CHARTERED SEMICONDUCTOR MANUFACTURING LTD, 424B4, 1999-11-01

CHARTERED SEMICONDUCTOR MANUFACTURING LTD
424B4, 1999-11-01
SEMICONDUCTORS & RELATED DEVICES

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<PAGE> 1

This Prospectus is being filed
pursuant to Rule 424(b)(4) of the
Securities Act of 1933, as
amended, and relates to
Registration Number 333-88397.
PROSPECTUS

225,000,000 ORDINARY SHARES
DIRECTLY OR IN THE FORM OF AMERICAN DEPOSITARY SHARES

CHARTERED LOGO

S$3.344 PER ORDINARY SHARE
US$20.00 PER ADS

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

We are offering 225,000,000 ordinary shares, directly or in the form of
American Depositary Shares. Each American Depositary Share, or ADS, represents
the right to receive ten ordinary shares. The ADSs will be offered in U.S.
dollars and the ordinary shares will be offered in Singapore dollars. Of the
225,000,000 ordinary shares that we are offering, 150,000,000 are being offered
in the United States and Canada and 75,000,000 are being offered outside the
United States and Canada, in each case, directly or in the form of ADSs. We are
also offering 25,000,000 ordinary shares in Singapore through a separate
offering.

This is our initial public offering. The ADSs have been approved for
quotation on the Nasdaq National Market under the symbol "CHRT" and the ordinary
shares have been approved for listing on the Stock Exchange of Singapore
Limited.
------------------

INVESTING IN OUR ORDINARY SHARES AND ADSS INVOLVES A HIGH DEGREE OF RISK.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF THOSE RISKS.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------

<TABLE>
<CAPTION>
PER ORDINARY
SHARE PER ADS TOTAL
-------------- -------------- --------------
<S> <C> <C> <C>
Public Offering Price S$3.344 US$20.00 US$450,000,000
Underwriting Discount S$0.150 US$ 0.90 US$ 20,250,000
Proceeds to Chartered (before expenses) S$3.194 US$19.10 US$429,750,000
</TABLE>

We have granted the U.S., international and Singapore underwriters a 30-day
option to purchase from us up to an aggregate of 37,500,000 additional ordinary
shares, directly or in the form of ADSs, to cover overallotments, if any.

The underwriters are offering the ordinary shares and the ADSs subject to
various conditions. The underwriters expect to deliver the ordinary shares and
the ADSs to purchasers on or about November 4, 1999.

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

SALOMON SMITH BARNEY CREDIT SUISSE FIRST BOSTON
HAMBRECHT & QUIST
SG COWEN
SOUNDVIEW TECHNOLOGY GROUP
October 29, 1999
<PAGE> 2

[Description of inside cover artwork: The inside front cover will have our
logo and the logos of our customers, strategic and EDA/IP partners.]
<PAGE> 3

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.......................................... 1
RISK FACTORS................................................ 7
USE OF PROCEEDS............................................. 20
DIVIDEND POLICY............................................. 21
CAPITALIZATION.............................................. 22
EXCHANGE RATES.............................................. 23
DILUTION.................................................... 24
SELECTED FINANCIAL DATA..................................... 25
UNAUDITED PRO FORMA FINANCIAL INFORMATION................... 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 29
BUSINESS.................................................... 44
MANAGEMENT.................................................. 57
PRINCIPAL SHAREHOLDERS...................................... 65
RELATIONSHIP WITH SINGAPORE TECHNOLOGIES.................... 66
DESCRIPTION OF ORDINARY SHARES.............................. 69
DESCRIPTION OF AMERICAN DEPOSITARY SHARES................... 73
TAXATION.................................................... 80
SHARES ELIGIBLE FOR FUTURE SALE............................. 84
UNDERWRITING................................................ 86
LEGAL MATTERS............................................... 89
EXPERTS..................................................... 89
WHERE YOU CAN FIND MORE INFORMATION......................... 89
INDEX TO FINANCIAL STATEMENTS............................... F-1
ANNEX A: THE REPUBLIC OF SINGAPORE.......................... A-1
ANNEX B: THE SECURITIES MARKET OF SINGAPORE................. B-1
</TABLE>

UNTIL AND INCLUDING NOVEMBER 22, 1999, ALL DEALERS THAT BUY, SELL OR TRADE
THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

THIS PROSPECTUS HAS NOT BEEN REGISTERED AS A PROSPECTUS, NOR HAS IT BEEN
LODGED AS AN INFORMATION MEMORANDUM FOR THE PURPOSES OF SECTION 106D OF THE
COMPANIES ACT (CHAPTER 50) OF SINGAPORE, WITH THE REGISTRAR OF COMPANIES IN
SINGAPORE. ACCORDINGLY, THIS PROSPECTUS MAY NOT BE CIRCULATED OR DISTRIBUTED,
DIRECTLY OR INDIRECTLY, IN SINGAPORE. THE REGISTRAR OF COMPANIES TAKES NO
RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS.

IT IS EXPECTED THAT DELIVERY OF THE ORDINARY SHARES, DIRECTLY OR IN THE
FORM OF ADSs, WILL BE MADE AGAINST PAYMENT THEREFOR ON OR ABOUT THE DATE
SPECIFIED IN THE LAST PARAGRAPH OF THE COVER PAGE OF THIS PROSPECTUS, WHICH IS
THE FOURTH BUSINESS DAY FOLLOWING THE DATE HEREOF (SUCH SETTLEMENT CYCLE BEING
HEREIN REFERRED TO AS "T+4"). PURCHASERS OF ORDINARY SHARES, DIRECTLY OR IN THE
FORM OF ADSs, SHOULD NOTE THAT TRADING OF THE ORDINARY SHARES, DIRECTLY OR IN
THE FORM OF ADSs, ON THE DATE HEREOF MAY BE AFFECTED BY THE T+4 SETTLEMENT.

i
<PAGE> 4

(This Page Intentionally Left Blank)
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights certain 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 or ordinary shares under "Risk Factors," before deciding
to buy our ADSs or ordinary shares. References in this prospectus to
"Chartered," "our company," "we," "our" and "us" refer to Chartered
Semiconductor Manufacturing Ltd, a limited liability company formed in the
Republic of Singapore, and its subsidiary.

THE COMPANY

Chartered is one of the world's leading independent semiconductor
foundries. We provide comprehensive wafer fabrication services and technologies
to semiconductor suppliers and manufacturers of electronic systems. We focus on
providing foundry services to customers that serve high growth, technologically
advanced applications, including communications applications such as cable
modems, data networking and telecommunications equipment. Our top five customers
are Hewlett-Packard, Lucent Technologies, Level One Communications, Broadcom and
Conexant.

We offer a broad array of leading digital and analog technologies,
including standard complementary metal oxide silicon, or CMOS, mixed-signal and
embedded memory processes. We are also developing additional high performance
technologies such as advanced embedded memory technologies and specialized CMOS
for wireless applications. In order to augment our internal development efforts,
we have entered into technology alliances with leading semiconductor companies
such as Lucent and Motorola. Our alliance with Lucent includes an agreement to
jointly develop 0.18 micron (u) process geometries for high density, low power
and cost-effective applications. Our alliance with Motorola includes the
licensing and process transfer of Motorola's leading edge copper interconnect
technology for 0.15u, 0.13u and 0.10u process geometries.

We continue to expand the range of services we provide as our customers'
needs evolve. We partner with leading providers of semiconductor electronic
design automation, or EDA, software tools and intellectual property, or IP, and
design services. Our partnerships and range of services enable our customers to
integrate an increasing number of functions in their products while accelerating
time-to-market and reducing design and manufacturing risk. Our EDA development
and IP partners include Artisan Components, Avant!, Cadence, MIPS and Synopsys.
We also offer our customers turnkey services, which incorporate wafer
fabrication services and assembly and test, by partnering with assembly and test
providers, principally our sister company ST Assembly Test Services Ltd.

We currently own, or have an interest in, five fabrication facilities,
which are located in Singapore. Fabs 1, 2 and 3 are wholly-owned by our company.
Fab 5 is operated by Silicon Manufacturing Partners, known as SMP, which is
jointly-owned with a subsidiary of Lucent. Fab 6, known as Chartered Silicon
Partners, or CSP, is jointly-owned with an affiliate of the Government of
Singapore and a subsidiary of Hewlett-Packard. We plan to increase our total
production capacity from approximately 60,000 eight-inch equivalent wafers per
month in June 1999 to an estimated 134,000 eight-inch equivalent wafers per
month (which figure includes 100% of the production capacity of our
jointly-owned fabs) by December 2002.

We believe that Chartered is a trusted, customer-oriented service provider.
We have service operations in 12 cities in nine countries in North America,
Europe and Asia. All of our manufacturing operations are located in Singapore, a
politically and economically stable nation with laws that protect our customers'
proprietary technology.

We were incorporated in Singapore in 1987. We are 90.8% owned by Singapore
Technologies Pte Ltd and its affiliates (72.5% following the global offering,
assuming the underwriters do not exercise their overallotment option). The
remainder of our shares are owned by customers, directors, officers and
employees of our company and our affiliates. Singapore Technologies is one of
Singapore's largest industrial conglomerates and is indirectly wholly-owned by
the Government of Singapore.

1
<PAGE> 6

Our principal executive and registered offices are located at 60 Woodlands
Industrial Park D, Street 2, Singapore 738406. Our telephone number is (65)
362-2838. Our internet address is www.charteredsemi.com. INFORMATION CONTAINED
ON OUR WEB SITES DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS.

Please see "Annex A -- The Republic of Singapore" for additional
information regarding the Republic of Singapore where we are located.

RECENT DEVELOPMENTS

The Company's net revenue for the three months ended September 30, 1999 was
$183.3 million, a 118.4% increase over the $83.9 million net revenue reported in
the corresponding period of 1998 and a 11.8% increase over the $163.9 million
recorded in the June 30, 1999 quarter. Gross profit was $48.4 million, or 26.4%
of net revenue, in the third quarter versus a gross loss of $19.3 million
reported in the corresponding period of 1998 and a gross profit of $34.8 million
in the June 30, 1999 quarter. Operating income totaled $7.1 million, or 3.9% of
net revenue, in the September 30, 1999 quarter against an operating loss of
$48.5 million in the corresponding period of 1998 and an operating loss of $0.6
million in the June 30, 1999 quarter. Operating income or loss included a charge
for stock-based compensation, which for the three months ended September 30,
1999 totaled $8.8 million, compared with a credit of $0.7 million in the
corresponding period of 1998 and $1.6 million charged in the June 30, 1999
quarter. Equity in loss of SMP and CSP for the three months ended September 30,
1999 totaled $10.2 million, compared with $7.4 million in the corresponding
period of 1998 and $9.5 million in the June 30, 1999 quarter. Net loss for the
three month period ended September 30, 1999 was $6.2 million, or -3.4% of net
revenue, versus a net loss of $52.7 million reported in the corresponding period
of 1998 and a net loss of $13.8 million recorded in the June 30, 1999 quarter.

<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
------------------------------------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
1998 1999 1999
------------- -------- -------------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue............................. $ 83.9 $163.9 $183.3
Gross profit (loss)..................... (19.3) 34.8 48.4
Charge for stock-based compensation..... (0.7) 1.6 8.8
Operating income (loss)................. (48.5) (0.6) 7.1
Equity in loss of SMP and CSP........... 7.4 9.5 10.2
Net loss................................ (52.7) (13.8) (6.2)
</TABLE>

<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1999
------------------
(UNAUDITED)
(IN MILLIONS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 17.1
Short-term borrowings and current portion of long-term
debt...................................................... 86.1
Current installments of obligations under capital leases.... 5.2
Obligations under capital leases, excluding current
installments.............................................. 10.7
Other long-term debt........................................ 320.6
Shareholders' equity........................................ 561.1
</TABLE>

2
<PAGE> 7

THE GLOBAL OFFERING

THE GLOBAL OFFERING........... The global offering consists of the U.S.
offering, the international offering and the
Singapore offering, each of which is described
below. In connection with the global offering,
we restructured our capital effective October
14, 1999. Please see "Capitalization" for
additional information regarding our capital
restructuring. Unless we indicate otherwise,
all share information and financial data in
this prospectus gives effect to the capital
restructuring. Following the global offering, a
total of 1,238,847,853 ordinary shares
(including ordinary shares represented by ADSs)
will be issued and outstanding.

U.S. OFFERING................. An offering in the United States and Canada of
150,000,000 ordinary shares, directly or in the
form of ADSs.

INTERNATIONAL OFFERING........ An offering outside the United States and
Canada of 75,000,000 ordinary shares, directly
or in the form of ADSs. The international
offering will occur at the same time as the
U.S. offering. In this prospectus, we
collectively refer to the U.S. offering and the
international offering as the Combined
Offering.

SINGAPORE OFFERING............ A public offering in Singapore of 25,000,000
ordinary shares. The Singapore offering will be
underwritten and will occur at the same time as
the Combined Offering.

RESERVED SHARES............... 12,500,000 ordinary shares (including ordinary
shares represented by ADSs) offered in the
global offering are subject to priority
allocation to our employees and business
associates, to directors, officers and
employees of our affiliates and to certain
charitable organizations in Singapore.

OFFERING PRICE................ $20.00 per ADS and S$3.344 per ordinary share
(the equivalent of US$2.00 per ordinary share
based on an exchange rate of S$1.672 to
US$1.00).

USE OF PROCEEDS FROM THE
GLOBAL OFFERING............... The net proceeds of the global offering will be
used to fund a portion of our capital
expenditure requirements in connection with the
expansion of our manufacturing facilities, to
make equity contributions to our jointly-owned
fabs, for working capital and for general
corporate purposes. Please see "Use of
Proceeds" for further discussion of how we
intend to use the proceeds from the global
offering.

OVERALLOTMENT OPTIONS......... We have granted our U.S., international and
Singapore underwriters a 30-day option to
purchase up to an aggregate of 37,500,000
additional ordinary shares (including ordinary
shares represented by ADSs) in the global
offering, solely to cover overallotments, if
any. Unless we indicate otherwise, all
information in this prospectus assumes the
underwriters have not exercised their
overallotment option.

SHARES OUTSTANDING AFTER THE
GLOBAL OFFERING............... 1,238,847,853 ordinary shares (including
ordinary shares represented by ADSs) will be
outstanding after the global offering. If the
underwriters exercise their overallotment
option

3
<PAGE> 8

in full, 1,276,347,853 ordinary shares
(including ordinary shares represented by ADSs)
will be outstanding.

AMERICAN DEPOSITARY SHARES.... Each ADS represents ten ordinary shares. The
ADSs are evidenced by American Depositary
Receipts, or ADRs. Please see "Description of
American Depositary Shares" for a summary of
the material features of the ADSs and ADRs.

LISTING....................... The ADSs have been approved for quotation on
the Nasdaq National Market under the symbol
"CHRT" and the ordinary shares have been
approved for listing on the Stock Exchange of
Singapore Limited.

4
<PAGE> 9

SUMMARY FINANCIAL AND OTHER DATA

You should read the following summary financial data in conjunction with
our consolidated financial statements and the related notes, "Selected Financial
Data," "Unaudited Pro Forma Financial Information" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus. Our financial statements are reported in U.S.
dollars and presented in accordance with U.S. generally accepted accounting
principles, or U.S. GAAP, for the fiscal years ended December 31, 1994, 1995,
1996, 1997 and 1998 and for the six month periods ended June 30, 1998 and 1999.
The pro forma data set forth below reflect a subsequent change to our strategic
alliance agreement relating to CSP that results in CSP being consolidated and
presents our balance sheet data as if such change had occurred on June 30, 1999.
The pro forma as adjusted data set forth below adjust the pro forma data to give
effect to the issuance by our company of 250,000,000 ordinary shares in the
global offering (including ordinary shares represented by ADSs), and the
application of the net proceeds from such offering at the initial public
offering price of $20.00 per ADS and S$3.344 per ordinary share.

When we refer to "Singapore dollars" and "S$" in this prospectus, we are
referring to Singapore dollars, the legal currency of Singapore. When we refer
to "U.S. dollars," "dollars," "$" and "US$" in this prospectus, we are referring
to United States dollars, the legal currency of the United States. For your
convenience, we have included in this prospectus translations of certain
Singapore dollar amounts into U.S. dollars amounts. These translations should
not be construed as a representation that those Singapore dollar or U.S. dollar
amounts could have been, or could be, converted into U.S. dollars or Singapore
dollars, as the case may be, at any particular rate, the rate stated below, or
at all.

5
<PAGE> 10

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 47,548 $ 53,431 $ 528,881
Working capital (deficit)................................... (49,633) (49,483) 425,967
Total assets................................................ 1,229,847 1,340,278 1,815,728
Short-term borrowings and current portion of long-term
debt...................................................... 87,601 87,601 87,601
Current installments of obligations under capital leases.... 4,914 4,914 4,914
Obligations under capital leases, excluding current
installments.............................................. 10,698 10,698 10,698
Other long-term debt........................................ 364,903 440,903 440,903
Shareholders' equity........................................ 556,339 556,339 1,031,789
</TABLE>

- ---------------
(1) In 1996, gross profit and operating income included $23.2 million relating
to a reduction in accrued liabilities for a change in estimate of cost to
obtain certain licenses. Please see note 22(g) to our consolidated financial
statements.

(2) Effective July 1, 1998, we changed our functional currency from the
Singapore dollar to the U.S. dollar. Please see note 2(e) to our
consolidated financial statements.

(3) In 1998 we recorded a charge of $31.8 million relating to the write-down of
equipment in connection with the termination of a development program.
Please see note 8 to our consolidated financial statements.

(4) In the first six months of 1999, we recorded a charge of $6.5 million in
connection with the termination of a development program. Please see note 8
to our consolidated financial statements.

6
<PAGE> 11

RISK FACTORS

An investment in our ADSs or ordinary shares involves a high degree of
risk. You should carefully consider the following information about these risks,
together with the other information contained in this prospectus, including our
consolidated financial statements and related notes, before you decide to buy
our ADSs or ordinary shares. If any of the following risks actually occur, our
business, results of operations and financial condition would likely suffer. In
any such case, the market price of our ADSs or ordinary shares could decline,
and you may lose all or part of the money you paid to buy our ADSs or ordinary
shares.

RISKS RELATED TO OUR FINANCIAL CONDITION

WE HAVE A HISTORY OF LOSSES AND NEGATIVE CASH FLOWS AND THIS MAY CONTINUE.

Since our inception in 1987, we have incurred significant operating losses
and negative cash flows. This was true even in years in which our revenues
increased. For example, in 1998, revenue increased 11.3% over 1997 but operating
losses were 103.9% higher. The increase in revenue in 1998 was driven by higher
shipment volumes but was offset by a 12.0% decline from 1997 in our average
selling price of silicon wafers, higher production costs on increased volume and
under utilization of capacity at our fabrication facilities.

As of June 30, 1999, we had a retained deficit of approximately $293.6
million. We cannot assure you that our operating losses or negative cash flows
will not continue or increase in the future or that we will become profitable.
Please see "Selected Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for information regarding our
financial condition.

WE NEED TO CONTINUOUSLY IMPROVE OUR DEVICE YIELDS, MAINTAIN HIGH CAPACITY
UTILIZATION AND OPTIMIZE THE TECHNOLOGY MIX OF OUR SILICON WAFER PRODUCTION TO
ACHIEVE OUR PROFIT TARGETS.

The key factors that affect our profit margin are our ability to:

- continuously improve our device yields;

- maintain high capacity utilization; and

- optimize the technology mix of our silicon wafer production.

The term "device yields" means the actual number of usable semiconductor
devices on a wafer in relation to the total number of devices on the wafer. Our
device yields directly affect our ability to attract and retain customers, as
well as the price of our services.

The term "capacity utilization" means the actual number of silicon wafers
we are processing at a fabrication facility, or fab, in relation to the total
number of wafers we have the capacity to process. Our capacity utilization
affects our operating results because a large percentage of our operating costs
are fixed. For example, in 1996, 1997 and 1998, a worldwide overcapacity of
semiconductor wafer supply resulted in lower utilization rates at our fabs. This
had a negative effect on our company during such period. Other factors
potentially affecting capacity utilization rates are the complexity and mix of
the wafers produced, overall industry conditions, operating efficiencies, the
level of customer orders, mechanical failure, disruption of operations due to
expansion of operations or relocation of equipment and fire or natural disaster.

Because the price of wafers varies significantly, the mix of wafers
produced affects revenue and profitability. The value of a wafer is determined
by the complexity of the device on the wafer. Production of devices with higher
level functionality and greater system-level integration requires more
manufacturing steps than the production of less complex devices and commands
higher wafer prices.

If we are unable to continuously improve our device yields, maintain high
capacity utilization or optimize the technology mix of our wafer production, we
may not be able to achieve our profit targets in which case the market price of
our ADSs or ordinary shares could fall.

7
<PAGE> 12

OUR OPERATING RESULTS FLUCTUATE FROM QUARTER-TO-QUARTER WHICH MAKES IT DIFFICULT
TO PREDICT OUR FUTURE PERFORMANCE.

Our revenues, expenses and operating results have varied significantly in
the past and may fluctuate significantly from quarter-to-quarter in the future
due to a number of factors, many of which are outside our control. These factors
include, among others:

- the cyclical nature of both the semiconductor industry and the markets
served by our customers;

- shifts by integrated device manufacturers, or IDMs, between internal and
outsourced production;

- our customers' adjustments in their inventory;

- the loss of a key customer or the postponement of an order from a key
customer;

- the rescheduling and cancellation of large orders;

- the timing and volume of orders relative to our available production
capacity;

- our ability to obtain raw materials on a timely and economic basis;

- environmental events or industrial accidents such as fires;

- currency and interest rate fluctuations that may not be adequately
hedged; and

- technological changes.

Due to the factors noted above and other risks discussed in this section,
many of which are beyond our control, you should not rely on quarter-to-quarter
comparisons to predict our future performance. Unfavorable changes in any of the
above factors may seriously harm our company. In addition, it is possible that
in some future periods our operating results may be below the expectations of
public market analysts and investors. In this event, the price of our ADSs or
ordinary shares may underperform or fall.

WE EXPECT TO INCUR SUBSTANTIAL CAPITAL EXPENDITURES IN CONNECTION WITH OUR
GROWTH PLANS AND MAY REQUIRE ADDITIONAL FINANCING THAT MAY NOT BE AVAILABLE.

Our business and the nature of our industry require us to make substantial
capital expenditures leading to a high level of fixed costs. We expect to incur
significant capital expenditures in connection with our growth plans. We are
currently expanding and equipping three fabs, two of which are jointly-owned
with third parties, and expect to require additional financing to complete the
equipping. These capital expenditures, including the expenditures for the three
fabs being expanded and equipped, will be made in advance of sales. Given the
fixed cost nature of our business, we may incur operating losses if our revenue
does not adequately offset the level of our capital expenditures, which occurred
in 1996, 1997 and 1998. Additionally, our actual expenditures may exceed our
planned expenditures for a variety of reasons, including changes in our growth
plan, our process technology, market conditions, interest rates and other
factors. We expect to finance our capital expenditure requirements with the
proceeds of the global offering, additional debt and equity financing and cash
from operations. We anticipate that Chartered Silicon Partners, or CSP, our
strategic alliance that owns and will operate Fab 6, will need to raise at least
an additional $450 million of debt during the first half of 2000 for the
financing of Fab 6. In addition, we may require additional financing to fund our
current growth plan. Currently, a substantial portion of our borrowings is
guaranteed by our controlling shareholder, Singapore Technologies Pte Ltd, or
ST, and its affiliates. Following our initial public offering, we may not
receive similar credit guarantees. We cannot assure you that any additional
financing we may need will be available or, if available, will be available on
terms satisfactory to us.

8
<PAGE> 13

WE HAVE A HIGH LEVEL OF DEBT. IF WE ARE UNABLE TO MAKE INTEREST AND PRINCIPAL
PAYMENTS ON OUR DEBT, IT COULD SERIOUSLY HARM OUR COMPANY.

We have now and will continue to have a significant amount of debt. Our
high level of debt and the covenants contained in our financing documents could
have important consequences to you. For example, they could:

- increase our vulnerability to general adverse economic and industry
conditions;

- limit our ability to pursue our growth plan;

- require us to seek the lender's consent prior to paying dividends on our
ordinary shares;

- require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing the availability of
our cash flow to fund capital expenditures, working capital and other
general corporate purposes; and

- limit our flexibility in planning for, or reacting to, changes in our
business and the semiconductor industry.

We cannot assure you that we will be able to make interest and principal
payments on debt incurred in connection with our growth if the average selling
prices or demand for our semiconductor wafers are lower than expected.

RISKS RELATED TO OUR OPERATIONS

THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY AND THE PERIODIC OVERCAPACITY
THAT RESULTS FROM THIS MAY SERIOUSLY HARM OUR COMPANY.

The semiconductor industry has historically been highly cyclical and, at
various times, has experienced significant economic downturns characterized by
production overcapacity, reduced product demand, and rapid erosion of average
selling prices. Historically, companies in the semiconductor industry have
expanded aggressively during periods of increased demand. As a result, periods
of overcapacity in the semiconductor industry have frequently followed periods
of increased demand. We expect this pattern to be repeated in the future. In
addition, the markets for semiconductors are characterized by rapid
technological change, evolving industry standards, intense competition and
fluctuations in end-user demand. Our operating results for 1996, 1997 and 1998
were seriously harmed by a downturn in the semiconductor market. Future
downturns in the semiconductor industry may be severe and could seriously harm
our company.

A DECREASE IN DEMAND FOR COMMUNICATIONS EQUIPMENT AND PERSONAL COMPUTERS MAY
SIGNIFICANTLY DECREASE THE DEMAND FOR OUR SERVICES.

A significant percentage of our sales revenue is derived from customers who
use our manufacturing services to make semiconductors for communications
equipment and personal computers. Any significant decrease in the demand for
communications equipment or personal computers may decrease the demand for our
services and could seriously harm our company. In addition, the declining
average selling price of communications equipment and personal computers places
significant pressure on the prices of the components that are used in this
equipment. If the average selling prices of communications equipment and
personal computers continue to decrease, the pricing pressure on components
produced by our company may reduce our revenue and therefore reduce our gross
profit margin significantly.

WE DEPEND ON A SMALL NUMBER OF CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR
REVENUES.

We have been largely dependent on a small number of customers for a
substantial portion of our business. Our top ten customers accounted for 65.7%
and 62.8% of our total net revenue in 1997 and 1998, respectively and 65.0%
during the first six months of 1999. In 1998, our two largest customers
accounted for approximately 9.6% and 9.3% of our total net revenue,
respectively. During the first six months of 1999,

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<PAGE> 14

our two largest customers accounted for 12.4% and 10.0% of our total net
revenue, respectively. We expect that we will continue to be dependent upon a
relatively limited number of customers for a significant portion of our revenue.
We cannot assure you that revenue generated from these customers, individually
or in the aggregate, will reach or exceed historical levels in any future
period. Loss or cancellation of business from, significant changes in scheduled
deliveries to, or decreases in the prices of services sold to, any of these
customers could seriously harm our company. Please see "Business -- Customers
and Markets" for additional information regarding our customers.

OUR CUSTOMERS DO NOT PLACE PURCHASE ORDERS FAR IN ADVANCE. THEREFORE, WE DO NOT
HAVE ANY SIGNIFICANT BACKLOG.

Our customers generally do not place purchase orders far in advance. In
addition, due to the cyclical nature of the semiconductor industry, our
customers' purchase orders have varied significantly from period-to-period. As a
result, we do not typically operate with any significant backlog. The lack of a
significant backlog makes it difficult for us to forecast our net revenue in
future periods. Moreover, our expense levels are based in part on our
expectations of future revenue and we may be unable to adjust costs in a timely
manner to compensate for revenue shortfalls. We expect that in the future our
revenue in any quarter will continue to be substantially dependent upon purchase
orders received in that quarter. We cannot assure you that any of our customers
will continue to place orders with us in the future at the same levels as in
prior periods.

WE MAY NOT BE ABLE TO IMPLEMENT NEW TECHNOLOGY AS IT BECOMES AVAILABLE WHICH MAY
AFFECT OUR ABILITY TO PRODUCE ADVANCED PRODUCTS AT COMPETITIVE PRICES.

The semiconductor industry is rapidly developing and the technology used is
constantly evolving. If we do not anticipate the technology evolution and
rapidly adopt new and innovative technology, we may not be able to produce
sufficiently advanced products at competitive prices. There is a risk that our
competitors may adopt new technology before we do, resulting in our loss of
market share. If we do not continue to produce the most advanced products at
competitive prices, our customers may use the services of our competitors
instead of our services, which could seriously harm our company.

WE DEPEND ON OUR TECHNOLOGY PARTNERS TO ADVANCE OUR PORTFOLIO OF PROCESS
TECHNOLOGIES.

Enhancing our manufacturing process technologies is critical to our ability
to provide services for our customers. We intend to continue to advance our
process technologies through internal research and development efforts and
technology alliances with leading semiconductor suppliers. Although we have an
internal research and development team focused on developing new semiconductor
manufacturing process technologies, we are dependent on our technology partners
to advance our portfolio of process technologies. We currently have joint
development and technology sharing agreements with Lucent and Hewlett-Packard,
and a technology transfer and licensing agreement with Motorola. If we are
unable to continue our technology alliances with Lucent, Hewlett-Packard and
Motorola on mutually beneficial economic terms, or are unable to enter into new
technology alliances with other leading semiconductor suppliers, we may not be
able to continue providing our customers with leading edge process technologies,
which could seriously harm our company. Please see "Business -- Research and
Development" for additional information regarding our internal research and
development efforts.

WE DEPEND ON OUR STRATEGIC ALLIANCES RELATING TO FAB 5 AND FAB 6. TERMINATION OF
EITHER OF THESE ALLIANCES COULD SERIOUSLY HARM OUR COMPANY.

We currently have two strategic alliances relating to the development and
operation of Fab 5 and Fab 6. Silicon Manufacturing Partners, or SMP, which will
operate Fab 5, is jointly-owned with a subsidiary of Lucent. CSP, which will own
and operate Fab 6, is jointly-owned with EDB Investments Pte Ltd and a
subsidiary of Hewlett-Packard. We believe our alliances with these companies
give us access to select leading edge process technologies, moderate our
development costs and capital expenditures and increase our fab utilization
rates. The termination of either of these alliances could

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seriously harm our company. Please see "Business -- Chartered Silicon Partners"
and "-- Silicon Manufacturing Partners" for a more detailed description of these
alliances and for certain recent developments regarding Hewlett-Packard.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN OUR INDUSTRY.

The worldwide semiconductor foundry industry is highly competitive. We
compete with dedicated foundry service providers such as Taiwan Semiconductor
Manufacturing Corporation, or TSMC, and United Microelectronics, or UMC, as well
as the foundry operation services of some IDMs such as International Business
Machines, or IBM. IDMs principally manufacture and sell their own proprietary
semiconductor products, but may offer foundry services. Our competitors have
greater access to capital and substantially greater production, research and
development, marketing and other resources than we do. As a result, these
companies may be able to compete more aggressively over a longer period of time
than we can.

A number of semiconductor manufacturers, including our primary competitors,
have recently announced plans to increase their manufacturing capacity and, as a
result, we expect that there will be a significant increase in worldwide
semiconductor capacity over the next five years. If growth in demand for this
capacity fails to match the growth in supply, or occurs more slowly than
anticipated, there may be more intense competition and pressure on the pricing
of our services may result. Any significant increase in competition may erode
our profit margins and weaken our earnings.

The principal elements of competition in the wafer foundry market include
technical competence, time-to-market, research and development quality,
available capacity, device yields, customer service and price. We cannot assure
you that we will be able to compete successfully in the future, which could
seriously harm our company.

OUR BUSINESS DEPENDS IN PART ON OUR ABILITY TO OBTAIN AND PRESERVE INTELLECTUAL
PROPERTY RIGHTS.

Our ability to compete successfully and achieve future growth will depend,
in part, on our ability to protect our proprietary technology. We currently hold
147 patents worldwide, 114 of which are U.S. patents, related to our production
processes. We intend to continue to file patent applications when appropriate to
protect our proprietary technologies. The process of seeking patent protection
may take a long time and be expensive. We cannot assure you that patents will be
issued from pending or future applications or that, if patents are issued, they
will not be challenged, invalidated or circumvented or that the rights granted
under the patents will provide us with meaningful protection or any commercial
advantage. In addition, we cannot assure you that the Asian countries in which
we market our products, such as Taiwan and China, will protect our intellectual
property rights to the same extent as the United States. Please see
"Business -- Intellectual Property" for a more detailed description of our
proprietary technology.

WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY RIGHTS DISPUTES.

Our ability to compete successfully depends on our ability to operate
without infringing the proprietary rights of others. We have no means of knowing
what patent applications have been filed in the United States until they are
granted. Although we are not currently a party to any material litigation
involving patent infringement, the semiconductor industry is characterized by
frequent litigation regarding patent and other intellectual property rights. As
is typical in the semiconductor industry, we have from time to time received
communications from third parties asserting patents that cover certain of our
technologies and alleging infringement of certain intellectual property rights
of others. We expect to receive similar communications in the future. In the
event any third party were to make a valid claim against us or our customers we
could be required to:

- discontinue using certain process technologies which could cause us to
stop manufacturing certain semiconductors;

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<PAGE> 16

- pay substantial monetary damages;

- seek to develop non-infringing technologies, which may not be feasible;
or

- seek to acquire licenses to the infringed technology which may not be
available on commercially reasonable terms, if at all.

Our company could be seriously harmed by such developments. Litigation,
which could result in substantial costs to us and diversion of our resources,
may also be necessary to enforce our patents or other intellectual property
rights or to defend us against claimed infringement of the rights of others. If
we fail to obtain necessary licenses or if litigation relating to patent
infringement or other intellectual property matters occurs, it could seriously
harm our company.

