGISTRATION STATEMENTS"), relating to the registration of equity securities in an aggregate principal amount of up to US$370,000,000 of the Company (the "SECURITIES"), and to sign and file any and all amendments or post-effective amendments to such Registration Statements (including, without limitation, any amendments or supplements to the prospectus contained therein), together with such exhibits and other documents as may be necessary or appropriate.
2. To sign Form CB and Form F-X under the Exchange Act relating to the Company's offer to exchange American Depositary Shares for Rule 144A Global Depositary Shares previously issued by the Company (the "EXCHANGE OFFER") (including, without limitation, post-effective amendments thereto) and one or more amendments to such Form CB or Form F-X and to cause the same to be filed with or, where permitted, transmitted for filing to, the Commission, together with such exhibits and other documents as may be necessary or appropriate.
3. To sign such applications, certificates, consents and other documents as may be necessary or appropriate from time to time in connection with the (x) listing of any or all of the Securities on one or more securities exchange (including, without limitation, the New York Stock Exchange, Inc.), (y) the Exchange Offer and (z) qualification of the Securities under the securities or Blue Sky laws of any states or other jurisdictions of the United States of America; and to cause the same to be filed with such securities exchanges or the securities or Blue Sky commissions of such states or other jurisdictions, as the case may be.
4. To sign such other documents, to take such other actions and to do such other things as said agents and attorneys-in-fact, or any of them, may deem necessary or appropriate from time to time in connection with the foregoing, the issuance and sale of the Securities and engagement in the Exchange Offer.
IN WITNESS WHEREOF, each of the undersigned has executed this power of attorney on August 28, 2000:
Name and Signature Title ------------------ ----- /s/JASON C.S. CHANG ------------------------- JASON C.S. CHANG Chairman and Director /s/RICHARD H.P. CHANG ------------------------- RICHARD H.P. CHANG Chief Executive Officer and Director /s/CHANG YAO HUNG-YING ------------------------- CHANG YAO HUNG-YING Director /s/LEONARD LIU ------------------------- LEONARD LIU President and Director /s/CHIN KO-CHIEN ------------------------- CHIN KO-CHIEN Director /s/DAVID PAN ------------------------- DAVID PAN Director /s/JOSEPH TUNG Chief Financial Officer and ------------------------- Director JOSEPH TUNG |
ARTICLE 5 |
MULTIPLIER: 1,000 |
CURRENCY: NT DOLLARS |
PERIOD TYPE | 12 MOS |
FISCAL YEAR END | DEC 31 1999 |
PERIOD START | JAN 01 1999 |
PERIOD END | DEC 31 1999 |
EXCHANGE RATE | 30.8 |
CASH | 11,809,112 |
SECURITIES | 216,280 |
RECEIVABLES | 7,697,711 |
ALLOWANCES | 234,254 |
INVENTORY | 2,449,691 |
CURRENT ASSETS | 23,350,292 |
PP&E | 48,848,986 |
DEPRECIATION | 14,961,384 |
TOTAL ASSETS | 77,330,775 |
CURRENT LIABILITIES | 17,636,203 |
BONDS | 20,567,302 |
PREFERRED MANDATORY | 0 |
PREFERRED | 0 |
COMMON | 19,800,000 |
OTHER SE | 9,927,020 |
TOTAL LIABILITY AND EQUITY | 77,330,775 |
SALES | 24,816,363 |
TOTAL REVENUES | 7,793,198 |
CGS | 19,271,627 |
TOTAL COSTS | 23,959,566 |
OTHER EXPENSES | 0 |
LOSS PROVISION | 109,263 |
INTEREST EXPENSE | 1,469,795 |
INCOME PRETAX | 9,062,441 |
INCOME TAX | 459,543 |
INCOME CONTINUING | 7,794,666 |
DISCONTINUED | 0 |
EXTRAORDINARY | 0 |
CHANGES | 0 |
NET INCOME | 7,794,666 |
EPS BASIC | 3.89 |
EPS DILUTED | 3.89 |