RISKS RELATING TO MANUFACTURING

WE MAY EXPERIENCE DIFFICULTY IN ACHIEVING ACCEPTABLE DEVICE YIELDS, PRODUCT
PERFORMANCE AND DELIVERY TIMES AS A RESULT OF MANUFACTURING PROBLEMS.

The process technology for the manufacture of semiconductor wafers is
highly complex, requires advanced and costly equipment and is continuously being
modified in an effort to improve device yields and product performance.
Microscopic impurities such as dust and other contaminants, difficulties in the
production process or defects in the key materials and tools used to manufacture
a particular wafer can cause a percentage of the wafers to be rejected or
individual semiconductors on specific wafers to be non-functional, which in each
case negatively affects our device yields. We have, from time to time,
experienced production difficulties that have caused delivery delays, lower than
expected device yields and the replacement of certain vendors of manufacturing
equipment used in our production processes. We may also experience difficulty
achieving acceptable device yields, product performance and product delivery
times in the future as a result of manufacturing problems. These problems may
result from, among other things, capacity constraints, construction delays,
increasing production at new facilities, upgrading or expanding existing
facilities or changing our process technologies. Any of these problems could
seriously harm our company.

WE DEPEND ON OUR SUPPLIERS OF RAW MATERIALS AND EQUIPMENT AND DO NOT TYPICALLY
HAVE LONG-TERM SUPPLY CONTRACTS WITH THEM.

We depend on our suppliers of raw materials. To maintain competitive
manufacturing operations, we must obtain from our suppliers, in a timely manner,
sufficient quantities of quality materials at acceptable prices. We obtain most
of our materials, including critical materials such as raw silicon wafers, from
a limited number of suppliers. We purchase all of our materials on a blanket
purchase order basis. With the exception of one multi-year contract for the
purchase of raw wafers, we do not have long-term contracts with any of our
suppliers. From time to time, vendors have extended lead times or limited the
supply of required materials to us because of capacity constraints.
Consequently, from time to time, we have experienced difficulty obtaining
quantities of raw materials we need on a timely basis.

In addition, from time to time, we may reject materials that do not meet
our specifications, resulting in declines in output or device yields. We cannot
assure you that we will be able to obtain sufficient quantities of raw materials
and other supplies of an acceptable quality. If our ability to obtain sufficient
quantities of raw materials and other supplies in a timely manner is
substantially diminished or if there are significant increases in the costs of
raw materials, it could seriously harm our company.

We also depend on a limited number of manufacturers and vendors that make
and sell the complex equipment we use in our manufacturing processes. In periods
of high market demand, the lead times from order to delivery of this equipment
could be as long as 12 to 18 months. If there are delays in the delivery of this
equipment or if there are increases in the cost of this equipment, it could
seriously harm our company. Please see "Business -- Equipment and Materials" for
additional information regarding our relationships with our suppliers of
materials and equipment.

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WE DEPEND ON ST ASSEMBLY TEST SERVICES LTD FOR MOST OF OUR SEMICONDUCTOR
ASSEMBLY AND TESTING REQUIREMENTS.

Semiconductor assembly and testing are complex processes which involve
significant technological expertise and specialized equipment. Although we are
in the process of evaluating additional sources of supply, we currently depend
on our affiliate ST Assembly Test Services Ltd, or STATS, for almost all of the
assembly and test services we offer our customers. We do not have a long-term
contract with STATS and retain its services on a purchase order basis. STATS
may, from time to time, experience production interruption due to, among other
things, technical problems occurring during the assembly and testing processes.
Because STATS is our major provider of these services, any prolonged
interruption in STATS' operations or the termination of our affiliation with
STATS could seriously harm our company.

WE ARE SUBJECT TO THE RISK OF LOSS DUE TO FIRE BECAUSE THE MATERIALS WE USE IN
OUR MANUFACTURING PROCESSES ARE HIGHLY FLAMMABLE.

We use highly flammable materials such as silane and hydrogen in our
manufacturing processes and are therefore subject to the risk of loss arising
from fires. Although we have implemented industry acceptable risk management
controls at our manufacturing locations, the risk of fire associated with these
materials cannot be completely eliminated and, in the past, we have had minor
interruptions in production as a result of fire. We maintain insurance policies
to guard against losses caused by fire. While we believe our insurance coverage
for damage to our property and disruption of our business due to fire is
adequate, we cannot assure you that it would be sufficient to cover all of our
potential losses. If any of our fabs were to be damaged or cease operations as a
result of a fire, it would temporarily reduce manufacturing capacity and
seriously harm our company.

OUR FAILURE TO COMPLY WITH CERTAIN ENVIRONMENTAL REGULATIONS COULD SERIOUSLY
HARM OUR COMPANY.

We are subject to a variety of laws and governmental regulations in
Singapore relating to the use, discharge and disposal of toxic or otherwise
hazardous materials used in our production process. While we believe that we are
currently in compliance in all material respects with such laws and regulations,
if we fail to use, discharge or dispose of hazardous materials appropriately,
our company could be subject to substantial liability or could be required to
suspend or adversely modify our manufacturing operations. In addition, we could
be required to pay for the cleanup of our properties if they are found to be
contaminated even if we are not responsible for the contamination. We maintain
insurance policies to guard against losses resulting from environmental harm
caused by our company. While we believe our insurance coverage is adequate, we
cannot assure you that it would be sufficient to cover all our potential losses.

RISKS RELATING TO OUR INFRASTRUCTURE

WE DEPEND ON KEY PERSONNEL AND, DUE TO THE STRONG DEMAND IN SINGAPORE FOR
SKILLED LABOR, MAY HAVE DIFFICULTY ATTRACTING SUFFICIENT NUMBERS OF SKILLED
EMPLOYEES.

Our success depends to a significant extent upon the continued service of
our key senior executives and our engineering, marketing, sales, manufacturing,
support and other personnel. In addition, in connection with our growth plans,
we are likely to need a greater number of experienced engineers and other
employees in the future. The competition for skilled employees is intense. Due
to the current shortage of experienced personnel in Singapore, we must recruit
our personnel internationally. This is more expensive than hiring personnel
locally, and therefore increases our operating costs. As of June 30, 1999, a
majority of our total number of employees were citizens of countries other than
Singapore. We expect demand for personnel in Singapore to increase significantly
in the future as new wafer fabrication facilities are established in Singapore.
If we were to lose the services of any of our existing key personnel without
adequate replacements, or were unable to attract and retain new experienced
personnel as we grow, it could seriously harm our company. We do not carry "key
person" life insurance on any of our personnel.

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WE MAY NOT BE ABLE TO MANAGE OUR GROWTH, WHICH COULD SERIOUSLY HARM OUR COMPANY.

We have experienced and are currently experiencing a period of significant
growth. This growth has placed, and the future growth will continue to place, a
significant strain on our managerial, technical, financial, production,
operational and other resources. In particular, by expanding our manufacturing
facilities and equipping new facilities we may create additional capacity at our
fabs, which, if not utilized, would reduce our profitability and could seriously
harm our company.

THE YEAR 2000 PROBLEM MAY SERIOUSLY HARM OUR COMPANY.

Many currently installed computer systems and software products are coded
to accept only two-digit year entries in the date code field. Consequently, on
January 1, 2000, many of these systems could malfunction because they may not be
able to distinguish twenty-first century dates from twentieth century dates. In
1997, we organized a Year 2000 committee to focus on, among other things, Year
2000 readiness of our information technology systems, facility equipment,
production equipment, fab support areas and vendors. Our information technology
systems have been assessed and we have established a timeline to upgrade and
test all of our equipment, including quality and reliability assurance, research
and development and facility equipment. We have communicated with our equipment
suppliers to understand whether the equipment we have purchased from them is
Year 2000 ready. We have also worked with our raw material suppliers to
understand whether the information technology systems used by them will be Year
2000 ready. We have identified several potential problems relating to Year 2000.
We believe that the most likely worst case scenario would be an external power
surge or dip, or a power trip which could cause our equipment to malfunction. An
equipment malfunction could cause the semiconductors we are processing at the
time of the malfunction to be misprocessed. In addition, certain machines may
fail despite having been tested to be Year 2000 ready. We are currently
preparing a contingency plan to address this worst case scenario. If we are
unable to develop such a plan, or if we or our suppliers fail to make the
necessary modifications and upgrades in a timely manner, the Year 2000 problem
could seriously harm our company.

RISKS RELATED TO INVESTMENTS IN A CONTROLLED CORPORATION

SINGAPORE TECHNOLOGIES WILL CONTINUE TO CONTROL OUR COMPANY FOLLOWING COMPLETION
OF THE GLOBAL OFFERING AND ITS INTERESTS MAY CONFLICT WITH THE INTERESTS OF OUR
OTHER SHAREHOLDERS.

ST and its affiliates will beneficially own approximately 72.5% of our
outstanding ordinary shares following completion of the global offering, or
70.3% if the underwriters exercise their overallotment option in full. As a
result, ST will be able to exercise control over many matters requiring approval
by our shareholders, including the election of directors and approval of
significant corporate transactions.

ST also provides us with financing, guarantees some of our debt and enters
into forward foreign exchange contracts with us relating to some of our
equipment purchase commitments with foreign vendors. While we believe that ST
will continue to provide us credit and other support, ST has no obligation to do
so and the availability and amount of its support will depend on various
factors, including our ability to raise funds without such support and the
expenses relating to such fundraising.

After completion of the global offering, we will continue to have
contractual and other business relationships with ST and its affiliates and may
engage in transactions from time to time that are material to us. Although the
Audit Committee of our Board of Directors will review all material transactions
between our company and ST, circumstances may arise in which the interests of ST
and its affiliates could conflict with the interests of our other shareholders.
Because ST and its affiliates own a significant portion of our ordinary shares,
they could delay or prevent a change in control of our company, even if a
transaction of that nature would be beneficial to our other shareholders. Our
Articles of Association do not contain a provision requiring that ST and its
affiliates own at least a majority of our ordinary shares. Please see

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"Relationship with Singapore Technologies" for additional information regarding
our relationship with ST and its affiliates.

RISKS RELATED TO INVESTMENT IN A FOREIGN CORPORATION

WE OPERATE INTERNATIONALLY AND ARE THEREFORE AFFECTED BY PROBLEMS IN OTHER
COUNTRIES.

Our principal customers are located in the United States and Taiwan and our
principal suppliers are located in the United States, Japan, Korea and Germany.
As a result, we are affected by economic and political conditions in those
countries, including:

- fluctuations in the value of currencies;

- changes in labor conditions;

- longer payment cycles;

- greater difficulty in collecting accounts receivable;

- burdens and costs of compliance with a variety of foreign laws;

- political and economic instability;

- increases in duties and taxation;

- imposition of restrictions on currency conversion or the transfer of
funds;

- limitations on imports or exports;

- expropriation of private enterprises; and

- reversal of the current policies (including favorable tax and lending
policies) encouraging foreign investment or foreign trade by our host
countries.

The geographical distances between Asia, the Americas and Europe also
create a number of logistical and communications challenges. Although we have
not experienced any serious harm in connection with our international
operations, we cannot assure you that such problems will not arise in the
future.

EXCHANGE RATE FLUCTUATIONS MAY AFFECT THE VALUE OF OUR ADSS OR ORDINARY SHARES.

Our financial statements are prepared in U.S. dollars. Our net revenue is
generally denominated in U.S. dollars and our operating expenses are generally
incurred in U.S. dollars and Singapore dollars. Our capital expenditures are
generally denominated in U.S. dollars, Japanese yen, Singapore dollars and other
currencies. Although we hedge a portion of the resulting net foreign exchange
position through the use of forward exchange contracts, we are still affected by
fluctuations in exchange rates among the U.S. dollar, the Japanese yen, the
Singapore dollar and other currencies. We are particularly affected by
fluctuations in the exchange rate between the U.S. dollar and the Singapore
dollar. For example, substantially all of our revenue and approximately 76.0% of
our cost of revenue is denominated in U.S. dollars. If the Singapore dollar
strengthens against the U.S. dollar by 2.0%, our cost of revenue will increase
by 0.5%, likewise, if the Singapore dollar weakens against the U.S. dollar by
2.0%, our cost of revenue will decrease by 0.5%. Any significant fluctuation in
exchange rates may harm our company. In addition, fluctuations in the exchange
rate between the U.S. dollar and the Singapore dollar will affect the U.S.
dollar value of our ordinary shares and ADSs, and the value of any cash
dividends if paid in U.S. or Singapore dollars.

ECONOMIC CONDITIONS IN THE ASIA PACIFIC REGION MAY HAVE A NEGATIVE IMPACT ON OUR
REVENUE.

A significant portion of our revenue is derived from sales to customers
whose semiconductors are used in products that are sold in Japan, Taiwan and
other countries in East and Southeast Asia. In 1998, many countries in Asia
experienced considerable currency volatility and depreciation, high interest
rates and declining asset values. As a result, there was a general decline in
business and consumer spending and a

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decrease in economic growth as compared with prior years. Although Singapore was
not materially affected by these events, our results of operations in 1998 were
affected by overall regional economic conditions because demand for
semiconductor products generally rises as the overall level of economic activity
increases and falls as activity decreases. Our results of operations could be
further impacted if the economic environment in these countries fails to improve
or worsens in 1999 or 2000.

OUR PUBLIC SHAREHOLDERS MAY HAVE MORE DIFFICULTY PROTECTING THEIR INTERESTS THAN
THEY WOULD AS SHAREHOLDERS OF A U.S. CORPORATION.

Our corporate affairs are governed by our Memorandum and Articles of
Association and by the laws governing corporations incorporated in Singapore.
The rights of our shareholders and the responsibilities of the members of our
Board of Directors under Singapore law may be different from those applicable to
a corporation incorporated in the United States. Therefore, our public
shareholders may have more difficulty in protecting their interests in
connection with actions taken by our management, members of our Board of
Directors or our controlling shareholders than they would as shareholders of a
corporation incorporated in the United States. For example, controlling
shareholders in United States corporations are subject to fiduciary duties while
controlling shareholders in Singapore corporations are not subject to such
duties. Please see "-- Singapore Technologies will continue to control our
company following completion of the global offering and its interests may
conflict with the interests of our other shareholders" for a discussion relating
to our controlling shareholders, ST and its affiliates.

IT MAY BE DIFFICULT FOR YOU TO ENFORCE ANY JUDGMENT OBTAINED IN THE UNITED
STATES AGAINST US OR OUR AFFILIATES.

Our company is incorporated under the laws of the Republic of Singapore.
Many of our directors and executive officers, and some of the experts named in
this prospectus, reside outside the United States. In addition, virtually all of
our assets and the assets of those persons are located outside the United
States. As a result, it may be difficult to enforce in or out of the United
States any judgment obtained in the United States against us or any of these
persons, including judgments based upon the civil liability provisions of the
United States securities laws. In addition, in original actions brought in
courts in jurisdictions located outside the United States, it may be difficult
for investors to enforce liabilities based upon United States securities laws.

We have been advised by Allen & Gledhill, our Singapore legal counsel, that
judgments of U.S. courts based on the civil liability provisions of the federal
securities laws of the United States are not enforceable in Singapore courts.
Allen & Gledhill has also advised us that there is doubt as to whether Singapore
courts will enter judgments in original actions brought in Singapore courts
based solely upon the civil liability provisions of the federal securities laws
of the United States.

SINGAPORE LAW CONTAINS PROVISIONS THAT COULD DISCOURAGE A TAKEOVER OF OUR
COMPANY.

The Companies Act (Chapter 50) of Singapore and the Singapore Code on
Takeovers and Mergers contain certain provisions that may delay, deter or
prevent a future takeover or change in control of our company. Any person
acquiring an interest, either on his or her own or together with parties acting
in concert with him or her, in 25% or more of our voting shares must extend a
takeover offer for the remaining voting shares in accordance with the Singapore
Code on Takeovers and Mergers. A takeover offer is also required to be made if a
person holding between 25% and 50% (both inclusive) of the voting rights (either
on his or her own or together with parties acting in concert with him or her)
acquires an additional 3% of our voting shares in any 12-month period. The
preceding provisions may discourage or prevent certain types of transactions
involving an actual or threatened change of control of our company. This may
harm you because a transaction of that kind may allow you to sell your shares at
a price above the prevailing market price.

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RISKS RELATED TO OUR ADSS AND ORDINARY SHARES AND OUR TRADING MARKET

THERE HAS BEEN NO PRIOR MARKET FOR OUR ADSS OR ORDINARY SHARES AND THE GLOBAL
OFFERING MAY NOT RESULT IN AN ACTIVE OR LIQUID MARKET FOR THESE SECURITIES.

Prior to the global offering, there has not been a public market for our
ADSs or ordinary shares. The ADSs have been approved for quotation on the Nasdaq
National Market. The Singapore stock exchange has approved our application to
list our ordinary shares. However, we cannot assure you that an active public
market will develop or be sustained after the global offering. The initial
public offering price for the ordinary shares and the ADSs has been determined
by negotiations between us and the representatives of the underwriters and may
not be indicative of prices that will prevail in the trading market. Investors
may not be able to resell their ordinary shares or ADSs at or above the initial
public offering price. The financial markets in the United States and other
countries have experienced significant price and volume fluctuations and market
prices of technology companies have been and continue to be extremely volatile.
Volatility in the price of our ordinary shares and ADSs may be caused by factors
outside of our control and may be unrelated or disproportionate to our operating
results. In the past, following periods of volatility in the market price of a
public company's securities, securities class action litigation has often been
instituted against that company. Such litigation could result in substantial
costs and a diversion of our management's attention and resources.

THE SINGAPORE SECURITIES MARKET IS RELATIVELY SMALL AND MORE VOLATILE THAN U.S.
MARKETS AND MAY CAUSE THE MARKET PRICE OF OUR ADSS AND ORDINARY SHARES TO
FLUCTUATE.

The Stock Exchange of Singapore Limited is relatively small and more
volatile than stock exchanges in the United States and certain other European
countries. As of June 30, 1999, there were 308 Singapore companies listed on the
Main Board of the Singapore stock exchange and the aggregate market
capitalization of listed equity securities of these companies was approximately
US$226 billion. For the year ended December 31, 1998, the average daily equity
trading value on the Singapore stock exchange (including shares traded on the
CLOB International trading system) was approximately US$229 million, with an
annualized aggregate trading value of approximately US$57 billion. The
relatively small market capitalization of, and trading volume on, the Singapore
stock exchange may cause the market price of securities of Singapore companies,
including our ADSs and our ordinary shares, to fluctuate in both the domestic
and the international markets. Please see "Annex B -- The Securities Market of
Singapore" for additional information regarding the Singapore securities market.

NEW INVESTORS IN OUR COMPANY WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.

The purchase price of the ordinary shares and ADSs offered by this
prospectus is substantially higher than the net tangible book value of our
outstanding ordinary shares. Investors who purchase ordinary shares or ADSs in
the global offering will therefore experience immediate and significant dilution
in the tangible net book value of their investment. Based on the initial public
offering price of our ordinary shares and ADSs, our current shareholders will
have an aggregate unrealized gain of approximately $1,099 million as a result of
the global offering. Please see "Dilution" for additional information regarding
the dilutive effect of the global offering.

THE GLOBAL OFFERING MAY NOT RESULT IN AN ACTIVE OR LIQUID MARKET FOR OUR ADSS OR
ORDINARY SHARES.

We cannot predict the extent to which the global offering will result in
the development of an active, liquid public trading market for our ADSs or
ordinary shares offered by this prospectus or how liquid that market will be.
Active, liquid trading markets generally result in lower price volatility and
more efficient execution of buy and sell orders for investors. 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 ordinary shares underlying the ADSs from the depositary at any
time, there is no public market for our ordinary shares in the United States.

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YOUR VOTING RIGHTS WITH RESPECT TO THE ADSS ARE LIMITED BY THE TERMS OF THE
DEPOSIT AGREEMENT FOR THE ADSS.

Holders may exercise voting rights with respect to the ordinary shares
represented by ADSs only in accordance with the provisions of the deposit
agreement relating to the ADSs. There are no provisions under Singapore law or
under our Articles of Association that limit ADS holders' ability to exercise
their voting rights through the depositary with respect to the underlying
ordinary shares. However, there are practical limitations upon the ability of
ADS holders to exercise their voting rights due to the additional procedural
steps involved in communicating with such holders. For example, our Articles of
Association require us to notify our shareholders at least 14 days in advance of
any annual general meeting unless a special resolution is to be passed at that
meeting, in which case at least 21 days' notice must be given. Our ordinary
shareholders will receive notice directly from us and will be able to exercise
their voting rights by either attending the meeting in person or voting by
proxy.

ADS holders, by comparison, will not receive notice directly from us.
Rather, in accordance with the deposit agreement, we will provide the notice to
the depositary, which will in turn, as soon as practicable thereafter, mail to
holders of ADSs:

- the notice of such meeting;

- voting instruction forms; and

- a statement as to the manner in which instructions may be given by
holders.

To exercise their voting rights, ADS holders must then instruct the
depositary how to vote their shares. Because of this extra procedural step
involving the depositary, the process for exercising voting rights will take
longer for ADS holders than for holders of ordinary shares. ADSs for which the
depositary does not receive timely voting instructions will not be voted at any
meeting.

Except as described in this prospectus, holders will not be able to
exercise voting rights attaching to the ADSs. Please see "Description of
Ordinary Shares" for additional information relating to our ordinary shares.

YOUR ABILITY TO PARTICIPATE IN ANY RIGHTS OFFERING OF OUR COMPANY IS LIMITED.

We may, from time to time, distribute rights to our shareholders, including
rights to acquire securities under the deposit agreement relating to the ADSs.
The depositary will not offer rights to holders unless both the rights and the
securities to which such rights relate are either exempt from registration under
the Securities Act or are registered under provisions of the Securities Act.
However, we are under no obligation to file a registration statement with
respect to any such rights or underlying securities or to endeavor to cause such
a registration statement to be declared effective. Accordingly, holders of our
ordinary shares may be unable to participate in rights offerings by us and may
experience dilution of their holdings as a result.

THE FUTURE SALES OF SECURITIES BY OUR COMPANY OR EXISTING SHAREHOLDERS MAY HURT
THE PRICE OF OUR ADSS AND OUR ORDINARY SHARES.

The market price of our ADSs could decline as a result of sales of a large
number of ordinary shares or ADSs after the global offering or the perception
that such sales could occur. Such sales also might make it more difficult for us
to sell ordinary shares in the future at a time and at a price that we deem
appropriate. Upon completion of the global offering, we will have an aggregate
of 1,238,847,853 ordinary shares issued and outstanding (including ordinary
shares represented by ADSs). ST and its affiliates will own, directly and
indirectly, 897,632,876 ordinary shares constituting approximately 72.5% of the
outstanding ordinary shares. The 250,000,000 ordinary shares sold in the global
offering (including ordinary shares represented by ADSs) will be freely
tradable, other than ordinary shares purchased by our affiliates. The remaining
988,847,853 ordinary shares may be sold in the United States only pursuant to a
registration statement under the Securities Act or an exemption from the
registration requirements of the

18
<PAGE> 23

Securities Act. We have, and each of our directors, executive officers and
equity investor customers, ST and its affiliates and certain other existing
shareholders, has agreed that he, she or it will not offer, sell or agree to
sell, directly or indirectly, or otherwise dispose of any ordinary shares
without the prior written consent of Salomon Smith Barney Inc. for a period of
180 days from the date of this prospectus, subject to certain exceptions. Please
see "Underwriting" and "Shares Eligible for Future Sale" for additional
information regarding resale restrictions.

FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS MAY NOT BE REALIZED

This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of the risks faced by us
described above and elsewhere in this prospectus. We undertake no obligation
after the date of this prospectus to update publicly any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.

19
<PAGE> 24

USE OF PROCEEDS

The net proceeds from the global offering, after deducting underwriting
discounts and the estimated offering expenses payable by us, are estimated to be
approximately $475.5 million, or $547.3 million if the underwriters exercise
their overallotment option in full, based on the initial public offering price
of $20.00 per ADS and S$3.344 per ordinary share. We intend to use the proceeds
from the global offering for the following purposes:

- to fund approximately $230 million in capital expenditures in connection
with the expansion of our manufacturing facilities;

- to make approximately $170 million in equity contributions to SMP and
CSP;

- for working capital; and

- for general corporate purposes.

We may also use a portion of the proceeds for strategic investments and
acquisitions. While we have from time to time had preliminary discussions
regarding potential investments and acquisitions in the ordinary course of our
business, we do not currently have any agreements or understandings to make any
such investment or acquisition. Please see "Management's Discussion and Analysis
of Financial Condition and Results of Operation" for information regarding our
future liquidity needs.

Except as indicated above, we have not yet determined the amount of net
proceeds to be used specifically for the purposes specified above. Accordingly,
management will have significant flexibility in applying the net proceeds of the
global offering. Pending any use, as described above, we intend to invest the
net proceeds in high quality, interest-bearing instruments.

20
<PAGE> 25

DIVIDEND POLICY

In December 1995 and January 1997, we paid a cash dividend on our ordinary
shares in an amount equivalent to US$87,000 and US$93,000, respectively, for the
purpose of qualifying our ordinary shares as "trustee stock" eligible for
investment by account holders of the Central Provident Fund, a mandatory
employee pension plan administered by the Government of Singapore. Except for
these dividends, we have not, since our inception, declared or paid any cash
dividends on our ordinary shares. We do not currently anticipate paying any cash
dividends in 1999. We may, by ordinary resolution, declare dividends at a
general meeting, but we may not pay dividends in excess of the amount
recommended by our Board of Directors. Our Board of Directors may also declare
interim dividends without seeking shareholder approval. We must pay all
dividends out of our profits or pursuant to Section 69 of the Companies Act of
Singapore. In making its recommendation, our Board of Directors will consider,
among other things, our future earnings, operations, capital requirements and
general financial condition, as well as general business conditions and other
factors which our Board of Directors may determine are appropriate. Some of our
loan agreements restrict the payment of dividends without the consent of the
lender. We currently intend to retain future earnings, if any, to finance the
expansion of our business.

21
<PAGE> 26

CAPITALIZATION

The following table sets forth, as of June 30, 1999, the capitalization of
our company on an actual, pro forma and pro forma as adjusted basis. The pro
forma data set forth below reflect a subsequent change to our strategic alliance
agreement relating to CSP that results in CSP being consolidated and presents
our balance sheet data as if such change had occurred on June 30, 1999. The pro
forma as adjusted data set forth below adjust the pro forma data to give effect
to the issuance of 250,000,000 ordinary shares in the global offering (including
ordinary shares represented by ADSs), and the application of the net proceeds
from such offering at the initial public offering price of $20.00 per ADS and
S$3.344 per ordinary share. You should read this information in conjunction
with:

- our consolidated financial statements and the related notes included
elsewhere in this prospectus; and

- "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............................... $ 47,548 $ 53,431 $ 528,881
========== ========== ==========
Short-term borrowings, including current portion of
long-term debt.......................................... $ 87,601 $ 87,601 $ 87,601
Long-term debt.......................................... 364,903 440,903 440,903
Shareholders' equity:
Ordinary shares, S$0.26 par value per share,
3,076,923,079 shares authorized; 1,001,425,308
shares issued and outstanding, actual;
1,251,425,308 shares issued and outstanding, as
adjusted......................................... 221,636 221,636 260,512
Subscription receivables........................... (12,731) (12,731) (12,731)
Additional paid-in capital......................... 694,752 694,752 1,131,326
Unearned compensation.............................. (982) (982) (982)
Accumulated other comprehensive income (loss)...... (52,696) (52,696) (52,696)
Retained deficit................................... (293,640) (293,640) (293,640)
---------- ---------- ----------
Total shareholders' equity.................... 556,339 556,339 1,031,789
---------- ---------- ----------
Total capitalization..................... $1,008,843 $1,084,843 $1,560,293
========== ========== ==========
</TABLE>

In connection with the global offering, we restructured our capital
effective October 14, 1999. We currently have one class of ordinary shares with
a par value of S$0.26.

In our capital restructuring, we:

- issued one additional fully paid "A" ordinary share for every 20 partly
paid "A" ordinary shares and cancelled the partly paid shares;

- cancelled all unissued "A" ordinary shares and "B" ordinary shares;

- cancelled the special rights attached to the "B" ordinary shares;

- redesignated the "A" ordinary shares and "B" ordinary shares as one class
of ordinary shares;

- effected a share split such that each ordinary share with a par value of
S$0.4888 was sub-divided into 1.88 ordinary shares with a par value of
S$0.26;

- adopted new Articles of Association; and

- will issue new ordinary shares in connection with the global offering
which will rank equal in all respects with our existing ordinary shares.

22
<PAGE> 27

EXCHANGE RATES

Fluctuations in the exchange rate between the Singapore dollar and the U.S.
dollar will affect the U.S. dollar equivalent of the Singapore dollar price of
the ordinary shares on the Singapore stock exchange and, as a result, are
expected to affect the market price of the ADSs. These fluctuations will also
affect the U.S. dollar conversion by the depositary of any cash dividends paid
in Singapore dollars on the ordinary shares represented by ADSs or any other
distribution received by the depositary in connection with the payment of
dividends on the ordinary shares. Currently, there are no restrictions in
Singapore on the conversion of Singapore dollars into U.S. dollars and vice
versa.

The following table sets forth, for the fiscal years indicated, information
concerning the exchange rates between Singapore dollars and U.S. dollars based
on the average of the noon buying rate in the City of New York on the last
business day of each month during the period for cable transfers in Singapore
dollars as certified for customs purposes by the Federal Reserve Bank of New
York. The table illustrates how many Singapore dollars it would take to buy one
U.S. dollar.

<TABLE>
<CAPTION>
S$ PER US$1.00
NOON BUYING RATE
----------------------------------------
FISCAL YEAR ENDED DECEMBER 31, AVERAGE(1) LOW HIGH PERIOD END
------------------------------ ---------- ---- ---- ----------
<S> <C> <C> <C> <C>
1994............................................... 1.53 1.46 1.61 1.46
1995............................................... 1.42 1.39 1.47 1.42
1996............................................... 1.41 1.40 1.43 1.40
1997............................................... 1.49 1.40 1.71 1.61
1998............................................... 1.67 1.58 1.80 1.65
1999 (through June 30, 1999)....................... 1.71 1.66 1.74 1.70
</TABLE>

- ---------------
(1) The average of the daily Noon Buying Rates on the last business day of each
month during the year.

Unless we indicate otherwise, all translations from Singapore dollars to
U.S. dollars contained in this prospectus have been based on the noon buying
rate in the City of New York on June 30, 1999 for cable transfers in Singapore
dollars as certified for customs purposes by the Federal Reserve Bank of New
York. The noon buying rate on June 30, 1999 was S$1.70 per $1.00.

23
<PAGE> 28

DILUTION

The net tangible book value of our company as of June 30, 1999 was $552.4
million or S$0.922 per ordinary share, the equivalent of $5.52 per ADS. Net
tangible book value per ordinary share is determined by dividing our net
tangible book value (total tangible assets less total liabilities) as of June
30, 1999 by the number of outstanding ordinary shares at that date.

Based on the issuance by us of 250,000,000 ordinary shares in the global
offering (including ordinary shares represented by ADSs), at an initial public
offering price of S$3.344 per ordinary share (or $20.00 per ADS), after
deducting underwriting discounts and estimated offering expenses paid by us, the
net tangible book value of our company as of June 30, 1999 would have been
S$1.373 per ordinary share (the equivalent of $8.21 per ADS). This represents an
immediate increase in net tangible book value of S$0.451 per ordinary share (the
equivalent of $2.69 per ADS) to our existing shareholders and an immediate
dilution in net tangible book value of S$1.971 per ordinary share (the
equivalent of $11.79 per ADS) to new investors. The following table illustrates
this per ordinary share and per ADS dilution:

<TABLE>
<CAPTION>
PER SHARE PER ADS
--------- -------
<S> <C> <C> <C> <C>
Initial public offering price per ordinary share and per
ADS....................................................... S$3.344 $20.00
Net tangible book value per ordinary share and per ADS as of
June 30, 1999............................................... S$0.922 $5.52
Increase in net tangible book value per ordinary share and
per ADS attributable to new
public investors.......................................... 0.451 2.69
------- -----
Net tangible book value per ordinary share and per ADS after
the global offering....................................... 1.373 8.21
------- ------
Dilution in net tangible book value per ordinary share and
per ADS to new public investors........................... S$1.971 $11.79
======= ======
</TABLE>

The following table summarizes as of June 30, 1999, the total number of
ordinary shares purchased from us, the total consideration paid to us and the
average price paid per ordinary share by our existing shareholders and by our
new public investors in the global offering. For purposes of this table, we have
assumed that all new public investors purchase ordinary shares rather than ADSs.

<TABLE>
<CAPTION>
ORDINARY SHARES
PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT ORDINARY SHARE
------- ------- -------- ------- --------------
(IN MILLIONS, EXCEPT PERCENTAGE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Existing shareholders................ 1,001.4 80.0% $ 904.0 64.4% $0.90
New public investors................. 250.0 20.0% $ 500.0 35.6% $2.00
------- ----- -------- ----- -----
Total...................... 1,251.4 100.0% $1,404.0 100.0% $1.12
======= ===== ======== ===== =====
</TABLE>

The tables above assume:

- the underwriters have not exercised their overallotment option; and

- outstanding share options have not been exercised.

To the extent that the overallotment or outstanding share options are
exercised there will be further dilution to new investors. Please see
"Management" for a description of our share option plans.

24
<PAGE> 29

SELECTED FINANCIAL DATA

You should read the following selected financial data in conjunction with
our consolidated financial statements and the related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The selected financial data for the
fiscal years ended December 31, 1994 and 1995 are derived from our audited
financial statements, however, we have not included our audited financial
statements for those periods in this prospectus. The selected financial data for
the fiscal years ended December 31, 1996, 1997 and 1998 and the six month
periods ended June 30, 1998 and 1999 are derived from our audited financial
statements included elsewhere in this prospectus which have been audited by
KPMG, independent accountants. Our financial statements are prepared in
accordance with U.S. GAAP for the fiscal years ended December 31, 1994, 1995,
1996, 1997 and 1998 and the six month periods ended June 30, 1998 and 1999.
Historical results are not indicative of the results to be expected in the
future.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- -------------------
1994 1995 1996(1) 1997 1998(2)(3) 1998 1999(4)
-------- -------- -------- --------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue....................... $152,373 $287,026 $406,936 $ 379,761 $ 422,622 $232,771 $294,738
Cost of revenue................... 94,496 187,168 289,435 368,521 439,668 224,105 247,257
-------- -------- -------- --------- --------- -------- --------
Gross profit (loss)............... 57,877 99,858 117,501 11,240 (17,046) 8,666 47,481
-------- -------- -------- --------- --------- -------- --------
Operating expenses:
Research and development........ 4,737 9,069 13,018 26,553 43,419 20,642 22,955
Fab start-up costs.............. 8,381 11,236 13,132 10,908 1,455 1,455 --
Sales and marketing............. 3,557 5,550 16,233 20,184 31,872 13,609 20,568
General and administrative...... 9,444 20,097 32,615 30,144 37,389 15,089 22,701
Costs incurred on termination of
development program........... -- -- -- -- 31,776 -- 6,500
Stock-based compensation........ -- 2,799 332 2,024 (2,780) (1,333) 3,289
-------- -------- -------- --------- --------- -------- --------
Total operating
expenses............... 26,119 48,751 75,330 89,813 143,131 49,462 76,013
-------- -------- -------- --------- --------- -------- --------
Operating income (loss)........... 31,758 51,107 42,171 (78,573) (160,177) (40,796) (28,532)
Other income (expense):
Equity in loss of SMP and CSP... -- -- -- (1,272) (20,434) (6,829) (17,988)
Other income (loss)............. 1,319 2,982 3,850 4,860 4,680 330 650
Interest income................. 929 2,944 973 179 1,690 811 1,207
Interest expense................ (3,562) (1,297) (1,144) (12,782) (20,137) (10,100) (9,094)
Exchange gain (loss)............ 2,318 (22) 1,963 (31,678) 5,237 (3,139) 5,065
-------- -------- -------- --------- --------- -------- --------
Income (loss) before income
taxes........................... 32,762 55,714 47,813 (119,266) (189,141) (59,723) (48,692)
Income tax benefit (expense)...... (251) (832) (337) (355) (865) (543) 172
-------- -------- -------- --------- --------- -------- --------
Net income (loss)................. $ 32,762 $ 54,882 $ 47,476 $(119,621) $(190,006) $(60,266) $(48,520)
======== ======== ======== ========= ========= ======== ========
Net income (loss) per ordinary
share:
Basic........................... $ 0.11 $ 0.13 $ 0.10 $ (0.24) $ (0.24) $ (0.09) $ (0.05)
======== ======== ======== ========= ========= ======== ========
Diluted......................... $ 0.11 $ 0.13 $ 0.10 $ (0.24) $ (0.24) $ (0.09) $ (0.05)
======== ======== ======== ========= ========= ======== ========
Shares used in per share
calculation:
Basic........................... 305,412 418,661 488,296 490,407 784,541 685,871 985,816
Diluted......................... 305,412 418,661 488,824 490,407 784,541 685,871 985,816
Net income (loss) per ADS:
Basic........................... $ 1.06 $ 1.31 $ 0.97 $ (2.44) $ (2.42) $ (0.88) $ (0.49)
======== ======== ======== ========= ========= ======== ========
Diluted......................... $ 1.06 $ 1.31 $ 0.97 $ (2.44) $ (2.42) $ (0.88) $ (0.49)
======== ======== ======== ========= ========= ======== ========
ADSs used in per ADS calculation:
Basic........................... 30,541 41,866 48,830 49,041 78,454 68,587 98,582
Diluted......................... 30,541 41,866 48,882 49,041 78,454 68,587 98,582
</TABLE>

25
<PAGE> 30

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1999
-------- -------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 66,974 $ 41,925 $ 7,064 $ 23,785 $ 99,619 $ 47,548
Working capital (deficit).............. (33,632) (29,917) (173,937) (328,927) 13,099 (49,633)
Total assets........................... 362,280 618,043 1,035,561 1,278,968 1,321,510 1,229,847
Short-term borrowings and current
portion of long-term debt............ 83,473 28,456 29,155 10,591 52,128 87,601
Current installments of obligations
under capital leases................. -- 3,620 3,842 4,078 4,329 4,914
Obligations under capital leases,
excluding current installments....... -- 25,665 21,823 17,745 13,414 10,698
Other long-term debt................... 28,767 16,961 65,934 273,008 419,545 364,903
Shareholders' equity................... 182,876 377,609 489,237 310,806 601,246 556,339
</TABLE>

(2) Effective July 1, 1998, we changed our functional currency from the
Singapore dollar to the U.S. dollar. Please see note 2(e) to our
consolidated financial statements.

(4) In the first six months of 1999, we recorded a charge of $6.5 million in
connection with the termination of a development program. Please see note 8
to our consolidated financial statements.

26
<PAGE> 31

UNAUDITED PRO FORMA FINANCIAL INFORMATION

We believe that recent changes to our strategic alliance agreement with
respect to CSP will have a material impact on the basis of presentation of our
financial information. U.S. GAAP generally requires consolidation of all
majority owned (greater than 50%) subsidiaries. However, as a result of certain
provisions contained in the strategic alliance agreement, the minority
shareholders of CSP were deemed to have substantive participative rights which
overcame the presumption that we should consolidate CSP. Therefore, CSP has
historically been accounted for under the equity method in our financial
statements. As a result of an amendment to the strategic alliance agreement, we
will treat CSP as a consolidated subsidiary from October 1, 1999 forward. Please
see "Business -- Strategic Alliances -- Chartered Silicon Partners" for a
discussion of this amendment.

The unaudited pro forma consolidated balance sheet as of June 30, 1999 and
unaudited pro forma consolidated statement of operations for the year ended
December 31, 1998 and the six months ended June 30, 1999 have been prepared
based on our historical consolidated financial statements after giving effect to
the subsequent change to our strategic alliance agreement relating to CSP that
resulted in CSP being consolidated. The unaudited pro forma financial
information presents our financial condition as if such change had occurred on
June 30, 1999 and presents our results of operations data as if such change had
occurred on January 1, 1998.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 SIX MONTHS ENDED JUNE 30, 1999
------------------------------------ ------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue........................ $ 422,622 $ 422,622 $294,738 $ (605) $294,133
Cost of revenue.................... 439,668 439,668 247,257 247,257
--------- --------- -------- --------
Gross profit (loss)................ (17,046) (17,046) 47,481 46,876
--------- --------- -------- --------
Operating Expenses: Research and
development...................... 43,419 $ 4,668 48,087 22,955 4,256 27,211
Fab start-up costs............... 1,455 6,911 8,366 -- 6,239 6,239
Sales and marketing.............. 31,872 31,872 20,568 20,568
General and administrative....... 37,389 37,389 22,701 514 23,215
Costs incurred on termination of
development program........... 31,776 31,776 6,500 6,500
Stock-based compensation......... (2,780) (2,780) 3,289 3,289
--------- --------- -------- --------
Total operating
expenses............... 143,131 154,710 76,013 87,022
--------- --------- -------- --------
Operating income (loss)............ (160,177) (171,756) (28,532) (40,146)
Other income (expense):
Equity in loss of CSP and SMP.... (20,434) 5,577 (14,857) (17,988) 5,937 (12,051)
Other income (loss).............. 4,680 4,680 650 650
Interest income.................. 1,690 1,562 3,252 1,207 83 1,290
Interest expense................. (20,137) (20,137) (9,094) (9,094)
Exchange gain (loss)............. 5,237 (513) 4,724 5,065 (89) 4,976
--------- --------- -------- --------
Income (loss) before income
taxes............................ (189,141) (194,094) (48,692) (54,375)
Income tax benefit (expense)....... (865) (406) (1,271) 172 (21) 151
--------- --------- -------- --------
Income (loss) before minority
interests........................ (190,006) (195,365) (48,520) (54,224)
Minority interest in loss of CSP... -- 5,359 5,359 -- 5,704 5,704
--------- --------- -------- --------
Net income (loss).................. $(190,006) $(190,006) $(48,520) $(48,520)
========= ========= ======== ========
</TABLE>

27
<PAGE> 32

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 47,548 $ 5,883 $ 53,431
Accounts receivable
Trade..................................................... 86,274 6,558 92,832
Others.................................................... 7,073 979 8,052
Amounts due from ST and ST affiliates....................... 2,137 440 2,577
Amounts due from CSP and SMP................................ 10,441 (6,787) 3,654
Inventories................................................. 26,943 26,943
Prepaid expenses............................................ 2,468 395 2,863
---------- ----------
Total current assets.............................. 182,884 190,352
Investment in CSP and SMP................................... 60,376 (28,220) 32,156
Other assets................................................ 41,505 41,505
Technology license agreements............................... 3,974 9,167 13,141
Property, plant and equipment, net.......................... 941,108 122,016 1,063,124
---------- ----------
Total Assets...................................... $1,229,847 $1,340,278
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable
Trade..................................................... $ 5,656 $ 5,656
Fixed asset purchases..................................... 32,458 $ 3,910 36,368
Current installments of obligations under capital leases.... 4,914 4,914
Current installments of long-term debt...................... 86,391 86,391
Bank overdrafts............................................. 1,210 1,210
Accrued operating expenses.................................. 87,612 3,885 91,497
Amounts due to ST and ST affiliates......................... 8,574 (609) 7,965
Income taxes payable........................................ 793 132 925
Other current liabilities................................... 4,909 4,909
---------- ----------
Total current liabilities......................... 232,517 239,835
Obligations under capital leases, excluding current
installments.............................................. 10,698 10,698
Long-term debt, excluding current installments.............. 364,903 76,000 440,903
Customer deposits........................................... 42,805 42,805
Other liabilities........................................... 22,585 22,585
---------- ----------
Total liabilities................................. 673,508 756,826
---------- ----------
Minority interest........................................... -- 27,113 27,113
Share capital
Ordinary shares of S$0.26 each............................ 221,636 221,636
Subscription receivables.................................... (12,731) (12,731)
Additional paid-in capital.................................. 694,752 694,752
Unearned compensation....................................... (982) (982)
Accumulated other comprehensive income (loss)............... (52,696) (52,696)
Retained earnings (deficit)................................. (293,640) (293,640)
---------- ----------
Total shareholders' equity........................ 556,339 556,339
---------- ----------
Total liabilities and shareholders' equity........ $1,229,847 $1,340,278
========== ==========
</TABLE>

28
<PAGE> 33

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

The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the related notes included elsewhere in this prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ significantly from those projected
in the forward-looking statements. Factors that might cause future results to
differ significantly from those projected in the forward-looking statements
include, but are not limited to, those discussed below and elsewhere in this
prospectus, particularly in "Risk Factors."

OVERVIEW

Chartered is one of the world's leading independent semiconductor
foundries. We provide comprehensive wafer fabrication services and technologies
to semiconductor suppliers and manufacturers of electronic systems. We operate
three wholly-owned fabs in Singapore and hold interests in two strategic
alliances for fabs in Singapore. We hold a 51% equity interest in CSP, which
owns and will operate Fab 6, and a 49% equity interest in SMP, which operates
Fab 5. We account for SMP on a minority interest equity basis.

U.S. GAAP generally requires consolidation of all majority owned (greater
than 50%) subsidiaries. However, as a result of certain provisions contained in
our strategic alliance agreement with respect to CSP the minority shareholders
of CSP are deemed to have substantive participative rights which would overcome
the presumption that we should consolidate CSP. Therefore, CSP has been
historically accounted for under the equity method in our financial statements.
As a result of an amendment to the strategic alliance agreement, we will treat
CSP as a consolidated subsidiary from October 1, 1999 forward. Please see
"Business -- Strategic Alliances -- Chartered Silicon Partners" for a discussion
of this amendment.

We are 90.8% owned by ST and its affiliates (72.5% following the global
offering). We have a service agreement with ST pursuant to which we currently
pay ST an annual management fee for certain management and corporate support
services. This fee is based on certain percentages of capital employed, sales,
manpower and payroll. We expect to amend the service agreement prior to closing
the global offering to convert from a formula based fee arrangement to a service
based fee arrangement.

According to the World Semiconductor Trade Statistics, the traditional
long-term growth rate for the worldwide semiconductor industry has been more
than 15%. However, the semiconductor industry is highly cyclical. Fabs can take
several years to plan, construct and begin operations. Therefore, during periods
of favorable market conditions, semiconductor manufacturers often begin building
new fabs in response to anticipated demand growth for semiconductors. In
addition, upon operation, fabs increase production volumes rapidly. As a result,
large amounts of semiconductor manufacturing capacity typically become available
during the same time period. Absent growth in demand, this sudden increase in
supply results in semiconductor manufacturing overcapacity, which leads to sharp
drops in semiconductor prices.

From 1996 through the second quarter of 1998, a number of sectors of the
semiconductor industry were in a state of overcapacity resulting in sharp
declines in the average selling price of semiconductor wafers and completed
semiconductor devices. However, since the third quarter of 1998, global
semiconductor demand has been growing at an accelerated pace.

Semiconductor manufacturing is very capital intensive in nature. A high
percentage of the cost of a fab is fixed, therefore increases or decreases in
capacity utilization rates can have a significant effect on profitability. The
unit cost of wafer fabrication generally decreases as fixed charges, such as
depreciation expense on the facility and semiconductor manufacturing equipment,
are allocated over a larger number of units produced.

of devices with higher level functionality and greater system-level integration
requires more manufacturing steps and commands higher wafer prices.

Since prices for wafers of a given level of technology decline over the
product life cycle, a fab must continue to migrate to increasingly sophisticated
technologies to maintain the same level of profitability. This requires
continuous capital investment.

In our first two fabs, we initially focused on manufacturing semiconductor
wafers for the computer industry. Production commenced in Fab 1 in 1989 and in
Fab 2 in 1995. We achieved profitability in 1993 and continued to increase our
profitability through the first half of 1996. Conditions in the semiconductor
industry began to deteriorate in the second half of 1996. At the same time, our
capacity utilization declined from 90.7% in the first half of 1996 to 57.2% in
the second half of 1996 and average selling price per wafer declined
significantly. Consistent with our long-term view of the growth of the
semiconductor industry, we continued to invest in new process technologies and
the expansion of our manufacturing capacity. During 1997, Fab 3 commenced
production and we entered into strategic alliances to form CSP and SMP. Because
we begin amortizing the capitalized costs associated with a new fab as soon as
the fab commences operation, we incur large depreciation expenses related to the
fab prior to the time the fab reaches volume production. In addition, we expense
all non-capitalized costs as incurred related to the start-up of the fab such as
personnel training costs and payroll and employee related costs.

Our production generally begins upon receipt of purchase orders from our
customers. Some of our customers are entitled to a discount on a fixed number of
wafers per period. Sales subject to these discounts were approximately 16% of
total revenue during the first six months of 1999.

Our 1995 and 1997 share ownership plans are accounted for in accordance
with variable plan accounting. As a consequence, we recognize share compensation
expense for options granted to employees under these plans. For each reporting
period, compensation cost for shares granted under these plans to employees is
recorded over the requisite vesting periods based on the current market value of
our ordinary shares at the end of the relevant period. We recognized
approximately $3.3 million of related compensation expense during the six months
ended June 30, 1999. We terminated these plans effective September 30, 1999 and
replaced all unpaid portions of partly paid shares under these plans with share
options under our 1999 plan. These options have the same exercise price and
vesting schedule as the replaced partly paid shares.

In addition, we account for our 1999 plan as a fixed option plan. Reported
share compensation expense represents the difference between the exercise price
of employee share option grants and the deemed fair value of our ordinary shares
at the date of the grant, amortized over the vesting period of the applicable
options.

Effective July 1, 1998, we changed our functional currency from the
Singapore dollar to the U.S. dollar. Significant changes in economic facts
necessitated this change in functional currency. These changes included
increased financing in U.S. dollars along with increasing sales to companies
based outside of Singapore, principally in the United States. In addition, there
continues to be less financial dependence by us on our parent.

The change in functional currency was recognized through the translation of
Singapore dollar amounts of our non-monetary assets, principally property, plant
and equipment at June 30, 1998, to U.S. dollars on July 1, 1998 with those U.S.
dollar amounts becoming the accounting basis for those assets at July 1, 1998
and for subsequent periods. The $52.7 million cumulative translation adjustment
at July 1, 1998 in shareholders' equity prior to the change remains as a
separate component of accumulated comprehensive income. Please see note 2(e) to
our consolidated financial statements for additional information regarding our
change in functional currency.

30
<PAGE> 35

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------- ----------------
1996 1997 1998 1998 1999
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue.................................... 71.1 97.0 104.0 96.3 83.9
----- ----- ----- ----- -----
Gross profit (loss)................................ 28.9 3.0 (4.0) 3.7 16.1
Operating Expenses:
Research and development......................... 3.2 7.0 10.3 8.9 7.8
Fab start-up costs............................... 3.2 2.9 0.3 0.6 --
Sales and marketing.............................. 4.0 5.3 7.5 5.8 7.0
General and administrative....................... 8.0 7.9 8.8 6.5 7.7
Costs incurred on termination of development
program....................................... -- -- 7.5 -- 2.2
Stock-based compensation......................... 0.1 0.5 (0.7) (0.6) 1.1
----- ----- ----- ----- -----
Total operating expenses...................... 18.5 23.6 33.7 21.2 25.8
----- ----- ----- ----- -----
Operating income (loss)............................ 10.4 (20.6) (37.7) (17.5) (9.7)
Other income (expense):
Equity in loss of SMP and CSP.................... -- (0.3) (4.8) (2.9) (6.1)
Other income (loss).............................. 0.9 1.3 1.1 0.1 0.2
Interest income.................................. 0.2 0.0 0.4 0.3 0.4
Interest expense................................. (0.3) (3.4) (4.8) (4.3) (3.1)
Exchange gain (loss)............................. 0.5 (8.3) 1.2 (1.3) 1.7
----- ----- ----- ----- -----
Income (loss) before income taxes.................. 11.7 (31.3) (44.6) (25.6) (16.6)
Income tax benefit (expense)....................... (0.1) (0.1) (0.2) (0.2) 0.0
----- ----- ----- ----- -----
Net income (loss).................................. 11.6% (31.4)% (44.8)% (25.8)% (16.6)%
===== ===== ===== ===== =====
</TABLE>

SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1999

Net revenue. We generate revenue primarily from fabricating semiconductor
wafers. In addition, we derive revenue from associated subcontracted assembly
and test services. Revenue is recognized upon shipment of goods to our
customers. Substantially all revenue is in U.S. dollars. Net revenue increased
26.6%, from $232.8 million in the first half of 1998 to $294.7 million in the
first half of 1999. This increase in revenue was due primarily to an increase in
the number of wafers shipped resulting from increased worldwide market demand
and additional manufacturing capacity in our fabs. The number of eight-inch
equivalent wafers shipped increased from 213,500 in the first half of 1998 to
327,300 in the first half of 1999, an increase of 113,800 or 53.3%. Of the
increase, 25.0% resulted from the sale of semiconductor wafers with line
geometries of 0.35 micron, or 0.35u, and below and 31.4% was derived from the
sale of print head chips which commenced shipment in the second half of 1998 and
ceased production in July 1999. We do not expect the cessation in production of
print head chips to have a material impact on our results of operations, capital
resources or cash flows, as the net revenue from sales of such chips was only
4.5% of our total net revenue in the first half of 1999.

Average selling prices decreased from $1,090 per wafer in the first half of
1998 to $900 per wafer in the first half of 1999 due primarily to the lower
selling price for the less complex print head chips and worldwide declines in
average selling prices of semiconductor wafers. Excluding print head chips, the
average selling price per wafer for the first half of 1999 was $965.

Cost of revenue and gross profit (loss). Cost of revenue includes
depreciation expense, attributed overhead, cost of materials and subcontracted
expenses for assembly and test services. Cost of revenue increased 10.3% from
$224.1 million in the first half of 1998 to $247.3 million in the first half of
1999,

31
<PAGE> 36

principally due to the incremental depreciation on additional equipment
installed to increase capacity of Fab 3 and an increase in production volumes.
Cost per wafer decreased from $1,050 in the first half of 1998 to $755 in the
first half of 1999. A significant portion of this decline was due to the lower
cost of wafers for print head chips, as well as an improvement in capacity
utilization from 73.8% to 94.8% and a slightly reduced cost of materials per
wafer. These factors resulted in an improvement in gross margins from 3.7% in
the first half of 1998 to 16.1% in the first half of 1999.

Research and development expenses. Research and development expenses
consist primarily of salaries and benefits for research and development
personnel, depreciation of research and development equipment and material
expenses for development wafers. Research and development expenses increased by
11.2% from $20.6 million in the first half of 1998 to $23.0 million in the first
half of 1999. This was due principally to expenses for the development of 0.25u
and 0.18u process technologies, as well as other advanced processes. We expect
our research and development expenses to increase in the future as we continue
to develop new process technologies.

Fab start-up costs. Fab start-up costs constitute all expenses (other than
capitalized interest related to acquisition or construction of property, plant
and equipment) in connection with the establishment of new fabs and operations.
There were no fab start-up costs in the first half of 1999 compared to $1.5
million in the first half of 1998 due primarily to start-up activities for print
head operations.

Sales and marketing expenses. Sales and marketing expenses consist
primarily of salaries and benefits for sales and marketing personnel, contract
expenses paid to providers of EDA software, expenses associated with overseas
offices, wafer samples, promotions and receivables provisions. Sales and
marketing expenses increased by 51.1% from $13.6 million in the first half of
1998 to $20.6 million in the first half of 1999, due principally to costs of
expanding our EDA partnership program. Sales and marketing expenses as a
percentage of net sales increased from 5.8% to 7.0% over these same periods.

General and administrative expenses. General and administrative expenses
consist primarily of salaries and benefits for administrative personnel,
depreciation of non-production equipment and recruitment and training expenses.
General and administrative expenses increased 50.4% from $15.1 million in the
first half of 1998 to $22.7 million in the first half of 1999. The increase was
due primarily to higher administrative headcount which resulted in higher
payroll and staff related expenses. Administrative, payroll and other expenses
relating to the print head chip business (that previously were allocated to fab
start-up costs) also contributed to the increase in general and administrative
expenses following the commencement of production in the second half of 1998.

Cost relating to termination of development program. During 1998, we
decided to discontinue a technology transfer and licensing arrangement related
to a development program. The program involved the transfer of two generation
(geometry) process technologies from the licensor and further enhancing them for
application by us. The process technologies were intended for a specific market
requiring embedding applications on to memory chips. The program started in
mid-1997 and by the later half of 1998, extreme weakness and volatility of the
market and adverse customer perceptions on the cost of the application, together
with customer views of the long and complicated product development cycle, led
to difficulties in both Chartered and the licensor fulfilling the original
intent of the agreement. All program transfer, development and marketing
activities were terminated in 1998.

In connection with the discontinuation of this development program, certain
equipment previously purchased and yet to be placed into service was identified
by management in 1998 as redundant and to be disposed of in the near term. We
recorded a $31.8 million loss in 1998 to reduce the carrying amount of certain
identified equipment and a technology license agreement to their estimated fair
value less costs to sell. This loss comprised $30.9 million for the write-down
of plant and equipment to fair value less costs to sell and $0.8 million to
reduce the carrying amount of the related technology license agreement to zero.
The equipment was unique to or specifically configured to the requirements of
the transferred process technologies and could not be re-deployed effectively.
The technology license agreement written off represented the unamortized amount
paid in 1997 for the acquisition of the technology. As of

32
<PAGE> 37

December 31, 1998, management did not expect to incur any further costs with
respect to the decision to discontinue the development program.

In February 1999, we reached an agreement in principle with the licensor to
terminate the program. As part of the settlement, we paid the licensor $6.5
million. The termination agreement was signed in August 1999. No further
payments will be made with respect to this program.

Other income. Other income increased from $0.3 million in the first half
of 1998 to $0.7 million in the first half of 1999 due to the increase in grants
received from the Government of Singapore for both research and development and
staff training.

Interest income. Interest income increased from $0.8 million in the first
half of 1998 to $1.3 million in the first half of 1999 due to higher cash
balances.

Interest expense. Interest expense decreased from $10.1 million in the
first half of 1998 to $9.1 million in the first half of 1999 due to lower
interest rates.

Exchange gain (loss). Exchange gains and losses result from movements in
the exchange rates of foreign currencies between the date a monetary asset or
liability arises and the balance sheet date or the date of settlement, to the
extent it has not been hedged. We recognized an exchange loss of $3.1 million in
the first half of 1998 and an exchange gain of $5.1 million in the first half of
1999 primarily related to currency fluctuations between the U.S. dollar and the
Singapore dollar.

Income tax benefit (expense). Each of our fabs has been exempted from
income tax on profits from the sale of manufactured goods for ten years
following the date specified production milestones are achieved. Currently, we
pay tax only on interest income. We had a provision for taxes of $0.5 million in
the first half of 1998 compared with a net tax refund of $0.2 million, which
included a tax refund of $0.8 million offset by a charge of $0.6 million, in the
first half of 1999. The tax refund was for allowed interest expense that was
offset against interest income for the period from 1992 to 1995.

Equity in loss of SMP and CSP. Our share of the losses in SMP and CSP was
$6.8 million in the first half of 1998 and $18.0 million in the first half of
1999. This increase in loss represents the increase in start-up activities for
Fab 5 and Fab 6 during the first half of 1999. Fab 5 and Fab 6 have not yet
commenced volume production.

YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1998

Net revenue. Net revenue increased 11.3%, from $379.8 million in 1997 to
$422.6 million in 1998. This increase in revenue was due primarily to an
increase in the number of wafers shipped. The number of eight-inch equivalent
wafers shipped increased from 344,100 in 1997 to 439,700 in 1998, an increase of
95,600 or 27.8%. This was primarily the result of increased shipment of 0.35u
products and, to a lesser extent, the sale of print head chips.

The increase in wafers shipped was offset by a 12.9% decrease in average
selling prices, from $1,104 per wafer in 1997 to $961 per wafer in 1998. This
decrease was due primarily to worldwide semiconductor overcapacity and a
resulting decrease in average prices.

Cost of revenue and gross profit (loss). Cost of revenue increased 19.3%
from $368.5 million in 1997 to $439.7 million in 1998, principally due to higher
depreciation cost as a result of additional capacity installed in Fabs 1, 2 and
3. The increase in the number of wafers produced resulted in average cost per
wafer decreasing 6.6% from $1,071 in 1997 to $1,000 in 1998. We suffered a gross
loss of $17.0 million in 1998 compared with gross profit of $11.2 million in
1997. This was the result of declining average selling price and higher cost of
revenue including higher depreciation cost.

Research and development expenses. The 63.5% increase in research and
development expenses from $26.6 million in 1997 to $43.4 million in 1998 was due
primarily to activities in improving process technology and the development of
new technology, in particular the development of 0.25u and 0.35u process
technologies. To support these activities, we increased the number of personnel
engaged in

33
<PAGE> 38

research and development by 28 during 1998. In addition, we moved our research
and development operations from Fab 2, which was in commercial production, to
Fab 3, which was then being equipped with our latest production equipment and
was only producing a limited number of wafers. This caused a significant
increase in absorption of fixed costs by our research and development activity.

Fab start-up costs. Fab start-up costs decreased 86.7% from $10.9 million
in 1997 to $1.5 million in 1998. Fab 3 commenced operations in August 1997,
after which Fab 3 expenses were no longer classified as start-up costs.

Sales and marketing expenses. Sales and marketing expenses increased by
57.9% from $20.2 million in 1997 to $31.9 million in 1998 as we expanded our EDA
partnership programs, increased our presence in Europe and the eastern United
States and increased our use of wafer samples for prospective business. As a
percentage of net revenue, sales and marketing expenses increased from 5.3% in
1997 to 7.5% in 1998.

General and administrative expenses. General and administrative expenses
increased 24.0% from $30.1 million in 1997 to $37.4 million in 1998. As a
percentage of net revenue, general and administrative expenses increased from
7.9% in 1997 to 8.8% in 1998. This increase was due to administrative, payroll
and other expenses in connection with the commencement of production in Fab 3 in
1997.

Cost relating to termination of development program. In connection with
the discontinuation of the development program described above under "-- Six
months ended June 30, 1998 and June 30, 1999 -- Cost relating to termination of
development program," certain equipment previously purchased and yet to be
placed into service was identified by management in 1998 as redundant and to be
disposed of in the near term. We recorded a $31.8 million loss in 1998 to reduce
the carrying amount of certain identified equipment and technology license
agreements to their estimated fair value less costs to sell. This loss comprised
$30.9 million for the write-down of plant and equipment to fair value less costs
to sell and $0.8 million to reduce the carrying amount of the related technology
license agreement to zero. The equipment was unique to or specifically
configured to the requirements of the transferred process technologies and could
not be re-deployed effectively. The technology license agreement written off
represented the unamortized amount paid in 1997 for the acquisition of the
technology. As of December 31, 1998, management did not expect to incur any
further costs with respect to the decision to discontinue the development
program.

In 1999, as a result of subsequent discussions with the licensor regarding
the termination of the development program, we recorded a $6.5 million charge
representing a final cash settlement amount that allowed an in-principle
agreement to be reached on the termination of the license agreement. The
termination agreement was signed in August 1999. No further payments will be
made with respect to this program.

Equity in loss of SMP and CSP. Our share of the losses in SMP and CSP was
$20.4 million in 1998 compared to $1.3 million in 1997. The increase in loss was
primarily attributable to pre-operating costs for SMP and CSP. SMP was formed in
January 1998 and CSP was formed in March 1997.

Interest income. Interest income increased from $0.2 million in 1997 to
$1.7 million in 1998 due to the additional equity investments in March and
October 1998 by existing shareholders. This capital was temporarily deposited in
fixed rate interest bearing accounts, before being drawn down for the repayment
of indebtedness and purchase of new equipment.

Interest expense. Interest expense increased 57.5% from $12.8 million in
1997 to $20.1 million in 1998 due primarily to the higher level of borrowings to
finance the expansion of Fab 3. Outstanding loan balances increased from $282.2
million at December 31, 1997 to $468.6 million at December 31, 1998.

Exchange gain (loss). In 1997, we incurred a loss of $31.7 million due to
the significant strengthening of the U.S. dollar against the Singapore dollar
and its effect on our U.S. dollar denominated liabilities. In 1998, we
recognized an exchange gain of $5.2 million in 1998 in a period of relative
stability between the U.S. dollar and the Singapore dollar, primarily as a
result of the amortization of gains on certain hedging transactions.

34
<PAGE> 39

Income tax benefit (expense). Income tax expense increased from $0.4
million in 1997 to $0.9 million in 1998 due primarily to an increase in non-tax
exempt interest income.

YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1997

Net revenue. Net revenue decreased 6.7% from $406.9 million in 1996 to
$379.8 million in 1997. This was primarily due to a reduction in average selling
price per wafer from $1,603 in 1996 to $1,104 in 1997. This decrease was caused
by overcapacity in the worldwide semiconductor market.

The decrease in revenue caused by lower average selling prices was
substantially offset by a 35.5% increase in the number of eight-inch equivalent
wafers shipped, from 253,900 in 1996 to 344,100 in 1997.

Cost of revenue and gross profit. Cost of revenue increased 27.3% from
$289.4 million in 1996 to $368.5 million in 1997. The main increase came from
depreciation as a result of increased production capacity at Fab 2. Cost per
wafer decreased from $1,140 in 1996 to $1,071 in 1997, a decrease of 6.1%.

Gross profit decreased 90.4%, from $117.5 million in 1996 to $11.2 million
in 1997 due to declining average selling prices and higher costs of revenue,
offset to a limited extent by a decrease in per wafer costs. In 1996, 19.8% of
gross profit, representing $23.2 million, was attributable to a reduction in the
reserves for technology liabilities. We use numerous manufacturing processes
that are developed internally or licensed from third parties. We have no means
of knowing what patent applications have been filed in various countries until
they are granted. As is typical in the semiconductor industry, third parties
have from time to time asserted patents that cover certain of our technologies
and alleged infringement of certain intellectual property rights.

We accrue for probable and estimable technology liabilities expected to be
incurred at each balance sheet date. Such accruals are estimated on the basis of
our historical experience in dealing with such claims, and are established when
we have been approached by or are negotiating with third parties with the
intention of entering into licensing arrangements.

Beginning in 1995, we established a strategy to deal aggressively with
technology claims. We modified our business processes to limit the impact and
likelihood of such claims, and at the same time took advantage of a capacity
shortage in the wafer industry to establish business relationships with
potential claimants. Also, the establishment of our own patent portfolio further
strengthened our negotiating position. As a result, a number of expected claims
for which accruals had been previously established did not materialize, and we
released the accruals for technology liabilities of $23.2 million in 1996.

Gross margin decreased from 28.9% in 1996 to 3.0% in 1997.

Research and development expenses. There was a 104.0% increase in research
and development expenses from $13.0 million in 1996 to $26.6 million in 1997. As
a percentage of net revenue, research and development expenses increased from
3.2% to 7.0%. This increase was primarily due to efforts related to improvement
of existing process technologies and the development of new process
technologies.

Fab start-up costs. Fab start-up costs decreased from $13.1 million in
1996 to $10.9 million in 1997. For both 1996 and 1997, the majority of fab
start-up costs expenses were related to start-up costs at Fab 3. Fab 3 began
commercial production in August 1997, at which point the Fab 3 costs were no
longer classified as fab start-up costs.

Sales and marketing expenses. Sales and marketing expenses increased by
24.3% from $16.2 million in 1996 to $20.2 million in 1997. As a percentage of
net revenue, sales and marketing expense increased from 4.0% to 5.3% . The
increase was primarily due to the establishment of overseas offices in Japan,
Israel and Germany during the second half of 1996.

General and administrative expenses. General and administrative expenses
decreased 7.6% from $32.6 million in 1996 to $30.1 million in 1997. This expense
reduction was a result of lower bonus

35
<PAGE> 40

payments in 1997 compared to 1996. As a percentage of net revenue, general and
administrative expenses decreased from 8.0% to 7.9%.

Equity in loss of SMP and CSP. Our share of the losses in CSP was $1.3
million in 1997, which was primarily attributable to pre-operating costs.

Interest income. Interest income declined from $1.0 million in 1996 to
$0.2 million in 1997 primarily due to lower average cash balances in 1997.

Interest expense. Interest expense net of capitalized interest increased
from $1.1 million in 1996 to $12.8 million in 1997 due to higher borrowing
related to the expansion of wafer capacity. Outstanding loans increased from
$95.1 million at December 31, 1996 to $282.2 million at December 31, 1997.

Exchange gain (loss). We recognized an exchange gain of $2.0 million in
1996 in a period of relative stability between the U.S. dollar and the Singapore
dollar. In 1997, we incurred a loss of $31.7 million due to the significant
strengthening of the U.S. dollar against the Singapore dollar and its effects on
our U.S. dollar denominated liabilities.

Income tax benefit (expense). Income tax expense increased from $0.3
million in 1996 to $0.4 million in 1997.

QUARTERLY RESULTS

The following table sets forth certain unaudited consolidated financial
information, including as a percentage of net revenue, for the eight fiscal
quarters ended June 30, 1999. We believe that all necessary adjustments,
consisting only of normal recurring adjustments, have been included in the
amounts stated below to present fairly the selected quarterly information when
read in conjunction with our consolidated financial statements and the related
notes included elsewhere in the prospectus. Our results of operations have
varied and may continue to vary significantly from quarter-to-quarter and are
not necessarily indicative of the results of any future period. In addition, in
light of our recent growth, we believe that period-to-period comparisons should
not be relied upon as an indication of future performance.

<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
SEP. 30, DEC. 31, MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30,
1997 1997 1998 1998 1998 1998 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............................ $ 86.9 $157.8 $145.7 $ 87.1 $ 83.9 $106.0 $130.8 $163.9
Cost of revenue........................ 85.7 116.1 115.5 108.6 103.2 112.4 118.1 129.1
------ ------ ------ ------ ------ ------ ------ ------
Gross profit (loss).................... 1.2 41.7 30.2 (21.5) (19.3) (6.4) 12.7 34.8
------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Research and development............. 8.0 9.3 9.4 11.3 13.3 9.5 12.1 10.9
Fab start-up costs................... 3.0 (1.4) 0.9 0.6 0.0 0.0 -- 0.0
Sales and marketing.................. 4.8 7.6 4.3 9.3 8.8 9.5 10.1 10.5
General and administrative........... 8.7 3.2 6.5 8.6 7.8 14.5 10.3 12.4
Costs incurred on termination of
development program................ -- -- -- -- -- 31.8 6.5 --
Stock-based compensation............. 0.5 0.5 (0.7) (0.7) (0.7) (0.7) 1.6 1.6
------ ------ ------ ------ ------ ------ ------ ------
Total operating expenses....... 25.0 19.2 20.4 29.1 29.2 64.6 40.6 35.4
------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss)................ (23.8) 22.5 9.8 (50.6) (48.5) (71.0) (27.9) (0.6)
Other income (expense):
Equity in loss of SMP and CSP........ (0.4) (0.6) (0.9) (5.9) (7.4) (6.2) (8.5) (9.5)
Other income (loss).................. 1.1 1.3 0.0 0.3 1.9 2.4 0.3 0.3
Interest income...................... 0.0 0.1 0.5 0.3 0.1 0.7 0.7 0.5
Interest expense..................... (3.3) (6.0) (5.7) (4.4) (5.3) (4.7) (4.6) (4.5)
Exchange gain (loss)................. (12.8) (15.9) (1.3) (1.8) 6.6 1.8 5.5 (0.5)
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before income taxes...... (39.2) 1.4 2.4 (62.1) (52.6) (77.0) (34.5) (14.3)
Income tax benefit (expense)........... 0.0 (0.1) (0.3) (0.3) (0.1) (0.2) (0.4) 0.5
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)...................... $(39.2) $ 1.3 $ 2.1 $(62.4) $(52.7) $(77.2) $(34.9) $(13.8)
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

36
<PAGE> 41

<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET REVENUES
QUARTER ENDED
-------------------------------------------------------------------------------------
SEP. 30, DEC. 31, MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30,
1997 1997 1998 1998 1998 1998 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue........................ 98.5 73.6 79.3 124.7 123.0 106.0 90.3 78.8
------ ------ ------ ------ ------ ------ ------ ------
Gross profit (loss).................... 1.5 26.4 20.7 (24.7) (23.0) (6.0) 9.7 21.2
------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Research and development............. 9.2 5.9 6.4 12.9 15.8 9.0 9.2 6.6
Fab start-up costs................... 3.4 (0.9) 0.6 0.6 0.0 0.0 0.0 0.0
Sales and marketing.................. 5.6 4.8 3.0 10.6 10.5 8.9 7.7 6.4
General and administrative........... 10.0 2.0 4.4 9.9 9.3 13.7 7.9 7.6
Costs incurred on termination of
development program................ -- -- -- -- -- 30.0 5.0 --
Stock-based compensation............. 0.6 0.3 (0.5) (0.8) (0.9) (0.7) 1.3 1.0
------ ------ ------ ------ ------ ------ ------ ------
Total operating expenses....... 28.8 12.1 13.9 33.2 34.7 60.9 31.1 21.6
------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss)................ (27.3) 14.3 6.8 (57.9) (57.7) (66.9) (21.4) (0.4)
Other income (expense):
Equity in loss of SMP and CSP........ (0.4) (0.4) (0.6) (6.8) (8.8) (5.8) (6.5) (5.8)
Other income (loss).................. 1.3 0.8 0.0 0.4 2.3 2.3 0.2 0.2
Interest income...................... 0.0 0.1 0.3 0.4 0.2 0.7 0.5 0.3
Interest expense..................... (3.8) (3.8) (3.9) (5.0) (6.3) (4.5) (3.5) (2.7)
Exchange gain (loss)................. (14.7) (10.1) (0.9) (2.1) 7.9 1.7 4.2 (0.3)
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before income taxes...... (44.9) 0.9 1.7 (71.0) (62.4) (72.5) (26.5) (8.7)
Income tax benefit (expense)........... 0.0 (0.1) (0.2) (0.3) (0.1) (0.2) (0.3) 0.3
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)...................... (44.9)% 0.8% 1.5% (71.3)% (62.5)% (72.7)% (26.8)% (8.4)%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

The worldwide semiconductor industry suffered from reduced demand in the
second and third quarters of 1998, due in part to excess inventories. As a
result, we shipped fewer wafers during these periods, at lower average selling
prices. Industry demand began to increase in the fourth quarter of 1998 and has
continued to increase in each of the quarters of 1999. Our wafer shipments
increased significantly during each of these periods. These increases have
resulted in higher net revenues, despite decreases in average selling price per
wafer.

Gross margins improved in each of the quarters beginning in the third
quarter of 1998, primarily due to higher capacity utilization.

Research and development costs vary from quarter-to-quarter as the level of
our research and development activity varies based on, among other things, the
commencement and termination of specific programs.

General and administrative expenses increased in the second through fourth
quarters of 1998 as we increased infrastructure and management resources to
support future growth.

In 1998, we recorded a charge of $31.8 million relating to the termination
of a development program. In the first six months of 1999, we recorded a charge
of $6.5 million in connection with the termination of a development program.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our cash requirements primarily through capital infusions
from, and loans guaranteed by, ST. To date, we have raised approximately $722
million from ST and $182 million through equity financing from equity investor
customers, strategic partners and stock purchases by employees.

At June 30, 1999, our principal sources of liquidity included $47.5 million
in cash and cash equivalents and $119.0 million of unutilized banking and credit
facilities consisting of short-term advances and bank guarantees.

Net cash provided by operating activities totaled $156.9 million in 1998
and $95.8 million in the six months ended June 30, 1999. The $156.9 million of
cash generated in 1998 was attributable to a decrease in accounts receivable and
inventories and an increase in accrued operating expenses, as well as cash

37
<PAGE> 42

generated by other operating activities. The $95.8 million of cash generated in
the first six months of 1999 is attributable to a decrease in inventories and an
increase in accrued operating expenses, as well as other cash generated by
operating activities, offset by an increase in accounts receivable and decreases
in other current liabilities and amounts due to ST and its affiliates.

Net cash used in investing activities totaled $358.6 million in 1998 and
$114.7 million in the six months ended June 30, 1999. Through June 30, 1999, our
investing activities have consisted primarily of capital expenditures totaling
$279.4 million in 1998 and $89.8 million in the six months ended June 30, 1999.
Capital expenditures have been principally comprised of the purchase of
semiconductor equipment for the equipping of fabs. We have also had significant
cash outflows relating to our investment in SMP and CSP.

Net cash provided by financing activities totaled $284.9 million in 1998,
net cash used was $33.5 million in the six months ended June 30, 1999. Cash
generated from financing activities in 1998 was principally generated from the
issuance of ordinary shares totaling $492.9 million, offset by the repayment of
loans and reduction of customer deposits. In the six months ended June 30, 1999,
cash outflow from financing activities was principally due to the return of
customer deposits.

We have an oral multi-currency $100 million short-term credit facility with
ST. Interest on the facility accrues at the monthly average interest rate of
three specific banks as indicated by ST. The current monthly average interest
rate for Singapore dollar borrowings under the facility is 2.43%. Borrowings are
unsecured. As of June 30, 1999, there were $1.9 million of unsecured borrowings
outstanding under this facility.

As of June 30, 1999, we had three loans for capital expenditures and
equipment with outstanding principal amounts of $40.6 million, $176.0 million
and $176.0 million. Each of the loans is denominated in Singapore dollars and we
fully hedge both interest and principal payments against fluctuations in foreign
exchange rates. The loans bear interest at rates between 4.0 and 4.25%. The
three loan agreements are unsecured and guaranteed by ST.

- The first loan matures on September 1, 2003. Interest is payable
semiannually and principal will be amortized in equal semi-annual
installments commencing on September 1, 1997.

- The second loan matures on September 1, 2005. Interest is payable
semiannually and principal will be amortized in equal semi-annual
installments commencing on September 1, 1999.

- The third loan matures on September 1, 2002. Interest is payable
semi-annually and principal will be amortized in equal semi-annual
installments commencing on September 1, 1999.

As of June 30, 1999, we had two bank loans with outstanding amounts of
S$50.0 million (U.S.$29.3 million) each. The loans are due February 13, 2002 and
June 17, 2002, respectively. The loans carry interest rates of 2.0% above the
bank's first tier savings rate and 1.0% above the arithmetic mean of SIBOR for
deposits quoted by specified banks to the lender, respectively. Interest is
payable semi-annually in Singapore dollars for both loans. The loans are
unsecured. During 1998, we entered into foreign currency forward contracts to
hedge the principal and interest cash flows related to all of our Singapore
dollar borrowings.

Our affiliate CSP has a term loan facility of $143.2 million with several
banks and financial institutions for capital expenditures and equipment. At June
30, 1999, $76.0 million had been drawn on this facility. The loan matures June
30, 2002 and carries an interest rate of 0.5625% above the arithmetic mean of
SIBOR rates for U.S. dollars deposits quoted by specified banks to the lender.
Interest is payable semi-annually in U.S. dollars and principal will be
amortized in four equal semi-annual installments commencing December 31, 2000.
Borrowings under this facility are unsecured.

We have been awarded cumulative grants from various agencies of the
Government of Singapore totaling $56.4 million at June 30, 1999. The grants
support research and development activities and training activities and are paid
to reimburse us for specified research and development expenses, training costs
and achievement of certain milestones. At June 30, 1999, $16.1 million had been
disbursed under these grants. The grants are disbursed based on the amount of
expenditures incurred. There are no
38
<PAGE> 43

conditions attached to the grants other than completion of the project to which
the grant relates and the certification of the costs incurred.

We anticipate use of proceeds from this offering primarily to fund equity
contributions to our joint ventures, capital expenditures in connection with the
expansion of our manufacturing facilities, for working capital and general
corporate purposes.

We expect our aggregate capital expenditures, including CSP and investments
in SMP, to be approximately $530 million in the second half of 1999 and
approximately $770 million in 2000 (CSP accounted for on a consolidated basis).
We expect that CSP will fund a portion of these expenditures through the
incurrence of at least $450 million of debt during the first half of 2000. We
believe that the net proceeds of the global offering, together with cash on
hand, cash equivalents and credit facilities with our equipment vendors will be
sufficient to meet our working capital needs for at least the next 12 months.
Thereafter, we may require additional funds to support our working capital
requirements or for other purposes and may seek to raise additional funds
through public or private equity financing or from other sources. There can be
no assurance that additional financing will be available at all or, if
available, that such financing will be obtainable on terms favorable to us or
that any additional financing will not be dilutive.

YEAR 2000 READINESS

IMPACT OF THE YEAR 2000 COMPUTER PROBLEM

The Year 2000 computer problem refers to the potential for system and
processing failures of date-related data as a result of computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may recognize a
date represented as "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations,
including among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

STATE OF READINESS

As of August 1999, more than 99% of our fab equipment and internal systems
had been tested and upgraded and found to be Year 2000 ready.

We have received assurances from our third-party vendors that all material
business and manufacturing systems supplied by them and used by us are Year 2000
ready. We are in the final stages of our testing and expect to complete it prior
to closing the global offering. We do not believe that we have any significant
systems that contain embedded chips that are not Year 2000 ready. Our internal
operations and business are also dependent upon the computer-controlled systems
of third parties such as our equipment manufacturers, suppliers, customers and
other service providers. If our manufacturers, suppliers, vendors, partners,
customers and service providers fail to correct their Year 2000 problems, these
failures could result in an interruption in, or a failure of, our normal
business activities or operations. If a Year 2000 problem occurs, it may be
difficult to determine which party's products have caused the problem. These
failures could interrupt our operations and damage our relationships with our
customers. Due to the general uncertainty regarding the readiness of third-party
manufacturers, suppliers and vendors, we are unable to determine at this time
whether Year 2000 failures could harm our business and our financial results.

EXPENSES

Based on our assessment to date, we anticipate that expenses associated
with testing and remediating our internal systems will be approximately $3.0
million.

39
<PAGE> 44

RISKS

Failures of our internal systems to be Year 2000 ready could temporarily
prevent us from processing orders, issuing invoices and developing products and
could require us to devote significant resources to correcting these problems.
Due to the general uncertainty regarding the Year 2000 readiness of third-party
suppliers and vendors, we are unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on our business,
results of operations or financial condition.

Contingency plan. We have identified several potential problems relating
to the millennium cross-over. We believe the worst case scenario would be an
external related power surge or dip, or a power trip which could cause our
equipment to malfunction. An equipment malfunction could cause the
semiconductors we are processing at the time of the malfunction to be
misprocessed. In addition, certain machines may fail despite having been
previously tested to be Year 2000 ready. To mitigate these problems, we plan to
shut down all of our information technology applications and databases and stop
all of our production equipment from 10:00 p.m. December 31, 1999 until 12:30
a.m. January 1, 2000. Over the last few days of 1999, we will perform thorough
backups of all of our applications and databases. We will make hard copies of
certain critical finance and manufacturing reports. We have established a team
of management, critical fab operations staff, information technology staff and
vendors that will be in our factories during the millennium cross-over to handle
any problems that may arise.

All of our fab operations and support organizations are developing
contingency plans to address the Year 2000 problem. Each fab will have an
operations command center during the millennium cross-over that will monitor and
track any Year 2000 related issues. There will be a central Year 2000 command
center that will consolidate all of our Year 2000 issues. All of these
contingency plans are being compiled and reviewed by management.

All of our raw material suppliers have agreed to increase the amount of
buffer stock kept at their warehouses from 1.5 months to 2 months supply. This
will help mitigate any potential Year 2000 problems at the supplier level.

SPECIAL TAX STATUS

We have been granted pioneer status under the Economic Expansion Incentives
(Relief from Income Tax) Act (Chapter 86) of Singapore for:

- the manufacture of large scale integrated circuits at Fab 1 for a
ten-year period beginning January 1, 1991;

- the manufacture of integrated circuits using submicron (smaller than one
micron) technology at Fab 2 for a ten-year period beginning July 1, 1996;
and

- the manufacture of integrated circuits using submicron technology at Fab
3 for a ten-year period beginning January 1, 1998.

We have also been granted post-pioneer status under the Economic Expansion
Incentives (Relief from Income Tax) Act for the manufacture of integrated
circuits using submicron technology at Fab 2 for a five-year period beginning
July 1, 2006 and development and expansion company status for the manufacture of
integrated circuits using submicron technology at Fab 3 for a five-year period
beginning January 1, 2008.

During the period for which our pioneer status is effective, subject to our
compliance with certain conditions, income from our pioneer trade (that is, sale
of integrated circuits) is exempt from Singapore income tax. During the periods
for which our post-pioneer status and development and expansion company status
are effective, subject to our compliance with certain conditions, income from
our post-pioneer trade and development and expansion is taxed at a concessionary
rate of 10%. The income tax exempt profits arising from the pioneer trade may be
distributed as tax-exempt dividends, and holders of ordinary shares are not
subject to Singapore income tax on such dividends. Please see
"Taxation -- Singapore Taxation -- Dividend Distribution" for information
regarding the taxation of dividends. Losses accumulated before the
40
<PAGE> 45

pioneer status period cannot be carried forward. Losses accumulated in the
pioneer status period may be carried forward and may be offset against profits
from the same pioneer trade arising after the expiration of the pioneer status
period, subject to our compliance with certain conditions. Profits arising
during pioneer status offset any accumulated pioneer loss carryforward balance.
Without this exemption from income tax or the concessionary tax rate of 10%, we
would be subject to income tax at the applicable corporate income tax rate
(which is currently 26%). Interest income is not exempt from taxation during the
pioneer status period or entitled to the concessionary tax rate during the
post-pioneer status period or the development and expansion company status
period.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133, as recently amended, is effective
for fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value. We believe the adoption of SFAS 133 will not have a material effect
on our financial position or results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to financial market risks derives primarily from the changes
in interest rates and foreign exchange rates. To mitigate these risks, the
Company utilizes derivative financial instruments, the application of which is
primarily for hedging purposes and not for speculative purposes.

INTEREST RATE RISK

Our cash equivalents and short-term investments are exposed to financial
market risk due to fluctuation in interest rates, which may affect our interest
income and the fair market value of our investments. We manage the exposure to
financial market risk by performing ongoing evaluations of our investment
portfolio and investing in short-term investment-grade corporate securities.
These securities are highly liquid and generally mature within 12 months from
our purchase date. Due to the short maturities of our investments, the carrying
value approximates the fair value. In addition, we do not use our investments
for trading or other speculative purposes.

We are exposed to interest rate risk on our existing floating rate debt and
as additional debt financing is periodically needed due to the capital
expenditures associated with our new fabs. The interest rate that we will be
able to obtain on debt financing will depend on market conditions at that time,
and may differ from the rates we have secured on our current debt.

41
<PAGE> 46

As of June 30, 1999, our debt obligations are as follows:

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
--------------------------------------------------------------------------------------------------
EXPECTED MATURITY DATE
(IN THOUSANDS) WEIGHTED
----------------------------------------------------------------- FAIR INTEREST
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE RATE
-------- -------- -------- -------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM DEBT
Singapore dollar at
floating rate...... $ 3,087 $ 3,087 $ 3,087 3.83%
LONG-TERM DEBT
Singapore dollar at
fixed rate(1)...... 43,195 $ 86,391 $ 86,391 $ 86,391 $ 36,104 $ 54,154 392,626 385,740 4.11
Singapore dollar at
floating rate(1)... 58,668 58,668 58,668 3.19
-------- -------- -------- -------- -------- -------- -------- --------
Total Debt
Maturing.... $ 46,282 $ 86,391 $ 86,391 $145,059 $ 36,104 $ 54,154 $454,381 $447,495
======== ======== ======== ======== ======== ======== ======== ========
ACCOUNTS PAYABLE
U.S. dollar.......... $ 25,311
Singapore
dollar(1).......... 2,956
Japanese yen(1)...... 9,126
Others............... 721
--------
Total.......... $ 38,114
========
</TABLE>

- ---------------
(1) We have entered into forward foreign currency contracts related to these
amounts to exchange the related cash flows to U.S. dollars. Please see
"-- Foreign Currency Risk" below.

86.4% of our outstanding debt obligations bear fixed interest rates. We
have no cash flow or earnings exposure due to market interest rate changes for
our fixed debt obligations. 13.6% of our outstanding debt obligations bear
floating interest rates. We have cash flow and earnings exposure due to market
interest rate changes for our floating debt obligations. A half percentage point
change in interest rates would affect our interest payments by 3% annually.

FOREIGN CURRENCY RISK

Our foreign currency exposures give rise to market risk associated with
exchange rate movements against the Japanese yen, the Singapore dollar and the
U.S. dollar, our functional currency. Substantially all of our revenue was
denominated in U.S. dollars during the six months ended June 30, 1999 and as a
result, we have relatively little foreign currency exchange risk with respect to
any of our revenue. During the six months ended June 30, 1999, approximately 24%
of our cost of revenue was denominated in Singapore dollars. In addition,
approximately 40% of our capital expenditures were denominated in U.S. dollars,
approximately 32% were denominated in Japanese yen and approximately 28% were
denominated in Singapore dollars. In addition, a substantial part of our debt is
denominated in foreign currency, primarily Singapore dollars.

To protect against reductions in value and the volatility of future cash
flows caused by changes in foreign exchange rates, we utilize currency forward
contracts to minimize the impact of foreign currency fluctuations on our results
of operations. We utilize, from time to time, currency forward contracts to
hedge specific currency risks related to equipment purchase commitments,
primarily in Japanese yen. In addition, we minimize our currency risk by
purchasing certain raw materials and equipment in U.S. dollars and borrowing in
U.S. dollars. Prior to July 1, 1998, our exposure to foreign currency risk was
viewed as exposure to non-Singapore dollar assets and liabilities. On July 1,
1998, we changed our functional currency to the U.S. dollar as described in note
2(e) to our consolidated financial statements. In

42
<PAGE> 47

connection with the change, we entered into foreign currency forward contracts
to mitigate the effects to us of exchange rate fluctuations between the U.S.
dollar and the Singapore dollar related to our non-U.S. dollar denominated
borrowings. The table below provides information about our derivative financial
instruments and presents the information in U.S. dollar equivalents.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
------------------------------------------------------------------------------------
EXPECTED MATURITY DATES (IN THOUSANDS)
------------------------------------------------------------------------------------
FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
------- -------- -------- -------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FORWARD EXCHANGE AGREEMENTS
(Receive Y/Pay US$)
Contract Amount............... $ 4,362 $ 5,728 $ 8,106 $ 18,196 $(4,226)
Average Contractual Exchange
Rate........................ 117.05 78.35 76.22
(Receive S$/Pay US$) Contract
Amount...................... 51,788 101,568 97,247 $148,370 $38,245 $55,701 492,918 39,529
Average Contractual Exchange
Rate........................ 1.7290 1.7404 1.7541 1.7606 1.7538 1.7401
------- -------- -------- -------- ------- ------- -------- -------
Total Contract Amount..... $56,150 $107,296 $105,353 $148,370 $38,245 $55,701 $511,114 $35,303
======= ======== ======== ======== ======= ======= ======== =======
</TABLE>

As of June 30, 1999, the extent of our forward foreign currency contract
transactions were as follows:

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-----------------------------------------------------
CARRYING
CARRYING AMOUNT AMOUNT HEDGED PERCENTAGE HEDGED
--------------- ------------- -----------------
<S> <C> <C> <C>
ACCOUNTS PAYABLE
Japanese yen................................. $ 9,126 $ 4,217 46.1%
Singapore dollars.......................... 2,956 -- --
Others..................................... 721 -- --
Capital lease
Japanese yen............................... 13,979 13,979 100.0
Foreign currency debt
Singapore dollar........................... 454,381 451,294 99.3
Future interest payable on debt
Singapore dollar........................... 41,623 41,623 100.0
------- -------- -----
Total.............................. $522,786 $511,113 97.7%
======== ======== =====
</TABLE>

43
<PAGE> 48

BUSINESS

COMPANY

We currently own, or have an interest in, five fabs, which are located in
Singapore. We have service operations in 12 cities in nine countries in North
America, Europe and Asia. We were incorporated in Singapore in 1987. We are
90.8% owned by ST and its affiliates (72.5% following the global offering). ST
is one of Singapore's largest industrial conglomerates and is indirectly
wholly-owned by the Government of Singapore. Please see "Relationship with
Singapore Technologies" for additional information regarding ST.

INDUSTRY BACKGROUND

Semiconductors are critical components used in an increasingly wide variety
of applications, such as computer systems, communications equipment and systems,
automobiles, consumer products and industrial automation and control systems. As
performance has increased and size and cost have decreased, the use of
semiconductors in these applications has grown significantly. According to the
Semiconductor Industry Association, or SIA, increased sales of communication
semiconductors used in applications such as computer modems, networks, cellular
phones and Internet and electronic commerce hardware and appliances will drive
growth in the semiconductor industry during the next several years. The SIA
estimates that worldwide semiconductor device market revenue will grow from
$125.6 billion in 1998 to $215.7 billion in 2002.

Historically, the semiconductor industry was composed primarily of
companies which designed and manufactured semiconductors in their own
fabrication facilities. These companies are known as integrated device
manufacturers, or IDMs. In the mid-1980s, fabless semiconductor companies, which
focused on design and marketing and utilized external manufacturing capacity,
began to emerge. Fabless companies initially relied on the excess capacity
provided by IDMs. As the semiconductor industry continued to grow, fabless
companies and IDMs began to seek reliable and dedicated sources of wafer
fabrication services. This need is being met by the development of independent
companies, known as foundries, that focus primarily on providing wafer
fabrication services to semiconductor suppliers.

THE GROWTH OF THE SEMICONDUCTOR FOUNDRY INDUSTRY

Semiconductor suppliers presently face increasing demands to offer new
products that provide higher performance and greater functionality at lower
prices. To compete successfully, they must also minimize the time it takes to
bring a product to market. High performance semiconductors, which contain
millions of transistors, are extraordinarily challenging to design and even more
challenging to manufacture. Additionally, these high performance semiconductors
can only be produced in fabs that employ the most advanced semiconductor process
technologies.

According to a Dataquest report in May 1999, the cost of a state-of-the-art
fab has grown from approximately $200 million in 1983 to $1.8 billion in 1999.
Today, only large and well-capitalized companies can support the substantial
technology and investment requirements of building state-of-the-art fabs. In
addition, for companies to justify the enormous cost of a new fab, a high level
of capacity utilization is essential to ensure that fixed costs are fully
absorbed. These trends have led to the rapid growth in demand for advanced
semiconductor manufacturing services provided by semiconductor foundries.

44
<PAGE> 49

Foundry services are now utilized by nearly every major semiconductor
company in the world. Dataquest estimates in a July 1999 report that in 1998
IDMs comprised 93% of the worldwide semiconductor market. Historically, IDMs
have used foundry services for their incremental manufacturing needs. Given the
mounting pressure on them to improve profit margins and accelerate
time-to-market, we expect IDMs to utilize foundries more extensively in the
future for their core manufacturing needs. For example, IDMs such as Motorola
and Toshiba have recently announced their intentions to outsource an increasing
proportion of their manufacturing needs. In addition, Dataquest estimates in an
August 1999 report that demand from fabless semiconductor companies for foundry
services will grow from $3.6 billion in 1998 to $8.5 billion in 2003.
Manufacturers of electronic systems, or systems companies, who design
semiconductors for use in their own products are also beginning to utilize
foundry services. According to an August 1999 Dataquest report, the growth of
the foundry market is expected to outpace growth of the semiconductor industry
overall, with foundry services expected to grow from $5.3 billion in 1998 to
$13.6 billion in 2003, representing a compound annual growth rate of over 20%.

THE REQUIREMENTS OF A FULL SERVICE FOUNDRY

As demand for foundry services has grown, many semiconductor suppliers are
seeking highly committed partners that meet their manufacturing technology
requirements. These partners must be able to provide the following:

Systems Integration Expertise. In recent years, business and consumer
demand for high performance data transmission, processing and storage has
increased dramatically. Fueling this demand has been growth in the data
communications, telecommunications, wireless and consumer markets. This has
resulted in greater demand for faster, smaller semiconductors that integrate an
increasing number of functions onto a single device at a lower cost. This need
for increased system-level integration requires semiconductor foundries to offer
specialized expertise in a number of areas. These include the integration of
logic, which processes data, and memory, which stores data, into a single device
and mixed-signal technologies which translate data between analog and digital
form.

Leading Edge Process Technologies. Semiconductor foundries must also
provide a range of manufacturing process technologies from standard CMOS to
technologies that enable extremely fast transmission and processing speeds, such
as specialized CMOS for wireless applications and the use of copper interconnect
for very high speed devices. Foundries must also continue to offer smaller
process geometries which allows for the integration of more functions in the
same size device or more devices per wafer.

Long-Term Relationships. As foundries become more integral to the overall
manufacturing strategies of their customers, it has become increasingly
important for foundries to form long-term relationships with them. Semiconductor
suppliers and systems companies need assurance that their foundry suppliers will
continue to provide sufficient advanced manufacturing capacity to keep pace with
their customers' growth, and develop and make available advanced process
technologies capable of producing next generation products.

Security. When using foundry services, semiconductor suppliers, systems
companies and their partners entrust highly valuable and proprietary
intellectual property to the foundries manufacturing their devices. These
customers demand foundry partners who understand the importance of protecting
intellectual property.

THE CHARTERED SOLUTION

Chartered is one of the world's leading independent semiconductor
foundries. We provide comprehensive wafer fabrication services and technologies
to semiconductor suppliers and systems companies and enable seamless integration
of the semiconductor design and manufacturing processes. By doing so, we enable
our customers to bring high performance, highly-integrated products to market
rapidly and cost effectively.

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<PAGE> 50

We enable system-level integration for our customers, many of which serve
high growth markets. For example, to meet the needs of customers serving the
communications markets, we offer a broad array of leading digital and analog
technologies, including standard CMOS, mixed-signal and embedded memory
processes. We are also developing additional leading high performance
technologies such as advanced embedded memory technologies and specialized CMOS
for wireless applications. In order to augment our internal development efforts,
we have entered into strategic alliances and technology alliances with leading
semiconductor companies such as Lucent and Motorola. SMP, our strategic alliance
with a subsidiary of Lucent, operates Fab 5. Our technology alliance with Lucent
includes an agreement to jointly develop 0.18u process geometries for high
density, low power and cost-effective applications. Our technology alliance with
Motorola includes the licensing and process transfer of Motorola's leading edge
copper interconnect HiPerMOS technology for 0.15u, 0.13u and 0.10u process
geometries.

We partner with leading providers of EDA, software tools, design
intellectual property, or IP, and design services to enable our customers to
integrate system-level functionality in their products with accelerated
time-to-market and reduced design and manufacturing risk. Our partners' EDA
tools, design IP and processes are proven and have been validated for
Chartered's manufacturing processes. Our EDA development and IP partners include
Artisan Components, Avant!, Cadence, MIPS and Synopsys. We also partner with
assembly and test providers, principally STATS, to offer our customers turnkey
services, which incorporate wafer fabrication, assembly and test. Our turnkey
service enables our customers to interface solely with Chartered for the entire
manufacturing process, from wafer manufacturing to drop shipment of completed
devices directly to their customers.

We believe that Chartered is a trusted, customer-oriented service provider.
We have service operations in 12 cities in nine countries in North America,
Europe and Asia. In addition, our proprietary Customer On-Line Access System
provides our customers with easy, secure access through the Internet to
information pertaining to the services we render for them, including the status
of their wafers in our manufacturing process. All of our manufacturing
operations are located in Singapore, a politically and economically stable
nation with laws that protect our customers' proprietary technology.

BUSINESS STRATEGY

Our objective is to be the leading worldwide, full service provider of
wafer foundry services to semiconductor suppliers and systems companies focused
on high growth applications that require a high degree of system-level
integration. Key elements of our strategy include:

FOCUS ON SEMICONDUCTOR DEVICES FOR HIGH GROWTH APPLICATIONS SUCH AS
COMMUNICATIONS

We are focused on providing foundry services to customers that serve high
growth applications and require a high degree of functional integration. These
customers compete based on differentiated products, rapid time-to-market and
device performance, as opposed to suppliers of less complex commodity
semiconductor products, which compete primarily on price and manufacturing
capacity. Many of our customers, including Broadcom, Conexant, Hewlett-Packard,
Level One, Lucent, Motorola and PMC-Sierra, use our services to manufacture
their communications products for applications such as cable modems, wireless,
Gigabit Ethernet, ATM and ADSL.

PROVIDE A COMPLETE RANGE OF SERVICES

We are continuing to expand our range of services so that we can
effectively meet our customers' evolving needs. Our goal is to seamlessly
integrate the design and manufacturing process with a wide array of services,
tools and technologies. The services we currently make available to our
customers, in conjunction with our partners, include an increasing number of EDA
design tools, design IP and process technologies that have been validated for
our manufacturing process. We also offer our customers full turnkey services
which include wafer fabrication, assembly and test.

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<PAGE> 51

INCREASE FOUNDRY CAPACITY

We intend to expand our production capacity to meet the anticipated needs
of our customers. We plan to increase our total production capacity from
approximately 60,000 eight-inch equivalent wafers per month in June 1999 to an
estimated 134,000 eight-inch equivalent wafers per month (which figure includes
100% of the production capacity of our jointly-owned fabs) by December 2002. We
believe that increasing our foundry capacity is critical to ensuring that we can
satisfy our customers' volume requirements as they continue to grow.

OFFER LEADING PROCESS TECHNOLOGY

We intend to continually expand our portfolio of process technologies
through internal development, technology alliances, strategic alliances and
licensing agreements. We believe that offering leading process technologies is
critical to attracting and retaining customers that design highly sophisticated
semiconductors. We are currently developing new digital and mixed-signal
technologies, such as specialized CMOS for wireless communications applications
and additional embedded memory technologies. Our research and development team
is comprised of 197 professionals, 55 of whom have Ph.D.s. We are jointly
developing 0.18u copper and aluminum processes with Lucent for high density, low
power and cost-effective applications. Our alliance with Motorola includes the
technology transfer and licensing of Motorola's leading edge copper interconnect
HiPerMOS technology for 0.15u 0.13u and 0.10u processes.

ENHANCE AND EXPAND ALLIANCES

We intend to leverage and expand our existing alliances and to establish
new alliances with leading companies that offer complementary technologies,
products and services. We believe that our alliances with semiconductor
technology leaders and providers of design tools, intellectual property and
assembly and test services have given us access to select leading edge system
technologies. These alliances have also enhanced our development efforts and
increased our fab utilization rates. We also believe that by establishing these
alliances and working closely with IDMs such as Lucent and Motorola, who are
also customers, we are better positioned to win future business with them.

MANUFACTURING FACILITIES

We currently own or have an interest in five fabs which are located in
Singapore. Fabs 1, 2 and 3 are wholly-owned and operated by our company. Fab 5
is operated by SMP which we jointly own with a

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<PAGE> 52

subsidiary of Lucent. Fab 6, which we jointly own with EDB Investments and a
subsidiary of Hewlett-Packard, is currently being equipped and will be operated
by CSP. We do not have a Fab 4.

<TABLE>
<CAPTION>
FAB 1 FAB 2 FAB 3 FAB 5 FAB 6
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
PRODUCTION COMMENCED......... 1989 1995 1997 1999 Expected 2000
CURRENT OUTPUT(1)............ 23,000 wafers(2) 35,000 wafers per 8,500 wafers per 2,000 wafers per --
per month month month month
ESTIMATED FULL CAPACITY(3)... 23,000 wafers(2) 40,000 wafers per 20,000 wafers per 26,000 wafers per 35,000 wafers per
per month; month; expected month; expected month; expected month; expected
achieved 1995 1999 2000 2000 2002
WAFER SIZE................... Six-inch (150mm) Eight-inch Eight-inch Eight-inch Eight-inch
(200mm) (200mm) (200mm) (200mm)
PROCESS TECHNOLOGIES......... 1.2 to 0.5u 0.6 to 0.3u(4) 0.35 to 0.22u(4) 0.25 to 0.15u(4) 0.25 to 0.13u(4)
MANUFACTURING TECHNOLOGIES... Digital; Analog; Digital; Analog; Digital; SRAM; 0.25u Digital; High performance,
ROM; EEPROM(5) SRAM; Flash ROM(5) BiCMOS; Analog; high-density
Memory(5) eSRAM(5) CMOS; high
density SRAM(5)
CLEAN ROOM................... 35,000 sq. ft. 70,000 sq. ft. 46,000 sq. ft. 46,000 sq. ft. 85,000 sq. ft.
Class 10(6) Class-1 Class-1 Class-1 Class-1
SMIF(6) SMIF(6) SMIF(6) SMIF(6)
</TABLE>

- ---------------
(1) Current output is as of June 30, 1999.

(2) Equivalent to 13,000 eight-inch wafers per month.

(3) Estimated capacity is based on our current and anticipated process
technology mix, which may vary and includes, with respect to Fab 5 and Fab
6, capacity to which our strategic partners are entitled. Please see
"-- Strategic Alliances" for additional information regarding our alliances
with these partners.

(4) These numbers are preliminary and their successful implementation depend on
various factors, including our ability to achieve advances in process
technology or to obtain access to advanced process technology developed by
others. These fabs can be retrofitted to achieve smaller geometries than
those shown above.

(5) ROMs are read-only memory devices. EEPROMs are electronically erasable
programmable read-only devices. SRAMs are static random access memory
devices. eSRAMs are embedded static random access memory devices.

(6) Class 10 means a standard of air purity under which the amount of dust is
limited to fewer than ten particles of dust per cubic foot of air. Class 1
means a standard of air purity under which the amount of dust is limited to
fewer than one particle of dust per cubic foot of air. SMIF means standard
mechanical interface.

All of our fabs in production currently operate 24 hours per day, seven
days per week. Maintenance at each of the fabs is performed concurrently with
production.

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<PAGE> 53

The following table sets forth information regarding the total wafer output
by each of our fabs during the past five years:

<TABLE>
<CAPTION>
TOTAL OUTPUT(1)
(IN THOUSANDS)
---------------------------------------
FAB 1995 1996 1997 1998 1999(2)
--- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Fab 1.......................................... 159 140 103 142 100
Fab 2(3)....................................... 27 114 220 265 195
Fab 3(3)....................................... -- -- 21 33 33
Fab 5(3)....................................... -- -- -- -- 2
</TABLE>

- ---------------
(1) Total output of revenue generating eight-inch equivalents for the fiscal
year end.

(2) Output figures for 1999 are as of June 30, 1999.

(3) Fab 2 commenced production in 1995, Fab 3 commenced production in 1997 and
Fab 5 commenced production in 1999.

QUALITY ASSURANCE PROGRAMS

We have implemented systems to ensure high quality service to customers and
manufacturing reliability at our facilities in Singapore. Our in-house
laboratory is equipped with advanced analytical tools and provides the necessary
equipment and resources for our research and development and engineering staff
to continuously enhance product quality and our manufacturing processes. Our
quality assurance staff is comprised of engineers, technicians and other
employees who monitor and control our manufacturing processes.

Our production facilities in Singapore have been certified by the
International Standards Organization, or ISO, to meet ISO 9002 standards. ISO
9002 standards set forth what is required to ensure the production of quality
products and services. There are a total of 20 requirements, including
management responsibility, quality systems, and process control. The ISO
certification process involves periodically subjecting production processes and
quality management systems to stringent third-party review and verification. Our
customers often look to an ISO certification as a threshold indication of our
quality control standards.

STRATEGIC ALLIANCES

CHARTERED SILICON PARTNERS

In March 1997, we entered into the CSP strategic alliance with
Hewlett-Packard Europe B.V., a subsidiary of Hewlett-Packard, or HP Europe, and
EDB Investments Pte Ltd relating to the joint ownership of Fab 6. We, HP Europe
and EDB Investments have a 51%, 30% and 19% equity interest in CSP,
respectively. We are obligated to make a total of S$367.2 million ($215.4
million) in equity contributions to CSP through the end of 2000. We and HP
Europe also each have an option to purchase additional shares in CSP from EDB
Investments at a formula-driven price. Pursuant to an agreement with CSP,
Hewlett-Packard is required to purchase a minimum number of wafers per year and
is entitled to purchase a maximum number of wafers per year from CSP. If HP
Europe's ownership interest in CSP changes, the number of wafers Hewlett-Packard
is required to purchase, as well as the number of wafers it is entitled to
purchase, changes accordingly.

CSP's Board of Directors is comprised of seven directors. As long as we own
at least 50% of CSP, we can elect four of the directors. HP Europe can elect two
directors as long as it owns more than 15% of CSP and EDB Investments can elect
one director as long as it holds any ownership interest in CSP.

Pursuant to our agreement, the CSP strategic alliance continues
indefinitely until it is terminated by either party upon the transfer by the
party of its entire interest in CSP. Neither we nor HP Europe may transfer our
interests in CSP until 2001. Before any transfer can occur, the non-transferring
party may exercise a right of first refusal with respect to the transferred
interests. Upon a serious, uncured default,

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<PAGE> 54

the non-defaulting party has the right to purchase all of the defaulting party's
interest for fair value, as defined in the agreement. Upon a change of control
of a party, the other parties have the right to purchase, at fair value, all of
such party's interest.

CSP owns and will operate Fab 6. Pursuant to a service support agreement,
we provide CSP with management and corporate support services including
accounting, financial, sales and marketing. Under this agreement, CSP is
allocated a portion of our costs in providing such services. Although such
agreement may be terminated by either party in certain instances, we expect the
services support agreement to remain in place during the term of this strategic
alliance.

Pursuant to a technology transfer and license agreement, both we and
Hewlett-Packard contribute the process technologies needed by CSP. Such process
technologies are licensed to CSP for its own use and CSP cannot sublicense them
to others. In addition, we and Hewlett-Packard cross-license the rights to use
such technologies to one another. These cross-licenses allow our respective
companies and subsidiaries to use the process technologies and related
intellectual property licensed to CSP in our respective manufacturing facilities
for our general businesses even if such uses are not related to CSP.

U.S. GAAP generally requires consolidation at all majority owned (greater
than 50%) subsidiaries. However, as a result of certain provisions contained in
the strategic alliance agreement, the minority shareholders of CSP are deemed to
have substantive participative rights which would overcome the presumption that
we should consolidate CSP. Therefore, CSP has been historically accounted for
under the equity method in our financial statements. As a result of the
amendment described below, we will treat CSP as a consolidated subsidiary from
October 1, 1999 forward.

Effective October 1, 1999, we, HP Europe and EDB Investments amended our
strategic alliance agreement. The amendment eliminated some of CSP's minority
shareholders' approval rights over CSP's annual business plan. It also increased
the thresholds for asset dispositions, borrowings and capital expenditures that
would require the approval of CSP's minority shareholders. We believe that these
changes eliminate CSP's minority shareholders' substantive participating rights
in CSP.

Hewlett-Packard has publicly announced that it is in the process of
spinning-off certain of its businesses into a new company, called Agilent
Technologies, Inc. Agilent Technologies is expected to assume the following
Hewlett-Packard businesses -- test and measurement, semiconductor products,
healthcare solutions and chemical analysis. Hewlett-Packard has informed us that
it expects to assign its rights and obligations under the agreements it has
entered into with us, including the agreements of its subsidiaries (including HP
Europe), to Agilent Technologies. Hewlett-Packard expects this assignment to
occur in November 1999. We intend to consent to the assignment.

SILICON MANUFACTURING PARTNERS

In December 1997, we entered into the SMP strategic alliance with Lucent
Technologies Microelectronics Pte Ltd, or Lucent Microelectronics, relating to
the joint ownership of Fab 5. Lucent Microelectronics has a 51% equity interest
in SMP and we have a 49% equity interest. We are obligated to make S$208.3
million ($122.2 million) in equity contributions to SMP through the end of 2000.
SMP's Board of Directors is comprised of five directors, three of which are
elected by Lucent Microelectronics and two of which are elected by us. We also
nominate the chairman of the Board of Directors and the general manager, while
Lucent Microelectronics names the financial controller.

SMP operates Fab 5, which is adjacent to our Fab 3 building. SMP owns the
equipment used in Fab 5 and leases the space in Fab 3 from us. Please see
"Relationship with Singapore Technologies" for a description of this lease.
Pursuant to our agreement, we are each required to purchase a specified
percentage of Fab 5's output. However, if one party does not purchase its share
of wafers, the other party is entitled to utilize that unused capacity. In the
event such other party does not utilize the unused capacity, the party who does
not purchase its entitlement will be required to compensate SMP for any costs it
incurs in connection with such unused capacity.

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<PAGE> 55

Pursuant to our agreement, the SMP strategic alliance continues
indefinitely until it is terminated. Neither party may terminate the alliance
until 2006, at which time a party must give two years advance notice in order to
terminate. In addition, the parties may only transfer their interests to their
respective affiliates. Upon our dissolution, winding up or liquidation, Lucent
Microelectronics can purchase all of our interests in SMP for fair value, as
defined in the agreement. Upon our serious, uncured breach, Lucent
Microelectronics has the right to sell all of its interest in SMP to us for the
higher of fair value and the value of its interest based on SMP's net book
value, as defined in the agreement. Upon Lucent Microelectronics' dissolution,
winding up or liquidation, we have the right to purchase all of its interest in
SMP for fair value. Upon Lucent Microelectronics' serious, uncured breach, we
have the right to purchase all of its interest in SMP for 90% of fair value.
Upon a change of control of a party, the other party has the right to purchase,
at fair value, all of such party's interest in SMP.

Pursuant to a services support agreement, we provide SMP management and
corporate support services such as accounting, financial and human resources.
Under this agreement, SMP is allocated a portion of our costs in providing such
services. Although such agreement may be terminated by either party in certain
instances, we expect the services agreement to remain in place during the term
of this strategic alliance.

Pursuant to a technology transfer and license agreement, both we and Lucent
Microelectronics contribute the process technologies needed by SMP. Such process
technologies are licensed to SMP for its own use and SMP cannot sublicense them
to others. We and Lucent Microelectronics categorize our licensed technologies
as restricted and unrestricted technologies. We and Lucent cross-license the
unrestricted technologies to one another. These cross-licenses allow our
respective companies and subsidiaries to use certain process technologies and
related intellectual property licensed to SMP in our respective manufacturing
facilities for our general businesses even if such uses are not related to SMP.
We do not cross-license the restricted technologies with one another, which
means that only SMP can use such restricted process technologies and
intellectual property.

WAFER FABRICATION SERVICES

OVERVIEW

Wafer fabrication is an intricate process that requires many distinct
steps. Each step in the manufacturing process must be completed with extreme
accuracy in order for finished semiconductor devices to work as intended. The
processes required to take raw wafers and turn them into finished semiconductor
devices are accomplished through a series of steps that can be summarized as
follows:

Circuit Design. Producing a semiconductor begins with designing the layout
of the semiconductor's components and designating the interconnections between
each component on the semiconductor. The result is a pattern of components and
connections that defines the function of the semiconductor. In highly complex
circuits, there may be more than 35 layers of electronic patterns.

We do not design semiconductors for our customers. If requested, we assist
our customers in the design process by providing them with access to our
partners' EDA tools, design IP and design services which are proven and have
been qualified for our manufacturing processes. Our design engineers assist our
customers during the development process to ensure that their designs can be
successfully manufactured in volume.

Mask Making. The design for each layer of a semiconductor is imprinted on
a photographic negative, called a semiconductor mask. The mask is the blueprint
for each specific layer of the semiconductor. We do not manufacture masks for
our customers.

Wafer Fabrication. Transistors and other circuit elements comprising a
semiconductor are formed by repeating a series of processes in which a
photosensitive material is deposited on the wafer and exposed to light through
the mask. The unwanted material is then etched away, leaving only the desired
circuit pattern on the wafer. This process is repeated for each mask layer. The
final step in the wafer fabrication

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<PAGE> 56

process is to visually and electronically inspect each individual semiconductor,
known as wafer probe, in order to identify the operable semiconductors for
assembly.

We provide all aspects of the wafer fabrication process except for wafer
probe, which we outsource principally to STATS. All steps in the wafer
manufacturing process are controlled by our computer-integrated manufacturing,
or CIM, system. The CIM system allows us to monitor equipment performance, wafer
processing steps, and the wafers themselves throughout the fabrication process.

Assembly and Test. After fabrication, the wafers are transferred to
assembly and test facilities. Assembly protects the semiconductor, facilitates
its integration into electronic systems and enables the dissipation of heat.
Following assembly, each semiconductor's functionality, voltage, current and
timing are tested. After testing, the completed semiconductor is either shipped
to the semiconductor supplier or directly to its final destination. We outsource
assembly and test services to independent assembly and test providers, primarily
STATS.

MANUFACTURING PROCESSES

We manufacture semiconductors using CMOS, bipolar and BiCMOS processes.
CMOS is the most widely used process technology because it requires lower power
than other technologies and allows dense placement of components onto a single
semiconductor. The low power consumption and high density characteristics of the
CMOS process allow the continued development of high performance semiconductors
that are smaller and faster. Bipolar technology enables very high speed but is
used only in analog semiconductors. BiCMOS process technology combines bipolar's
attribute of high speed with the high density and low power consumption of CMOS.
We use CMOS or a combination of CMOS and BiCMOS for the fabrication of logic,
mixed-signal and memory semiconductors.

We manufacture a variety of semiconductors for a full range of end market
applications including communications, computing, and consumer electronics.
Examples of the types of semiconductors we manufacture are as follows:

Logic. All digital electronic systems, such as computing devices, are
controlled by logic semiconductors, which process data. Microcontrollers,
microprocessors, digital signal processors, and graphics chipsets are all
logic devices. We manufacture logic semiconductors primarily for the
computing, consumer and communications markets.

Mixed-Signal. Mixed-signal semiconductors combine analog and digital
devices on a single semiconductor to process both analog signals and
digital data. Mixed-signal semiconductors are used in applications
including wireless equipment, fiber optic communications and data
networking. We make mixed-signal semiconductors using both CMOS and BiCMOS
processes.

Memory. Memory devices store data and can be manufactured as
stand-alone devices or embedded in system semiconductors, which combine a
number of functions, such as logic and memory components. We manufacture
stand-alone memory devices including EPROM, EEPROM, ROM, SRAM and Flash
memory and embedded memory including eSRAM, eEEPROM, and eFLASH memories.
Memory is used in a range of products from computers and mobile phones to
"smart" chip cards.

TURNKEY SERVICES

Although we are an independent foundry specializing in wafer fabrication,
we offer our customers the option to purchase from us finished semiconductor
products that have been assembled and tested. We principally subcontract
assembly and testing of the fabricated semiconductors to STATS. Testing includes
wafer probe and final testing of assembled semiconductors. After final testing,
the semiconductors are returned to the customer or drop-shipped according to our
customers' specifications.

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<PAGE> 57

CUSTOMERS AND MARKETS

We manufactured semiconductors for over 125 different customers in each of
1998 and the first six months in 1999. Our top five customers accounted for
approximately 43.3% and 44.7% of our revenue in 1998 and the first six months in
1999, respectively. In 1998, no customer individually accounted for more than
10% of our revenue. In the first six months in 1999, Hewlett-Packard and Lucent
each accounted for more than 10% of our revenue.

The following table sets forth our top five customers for the first six
months of 1999 in order of revenue:

<TABLE>
<CAPTION>
CUSTOMER REPRESENTATIVE PRODUCTS OR APPLICATIONS
-------- ---------------------------------------
<S> <C>
Hewlett-Packard....................................... Computer peripherals and networking
Lucent................................................ Communication ASICs, DSPs, LAN ICs
Level One Communications.............................. Ethernet Transceivers
Broadcom.............................................. Cable modem/set-top box, Ethernet
Conexant.............................................. xDSL and datacom
</TABLE>

We categorize a sale geographically based on the country in which the
customer is headquartered. The following table sets forth the geographical
distribution, by percentage, of our net sales for the periods indicated:

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
--------------------------------
SIX MONTHS ENDED
1997 1998 JUNE 30, 1999
---- ---- ----------------
<S> <C> <C> <C>
REGION
United States............................................... 52% 63% 78%
Asia/Pacific................................................ 47 35 18
Europe...................................................... 1 2 4
--- --- ---
Total..................................................... 100% 100% 100%
=== === ===
</TABLE>

We expect that the majority of our sales will continue to be made to
companies headquartered in the United States or to overseas affiliates of United
States companies. All of our sales are direct sales to our customers with
delivery in Singapore. We provide customer support in the United States through
a wholly-owned subsidiary located in Milpitas, California which has additional
offices in Irvine, California; Boston, Massachusetts and Austin, Texas. We also
maintain customer support offices in Hsin-Chu, Taiwan; Tokyo, Japan; Paris,
France; London, England; Munich, Germany; Tel Aviv, Israel and Shanghai, China.

Our customers generally do not place their purchase orders far in advance.
As a result, we do not typically operate with any significant backlog.

We currently allocate a portion of our wafer manufacturing capacity to
certain customers under several types of agreements. Some of these customers
have invested equity in us, placed deposits to secure wafer capacity, or prepaid
for our services. We are also obligated to make available capacity to customers
under certain other agreements.

CUSTOMER SERVICE

We focus on providing a high level of customer service in order to attract
customers and maintain their ongoing loyalty. Our culture emphasizes
responsiveness to customer needs, flexibility and delivery accuracy. Our
customer-oriented approach is especially evident in two prime functional areas
of customer interaction, customer design development and manufacturing services.

We emphasize very close interaction with customers throughout the design
development and prototyping process. We provide for an account manager to be
assigned early in the design development
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<PAGE> 58

process who coordinates an account team composed of local marketing, EDA,
silicon engineering, third-party partner and customer service/logistical
support. The local account team is supported by additional marketing and
customer engineering staff in Singapore.

After the design moves into manufacturing production, ongoing customer
support is provided through all phases of the manufacturing process. The local
account manager teams with a dedicated customer service representative, along
with marketing and customer engineering support teams at the factory.

In 1996, we introduced our Customer On-Line Access System, through which
our customers are provided secure access via the Internet to critical
manufacturing data as their products move through the fab. We are currently
developing our eFab(TM) system which will provide our customers information
access, data exchange and e-commerce functionality over the Internet. eFab(TM)
will implement a solution based on industry standards that will enable effective
and timely communication of manufacturing data between our information systems
and those of our customers and suppliers.

RESEARCH AND DEVELOPMENT

The semiconductor industry is characterized by rapid technological changes.
We believe effective research and development is essential to our success. Our
research and development activities are focused on developing new CMOS
manufacturing process technologies. In 1996, 1997 and 1998, we invested
approximately $13.0 million, $26.6 million and $43.4 million, respectively, in
research and development. Those investments represented approximately 3.2%, 7.0%
and 10.3% of our net sales for the respective period. As of June 30, 1999, we
employed 197 professionals in our research and development department, 55 of
whom have Ph.Ds.

We also enter into technology license and cross-license agreements. Our
technology alliances with leading semiconductor suppliers have contributed to
our development of new process technologies. For example, we have joint
development and technology sharing agreements with Lucent and Hewlett-Packard
and a technology transfer and licensing agreement with Motorola. We intend to
expand our existing relationships and establish new relationships to further
develop new technologies.

We are currently involved in several process technology development
projects. We are working to develop mixed-signal, core logic and embedded memory
(SRAM and Flash). We are jointly developing 0.18u copper and aluminum processes
with Lucent for high density, low power and cost-effective applications. Our
alliance with Motorola includes the technology transfer and licensing of
Motorola's leading edge copper interconnect HiPerMOS technology for 0.15u, 0.13u
and 0.10u processes.

We have received research grants totaling $56.4 million from various
agencies of the Government of Singapore. These grants provide funding for a
portion of our research and development related capital expenditures and for the
training and staffing costs associated with some of our process technology
development programs. Funds from these grants are disbursed upon the achievement
of program milestones. As of June 30, 1999, $16.1 million of the grants
currently in effect has been disbursed to us.

EQUIPMENT AND MATERIALS

We depend on a limited number of manufacturers that make and sell the
complex equipment that we use in our manufacturing processes. The principal
pieces of equipment we use to manufacture semiconductors are steppers, tracks,
etchers, furnaces, wet stations and implanters and sputtering, chemical vapor
deposition and chemical mechanical planarization equipment. In periods of high
market demand, the lead times from order to delivery of such equipment can be as
long as 12 to 18 months. We seek to manage this process through early
reservation of appropriate delivery slots and constant communication with our
suppliers.

Our manufacturing processes use highly specialized materials, including
silicon wafers, chemicals, gases, targets and masks. We depend on our suppliers
of these materials and seek to have more than one supplier for our material
requirements. To maintain competitive manufacturing operations, we must obtain
from our suppliers, in a timely manner, sufficient quantities of quality
materials at acceptable prices. We
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<PAGE> 59

source most of our materials, including critical items such as silicon wafers,
from a limited group of suppliers. We have a multi-year contract with MEMC
Electronics Materials Inc. to purchase raw wafers, pursuant to which we have
made deposits to secure future supply. We purchase all of our materials on a
blanket purchase order basis and are currently in negotiations with certain key
suppliers to develop long-term contracts. For those materials that are wholly
procured from one source, we identify and qualify alternative sources of supply.
We have agreements with key material suppliers under which they hold inventory
on consignment for us. We are not under any obligation to purchase inventory
that is held on consignment until we actually use it. We typically work with our
suppliers to forecast our raw material requirements one to three years in
advance, although pricing commitments are made on a semi-annual basis.

INTELLECTUAL PROPERTY

Our success depends in part on our ability to obtain patents, licenses and
other intellectual property rights covering our production processes. To that
end, we have acquired certain patents and patent licenses and intend to continue
to seek patents on our production processes. We have not federally registered
any of our trademarks or copyrights, but are in the process of doing so. As of
June 30, 1999, we had filed an aggregate of 469 patent applications worldwide,
241 of which had been filed in the United States. Of the 241 applications filed
in the United States, 114 had been issued as of June 30, 1999 and 17 had been
allowed but not issued. Those 17 patents will be issued if and when we pay the
applicable issuance fee. Our issued patents have expiration dates ranging from
2011 to 2017. All of the allowed and pending patents will expire after 2018. We
have also entered into various patent licenses and cross-licenses with major
semiconductor companies. We may choose to renew our present licenses or to
obtain additional technology licenses in the future. There can be no assurance
that any such licenses could be obtained on commercially reasonable terms.

Our ability to compete also depends on our ability to operate without
infringing the proprietary rights of others. The semiconductor industry is
generally characterized by frequent litigation regarding patent and other
intellectual property rights. We market products in several countries in Asia,
such as Taiwan and China, which may not protect our intellectual property rights
to the same extent as the United States. We have from time to time received
communications from third parties asserting patents that cover certain of our
technologies and alleging infringement of certain intellectual property rights
of others. We expect that we will receive similar communications in the future.
Irrespective of the validity or the successful assertion of such claims, we
could incur significant costs and devote significant management resources to the
defense of these claims which could seriously harm our company. There is no
material litigation currently pending against us.

COMPETITION

The worldwide semiconductor foundry industry is highly competitive. Our
principal competitors are TSMC, UMC and IBM. Our competitors may have greater
access to capital and substantially greater production, research and
development, marketing and other resources than we do. As a result, these
companies may be able to compete more aggressively over a longer period of time
than we can. In addition, several new dedicated foundries have commenced
operations and compete directly with us. Any significant increase in competition
may erode our profit margins and weaken our earnings.

A number of semiconductor manufacturers, including our primary competitors,
have recently announced plans to increase their manufacturing capacity and, as a
result, we expect that there will be a significant increase in worldwide
semiconductor capacity during the next five years. If growth in demand for this
capacity fails to match the growth in supply occur or occurs more slowly than
anticipated, there may be more intense competition and pressure on the pricing
of our services may result.

The principal elements of competition in the wafer foundry market include
technical competence, time-to-market, research and development, quality,
available capacity, device yields, customer service and price.

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ENVIRONMENTAL MATTERS AND COMPLIANCE

We have implemented an extensive environmental management system. This
system is third party certified through internationally recognized ISO 14001.
This system enables our operations to identify applicable environmental
regulations and assist in evaluating compliance status. Programs are established
at manufacturing locations to ensure that all accidental spills and discharges
are properly addressed.

We are subject to a variety of laws and governmental regulations in
Singapore relating to the use, discharge and disposal of toxic or otherwise
hazardous materials used in our production process. While we believe that we are
currently in compliance in all material respects with such laws and regulations
and have management systems in place to continue to be in compliance, if we fail
to use, discharge or dispose of hazardous materials appropriately, we could
subject our company to substantial liability or could be required to suspend or
adversely modify our manufacturing operations. In addition, we could be liable
for remedial measures if our properties were found to be contaminated even if we
were not responsible for such contamination.

EMPLOYEES

As of June 30, 1999, we had 3,319 employees, with 1,108 in process and
equipment engineering, 1,185 in manufacturing operations, 500 in manufacturing
support, 197 in research and development and 329 in administration, marketing
and finance. We consider our relationship with our employees to be good. In
addition, certain corporate support services, such as treasury, cash management,
internal audit, training, executive resources and corporate secretarial
services, are carried out by employees of ST on our behalf. Please see
"Relationship with Singapore Technologies" for a discussion of the services
provided to us by ST.

We provide our employees with customary compensation and benefit plans,
including employee bonus plans and an employee share ownership plan. Please see
"Management" for a discussion of those compensation plans.

Our employees are not covered by any collective bargaining agreements. We
have not experienced any strikes or work stoppages by our employees.

INSURANCE

We maintain industrial special risk insurance for our facilities, equipment
and inventories. The insurance for fabs (including our strategic alliance fabs)
and their equipment covers physical damage and consequential losses from natural
disaster, business interruption and certain other risks up to their respective
policy limits except for exclusions as defined in the policy. We also maintain
public liability insurance for losses to others arising from our business
operations and carry insurance for business interruption resulting from such
events. Our insurance policies covering public liability and actions by
employees are held by ST through its group insurance policy. We pay our pro rata
share of the costs of such policies based on the industrial all risk amount
insured and the number of its employees, respectively. Some of our insurance
coverage is provided through affiliates of ST. Some of our insurance coverage
for Fab 5 is under Lucent's global group insurance program.

While we believe that our insurance coverage is adequate, significant
damage to any of our production facilities, whether as a result of fire or other
causes, could seriously harm our company. We do not insure against the loss of
key personnel.

LEGAL PROCEEDINGS

We are not involved in any legal proceedings that we believe would be
harmful to our company.

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MANAGEMENT

The following table sets forth, as of October 15, 1999, the name, age and
position of each director and executive officer of our company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
BOARD OF DIRECTORS
Ho Ching(1)............................... 46 Chairman of the Board
Lim Ming Seong(1)(3)...................... 52 Deputy Chairman of the Board
Barry Waite............................... 51 Director
Sum Soon Lim(1)(2)(3)..................... 56 Director
James H. Van Tassel(3).................... 70 Director
Aubrey C. Tobey(1)(2)..................... 74 Director
Robert Edmund La Blanc(2)................. 65 Director
Andre Borrel(1)(3)........................ 63 Director
Charles E. Thompson(1).................... 70 Director
Koh Beng Seng(2).......................... 49 Director
Tsugio Makimoto........................... 62 Director
Premod Paul Thomas(4)..................... 42 Alternate Director to Sum Soon Lim
Liow Voon Kheong(4)(5).................... 48 Alternate Director to Lim Ming Seong

EXECUTIVE OFFICERS
Barry Waite............................... 51 President and Chief Executive Officer
Chia Song Hwee............................ 36 Chief Financial Officer
Robert Baxter............................. 44 Senior Vice President, Business Operations
John Docherty............................. 47 Senior Vice President, Manufacturing Operations
Brian Klene............................... 42 Vice President, Strategic Development
John Martin............................... 56 Vice President, Technology Development
Lau Chi Kwan.............................. 48 Vice President, Quality, Reliability and Assurance
Justin Lim................................ 42 Vice President, Information Technology
Tan Seng Chai............................. 37 Vice President, Human Resources
Michael J. Rekuc.......................... 50 President, North America
</TABLE>

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

(1) Member of the Executive Resource and Compensation Committee.

(2) Member of the Audit Committee.

(3) Member of the Budget Committee.

(4) Under our Articles of Association, a director is entitled to designate an
alternate director to take his place when he is absent from a meeting. An
alternate director, when serving in place of an absent director, may
exercise all of the powers and authority of the absent director, except the
power to appoint an alternate director. When not acting in place of an
absent director for whom he has been appointed alternate director, an
alternate director is not entitled to attend, participate or vote in any
board meetings.

(5) Liow Voon Kheong was nominated as an alternate director by EDB Investments
Pte Ltd. We have granted EDB Investments the right to nominate an alternate
director for so long as EDB Investments owns any of our ordinary shares.

BIOGRAPHICAL INFORMATION

HO CHING

Ho Ching has served on our Board of Directors since November 1987 and as
our Chairman of the Board since August 1995. Ms. Ho is the President and Chief
Executive Officer of Singapore Technologies Pte Ltd, our controlling
shareholder, Chairman of Singapore Technologies Engineering Ltd and Vice

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Chairman of SembCorp Industries Ltd. Ms. Ho also serves on the boards of
directors of various companies in the Singapore Technologies group. Before
joining Singapore Technologies in 1987, Ms. Ho was with the Ministry of Defence
of Singapore where she held various senior positions. Ms. Ho received a Master
of Science (Electrical Engineering) Degree from Stanford University. For her
public service, she was awarded the Public Service Star in 1996.

LIM MING SEONG

Lim Ming Seong has served on our Board of Directors since November 1987 and
as our Deputy Chairman of the Board since August 1995. Mr. Lim is the Group
Director of Singapore Technologies Pte Ltd, Deputy Chairman of ST Assembly Test
Services Ltd and Chairman of CSE Systems & Engineering Ltd. After joining
Singapore Technologies in December 1986, Mr. Lim has held various senior
positions in the Singapore Technologies group. Prior to joining Singapore
Technologies, Mr. Lim was with the Ministry of Defence of Singapore. Mr. Lim
received his Bachelor of Science (Honors) in Mechanical Engineering from the
University of Toronto and his Diploma in Business Administration from the
University of Singapore. Mr. Lim also participated in the Advanced Management
Programs at INSEAD and Harvard University.

BARRY WAITE

Barry Waite has served on our Board of Directors and as our President and
Chief Executive Officer since May 1998. Mr. Waite has more than 29 years of
experience in the semiconductor industry. Prior to joining our company, Mr.
Waite held various positions at Motorola Inc. Semiconductor Products Sector,
including Senior Vice President and General Manager of its microprocessor and
memory technology group and Senior Vice President and General Manager of the
European, Middle East and Africa region. Mr. Waite was with Texas Instruments
from 1970 to 1982. Mr. Waite has been Chairman of Silicon Manufacturing Partners
Pte Ltd and Chartered Silicon Partners Pte Ltd since May 1998. Mr. Waite
received his BA (Economics) (Honours) Degree from the University of Sheffield,
England and is an Officer of the Order of the British Empire.

SUM SOON LIM

Sum Soon Lim has served on our Board of Directors since February 1994 and
is currently a part time corporate advisor to Singapore Technologies Pte Ltd.
Prior to accepting his position with Singapore Technologies, Mr. Sum had worked
with the Singapore Economic Development Board, DBS Bank, J.P. Morgan Inc.,
Overseas Union Bank and Nuri Holdings (S) Pte Ltd, a private investment holding
company. Mr. Sum is also a member of the Securities Industry Council. Mr. Sum
received his B.Sc (Honors) in Production Engineering from the University of
Nottingham, England.

JAMES H. VAN TASSEL

James H. Van Tassel has served on our Board of Directors since June 1993.
He is a consultant in the semiconductor industry and has been involved in the
electronics and microelectronics industry since 1960. From 1980 to 1991, Dr. Van
Tassel was Vice President (Microelectronics) with NCR Corporation. Dr. Van
Tassel received his Bachelor of Science degree from the University of Wisconsin
at La Crosse, and his Master of Science Degree (Inorganic Chemistry) and Doctor
of Philosophy from Texas Technological University.

AUBREY C. TOBEY

Aubrey C. Tobey has served on our Board of Directors since March 1998 and
is currently the President of ACT International providing consultancy in the
management and marketing of high technology. From 1983 to 1987, Mr. Tobey was
Vice President of Micronix Corporation and from 1965 to 1983 was Corporate Vice
President at GCA Corporation. Mr. Tobey was with Arthur D. Little, Inc., a
management, science and technology consulting firm from 1959 to 1965. Mr. Tobey
received his Bachelor

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of Science degree in Mechanical Engineering from Tufts University and his Master
of Science degree in Mechanical Engineering from the University of Connecticut.

ROBERT EDMUND LA BLANC

Robert Edmund La Blanc has served on our Board of Directors since May 1998
and is the President of Robert E. La Blanc Associates, Inc., an information
technologies consulting and investment banking firm. From 1979 to 1981, Mr. La
Blanc was Vice Chairman of Continental Telecom, Inc. and from 1969 to 1979, a
General Partner of Salomon Brothers Inc. Mr. La Blanc has also held various
senior positions within companies in the telecommunications industry including
AT&T, Bell Telephone Laboratories and New York Telephone Company. Mr. La Blanc
received his B.E.E. from Manhattan College and his MBA from New York University.
Mr. La Blanc also is a graduate of the Operating Engineers Program at Bell
Telephone Laboratories and the USAF Communications Officers School.

ANDRE BORREL

Andre Borrel has served on our Board of Directors since July 1998 and is
currently working as a consultant in the semiconductor industry. Prior to
joining Chartered, Mr. Borrel was Senior Vice Present and General Manager of
Communications, Power and Signal Technology Group at Motorola Inc. Mr. Borrel is
also an Officer of the French National Order of Merit and holds a Master Degree
in Electronics from "Ecole Nationale Superieure des Telecommunications" in
Paris, France.

CHARLES E. THOMPSON

Charles E. Thompson has served on our Board of Directors since September
1998 and is currently working as a consultant in the information
technology/semiconductor technology industry. From 1973 to 1996, Mr. Thompson
was World Marketing Senior Vice President at Motorola Inc. Prior thereto, Mr.
Thompson was Computer Department Sales Director at General Electric. Mr.
Thompson received his Bachelor of Science in Mathematics from the University of
Washington.

KOH BENG SENG

Koh Beng Seng has served on our Board of Directors since February 1999. He
is currently Senior Advisor to Asia Pulp & Paper Co. Ltd and an advisor to the
International Monetary Fund. Mr. Koh is active in the financial services sector
and was with the Monetary Authority of Singapore from 1973 to 1998, where he
served as Deputy Managing Director from 1988 to 1998. Mr. Koh received his
Bachelor of Commerce (First Class Honors) from Nanyang University and his MBA
from Columbia University. Mr. Koh was awarded an Overseas Postgraduate
Scholarship by the Monetary Authority of Singapore in 1978. In 1987, the
President of the Republic of Singapore awarded him a Meritorious Service Medal.

TSUGIO MAKIMOTO

Tsugio Makimoto has served on our Board of Directors since September 1999
and has 40 years of working experience in the semiconductor industry. Dr.
Makimoto has worked for Hitachi Ltd since 1959 where he has held various senior
positions, including Executive Managing Director in 1993 and Senior Executive
Managing Director in 1997. Dr. Makimoto is currently Hitachi's Corporate Chief
Technologist. Dr. Makimoto is a member of the Advisory Committee of the NAIST
(Nara Institute of Science and Technology) and the International Advisory Panel
of the NSTB (National Science and Technology Board) of Singapore. Dr. Makimoto
is also a visiting professor at Toyo University.

PREMOD PAUL THOMAS

Premod Paul Thomas was appointed to our Board of Directors as the Alternate
Director to Sum Soon Lim in July 1999. Mr. Thomas is Director (Finance) of
Singapore Technologies Pte Ltd. Before joining Singapore Technologies Pte Ltd he
was with Tirtamas Group, Jakarta, as Group Executive Advisor from 1995 to 1998
and with Bank of America from 1983 to 1995. Mr. Thomas received his B.Com.
(First
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Class Honors) from Loyola College, India in 1977. He is a Certified Associate of
the Indian Institute of Bankers, Bombay, and has an MBA from the Indian
Institute of Management, Ahmedabad.

LIOW VOON KHEONG

Liow Voon Kheong was appointed to our Board of Directors as the Alternate
Director to Lim Ming Seong in July 1998. Mr. Liow was previously an Alternate
Director from May 1995 to July 1998. Mr. Liow is presently Assistant Managing
Director (Operations) of the Singapore Economic Development Board, General
Manager of EDB Investments Pte Ltd, Director/General Manager of EDB Ventures Pte
Ltd and EDB Ventures 2 Pte Ltd and General Manager of PLE Investments Pte Ltd.
Mr. Liow started his career with the Singapore Economic Development Board in
1976. He received his B.E. (Electrical & Electronics) and his Diploma in
Business Administration from the University of Singapore.

CHIA SONG HWEE

Chia Song Hwee has served as our Chief Financial Officer since December
1997 and served as our Director of Finance from April 1996 to December 1997. Mr.
Chia has more than 12 years of experience in financial accounting and has
overall responsibility for our company's finance and legal matters. From May
1992 through December 1994, Mr. Chia was Regional Financial Controller (Asia and
Middle East) for Anadrill Technical Services, Inc. From January 1995 to April
1996, Mr. Chia was Regional Controller (Asia, Australia and Middle East) for
Sedco Forex Technical Services, Inc. Mr. Chia has been an Alternate Director on
the Board of Directors of Chartered Silicon Partners Pte Ltd since July 1998 and
was appointed to its Board of Directors in April 1999. He has also been an
Alternate Director on the Board of Directors of Silicon Manufacturing Partners
Pte Ltd since October 1998. Mr. Chia received his Bachelor of Business
(Accountancy), with distinction, from Edith Cowan University, Australia and is a
Certified Practicing Accountant by the Australian Society of CPAs.

MICHAEL J. REKUC

Michael J. Rekuc has served as President of our North American operations
since March 1999. From 1976 until March 1999, Mr. Rekuc held sales, management
and director positions in the semiconductor product sector of Motorola Inc. His
most recent positions at Motorola Inc. included worldwide responsibilities as
global sales director for wireless subscriber systems and a two year role as
vice president and sales director for PC, computing and peripherals. Mr. Rekuc
holds a BSc in Electrical Engineering from Lawrence University of Michigan.

ROBERT BAXTER

Robert Baxter has served as our Senior Vice President, Business Operations
since July 1998 with overall responsibility for regional sales, worldwide
marketing, customer engineering and EDA teams in planning and executing business
strategies. Mr. Baxter has more than 23 years of working experience in the
semiconductor industry. He started his career with Texas Instruments in 1976 and
later joined Motorola Corporation in 1982. Prior to joining Chartered, Mr.
Baxter was Vice President and General Manager of Motorola's Advanced Digital
Consumer Division based in Tokyo. He also ran Microcontroller Business Divisions
based in Europe and in Austin, Texas for Motorola Inc. He has served on the
Board of Directors of Chartered Silicon Partners Pte Ltd since October 1998. Mr.
Baxter holds a BSc (Hons) in Applied Physics and Electronics from Durham
University, United Kingdom.

JOHN DOCHERTY

John Docherty has served as our Senior Vice President, Manufacturing
Operations since September 1998 and has overall responsibility for wafer fab
manufacturing operations, and leading our fab operations, turnkey services and
supply management activities. Mr. Docherty has more than 24 years experience in
the semiconductor industry. Prior to joining Chartered, Mr. Docherty was the
Vice President and Director of European Manufacturing for Motorola Inc.'s wafer
fabrication facilities in Scotland and France.

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Mr. Docherty has served on the Boards of Directors of Chartered Silicon Partners
Pte Ltd and Silicon Manufacturing Partners Pte Ltd since October 1998. Mr.
Docherty graduated from Napier University, Edinburgh, United Kingdom and holds a
Business Diploma from Strathclyde University, Glasgow.

BRIAN KLENE

Brian Klene has served as our Vice President, Strategic Development since
October 1998 and has overall responsibility for strategic business development
and planning activities and intellectual property management. Mr. Klene has also
served as Vice President, Worldwide Marketing. Mr. Klene has more than 20 years
of working experience in the semiconductor and communications industry. Prior to
joining Chartered, Mr. Klene was Executive Vice President of Sales and Marketing
at Micron Technology and was with IBM from 1979 to 1989. Mr. Klene received an
MBA from the University of Southern California and his BA from The Citadel.

JOHN MARTIN

John Martin has served as our Vice President, Technology Development since
January 1998 and has overall responsibility for our internal and external
technology development activities. Dr. Martin has more than 25 years of
experience in the semiconductor industry. He began his semiconductor career with
Rockwell International Microelectronics in 1973. From 1981 to 1997, Dr. Martin
held various positions in Motorola Inc.'s Semiconductor Products Sector. Dr.
Martin holds a Ph.D. in Inorganic Chemistry from the University of Arkansas and
a BA (Chemistry) from DePauw University.

LAU CHI KWAN

Lau Chi Kwan has served as our Vice President, Reliability and Quality
Assurance since January 1998 and has overall responsibility for our quality
operations, total quality management and quality engineering support, which
includes failure analysis and reliability engineering. From 1994 to 1997, Dr.
Lau was our Yield Engineering Manager and subsequently our Research and
Development Director. Dr. Lau has 23 years of experience in the semiconductor
industry, largely in research and development. Prior to joining Chartered, Dr.
Lau was a project manager for Hewlett-Packard's Circuit Technology Business
Division. He began his career in 1976 with Microwave Acoustics Lab of the
University of Southern California and subsequently continued his research and
engineering work at Texas Instruments for three years and Hewlett-Packard for 11
years. Dr. Lau received a BSc from the University of Hawaii and MSc from the
University of Wisconsin. Dr. Lau received his Ph.D. from the University of
Southern California.

JUSTIN LIM

Justin Lim has served as our Vice President, Information Technology since
February 1998 and has overall responsibility for the development and application
of information technology for our business, operational and strategic needs. Dr.
Lim has 16 years of experience in the semiconductor industry, largely in
information technology support and development work. He began his career in 1983
with Fairchild Semiconductor which was later acquired by National Semiconductor
Pte Ltd in 1988. Dr. Lim was with National Semiconductor from 1988 to 1995. From
1995 to 1998, Dr. Lim was the Director of Services for FASTech Integration Asia
for three years. Dr. Lim received his Ph.D. in Electrical Engineering from the
University of Swansea, UK in 1983 after obtaining his BSC (Electro-Mechanical
Eng) (1st Class Hons) there in 1980. He also holds a MBA from the National
University of Singapore.

TAN SENG CHAI

Seng Chai Tan has served as our Vice President, Human Resources since July
1999 and has overall responsibility for the development and implementation of
policies and processes in our human resource management system. From October
1997 to June 1999, Mr. Tan was our Human Resource Director. Mr. Tan joined our
company as human resource manager in April 1996. He has more than 12 years of

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experience in the semiconductor industry. He began his career at National
Semiconductor in 1987 where he held various positions in engineering, production
and human resource management. Mr. Tan later joined Creative Technology Ltd in
1994 and prior to joining Chartered, he was Creative's Senior Manager, Human
Resource. Mr. Tan holds a Bachelor of Engineering (Hons) from the National
University of Singapore in 1987 and a MSc (Industrial and System Eng) from the
National University of Singapore in 1991.

BOARD COMPOSITION AND COMMITTEES

Our Articles of Association set the minimum number of directors at two. We
currently have 11 directors and two alternate directors. A portion of our
directors are elected at each annual general meeting of shareholders. The number
of directors retiring and eligible to stand for reelection each year varies, but
generally it is equal to one-third of the board, with the directors who have
been in office longest since their reelection or appointment standing for
reelection. Our Chief Executive Officer and President will not be required to
stand for reelection as a director while he or she is in office. Because ST and
its affiliates will own approximately 72.5% of our outstanding ordinary shares
upon completion of the global offering, it will be able to control actions over
many matters requiring approval by our shareholders, including the election of
directors.

The Executive Resource and Compensation Committee, or ERCC, of our Board of
Directors oversees executive compensation and development in our company with
the goal of building capable and committed management teams through competitive
compensation, focused management and progressive policies which can attract,
motivate and retain a pool of talented executives to meet our current and future
growth plans. Specifically, the ERCC:

- establishes compensation policies for key executives;

- approves salary reviews, bonuses and incentives for key executives;

- approves share incentives, including share options and share ownership
for executives;

- approves key appointments and reviews succession plans for key positions;
and

- oversees the development of key executives and younger executives.

The members of the ERCC are Ms. Ho (chairman) and Messrs. Borrel, Lim,
Thompson, Sum and Tobey.

The Audit Committee of our Board of Directors consists of four members, of
which a majority may not be officers or employees of our company. The Audit
Committee reviews, acts on and reports to the Board of Directors regarding
various auditing and accounting matters, including the scope and results of
annual audits and the recommendation of our independent auditors. The Audit
Committee also reviews all material transactions between us and the Singapore
Technologies group. Please see "Relationship with Singapore Technologies" for a
description of our relationship with ST. The members of the Audit Committee are
Messrs. Sum (chairman), Koh, La Blanc and Tobey.

The Budget Committee of our Board of Directors is responsible for reviewing
our annual budget and our quarterly financial performance in relation to our
budget. The members of the Budget Committee are Messrs. Borrel (chairman), Lim,
Van Tassel and Sum.

DIRECTOR AND OFFICER COMPENSATION

The aggregate compensation we paid to all of our directors and executive
officers for services rendered to us and our subsidiaries during the fiscal year
ended December 31, 1998 was approximately $3.8 million.

The aggregate amount we set aside or accrued for all of our directors and
executive officers to provide for pension, retirement or similar benefits during
the fiscal year ended December 31, 1998 was approximately $5.0 million.

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All of our officers and employees are eligible to participate in our
employee bonus plans. The plans provide for bonus payments based upon our
achievement of certain operational, financial and customer satisfaction targets.
Upon achievement of these targets, the participants in our plans are awarded
bonuses based on a percentage of their annual salary. Our President and Chief
Executive Officer is entitled to a guaranteed minimum annual bonus pursuant to
his employment agreement.

ISSUANCES OF SHARE OPTIONS

As of October 15, 1999, options to purchase 17,273,481 ordinary shares were
issued and outstanding, of which 5,324,348 were held by our officers and
directors. The outstanding options were granted under our 1999 Share Option
Plan. The exercise prices of these options range from S$0.9309 to S$1.3830. The
expiration dates of the options range from April 2004 to April 2009.
Contemporaneously with the effectiveness of the registration statement of which
this prospectus is a part, we granted to our officers, directors and employees
options under our 1999 share option plan to purchase approximately 20,000,000
ordinary shares, including 8,560,000 to our President and Chief Executive
Officer and 3,110,000 to our other directors and executive officers. The
exercise price of such options is the same as the initial public offering price
of our ordinary shares, except for options issuable for approximately 2,100,000
ordinary shares that have exercise prices below the initial public offering
price (for which we are accruing a compensation charge).

EMPLOYEE BENEFIT PLANS

1995 Employees' Share Ownership Scheme

Effective as of September 28, 1995, we adopted our 1995 Employees' Share
Ownership Scheme. The 1995 scheme, as amended, generally provided for the grant
of options to subscribe for ordinary shares. The objectives of the 1995 scheme
were to motivate, retain and recognize employees and directors whose
contributions have been essential to our well-being and prosperity and who have
contributed to our growth.

In connection with the global offering, we terminated the 1995 scheme
effective September 30, 1999 and replaced all unpaid portions of partly paid
shares with share options under our 1999 Share Option Plan. These options have
the same exercise price and vesting schedule as the replaced options.

1997 Employees' Share Ownership Scheme

Effective as of November 27, 1997, we adopted our 1997 Employees' Share
Ownership Scheme. The provisions of the 1997 scheme, as amended, were
substantially similar to those with respect to the 1995 scheme.

In connection with the global offering, we also terminated the 1997 scheme
effective September 30, 1999 and replaced all unpaid portions of partly paid
shares with share options under our 1999 Share Option Plan. These options have
the same exercise price and vesting schedule as the replaced options.

1999 SHARE OPTION PLAN

Effective as of March 30, 1999, we adopted our 1999 Share Option Plan. The
purpose of the plan is to offer selected individuals an opportunity to acquire
or increase a proprietary interest in our company by purchasing our ordinary
shares. Options granted under the 1999 plan may be nonstatutory options or
incentive share options intended to qualify under Section 422 of the United
States Internal Revenue Code.

The 1999 plan is administered by the ERCC. Our employees, outside directors
and consultants are eligible to receive option grants except as follows:

- employees of our affiliates and our outside directors and consultants are
not eligible for the grant of incentive share options;

- employees, outside directors and consultants of our affiliates who are
residents or citizens of the United States are not eligible for the grant
of options; and

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- employees of SMP who are residents or citizens of the United States are
not eligible for the grant of options.

An individual who owns more than 10% of the total combined voting power of
all classes of our outstanding shares is not eligible for the grant of options
unless:

- the exercise price of the option is at least 110% of the fair market
value of a share on the date of grant; and

- in the case of an incentive stock option, such option by its terms is not
exercisable after the expiration of five years from the date of grant.

The aggregate number of shares that may be issued under the 1999 plan and
under any other share incentive and option schemes or agreements may not exceed
107,160,000 shares (subject to adjustment pursuant to the plan). If an
outstanding option expires for any reason or is cancelled or otherwise
terminated, the shares allocable to the unexercised portion of such option will
again be available for the purposes of the plan and all other share incentive
and option schemes approved by the ERCC.

The exercise price of an incentive stock option shall not be less than 100%
of the fair market value of a share on the date of grant. In no event will the
exercise price for an option be below par value.

The exercisability of options outstanding under the 1999 plan may be fully
or partially accelerated under certain circumstances such as a change in control
of our company, as defined in the 1999 plan. In addition, outstanding options
will accelerate by 12 months upon the closing of the global offering if the
optionee's service has not been terminated and his or her option agreement does
not provide otherwise.

Each grant under the 1999 plan is evidenced by a share option agreement and
the term of options granted may not exceed 10 years from the date of grant. If
the optionee's service with us is terminated, the optionee's outstanding
options, to the extent then exercisable, remain exercisable for a specified
period (which is based on the reason for the termination) following the date of
termination. All options which are not exercisable at the date of termination
lapse when the optionee's service terminates.

Options are generally not transferable under the plan. Shares issued upon
the exercise of an option are subject to such rights of first refusal as the
ERCC may determine.

In the event of certain changes in our capitalization, our Board of
Directors will make appropriate adjustments in one or more of the number of
shares available for future grants under the 1999 plan, the number of shares
covered by each outstanding option or the exercise price of each outstanding
option. If we are a party to a merger or consolidation, outstanding options will
be subject to the agreement of merger or consolidation.

The 1999 plan will terminate automatically on March 30, 2009. The ERCC may
amend, suspend or terminate the 1999 plan at any time and for any reason,
provided that any amendment which increases the number of shares available for
issuance under the 1999 plan, or which materially changes the class of persons
who are eligible for the grant of incentive share options, will be subject to
the approval of our shareholders.

We intend to amend the plan in connection with the global offering to
enable the plan and, at the ERCC's discretion, awards granted thereunder, to
comply with Section 162(m) of the United States Internal Revenue Code.

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PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of our ordinary shares as of October 15, 1999, based on an
aggregate of 988,847,853 ordinary shares outstanding as of such date, and as
adjusted to reflect the sale of the ordinary shares offered hereby, by:

- each person or group of affiliated persons who is known by us to
beneficially own 10% or more of our ordinary shares;

- each of our directors;

- our chief executive officer; and

- all of our directors and executive officers as a group.

<TABLE>
<CAPTION>
ORDINARY SHARES ORDINARY SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO THE GLOBAL AFTER THE GLOBAL
OFFERING(1) OFFERING(1)(2)
--------------------- ---------------------
BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
---------------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Singapore Technologies Pte Ltd(3)................ 499,116,152 50.5 499,116,152 40.3
Singapore Technologies Semiconductors
Pte Ltd(3)....................................... 398,516,724 40.3 398,516,724 32.2
Ho Ching......................................... -- * -- *
Lim Ming Seong................................... -- * -- *
Barry Waite...................................... 1,692,000 * 1,692,000 *
Sum Soon Lim..................................... 65,847 * 65,847 *
James H. Van Tassel.............................. 89,849 * 89,849 *
Aubrey C. Tobey.................................. 19,928 * 19,928 *
Robert E. La Blanc............................... 16,168 * 16,168 *
Andre Borrel..................................... 16,168 * 16,168 *
Charles E. Thompson.............................. 16,168 * 16,168 *
Koh Beng Seng.................................... 7,520 * 7,520 *
Tsugio Makimoto.................................. -- * -- *
All directors and executive officers as a group
(20 persons)................................... 3,358,747 * 358,747 *
</TABLE>

- ---------------
* Less than 1% of total.

(1) Gives effect to the ordinary shares issuable within 60 days of October 15,
1999 upon the exercise of all options and other rights beneficially owned by
the indicated shareholders on that date. Beneficial ownership is determined
in accordance with the rules of the SEC and includes voting and investment
power with respect to ordinary shares. Unless otherwise indicated, the
persons named in the table have sole voting and sole investment control with
respect to all ordinary shares beneficially owned.

(2) Assumes the issuance of 250,000,000 ordinary shares (including ordinary
shares represented by ADSs) and the underwriters' overallotment option is
not exercised.

(3) Temasek Holdings (Private) Limited, the principal holding company of the
Government of Singapore, owns 77.6% of Singapore Technologies Pte Ltd, or
ST, and 100% of Singapore Technologies Holdings Pte Ltd, or ST Holdings. ST
Holdings owns 22.4% of ST which, in turn, owns 100% of Singapore
Technologies Semiconductors Pte Ltd, or ST Semiconductors. Temasek may be
deemed to beneficially own the shares directly owned by ST and ST
Semiconductors because it is the parent of ST and ST Holdings.

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RELATIONSHIP WITH SINGAPORE TECHNOLOGIES

WHAT IS THE SINGAPORE TECHNOLOGIES GROUP

Singapore Technologies Pte Ltd, or ST, is a holding company for a group of
high-technology companies. ST is 22.4% owned by Singapore Technologies Holdings
Pte Ltd, or ST Holdings. ST and ST Holdings are 77.6% and 100% owned,
respectively, by Temasek Holdings (Private) Limited through which the corporate
investments of the Government of Singapore are held. Temasek is owned by the
Minister for Finance (Incorporated) of Singapore. ST owns 100% of Singapore
Technologies Semiconductors Pte Ltd, or ST Semiconductors. ST and ST
Semiconductors currently hold a 50.5% and 40.3% interest in our company,
respectively. ST Semiconductors holds interests in our sister companies, STATS
and Tritech Microelectronics Ltd (for which provisional liquidators were
appointed effective September 1, 1999), or Tritech. In 1998, our revenues
represented 12% of ST's revenues and our assets represented 22% of ST's assets.

ST has five principal business groups: engineering, technology,
infrastructure, property and financial services. ST has three operating
subsidiaries that are engaged in the semiconductor business, namely:

- Chartered Semiconductor Manufacturing Ltd;

- STATS; and

- Tritech (in liquidation).

STATS specializes in assembly and testing of semiconductors. Tritech, which
is in liquidation, was in the business of designing, developing and marketing
application specific standard products as well as customer specific
semiconductors. ST may in the future establish other subsidiaries, or form
strategic alliances with companies, which are engaged in the semiconductor
business.

ST and its affiliates will beneficially own approximately 72.5% of our
outstanding ordinary shares upon completion of the global offering, or 70.3% if
the underwriters exercise their overallotment option in full. As a result, it
will be able to control actions over many matters requiring approval by our
shareholders, including the election of directors and approval of significant
corporate transactions. In addition, Ms. Ho and Messrs. Lim, Sum, Koh and Liow,
each a member of our Board of Directors (other than Mr. Liow who serves as an
alternate member), serve as directors of companies in the Singapore Technologies
group. Ms. Ho and Mr. Lim, each a member of our Board of Directors, are employed
by companies in the Singapore Technologies group.

In 1996, our Board of Directors established an Audit Committee that, among
other things, reviews all material transactions between us and the Singapore
Technologies group. Please see "Management -- Board Composition and Committees"
for a summary of the function and composition of the Audit Committee. Mr. Sum,
the chairman of the Audit Committee, also serves as a consultant to ST and
serves as a director for other ST affiliates.

After completion of the global offering, we will continue to have
contractual and other business relationships with ST and its affiliates and we
may engage in material transactions with ST from time to time. Although our
Audit Committee will review all material transactions between our company and
the Singapore Technologies group, conflicts of interest may arise between us in
certain circumstances. We are not obligated to conduct any business with members
of the ST group if the costs of doing so are greater than for unaffiliated third
parties.

FINANCIAL SUPPORT PROVIDED TO US BY SINGAPORE TECHNOLOGIES GROUP

Through its subsidiary, ST Treasury Services Ltd, ST currently provides us
with short-term financing and guarantees some of our debt. Certain of our loan
agreements require ST to own at least a majority of our outstanding ordinary
shares. ST Treasury Services Ltd has also in the past provided loans to us and
has entered into forward foreign exchange contracts with us to provide a hedge
for certain of our equipment purchase commitments with foreign vendors. As of
June 30, 1999, $1.9 million of our short-
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<PAGE> 71

term financing was provided by ST at a weighted average interest rate of 2.43%
and approximately $216.6 million of our debt was guaranteed by ST at no cost. In
addition, $75.1 million, $71.6 million and $29.3 million of our debt was
guaranteed by The Bank of Tokoyo-Mitsubishi, Ltd, Royal Bank of Canada and The
Dai-ichi Kangyo Bank, Ltd, respectively, at the request of ST, at a weighted
average cost to us of 0.29%.

In addition, from time to time we advance funds to, or borrow funds from,
ST Treasury Services Ltd. (and from ST prior to the second half of 1998). In
general, advances to and borrowings from ST and ST Treasury bear interest at
rates comparable to the rates offered by commercial banks in Singapore, are
unsecured and are repayable within three to six months on a renewable basis. The
amount of interest income received from ST in 1996, 1997 and 1998 was $0.9
million, $0.2 million and $0.8 million, respectively. The amount of interest
income received from ST Treasury in 1998 was $0.9 million. The amount of
interest expense paid to ST was $4.2 million, $12.7 million and $6.6 million in
1996, 1997, 1998, respectively. The amount of interest expense paid to ST
Treasury in 1998 was $2.3 million. The average rate of interest payable in 1996,
1997 and 1998 to ST and ST Treasury for our Singapore dollar denominated
borrowings was 3.83%, 4.89% and 7.13%, respectively, and 5.84%, 6.06% and 6.33%,
respectively, for our U.S. dollar denominated borrowings.

We have also entered into an oral multi-currency credit facility with ST
Treasury in connection with our borrowing arrangements with it. Under this
facility, ST Treasury has agreed to make available to us funds of up to $100
million. We may, upon notice to ST Treasury, draw down at any time any amount
available under the facility. We are not restricted in our utilization of drawn
funds. Funds drawn under the facility are required to be repaid within one year
of the date on which they are drawn. Payment schedules and directions will be as
agreed to by us and ST Treasury at the time of the draw down. Unless otherwise
agreed to, amounts drawn under the facility are unsecured and neither we nor ST
Treasury are subject to conditions or events of default. Interest on drawn funds
accrues at a rate based on the monthly average interest rate of three banks, as
chosen by ST Treasury. The current monthly average interest rate for Singapore
dollar borrowings under the agreement is 2.43%. As of June 30, 1999, there were
$1.9 million of unsecured borrowings outstanding under this facility.

While ST has historically provided credit and other support to us, ST has
no obligation to continue doing so and the availability and amount of such
support will depend on various factors, including our ability to raise funds
without such support and the expenses relating to such fundraising.

CORPORATE SERVICES PROVIDED TO US BY SINGAPORE TECHNOLOGIES

In March 1997, we entered into a service agreement with ST pursuant to
which it provides us with services and support which are tangible as well as
intangible in nature. The services provided by ST include management and
corporate support services, such as treasury, cash management, internal audit,
training, executive resources and corporate secretarial services. In addition,
ST is able to offer us the benefits of a global network and the "Singapore
Technologies" name and ST's wide spectrum of industries provide us with
operational and financial leverages in our dealings with external third parties.
In return for those services, support and benefits, we currently pay ST an
annual management fee based on certain percentages of capital employed, sales,
manpower and payroll. We expect to amend the service agreement prior to the
consummation of the global offering to convert from a formula based fee
arrangement to a service based fee arrangement. In addition, we reimburse ST for
the third-party costs and expenses it incurs on our behalf.

In 1996, 1997 and 1998, we paid management fees to ST of $4.4 million, $5.7
million and $4.9 million, respectively. In addition, we reimbursed ST for costs
and expenses incurred on our behalf, principally certain of our payroll expenses
paid through ST. Those reimbursements totaled $5.9 million, $5.6 million and
$5.7 million in 1996, 1997 and 1998, respectively.

The service agreement expires in the event we cease to be a subsidiary of
ST. It can be terminated by ST upon our prolonged failure to pay the management
fees due to ST. The management fees we pay ST under the service agreement are
not itemized to allow us to compare them with similar services provided
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<PAGE> 72

by unrelated third parties. We also believe that we derive economic benefits
from the corporate services and support ST provides us. For example, ST
guarantees a portion of our debt without fees or covenants and provides standby
credit facilities without charge. In addition, we have used ST's leverage to
secure loans and terms (including interest rates and covenants) that we would
not otherwise have obtained.

In the event that the service agreement is terminated, however, we will be
required to provide the corporate services previously provided by ST either
internally or obtain them from third parties and the cost to us could be greater
than that charged by ST.

OTHER TRANSACTIONS WITH THE SINGAPORE TECHNOLOGIES GROUP

We transact business with ST and its affiliates in the normal course of our
respective businesses. We recorded sales to Tritech of $32.7 million, $20.8
million and $6.2 million in 1996, 1997 and 1998, respectively. These sales
represented 8%, 5.5% and 1.5% of our net sales for the respective periods. We
have not made any sales to Tritech since it was placed under judicial management
on July 2, 1999.

We paid STATS $8.4 million, $13.3 million and $22.7 million in 1996, 1997
and 1998, respectively, for services rendered in those years. We also paid
affiliates of ST $2.3 million, $3.0 million and $1.4 million in 1996, 1997 and
1998, respectively, for services rendered in those years. We purchased $8.7
million, $1.0 million and $0.9 million in assets from affiliates of ST in 1996,
1997 and 1998, respectively. We also paid ST Construction and ST Architects
$50.8 million, $2.6 million and $1.1 million in 1996, 1997 and 1998,
respectively, for construction costs rendered in those years.

Fabs 2 and 3 and our corporate offices are located on land leased to ST by
Jurong Town Corporation, or JTC, a statutory board established by the Government
of Singapore to develop and manage industrial estates in Singapore. These leases
run until 2024 with conditional options to extend for another 30 years. We have
entered into sub-leases with ST for the entire term of the leases for Fabs 2 and
3. The sub-leases for Fab 2 and Fab 3 require us to make rental payments to ST
at rates equal to the rent paid by ST to JTC for the subject land through 2006
for Fab 2 and 2024 for Fab 3. The rental rates may be re-negotiated thereafter.
In total, we paid ST $1.4 million, $2.1 million and $1.6 million, respectively,
in lease payments for 1996, 1997 and 1998.

CSP leases the land on which Fab 6 is located from ST, which in turn leases
it from JTC. The agreement provides for the land to be leased to ST until 2027,
with a conditional option to extend for an additional 30 years. CSP makes rental
payments to ST at rates equal to the rent paid by ST to JTC for the subject land
through 2027. CSP paid ST $0.5 million and $0.9 million in lease payments for
1997 and 1998, respectively.

Some of our insurance coverage is held under various insurance policies
which are negotiated and maintained by ST but billed directly to us. This
enables us to benefit from the group rates negotiated by ST.

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DESCRIPTION OF ORDINARY SHARES

Set forth below is a description of our share capital and a brief summary
of the basic rights and privileges of our shareholders conferred by our Articles
of Association and the laws of Singapore. This description is only a summary and
is qualified by reference to Singapore law and our Articles of Association, as
amended, a copy of which is filed as an exhibit to the registration statement of
which this prospectus is a part. This description gives effect to the capital
restructuring which occurred effective October 14, 1999.

ORDINARY SHARES

Our authorized capital is S$800,000,000.540 consisting of 3,076,923,079
ordinary shares of par value S$0.26 each. We have only one class of shares,
namely, the ordinary shares, which have identical rights in all respects and
rank equally with one another. Our Articles of Association provide that we may
issue shares of a different class with preferential, deferred, qualified or
other special rights, privileges or conditions as our Board of Directors may
determine and may issue preference shares which are, or at our option are,
subject to redemption, subject to certain limitations. Our directors may issue
shares at a premium. If shares are issued at a premium, a sum equal to the
aggregate amount or value of the premium will, subject to certain exceptions, be
transferred to a share premium account.

As of October 15, 1999, 988,847,853 ordinary shares were issued and
outstanding. All of our ordinary shares are in registered form. We may, subject
to the provisions of the Companies Act and the rules of the Singapore stock
exchange, purchase our own ordinary shares. However, we may not, except in
circumstances permitted by the Companies Act, grant any financial assistance for
the acquisition or proposed acquisition of our own ordinary shares.

NEW ORDINARY SHARES

New ordinary shares may only be issued with the prior approval in a general
meeting of our shareholders. The approval, if granted, will lapse at the
conclusion of the annual general meeting following the date on which the
approval was granted. Our shareholders have given us general authority to issue
any remaining approved but unissued ordinary shares prior to our next annual
general meeting. Subject to the foregoing, the provisions of the Companies Act
and any special rights attached to any class of shares currently issued, all new
ordinary shares are under the control of our Board of Directors who may allot
and issue the same with such rights and restrictions as it may think fit. Our
shareholders are not entitled to pre-emptive rights under the Articles of
Association or Singapore law.

SHAREHOLDERS

Only persons who are registered in our register of shareholders and, in
cases in which the person so registered is The Central Depository (Pte) Limited,
or the CDP, the persons named as the depositors in the depository register
maintained by the CDP for our ordinary shares, are recognized as shareholders.
We will not, except as required by law, recognize any equitable, contingent,
future or partial interest in any ordinary share or other rights for any
ordinary share other than the absolute right thereto of the registered holder of
the ordinary share or of the person whose name is entered in the depository
register for that ordinary share. We may close the register of shareholders for
any time or times if we provide the Registrar of Companies and Business of
Singapore at least 14 days' notice. However, the register may not be closed for
more than 30 days in aggregate in any calendar year. We typically close the
register to determine shareholders' entitlement to receive dividends and other
distributions for no more than 10 days a year.

TRANSFER OF ORDINARY SHARES

There is no restriction on the transfer of fully paid ordinary shares
except where required by law. Our Board of Directors may only decline to
register any transfer of ordinary shares which are not fully paid shares or
ordinary shares on which we have a lien. Ordinary shares may be transferred by a
duly signed instrument of transfer in any form acceptable to our Board of
Directors. Our Board of Directors may also decline to register any instrument of
transfer unless, among other things, it has been duly stamped and is
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presented for registration together with the share certificate and such other
evidence of title as they may require. We will replace lost or destroyed
certificates for ordinary shares if we are properly notified and if the
applicant pays a fee which will not exceed S$2 and furnishes any evidence and
indemnity that our Board of Directors may require.

GENERAL MEETINGS OF SHAREHOLDERS

We are required to hold an annual general meeting every year. Our Board of
Directors may convene an extraordinary general meeting whenever it thinks fit
and must do so if shareholders representing not less than 10% of the total
voting rights of all shareholders request in writing that such a meeting be
held. In addition, two or more shareholders holding not less than 10% of our
issued share capital may call a meeting. Unless otherwise required by law or by
our Articles of Association, voting at general meetings is by ordinary
resolution, requiring an affirmative vote of a simple majority of the votes cast
at that meeting. An ordinary resolution suffices, for example, for the
appointment of directors. A special resolution, requiring the affirmative vote
of at least 75% of the votes cast at the meeting, is necessary for certain
matters under Singapore law, including the voluntary winding up of the company,
amendments to our Memorandum and Articles of Association, a change of our
corporate name and a reduction in our share capital, share premium account or
capital redemption reserve fund. We must give at least 21 days' notice in
writing for every general meeting convened for the purpose of passing a special
resolution. Ordinary resolutions generally require at least 14 days' notice in
writing. The notice must be given to every shareholder who has supplied us with
an address in Singapore for the giving of notices and must set forth the place,
the day and the hour of the meeting and, in the case of special business, the
general nature of that business.

VOTING RIGHTS

A shareholder is entitled to attend, speak and vote at any general meeting,
in person or by proxy. A proxy need not be a shareholder. A person who holds
ordinary shares through the CDP book-entry clearance system will only be
entitled to vote at a general meeting as a shareholder if his name appears on
the depository register maintained by CDP 48 hours before the general meeting.
Except as otherwise provided in our Articles of Association, two or more
shareholders holding at least 33 1/3% of our issued and outstanding ordinary
shares must be present in person or by proxy to constitute a quorum at any
general meeting. Under our Articles of Association, on a show of hands, every
shareholder present in person and each proxy shall have one vote, and on a poll,
every shareholder present in person or by proxy shall have one vote for each
ordinary share held. A poll may be demanded in certain circumstances, including
by the chairman of the meeting or by any shareholder present in person or by
proxy and representing not less than 10% of the total voting rights of all
shareholders having the right to attend and vote at the meeting or by any two
shareholders present in person or by proxy and entitled to vote.

DIVIDENDS

We may, by ordinary resolution, declare dividends at a general meeting, but
we may not pay dividends in excess of the amount recommended by our Board of
Directors. We must pay all dividends out of our profits or pursuant to Section
69 of the Companies Act. Our Board of Directors may also declare an interim
dividend. All dividends are paid pro rata among the shareholders in proportion
to the amount paid up on each shareholder's ordinary shares, unless the rights
attaching to an issue of any ordinary share provides otherwise. Unless otherwise
directed, dividends are paid by cheque or warrant sent through the post to each
shareholder at his registered address. Notwithstanding the foregoing, our
payment to the CDP of any dividend payable to a shareholder whose name is
entered in the depository register shall, to the extent of payment made to the
CDP, discharge us from any liability to that shareholder in respect of that
payment.

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BONUS AND RIGHTS ISSUE

Our Board of Directors may, with the approval of our shareholders at a
general meeting, capitalize any reserves or profits (including profit or monies
carried and standing to any reserve or to the share premium account) and
distribute the same as bonus shares credited as paid-up to the shareholders in
proportion to their shareholdings. Our Board of Directors may also issue rights
to take up additional ordinary shares to shareholders in proportion to their
shareholdings. Such rights are subject to any conditions attached to such issue.

TAKEOVERS

The Companies Act and the Singapore Code on Takeovers and Mergers regulate
the acquisition of ordinary shares of public companies and contain certain
provisions that may delay, deter or prevent a future takeover or change in
control of our company. Any person acquiring an interest, either on his own or
together with parties acting in concert with him, in 25% or more of our voting
shares must extend a takeover offer for the remaining voting shares in
accordance with the provisions of the Singapore Code on Takeovers and Mergers.
"Parties acting in concert" include a company and its related and associated
companies, a company and its directors (including their relatives), a company
and its pension funds, a person and any investment company, unit trust or other
fund whose investment such person manages on a discretionary basis, and a
financial advisor and its client in respect of shares held by the financial
advisor and shares in the client held by funds managed by the financial advisor
on a discretionary basis. An offer for consideration other than cash must be
accompanied by a cash alternative at not less than the highest price paid by the
offeror or parties acting in concert with the offeror within the preceding 12
months. A mandatory takeover offer is also required to be made if a person
holding, either on his own or together with parties acting in concert with him,
between 25% and 50% of the voting shares acquires additional voting shares
representing more than 3% of the voting shares in any 12 month period.

LIQUIDATION OR OTHER RETURN OF CAPITAL

If our company liquidates or in the event of any other return of capital,
holders of ordinary shares will be entitled to participate in any surplus assets
in proportion to their shareholdings, subject to any special rights attaching to
any other class of shares.

INDEMNITY

As permitted by Singapore law, our Articles of Association provide that,
subject to the Companies Act, we will indemnify our Board of Directors and
officers against any liability incurred in defending any proceedings, whether
civil or criminal, which relate to anything done or omitted to have been done as
an officer, director or employee. We may not indemnify directors and officers
against any liability which by law would otherwise attach to them in respect of
any negligence, default, breach of duty or breach of trust of which they may be
guilty in relation to our company.

LIMITATIONS ON RIGHTS TO HOLD OR VOTE SHARES

Except as described in "-- Voting Rights" and "-- Takeovers" above, there
are no limitations imposed by Singapore law or by our Articles of Association on
the rights of non-resident shareholders to hold or vote ordinary shares.

MINORITY RIGHTS

The rights of minority shareholders of Singapore-incorporated companies are
protected under Section 216 of the Companies Act, which gives the Singapore
courts a general power to make any order,

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upon application by any shareholder of our company, as they think fit to remedy
any of the following situations:

- our affairs are being conducted or the powers of our Board of Directors
are being exercised in a manner oppressive to, or in disregard of the
interests of, one or more of our shareholders; or

- we take an action, or threaten to take an action, or the shareholders
pass a resolution, or threaten to pass a resolution, which unfairly
discriminates against, or is otherwise prejudicial to, one or more of our
shareholders, including the applicant.

Singapore courts have wide discretion as to the reliefs they may grant and
those reliefs are in no way limited to those listed in the Companies Act itself.
Without prejudice to the foregoing, Singapore courts may:

- direct or prohibit any act or cancel or vary any transaction or
resolution;

- regulate our affairs in the future;

- authorize civil proceedings to be brought in the name of, or on behalf
of, the company by a person or persons and on such terms as the court may
direct;

- provide for the purchase of a minority shareholder's shares by our other
shareholders or by our company and, in the case of a purchase of shares
by us, a corresponding reduction of our share capital;

- provide that our Memorandum or Articles of Association be amended; or

- provide that our company be wound up.

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DESCRIPTION OF AMERICAN DEPOSITARY SHARES

ADSs represent ownership interests in securities that are on deposit with a
depositary bank. Citibank, N.A., located at 111 Wall Street, New York, New York
10043, will act as the depositary bank for our ADSs. 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, our custodian is Citibank Nominees
Singapore Pte Ltd, located at 300 Tampines Avenue #07-00, Tampines Junction,
Singapore 529653.

We have appointed Citibank, N.A. as our depositary 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 SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Citicorp Investment Bank (Singapore) Limited, an
affiliate of Citibank, N.A., is acting as a co-lead manager and underwriter in
the Singapore offering and is receiving customary compensation in connection
with such transaction.

The following is a summary description of the ADSs and your rights as an
owner of ADSs. Please note that your rights and obligations as an owner of ADSs
will be determined by the deposit agreement and not by this summary. We urge you
to review the deposit agreement in its entirety as well as the form of ADR
attached to the deposit agreement.

Each ADS represents ten ordinary shares on deposit with the custodian bank.
An ADS also represents any other property received by the depositary or the
custodian on behalf of the owner of the ADS that has not been distributed to the
owners of ADSs because of legal restrictions or practical considerations.

If you become an owner of an ADS, 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 owner of ADSs and
those of the depositary bank. As an ADS holder you appoint the depositary to act
on your behalf in certain circumstances. Although the deposit agreement is
governed by New York law, our obligations to the holders of our ordinary shares
will continue to be governed by the laws of Singapore, which may be different
from the laws in the United States.

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 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.

ISSUANCE OF ADSs UPON DEPOSIT OF ORDINARY SHARES

The depositary may create ADSs on your behalf if you or your broker deposit
ordinary 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 ordinary shares to the
custodian.

The issuance of ADSs may be delayed until the depositary or the custodian
receives confirmation that all required approvals have been given and that the
ordinary shares have been duly transferred to the custodian. The depositary will
only issue ADSs in whole numbers.

When you make a deposit of ordinary shares, you will be responsible for
transferring good and valid title to the depositary. As such, you will be deemed
to represent and warrant that:

- your ordinary shares are duly authorized, validly issued, fully paid,
non-assessable and legally obtained;

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- all preemptive and similar rights, if any, with respect to your ordinary
shares have been validly waived or exercised;

- you are duly authorized to deposit the ordinary shares;

- your ordinary 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 such deposit will not be, except
as provided in the deposit agreement, "restricted securities" (as defined
in the deposit agreement); and

- the ordinary shares presented for deposit have not been stripped of any
rights or entitlements.

If any of the representations or warranties are false 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.

WITHDRAWAL OF ORDINARY SHARES UPON CANCELLATION OF ADSS

As a holder of ADSs, you will be entitled to present your ADSs to the
depositary for cancellation and then receive the underlying ordinary shares at
the custodian's offices. In order to withdraw the ordinary 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
ordinary shares being withdrawn. You assume the risk for delivery of all funds
and securities upon withdrawal. Once canceled, the ADSs will not have any rights
under the deposit agreement.

If you hold an ADR registered in your name, the depositary bank may ask you
to provide proof of identity and genuineness of any signature and certain other
documents as the depositary bank may deem appropriate before it will cancel your
ADSs. The withdrawal of the ordinary shares represented by your ADSs may be
delayed until the depositary receives satisfactory evidence of compliance with
all applicable laws and regulations. As noted above, the depositary bank will
only accept ADSs for cancellation that represent a whole number of securities on
deposit.

You will have the right to withdraw the ordinary shares represented by your
ADSs at any time subject to:

- temporary delays that may arise because the transfer books for the
ordinary shares or the ADSs are closed or when ordinary shares are
immobilized as a result of a shareholders' meeting or a payment of
dividends, if any;

- your obligation 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.

DIVIDENDS AND DISTRIBUTIONS

As a holder, you generally have the right to receive the distributions we
make on the securities deposited with the custodian bank. Your receipt of these
distributions may be limited, however, by practical considerations and legal
limitations. Holders will receive such distributions under the terms of the
deposit agreement in proportion to the number of ADSs held as of a specified
record date.

DISTRIBUTIONS OF CASH

Whenever we make a cash distribution for the securities on deposit with the
custodian, we will notify the depositary. Upon receipt of such notice, the
depositary will arrange for the funds to be converted into U.S. dollars and for
the distribution of the U.S. dollars to holders.

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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,
such as undistributed rights, held by the custodian in respect of securities on
deposit.

DISTRIBUTIONS OF ORDINARY SHARES

Whenever we make a free distribution of ordinary shares for the securities
on deposit with the custodian, we will notify the depositary bank. Upon receipt
of such notice, the depositary bank will either distribute to holders new ADSs
representing the ordinary shares deposited or modify the ADS-to-ordinary share
ratio, in which case each ADS you hold will represent rights and interests in
the additional ordinary shares so deposited. Only whole new ADSs will be
distributed. Fractional entitlements will be sold and the proceeds of such sale
will be distributed as in the case of a cash distribution.

The distribution of new ADSs or the modification of the ADS-to-ordinary
share ratio upon a distribution of ordinary 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 such taxes or governmental charges, the
depositary bank may sell all or a portion of the new ordinary shares so
distributed.

New ADSs will not be distributed if it would violate a law (i.e., the U.S.
securities laws) or if it is not operationally practicable. If the depositary
bank does not distribute new ADSs as described above, it will use its best
efforts to sell the ordinary shares received and will distribute the proceeds of
the sale as in the case of a distribution of cash.

ELECTIVE DISTRIBUTIONS

Whenever we intend to distribute a dividend payable at the election of
shareholders, either in cash or in additional shares, we will give prior notice
of the distribution to the depositary and will indicate whether we wish the
distribution to be made available to you. In such case, we will assist the
depositary in determining whether such distribution is lawful and reasonably
practical.

The depositary will make the election available to you only if it is
reasonably practical and if we have provided the depositary all of the
documentation contemplated in the deposit agreement. In such case, the
depositary will establish procedures to enable you to elect to receive either
cash or additional ADSs, in each case as described in the deposit agreement.

If the election is not made available to you, you will receive either cash
or additional ADSs, depending on what a shareholder in Singapore would receive
for failing to make an election, as more fully described in the deposit
agreement.

DISTRIBUTIONS OF RIGHTS

Whenever we intend to distribute rights to purchase additional ordinary
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.

The depositary will establish procedures to distribute rights to purchase
additional ADSs to holders and to enable such holders to exercise such rights if
it is lawful and reasonably practicable to make the rights available to holders
of ADSs. Upon the exercise of any such rights, you may have to pay fees,
expenses, taxes and other governmental charges to subscribe for the new ADSs.
Please note that the depositary bank is not obligated to establish procedures to
facilitate the distribution and exercise of such rights.

The depositary will not distribute the rights to you if:

- we do not request that the rights be distributed to you or we ask that
the rights not be distributed to you; or
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- we fail to deliver satisfactory documents to the depositary bank, such as
opinions addressing the lawfulness of the transaction; or

- it is not reasonably practicable to distribute the rights.

The depositary will sell any rights that are not exercised or not
distributed if such 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 bank is unable to sell the rights, it will allow the rights to
lapse, in which case you will receive no value for such rights.

OTHER DISTRIBUTIONS

Whenever we intend to distribute property other than cash, ordinary shares
or rights to purchase additional ordinary shares, we will notify the depositary
bank in advance and will indicate whether we wish such distribution to be made
to you. If so, we will assist the depositary bank in determining whether such
distribution to holders is lawful and reasonably practicable.

If it is reasonably practicable to distribute such property to you and if
we provide the depositary bank all of the documentation contemplated in the
deposit agreement, it will distribute the property to you 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 such 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 bank; or

- the depositary determines that all or a portion of the distribution to
you is not reasonably practicable.

The proceeds of such a sale will be distributed to holders as in the case
of a cash distribution.

REDEMPTION

Whenever we decide to redeem any of the securities on deposit with the
custodian, we will notify the depositary. If it is reasonably practicable and if
we provide the depositary bank all of the documentation contemplated in the
deposit agreement, the depositary will mail notice of the redemption to the
holders.

The custodian will be instructed to surrender the shares being redeemed
against payment of the applicable redemption price. The depositary will convert
the redemption funds received into U.S. dollars upon the terms of the deposit
agreement and will establish procedures to enable holders to receive the net
proceeds from the redemption upon surrender of their ADSs to the depositary. You
may have to pay fees, expenses, taxes and other governmental charges upon the
redemption of your ADSs. If less than all ADSs are being redeemed, the ADSs to
be retired will be selected by lot or on a pro rata basis, as the depositary may
determine.

CHANGES AFFECTING ORDINARY SHARES

The ordinary 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 such ordinary shares or a
recapitalization, reorganization, merger, consolidation or sale of assets.

If any such change were to occur, your ADSs would, to the extent permitted
by law, represent the right to receive the property received or exchanged in
respect of the ordinary shares held on deposit. The depositary bank may in such
circumstances deliver new ADSs to you or call for the exchange of your
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existing ADSs for new ADSs. If the depositary bank may not lawfully distribute
such property to you, the depositary bank may sell such property and distribute
the net proceeds to you as in the case of a cash distribution.

VOTING RIGHTS

As a holder, you generally have the right under the deposit agreement to
instruct the depositary bank to exercise the voting rights for the ordinary
shares represented by your ADSs. The voting rights of holders of ordinary shares
are described under the heading "Description of Ordinary Shares" in this
prospectus.

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 the depositary timely receives voting instructions from a holder of
ADSs, it will endeavor to vote the securities represented by the holder's ADSs
in accordance with such voting instructions.

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. Securities for which no voting instructions have been
received will not be voted.

FEES AND CHARGES

As an ADS holder, you will be required to pay the following service fees to
the depositary:

<TABLE>
<CAPTION>
SERVICE FEES
------- --------------------------
<S> <C>
Issuance of ADSs............................................ Up to 5c per ADS issued
Cancellation of ADSs........................................ Up to 5c per ADS canceled
Exercise of rights to purchase additional ADSs.............. Up to 5c per ADS issued
Distribution of stock or other free distributions........... Up to 5c per ADS held
Distribution of cash upon sale of rights and other
entitlements.............................................. Up to 2c per ADS held
</TABLE>

As an ADS holder, you will also be responsible to pay certain fees and
expenses incurred by the depositary bank and certain taxes and governmental
charges such as:

- fees for the transfer and registration of ordinary shares (i.e., upon
deposit and withdrawal of ordinary shares);

- expenses incurred for converting foreign currency into U.S. dollars;

- expenses for cable, telex and fax transmissions and for delivery of
securities; and

- taxes and duties upon the transfer of securities (i.e., when ordinary
shares are deposited or withdrawn from deposit).

We have agreed to pay certain other charges and expenses of the depositary.
Please 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 such changes.

AMENDMENTS AND TERMINATION

We may agree with the depositary to modify the deposit agreement at any
time without your consent. Except in very limited circumstances enumerated in
the deposit agreement, we have agreed to give holders 30 days' prior notice of
any modifications that would prejudice any of their substantial rights under the
deposit agreement.

You will be bound by any 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

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amended to prevent you from withdrawing the ordinary 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 of the deposit agreement, the following will occur:

- for a period of six months after termination, you will be able to request
the cancellation of your ADSs and the withdrawal of the ordinary shares
represented by your ADSs and the delivery of all other property held by
the depositary in respect of those ordinary shares on the same terms as
prior to the termination. During such six month period, the depositary
bank will continue to collect all distributions received on the ordinary
shares on deposit (i.e., dividends) but will not distribute any such
property to you until you request the cancellation of your ADSs; and

- after the expiration of such six month period, the depositary may sell
the securities held on deposit. The depositary will hold the proceeds
from such 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 these records at the depositary's 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.

LIMITATIONS ON OBLIGATIONS AND LIABILITIES

The deposit agreement limits our obligations and the depositary's
obligations to you. We and the depositary are obligated only to take the actions
specifically stated in the deposit agreement without negligence or bad faith.
Please note the following:

- 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
ordinary shares, for the validity or worth of the ordinary 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 Memorandum and Articles of Association, any provision of any
securities on deposit or by reason of any act of God or war or other
circumstances beyond our control.

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- 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 Memorandum and Articles of Association or in any
provisions of 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 ordinary shares for deposit,
any holder of ADSs or authorized representative thereof, 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 ordinary 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 may, under certain circumstances, issue ADSs before
receiving a deposit of ordinary shares or release ordinary shares before
receiving ADSs. 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 such transactions (i.e., the
need to receive collateral, the type of collateral required, the representations
required from brokers, etc.). The deposit agreement requires that the ADSs be
fully collateralized before any ADSs are pre-released. The depositary may retain
the compensation received from the pre-release transactions.

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 to issue ADSs, to deliver, transfer, split and
combine ADRs or 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 bank and to the custodian proof of taxpayer status
and residence and such 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 by you.

FOREIGN CURRENCY CONVERSION

The depositary will arrange for the conversion of all foreign currency
received into U.S. dollars if such conversion is 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; and

- hold the foreign currency, without liability for interest, for the
applicable holders.

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TAXATION

SINGAPORE TAXATION

The following discussion describes the material Singapore income tax, stamp
duty and estate duty consequences of the purchase, ownership and disposal of the
ordinary shares or ADSs (collectively the "securities") to a holder of the
securities that is not resident in Singapore. This discussion, insofar as it
relates to matters of Singapore tax law, constitutes the opinion of Allen &
Gledhill, Singapore tax advisor to Chartered. This discussion does not purport
to be a comprehensive description of all of the tax considerations that may be
relevant to a decision to purchase, own or dispose of the securities and does
not purport to deal with the tax consequences applicable to all categories of
investors.

This discussion is based on tax laws in effect in Singapore and on
administrative and judicial interpretations of these tax laws, as of the date of
this prospectus, all of which are subject to change, possibly on a retroactive
basis.

INCOME TAX

General. Non-resident corporate taxpayers are subject to income tax on
income that is accrued in or derived from Singapore, and on foreign income
received in Singapore, subject to certain exceptions. A non-resident individual
is subject to income tax on the income accrued in or derived from Singapore.

Subject to the provisions of any applicable double taxation treaty,
non-resident taxpayers who derive certain types of income from Singapore are
subject to a withholding tax on that income at a rate of 26%, or generally 15%
in the case of interest, royalty and rental of movable equipment.

A corporation will be regarded as being resident in Singapore if the
control and management of its business is exercised there (for example, if the
corporation's board of directors meets and conducts the business of the
corporation in Singapore). An individual will be regarded as being resident in
Singapore in a year of assessment if, in the preceding year, he or she was
physically present in Singapore or exercised an employment in Singapore (other
than as a director of a company) for 183 days or more, or if he or she resides
in Singapore.

Dividend Distributions. If we pay dividends on the ordinary shares or ADSs
out of the tax exempt income received because of our pioneer status or out of
our income subject to a concessionary tax rate, if any, such dividends will be
free of Singapore tax in the hands of the holders of the ordinary shares and
ADSs. Please see "Management's Discussion and Analysis of Financial Condition
and Results of Operation -- Special Tax Status" for a discussion of our pioneer
status.

Where the dividend is declared out of the above tax exempt income or income
subject to tax at a concessionary rate, we would have to obtain agreement from
the Inland Revenue Authority of Singapore confirming the amount of income
available for distribution of tax exempt dividends. Before this agreement has
been obtained, the Comptroller of Income Tax in Singapore may issue a
provisional assessment of our tax exempt income, and we will be able to
distribute tax exempt dividends based on this provisional assessment. Exempt
dividends paid by us in excess of our finalized tax exempt income will be deemed
distributed out of our ordinary income and will be subject to the treatment
outlined below.

We pay tax on our non-tax exempt income at the prevailing corporate tax
rate, which is currently 26%. This tax paid by us is in effect imputed to, and
deemed paid on behalf of, our shareholders. Thus, if we pay dividends on our
ordinary shares out of our non-tax exempt income, our shareholders receive the
dividends net of the tax paid by us. Dividends received by either a resident or
non-resident of Singapore are not subject to withholding tax. Shareholders are
taxed in Singapore on the gross amount of dividends, which is the cash amount of
the dividend plus an amount normally equivalent to the corporate income tax rate
paid by us on the dividend. The tax paid by us effectively becomes available to
shareholders as a tax credit to offset the Singapore income tax liability on
their overall income, including the gross amount of dividends.

A non-resident shareholder is effectively taxed on non-tax exempt dividends
at the corporate income tax rate. Thus, because tax deducted from the dividend
and paid by us at the corporate income tax rate is
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in effect imputed to, and deemed paid on behalf of, our shareholders (as
discussed in the preceding paragraph), no further Singapore income tax will be
imposed on the net dividend received by a non-resident holder of ordinary shares
or ADSs. Further, the non-resident shareholder will normally not receive any tax
refund from the Inland Revenue Authority of Singapore.

No comprehensive tax treaty currently exists between Singapore and the
United States.

Gains on Disposal of the Ordinary Shares or ADSs. Singapore does not
impose tax on capital gains. However, gains or profits may be construed to be of
an income nature and subject to tax, especially if they arise from activities
which the Inland Revenue Authority of Singapore regards as the carrying on of a
trade in Singapore, or if they are short-term gains from the sale of real
property or shares in unlisted companies with substantial real property or real
property-related assets in Singapore. Thus, any gains or profits from the
disposal of the ordinary shares or ADSs are not taxable in Singapore unless the
seller is regarded as carrying on a trade in securities in Singapore, in which
case the disposal profits would be taxable as trading profits rather than
capital gains.

STAMP DUTY

There is no stamp duty payable in respect of the issuance and holding of
new ordinary shares or ADSs. Where existing ordinary shares or ADSs evidenced in
certificated form are acquired in Singapore, stamp duty is payable on the
instrument of transfer of the ordinary shares or ADSs at the rate of S$2.00 for
every S$1,000 of the consideration for, or market value of, the ordinary shares
or ADSs, whichever is higher. The stamp duty is borne by the purchaser unless
there is an agreement to the contrary. Where an instrument of transfer is
executed outside Singapore or no instrument of transfer is executed, no stamp
duty is payable on the acquisition of existing ordinary shares or ADSs. Stamp
duty may be payable if the instrument of transfer is received in Singapore.

ESTATE DUTY

In the case of an individual who is not domiciled in Singapore, Singapore
estate duty is imposed on the value of most movable and immovable properties
situated in Singapore. Thus, an individual holder of the ordinary shares who is
not domiciled in Singapore at the time of his or her death will be subject to
Singapore estate duty on the value of any ordinary shares held by the individual
upon the individual's death. Such a shareholder will be required to pay
Singapore estate duty to the extent that the value of the ordinary shares, and
any other assets subject to Singapore estate duty, exceeds S$600,000. Unless
other exemptions apply to the other assets (for example, the separate exemption
limit for residential properties), any excess will be taxed at a rate equal to
5% on the first S$12 million of the individual's Singapore chargeable assets and
thereafter at a rate equal to 10%. However, an individual who holds ADSs and is
not domiciled in Singapore at the time of his or her death should not be subject
to Singapore estate tax duty on such ADSs because such ADSs are registered
outside Singapore and hence should not be considered as movable properties in
Singapore.

Prospective purchasers or ordinary shares or ADSs who are individuals,
whether or not domiciled in Singapore, should consult their own tax advisors
regarding the Singapore estate duty consequences of their investment.

UNITED STATES FEDERAL TAXATION

The following is a summary of the opinion of Latham & Watkins as to the
material U.S. federal income and estate tax consequences that may be relevant to
a U.S. holder with respect to the acquisition, ownership and disposition of
ordinary shares or ADSs. For purposes of this summary, a "U.S. holder" includes
the following:

- citizens or residents of the United States for United States federal
income tax purposes,

- corporations or other entities created or organized under the laws of the
United States or of any political subdivision thereof,
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- persons otherwise subject to United States federal income taxation on
their worldwide income regardless of its source,

- estates the income of which is subject to United States federal income
taxation regardless of source,

- any trust the administration of which is subject to the primary
supervision of a United States court and which has one or more United
States persons who have the authority to control all substantial
decisions of the trust, or, if the trust was in existence on August 20,
1996, has elected to continue to be treated as a United States person, or

- any other person that is subject to U.S. federal income tax on a net
income basis in respect of an investment in ordinary shares or ADSs.

This summary deals only with ordinary shares and ADSs held as capital
assets (within the meaning of section 1221 of the Internal Revenue Code of 1986,
as amended (the "Code")) and does not address the tax consequences applicable to
holders that may be subject to special tax rules, including without limitation
financial institutions, insurance companies, regulated investment companies,
dealers in securities or currencies, persons holding ordinary shares or ADSs as
a hedge against currency risks or as a position in a "straddle" or "conversion
transaction" or other integrated investment transaction for tax purposes,
persons whose "functional currency" is not the U.S. dollar, or holders of 10% or
more, by voting power or value, of the stock of our company. It also does not
deal with holders other than original purchasers (except where otherwise
specifically noted). This summary is based upon the Code, existing temporary and
proposed Treasury Regulations, Internal Revenue Service ("IRS") rulings and
judicial decisions as now in effect and as currently interpreted and does not
take into account possible changes in such tax laws or interpretations, any of
which may be applied retroactively and could affect the tax consequences
described below. This summary further is based in part on the assumption that
each obligation in the deposit agreement and any related agreement will be
performed in accordance with its terms.

EACH PROSPECTIVE PURCHASER SHOULD CONSULT A TAX ADVISOR WITH RESPECT TO THE
U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING, OWNING OR
DISPOSING OF ORDINARY SHARES OR ADSS.

OWNERSHIP OF ADSS

For U.S. federal income tax purposes, U.S. holders of ADSs will be treated
as the owners of the ordinary shares represented by such ADSs.

DIVIDENDS

Distributions of cash or property (other than ordinary shares, if any,
distributed pro rata to all shareholders of our company, including holders of
ADSs) with respect to ordinary shares will be included in income by a U.S.
holder as foreign source dividend income at the time of receipt, which in the
case of a U.S. holder of ADSs generally will be the date of receipt by the
depositary, to the extent such distributions are made from the current and
accumulated earnings and profits of our company. Such dividends will not be
eligible for the dividends received deduction generally allowed to corporate
U.S. holders. To the extent, if any, that the amount of any distribution by our
company exceeds our company's current and accumulated earnings and profits as
determined under U.S. federal income tax principles, it will be treated first as
a tax-free return of the U.S. holder's tax basis in the ordinary shares or ADSs
and thereafter as capital gain.

A U.S. holder will not be eligible for a foreign tax credit against its
U.S. federal income tax liability for Singapore dividend distribution taxes paid
by our company. U.S. holders should be aware that dividends paid by our company
generally will constitute "passive income" or, in the case of certain U.S.
holders, "financial services income" for purposes of the foreign tax credit.

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If dividends are paid in Singapore dollars, the amount of the dividend
distribution includible in the income of a U.S. holder will be the U.S. dollar
value of the payments made in Singapore dollars, determined at a spot exchange
rate between Singapore dollars and U.S. dollars on the date such dividend is
includible in the income of the U.S. holder, regardless of whether the payment
is in fact converted into U.S. dollars. Generally, gain or loss, if any,
resulting from currency exchange fluctuations during the period from the date
the dividend is paid to the date such payment is converted into U.S. dollars
will be treated as ordinary income or loss.

Sale or exchange of ordinary shares or ADSs. A U.S. holder generally will
recognize gain or loss on the sale or exchange of ordinary shares or ADSs equal
to the difference between the amount realized on such sale or exchange and the
U.S. holder's tax basis in the ordinary shares or ADSs, as the case may be. Such
gain or loss will be capital gain or loss, and will be long-term capital gain or
loss if the ordinary shares or ADSs, as the case may be, were held for more than
one year. Gain or loss, if any, recognized by a U.S. holder generally will be
treated as U.S. source passive income or loss for U.S. foreign tax credit
purposes.

ESTATE TAXES

An individual shareholder who is a citizen or resident of the United States
for U.S. federal estate tax purposes will have the value of the ordinary shares
or ADSs owned by such holder included in his or her gross estate for U.S.
federal estate tax purposes. An individual holder who actually pays Singapore
estate tax with respect to the ordinary shares or ADSs will, however, be
entitled to credit the amount of such tax against his or her U.S. federal estate
tax liability, subject to certain conditions and limitations.

BACKUP WITHHOLDING TAX AND INFORMATION REPORTING REQUIREMENTS

In general, information reporting requirements will apply to payments of
dividends in respect of the ordinary shares or ADSs or the proceeds received on
the sale, exchange or redemption of the ordinary shares or ADSs by a paying
agent within the United States to a non-corporate (or other exempt) U.S. holder,
and a 31 percent backup withholding tax may apply to such amounts if the U.S.
holder fails to provide an accurate taxpayer identification number to the paying
agent. Amounts withheld as backup withholding will be creditable against the
U.S. holder's United States federal income tax liability.

The above summary is not intended to constitute a complete analysis of all
tax consequences relating to ownership of ordinary shares or ADSs. You should
consult your tax advisor concerning the tax consequences of your particular
situation.

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<PAGE> 88

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the global offering, there has not been any public market for our
ADSs or ordinary shares, and no prediction can be made as to the effect, if any,
that market sales of ADSs or ordinary shares or the availability of ADSs for
sale will have on the market price of the ADSs prevailing from time to time.
Nevertheless, sales of substantial amounts of ADSs in the public market, or the
perception that such sales could occur, could adversely affect the market price
of ADSs and could impair our future ability to raise capital through the sale of
our equity securities. Please see "Risk Factors -- The future sales of
securities by our company or existing shareholders may hurt the price of our
ADSs and our ordinary shares."

Upon the closing of the global offering, we will have an aggregate of
1,238,847,853 ordinary shares issued and outstanding (including ordinary shares
represented by ADSs), assuming the underwriters do not exercise their
overallotment option and without taking into account the exercise of any
outstanding share options . The 250,000,000 ordinary shares sold in the global
offering (including ordinary shares represented by ADSs) will be freely tradable
in the United States, except that any shares held by "affiliates" as defined
under Rule 144 under the Securities Act may only be sold in compliance with the
limitations described below. The remaining 988,847,853 ordinary shares may be
sold in the United States only if registered or if they qualify for an exemption
from registration under the Securities Act, including Rule 144 or Regulation S.
The ordinary shares outstanding after the global offering may be deposited with
the depositary and, subject to the terms of the deposit agreement, ADSs
representing these ordinary shares will be issued.

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of 1.0% of the then
outstanding ordinary shares (including ordinary shares represented by ADSs)
(approximately 12,388,478 shares immediately after completion of the global
offering) or the average weekly trading volume in the ordinary shares (including
ordinary shares represented by ADSs) during the four calendar weeks preceding
the date on which notice of such sale is filed, subject to certain restrictions.
In addition, a person who is not deemed to have been an affiliate of our company
at any time during the 90 days preceding a sale and who has beneficially owned
the shares proposed to be sold for at least two years would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described
above. Ordinary shares (including ordinary shares represented by ADSs) issued
pursuant to Regulation S and held by non-affiliates may immediately be resold in
the United States. ST and ST Semiconductors may be deemed affiliates of our
company. Therefore, sales by them in the United States of the 897,632,876
ordinary shares owned by them following the global offering may continue to be
subject to the volume limitations of Rule 144.

Each of our directors and executive officers, ST and its affiliates, our
equity investor customers and certain other existing shareholders who will
collectively hold at least 979,231,742 ordinary shares after the global offering
will be subject to lock-up agreements following the completion of the global
offering. Pursuant to the lock-up agreements, these shareholders will agree that
they will not, without the prior written consent of Salomon Smith Barney Inc.,
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or announce the offering of, any ordinary shares or ADSs or any
securities convertible into or exercisable or exchangeable for, ordinary shares
or ADSs for a period of 180 days from the date of this prospectus, other than
ordinary shares disposed of as bona fide gifts approved by Salomon Smith Barney
Inc. and shares subject to priority allocation in the global offering. Following
the 180 day lock-up period, the ordinary shares held by these shareholders will
be eligible for resale, subject to the registration requirements under the
Securities Act. Please see "Underwriting" for additional information regarding
resale restrictions.

In addition, we have agreed not to sell or otherwise dispose of any
ordinary shares or securities convertible into or exchangeable for ordinary
shares during the 180-day period following the date of the prospectus, without
the prior written consent of Salomon Smith Barney Inc. The foregoing does not
prevent us, however, from issuing the ordinary shares, directly or in the form
of ADSs, subject to the

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<PAGE> 89

underwriters' overallotment option or issuing shares pursuant to our 1999 Share
Option Plan. We filed a registration statement on Form S-8 under the Securities
Act on the date that the registration statement of which this prospectus is a
part became effective to register all of the ordinary shares that are or may
become subject to options under our 1999 Share Option Plan, thus permitting the
resale of such ordinary shares by nonaffiliates in the public market without
restriction under the Securities Act. Concurrently with the effectiveness of the
registration statement of which this prospectus is a part, we granted to our
officers, directors and employees options under our 1999 Share Option Plan to
purchase approximately 20,000,000 ordinary shares, including 8,560,000 to our
President and Chief Executive Officer and 3,110,000 to our other directors and
executive officers. The exercise price of such options is the same as the
initial public offering price of our ordinary shares, except for options
issuable for approximately 2,100,000 ordinary shares that have exercise prices
below the initial public offering price (for which we are accruing a
compensation charge). In addition, we may issue ordinary shares in connection
with any acquisition of another company if the terms of such issuance provide
that such ordinary shares shall not be resold prior to the expiration of the
180-day period referenced in the preceding sentence. Please see "Risk Factors --
The future sales of securities by our company or existing shareholders may hurt
the price of our ADSs and our ordinary shares."

85
<PAGE> 90

UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement
dated as of October 28, 1999 the final prospectus, each of the U.S. underwriters
named below, for whom Salomon Smith Barney Inc., Credit Suisse First Boston
Corporation, Hambrecht & Quist LLC, SG Cowen Securities Corporation and
SoundView Technology Group, Inc. are acting as the U.S. representatives, has
severally agreed to purchase, and we have agreed to sell to such U.S.
underwriter, the number of ordinary shares (including ordinary shares
represented by ADSs) set forth opposite the name of such U.S. underwriter.

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS ORDINARY SHARES
----------------- ---------------
<S> <C>
Salomon Smith Barney Inc. .................................. 52,500,000
Credit Suisse First Boston Corporation...................... 45,000,000
Hambrecht & Quist LLC....................................... 18,750,000
SG Cowen Securities Corporation............................. 18,750,000
SoundView Technology Group, Inc............................. 15,000,000
-----------
Total..................................................... 150,000,000
===========
</TABLE>

Subject to the terms and conditions stated in a separate underwriting
agreement dated as of October 28, 1999, each of the international underwriters
named below, for whom Salomon Brothers International Limited, Credit Suisse
First Boston (Singapore) Limited, Hambrecht & Quist LLC, Societe Generale,
SoundView Technology Group, Inc., Overseas Union Bank Limited and Vickers Ballas
& Company Pte Ltd are acting as the international representatives, has severally
agreed to purchase, and we have agreed to sell to such international
underwriter, the number of ordinary shares (including ordinary shares
represented by ADSs) set forth opposite the name of such international
underwriter.

<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL UNDERWRITERS ORDINARY SHARES
-------------------------- ---------------
<S> <C>
Salomon Brothers International Limited...................... 25,312,500
Credit Suisse First Boston (Singapore) Limited.............. 21,562,500
Hambrecht & Quist LLC....................................... 9,000,000
Societe Generale............................................ 9,000,000
SoundView Technology Group, Inc............................. 7,125,000
Overseas Union Bank Limited................................. 1,500,000
Vickers Ballas & Company Pte Ltd............................ 1,500,000
----------
Total..................................................... 75,000,000
==========
</TABLE>

ST, our controlling shareholder, indirectly owns 40% of Vickers Ballas & Company
Pte Ltd.

Subject to the terms and conditions stated in a Singapore management and
underwriting agreement to be dated as of the date of the final prospectus, each
of the Singapore underwriters for whom Overseas Union Bank Limited is acting as
lead manager and underwriter and Citicorp Investment Bank (Singapore) Limited is
acting as co-lead manager and underwriter, has agreed to purchase and we have
agreed to sell to such Singapore underwriters 25,000,000 ordinary shares.

These offerings are part of a global offering that consists of:

- an offering of an aggregate of 150,000,000 ordinary shares, directly or
in the form of ADSs, in the United States and Canada;

- an offering of an aggregate of 75,000,000 ordinary shares, directly or in
the form of ADSs, outside the United States and Canada; and

- an offering of an aggregate of 25,000,000 ordinary shares in Singapore.

Salomon Smith Barney Inc. is acting as the sole book running manager for
the global offering.

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<PAGE> 91

The U.S. underwriting agreement, the international underwriting agreement
and the Singapore management and underwriting agreement each provide that the
obligations of the underwriters to purchase the ordinary shares (including
ordinary shares represented by ADSs) included in the global offering are subject
to approval of certain legal matters by counsel and to certain other conditions.
The U.S., international and Singapore underwriters are obligated to purchase all
the ordinary shares (including ordinary shares represented by ADSs) pursuant to
their respective agreements (other than those covered by the overallotment
option described below) if they purchase any of them. The public offering price
and underwriting discount per ADS for the U.S. offering, the international
offering and (taking into account the number of ordinary shares comprised in an
ADS) the Singapore offering will be identical. The underwriters expect that
delivery of the ordinary shares, directly or in the form of ADSs, will be made
against payment therefor on or about the date specified in the last paragraph of
the cover page of the final prospectus, which is the fourth business day
following the date of the final prospectus, or T+4. Trading of the ordinary
shares, directly or in the form of ADSs, on the date of the final prospectus may
be affected by the T+4 settlement. The closing of the international offering,
the U.S. offering and the Singapore offering are conditioned upon each other.

The U.S., international and Singapore underwriters propose to offer some of
the ordinary shares (including ordinary shares represented by ADSs) directly to
the public at the initial public offering price set forth on the cover page of
this prospectus and some of the ordinary shares (including ordinary shares
represented by ADSs) to certain dealers at the public offering price less a
concession not exceeding S$0.09 per ordinary share ($0.54 per ADS). The
underwriters may allow, and such dealers may reallow, a concession not exceeding
S$0.02 per ordinary share ($0.10 per ADS) on sales to certain other dealers. If
all the ordinary shares (including the ordinary shares represented by ADSs) are
not sold at the public offering price, the representatives may change the public
offering price and other selling terms. The representatives have advised us that
the underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.

12,500,000 ordinary shares (including ordinary shares represented by ADSs)
offered in the global offering are subject to priority allocation to our
employees and business associates, to directors, officers and employees of our
affiliates, and to certain charitable organizations in Singapore.

We have granted the U.S., international and Singapore underwriters an
option, exercisable for 30 days from the date of this prospectus, to purchase up
to an aggregate of 37,500,000 additional ordinary shares (including ordinary
shares represented by ADSs) at the applicable initial public offering price,
less the underwriting discount. The underwriters may exercise this option solely
to cover overallotments, if any, in connection with this offering. To the extent
that such option is exercised, each U.S., international and Singapore
underwriter, as the case may be, will be obligated, subject to certain
conditions, to purchase an additional number of ordinary shares (including
ordinary shares represented by ADSs) proportionate to such U.S., international
or Singapore underwriter's initial commitment.

The U.S., international and Singapore underwriters have entered an
agreement in which they agree to restrictions on where and to whom they and any
dealer purchasing from them may offer ordinary shares or ADSs. The U.S.,
international and Singapore underwriters also have agreed that they may sell
ordinary shares or ADSs, including those subject to priority allocation, among
their respective underwriting syndicates. The number of ordinary shares or ADSs
actually allocated to each offering may differ from the amount offered due to
reallocation among the U.S. offering, the international offering and the
Singapore offering.

We, ST and its affiliates, our equity investor customers, all of our
executive officers and directors and certain other existing shareholders have
agreed that, for a period of 180 days from the date of this prospectus, they
will not, without the prior written consent of Salomon Smith Barney Inc. offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly,
or announce the offering of, any ordinary shares or ADSs or any securities
convertible into or exchangeable for ordinary shares or ADSs, other than
ordinary shares disposed of as bona fide gifts approved by Salomon Smith Barney
Inc. and shares subject to priority allocation in the global offering. Salomon
Smith Barney Inc. in its sole discretion may release any of the ordinary shares
subject to the lock-up at any time without notice. Salomon Smith

87
<PAGE> 92

Barney, Inc. has advised us that it does not presently have any intention to
release prematurely any of the shares that are subject to the lockup agreement.

Prior to the global offering, there has been no public market for the
ordinary shares or the ADSs. Consequently, the initial public offering price for
the ordinary shares and the ADSs was determined through negotiations between us
and the representatives. Among the factors considered in determining the initial
public offering price was our record of operations, our current financial
condition, our future prospects, our markets, the economic conditions in and
future prospects in the semiconductor manufacturing industry, our management and
currently prevailing general conditions in the equity securities markets,
including current market valuations of publicly traded companies considered
comparable to us. There can be no assurance, however, that the prices at which
the ordinary shares or the ADSs will sell in the public market after this
offering will not be lower than the price at which they are sold by the
underwriters or that an active trading market in the ordinary shares or the ADSs
will develop and continue after this offering.

The ADSs have been approved for quotation on the Nasdaq National Market
under the symbol "CHRT" and the ordinary shares have been approved for listing
on the Stock Exchange of Singapore Limited.

The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with the U.S. and international
offerings. These amounts are shown assuming no exercise and full exercise of the
underwriters' option to purchase additional ordinary shares (including ordinary
shares represented by ADSs).

<TABLE>
<CAPTION>
PAID BY CHARTERED
----------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per ADS..................................................... $ 0.90 $ 0.90
Per Ordinary Share.......................................... 0.09 0.09
Total..................................................... $20,250,000 $23,287,500
</TABLE>

In connection with the Singapore offering, we have agreed to pay the
Singapore underwriters and members of the Singapore retail syndicate discounts
and commissions of $0.04 per ordinary share for a total of $1,000,000
($1,150,000 if the overallotment option is exercised in full).

In connection with the global offering, Salomon Smith Barney Inc. and
Salomon Brothers International Limited, on behalf of the underwriters, may
purchase and sell ADSs or ordinary shares in the open market. These transactions
may include overallotment, covering transactions and stabilizing transactions.
Overallotment involves syndicate sales of ADSs or ordinary shares in excess of
the number of ADSs to be purchased by the underwriters in the global offering,
which creates a syndicate short position. Syndicate covering transactions
involve purchases of the ADSs or ordinary shares in the open market after
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of ADSs or
ordinary shares made for the purpose of preventing or retarding a decline in the
market price of the ADSs or ordinary shares while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from an underwriter when Salomon
Smith Barney Inc., in covering syndicate short positions or making stabilizing
purchases, repurchases ADSs or ordinary shares originally sold by that
underwriter.

Any of these activities may cause the price of the ADSs or the ordinary
shares to be higher than the price that otherwise would exist in the open market
in the absence of such transactions. Subject to compliance with applicable laws,
these transactions may be effected on the Nasdaq National Market, the Stock
Exchange of Singapore Limited, in the over-the-counter market or otherwise and,
if commenced, may be discontinued at any time.

We estimate that the total expenses of the global offering will be $3.3
million. We have agreed to reimburse the U.S., international and Singapore
underwriters for certain expenses incurred in connection with the global
offering.

88
<PAGE> 93

Some of the representatives have been retained to perform certain
investment banking and advisory services for us from time to time for which they
have received customary fees and expenses. The representatives may, from time to
time, engage in transactions with and perform services for us in the ordinary
course of business.

We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or contribute to payments the underwriters may be required to make in respect of
any of those liabilities.

LEGAL MATTERS

Certain matters in connection with the global offering will be passed upon
for our company by Latham & Watkins. The validity of the ordinary shares
represented by the ADSs offered hereby will be passed upon by Allen & Gledhill,
our Singapore counsel. Latham & Watkins may rely upon Allen & Gledhill with
respect to certain matters governed by Singapore law. Certain matters in
connection with the global offering will be passed upon on behalf of the
underwriters by Cleary, Gottlieb, Steen & Hamilton, counsel for the
underwriters.

EXPERTS

We have included our consolidated financial statements as of December 31,
1997 and 1998 and June 30, 1998 and 1999, and for the years ended December 31,
1996, 1997 and 1998, and the six month periods ended June 30, 1998 and 1999, in
this prospectus and the related registration statement on Form F-1 in reliance
upon the report of KPMG, independent accountants, appearing elsewhere in this
prospectus, and upon the authority of said firm as experts in accounting and
auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form F-1, which
includes amendments, exhibits, schedules and supplements with respect to the
ADSs and the underlying ordinary shares offered by this prospectus. Although
this prospectus, which is a part of the registration statement, contains all
material information included in the registration statement, part of the
registration statement has been omitted from this prospectus as permitted by the
SEC. A related registration statement on Form F-6 has also been filed with the
SEC to register the ADSs as represented by the ADRs. For further information
with respect to our company and the ADSs offered by this prospectus, please
refer to these registration statements. Statements contained in this prospectus
as to the contents of any contract or other document referred to in this
prospectus are not necessarily complete, and where the contract or other
document is an exhibit to the registration statement, each such statement is
qualified in all respects by the provisions of the applicable exhibit, to which
reference is now made.

Upon completion of our global offering, we will be subject to the
information requirements of the Securities Exchange Act of 1934, as amended,
applicable to foreign private issuers. As a result, we will be required to file
reports, including annual reports on Form 20-F, reports on Form 6-K and other
information with the SEC. We also intend to submit to the SEC quarterly reports
on Form 6-K which will include unaudited quarterly financial information, for
the first three quarters of each fiscal year, in addition to our annual report
on Form 20-F which will include audited annual financial information. We intend
to file these reports within the same time periods that apply to the filing by
domestic issuers of quarterly reports on Form 10-Q and annual reports on Form
10-K. The SEC's rules generally require that domestic issuers file a quarterly
report on Form 10-Q within 45 days after the end of the first three fiscal
quarters and file an annual report on Form 10-K within 90 days after the end of
each fiscal year. These reports and other

89
<PAGE> 94

information filed or to be filed by us can be inspected and copied at the public
reference facilities maintained by the SEC at:

<TABLE>
<S> <C>
- - Judiciary Plaza - Seven World Trade Center
450 Fifth Street, N.W. 13th Floor
Room 1024 New York, New York 10048
Washington, D.C. 20549
</TABLE>

- Northwestern Atrium Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511

Copies of these materials can also be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed
rates.

The SEC maintains a website at www.sec.gov that contains reports, proxy and
information statements, and other information regarding registrants that make
electronic filings with the SEC using its EDGAR system. As a foreign private
issuer, we are not required to use the EDGAR system, but currently intend to do
so in order to make our reports available over the Internet.

Upon approval of the ADSs for quotation on the Nasdaq National Market, our
periodic reports and other information may also be inspected at the offices of
the Nasdaq National Market, Reports Section, 1735 K Street, Washington, D.C.
20006.

As a foreign private issuer, we will be exempt from the rules under the
Exchange Act prescribing the furnishing and content of proxy statements, and our
executive officers, directors and principal shareholders will be exempt from the
reporting and short-swing profit recovery provisions contained in Section 16 of
the Exchange Act.

We will furnish the depositary referred to under "Description of American
Depositary Shares" with annual reports, which will include annual audited
consolidated financial statements prepared in accordance with U.S. GAAP, and
quarterly reports, which will include unaudited quarterly consolidated financial
information prepared in accordance with U.S. GAAP. The depositary has agreed
with us that, at our request, it will promptly mail these reports to all
registered holders of ADSs. We will also furnish to the depositary all notices
of shareholders' meetings and other reports and communications that are made
generally available to our shareholders. The depositary will arrange for the
mailing of these documents to record holders of ADSs. Please see "Description of
American Depositary Shares" for further details on the responsibilities of the
depositary.

90
<PAGE> 95

CHARTERED SEMICONDUCTOR MANUFACTURING LTD
AND SUBSIDIARY

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations and Comprehensive
Income (Loss)............................................. F-4
Consolidated Statements of Shareholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to the Financial Statements........................... F-8
</TABLE>

F-1
<PAGE> 96

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Chartered Semiconductor Manufacturing Ltd:

We have audited the accompanying consolidated balance sheets of Chartered
Semiconductor Manufacturing Ltd and subsidiary as of December 31, 1997 and 1998
and June 30, 1998 and 1999, and the related consolidated statements of
operations and comprehensive income (loss), shareholders' equity and cash flows
for the years ended December 31, 1996, 1997 and 1998 and the six months ended
June 30, 1998 and 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Statements of Auditing Standards
issued by the Institute of Certified Public Accountants of Singapore ("ICPAS"),
which statements set forth standards 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 the
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Chartered Semiconductor Manufacturing Ltd and subsidiary as of December 31, 1997
and 1998, and June 30, 1998 and 1999, and the consolidated results of their
operations and their cash flows for the years ended December 31, 1996, 1997 and
1998 and the six months ended June 30, 1998 and 1999, in conformity with
generally accepted accounting principles in the United States of America.

/s/ KPMG
Singapore

August 12, 1999,
except as to Note 26,
which is as of October 14, 1999

F-2
<PAGE> 97

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
----------------------- -----------------------
1997 1998 1998 1999
NOTE ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........................... 3 $ 23,785 $ 99,619 $ 14,450 $ 47,548
Accounts receivable
Trade............................................. 4 104,635 71,285 77,674 86,274
Others............................................ 4 26,717 12,703 9,216 7,073
Amounts due from ST and ST affiliates............... 21 2,843 2,591 1,497 2,137
Amounts due from CSP and SMP........................ 666 6,663 3,852 10,441
Inventories......................................... 5 59,262 29,476 36,934 26,943
Prepaid expenses.................................... 895 895 1,324 2,468
---------- ---------- ---------- ----------
Total current assets...................... 218,803 223,232 144,947 182,884
Investment in CSP and SMP........................... 6 4,990 58,487 57,042 60,376
Other assets........................................ 25,250 50,905 32,154 41,505
Technology license agreements....................... 7 13,429 6,916 12,524 3,974
Property, plant and equipment, net.................. 9 1,016,496 981,970 1,081,840 941,108
---------- ---------- ---------- ----------
Total Assets.............................. $1,278,968 $1,321,510 $1,328,507 $1,229,847
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable
Trade............................................. $ 13,074 $ 8,530 $ 5,013 $ 5,656
Fixed asset purchases............................. 98,943 22,829 43,945 32,458
Current installments of obligations under capital
leases............................................ 10 4,078 4,329 4,201 4,914
Current installments of long-term debt.............. 11 9,213 49,046 9,280 86,391
Bank overdrafts..................................... 13 1,378 3,082 5,043 1,210
Accrued operating expenses.......................... 12 61,458 84,918 54,838 87,612
Amounts due to ST and ST affiliates................. 21 336,254 10,607 138,563 8,574
Income taxes payable................................ 301 662 520 793
Other current liabilities........................... 14 23,031 26,130 70,384 4,909
---------- ---------- ---------- ----------
Total current liabilities................. 547,730 210,133 331,787 232,517
Obligations under capital leases, excluding current
installments...................................... 10 17,745 13,414 15,609 10,698
Long-term debt, excluding current installments...... 11 273,008 419,545 366,891 364,903
Customer deposits................................... 14 121,254 47,087 47,087 42,805
Other liabilities................................... 15 8,425 30,085 8,203 22,585
---------- ---------- ---------- ----------
Total liabilities......................... 968,162 720,264 769,577 673,508
---------- ---------- ---------- ----------
Share capital
Ordinary shares of S$0.26 each.................... 17 143,384 221,433 190,996 221,636
Subscription receivable............................. (10,565) (12,341) (12,362) (12,731)
Additional paid-in capital.......................... 18 278,824 689,970 549,379 694,752
Unearned compensation............................... (1,821) -- (1,007) (982)
Accumulated other comprehensive income (loss)....... (43,902) (52,696) (52,696) (52,696)
Retained deficit.................................... 19 (55,114) (245,120) (115,380) (293,640)
---------- ---------- ---------- ----------
Total shareholders' equity................ 310,806 601,246 558,930 556,339
Commitments and contingencies....................... 22
---------- ---------- ---------- ----------
Total liabilities and shareholders'
equity.................................. $1,278,968 $1,321,510 $1,328,507 $1,229,847
========== ========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 98

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998,
AND SIX MONTHS ENDED JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue...................................... $ 406,936 $ 379,761 $ 422,622 $ 232,771 $ 294,738
Cost of revenue.................................. (289,435) (368,521) (439,668) (224,105) (247,257)
--------- --------- --------- --------- ---------
Gross profit (loss).............................. 117,501 11,240 (17,046) 8,666 47,481
--------- --------- --------- --------- ---------
Operating Expenses:
Research and development....................... 13,018 26,553 43,419 20,642 22,955
Fab start-up costs............................. 13,132 10,908 1,455 1,455 --
Sales and marketing............................ 16,233 20,184 31,872 13,609 20,568
General and administrative..................... 32,615 30,144 37,389 15,089 22,701
Costs incurred on termination of development
program..................................... -- -- 31,776 -- 6,500
Stock-based compensation (note 23)............. 332 2,024 (2,780) (1,333) 3,289
--------- --------- --------- --------- ---------
Total operating expenses............... 75,330 89,813 143,131 49,462 76,013
--------- --------- --------- --------- ---------
Operating income (loss).......................... 42,171 (78,573) (160,177) (40,796) (28,532)
Equity in loss of CSP and SMP.................... -- (1,272) (20,434) (6,829) (17,988)
Other income..................................... 3,850 4,860 4,680 330 650
Interest income.................................. 973 179 1,690 811 1,207
Interest expense................................. (1,144) (12,782) (20,137) (10,100) (9,094)
Exchange gain (loss)............................. 1,963 (31,678) 5,237 (3,139) 5,065
--------- --------- --------- --------- ---------
Income (loss) before income taxes................ 47,813 (119,266) (189,141) (59,723) (48,692)
Income tax (expense) benefit..................... (337) (355) (865) (543) 172
--------- --------- --------- --------- ---------
Net income (loss)................................ $ 47,476 $(119,621) $(190,006) $ (60,266) $ (48,520)
========= ========= ========= ========= =========
Other comprehensive income (loss) -- foreign
currency translation........................... $ 4,622 $ (62,020) $ (8,794) $ (8,794) $ --
Comprehensive income (loss)...................... $ 52,098 $(181,641) $(198,800) $ (69,060) $ (48,520)
========= ========= ========= ========= =========
Net income (loss) per share and ADS:
Basic net income (loss) per share................ $ 0.10 $ (0.24) $ (0.24) $ (0.09) $ (0.05)
Diluted net income (loss) per share.............. $ 0.10 $ (0.24) $ (0.24) $ (0.09) $ (0.05)
Basic net income (loss) per ADS.................. $ 0.97 $ (2.44) $ (2.42) $ (0.88) $ (0.49)
Diluted net income (loss) per ADS................ $ 0.97 $ (2.44) $ (2.42) $ (0.88) $ (0.49)
Number of shares (in thousands) used in
computing:
- -- basic net income (loss) per share............. 488,296 490,407 784,541 685,871 985,816
- -- diluted net income (loss) per share........... 488,824 490,407 784,541 685,871 985,816
Number of ADS (in thousands) used in computing:
- -- basic net income (loss) per ADS............... 48,830 49,041 78,454 68,587 98,582
- -- diluted net income (loss) per ADS............. 48,882 49,041 78,454 68,587 98,582
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 99

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
AND SIX MONTHS ENDED JUNE 30, 1998 AND 1999
IN THOUSANDS

<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPRE- TOTAL
SUBSCRIP- ADDITIONAL UNEARNED RETAINED HENSIVE SHARE-
ORDINARY SHARES TION PAID-IN COMPEN- EARNINGS INCOME HOLDERS'
NO. RECEIVABLE CAPITAL SATION (DEFICIT) (LOSS) EQUITY
-------------------- ---------- ---------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996... 471,998 $138,559 $ (5,873) $215,539 $(1,236) $ 17,124 $ 13,496 $ 377,609
Net income................... -- -- -- -- -- 47,476 -- 47,476
Other changes in unearned
compensation, net.......... -- -- -- (152) 152 -- -- --
Issuance of shares........... 30,353 4,624 (5,070) 59,644 -- -- -- 59,198
Amortization of stock
compensation............... -- -- -- -- 332 -- -- 332
Foreign currency
translation................ -- -- -- -- -- -- 4,622 4,622
--------- -------- -------- -------- ------- --------- -------- ---------
Balance at December 31,
1996....................... 502,351 143,183 (10,943) 275,031 (752) 64,600 18,118 489,237
Net loss..................... -- -- -- -- -- (119,621) -- (119,621)
Distribution................. -- -- -- -- -- (93) -- (93)
Payment of subscription
receivable................. -- -- 1,260 -- -- -- -- 1,260
Other changes in unearned
compensation, net.......... -- -- -- 3,093 (3,093) -- -- --
Issuance of shares........... 1,103 201 (882) 700 -- -- -- 19
Amortization of stock
compensation............... -- -- -- -- 2,024 -- -- 2,024
Foreign currency
translation................ -- -- -- -- -- -- (62,020) (62,020)
--------- -------- -------- -------- ------- --------- -------- ---------
Balance at December 31,
1997....................... 503,454 143,384 (10,565) 278,824 (1,821) (55,114) (43,902) 310,806
Net loss..................... -- -- -- -- -- (60,266) -- (60,266)
Payment of subscription
receivable................. -- -- 176 -- -- -- -- 176
Other changes in unearned
compensation, net.......... -- -- -- (2,147) 2,147 -- -- --
Issuance of shares........... 293,036 47,612 (1,973) 272,702 -- -- -- 318,341
Amortization of stock
compensation............... -- -- -- -- (1,333) -- -- (1,333)
Foreign currency
translation................ -- -- -- -- -- -- (8,794) (8,794)
--------- -------- -------- -------- ------- --------- -------- ---------
Balance at June 30, 1998..... 796,490 190,996 (12,362) 549,379 (1,007) (115,380) (52,696) 558,930
Net loss..................... -- -- -- -- -- (129,740) -- (129,740)
Call on partly paid shares... -- -- 1,017 -- -- -- -- 1,017
Other changes in unearned
compensation, net.......... -- -- -- (2,454) 2,454 -- -- --
Issuance of shares........... 203,617 30,437 (996) 143,045 -- -- -- 172,486
Amortization of stock
compensation............... -- -- -- -- (1,447) -- -- (1,447)
--------- -------- -------- -------- ------- --------- -------- ---------
Balance at December 31,
1998....................... 1,000,107 221,433 (12,341) 689,970 -- (245,120) (52,696) 601,246
Net loss..................... -- -- -- -- -- (48,520) -- (48,520)
Call on partly paid shares... -- -- 286 -- -- -- -- 286
Other changes in unearned
compensation, net.......... -- -- -- 4,271 (4,271) -- -- --
Issuance of shares........... 1,318 203 (676) 511 -- -- -- 38
Amortization of stock
compensation............... -- -- -- -- 3,289 -- -- 3,289
--------- -------- -------- -------- ------- --------- -------- ---------
Balance at June 30, 1999..... 1,001,425 $221,636 $(12,731) $694,752 $ (982) $(293,640) $(52,696) $ 556,339
========= ======== ======== ======== ======= ========= ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 100

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
AND SIX MONTHS ENDED JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss).................. $ 47,476 $(119,621) $(190,006) $ (60,266) $ (48,520)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Equity in loss of CSP and SMP.... -- 1,272 20,434 6,829 17,988
Depreciation and amortization.... 115,545 173,762 226,903 103,577 142,617
Foreign exchange (gain) loss on
financing activities.......... (1,822) 41,734 (4,843) (1,267) (4,314)
(Gain) loss on disposal of
property, plant and
equipment..................... (219) 623 7,342 1,404 3,426
Costs on termination of
development program........... -- -- 31,776 -- --
Stock-based compensation......... 332 2,024 (2,780) (1,333) 3,289
Others........................... (1,434) (491) 475 (198) (1,120)
Change in operating working
capital:
Accounts receivable.............. 17,492 (106,390) 36,545 37,683 (14,216)
Amounts due from ST and ST
affiliates.................... (13,343) 3,166 257 1,346 454
Amounts due from CSP and SMP..... -- (666) (6,663) (2,977) (3,778)
Inventories...................... (17,740) (22,664) 28,069 22,763 2,533
Prepaid expenses................. 438 129 164 (421) (1,573)
Trade accounts payable........... (3,294) 7,189 (4,408) (8,157) (2,874)
Accrued operating expenses....... (9,823) 23,091 27,550 (9,642) 2,694
Other current liabilities........ (35,091) (1,532) (17,967) 1,118 1,398
Amounts due to ST and ST
affiliates.................... (1,309) 4,346 3,696 6,994 (3,910)
Advances to suppliers.............. (10,255) (18,875) 61 961 1,623
Income taxes payable............... (3,126) 116 325 219 131
--------- --------- --------- --------- ---------
Net cash (used in) provided by
operating activities............. 83,827 (12,787) 156,930 98,633 95,848
--------- --------- --------- --------- ---------
</TABLE>

F-6
<PAGE> 101

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of property,
plant and equipment.............. $ 5 $ 256 $ 2,246 $ 297 $ 3,513
Purchase of property, plant and
equipment........................ (481,230) (410,551) (279,368) (215,725) (89,802)
Technology license fees paid....... (5,579) (5,878) (7,790) (2,500) (8,500)
Investment in CSP and SMP.......... -- (6,108) (73,678) (58,628) (19,877)
--------- --------- --------- --------- ---------
Net cash used in investing
activities....................... (486,804) (422,281) (358,590) (276,556) (114,666)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Bank overdrafts.................... (3,593) (1,502) 1,643 3,593 (1,872)
Customer deposits, net............. 53,927 79,755 (60,851) (27,931) (27,001)
Loans from ST and ST affiliates
-- borrowings.................... 523,533 824,288 410,051 242,097 5,195
-- repayments.................... (315,193) (681,235) (738,400) (446,782) (3,318)
Long term debt
-- borrowings.................... 73,758 258,245 193,900 96,513 --
-- repayments.................... (19,848) (25,615) (8,993) (4,640) (4,664)
Issuance of shares by the
Company.......................... 59,198 1,279 492,909 318,517 324
Capital lease payments............. (3,605) (3,407) (5,317) (2,012) (2,131)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities............. 368,177 451,808 284,942 179,355 (33,467)
--------- --------- --------- --------- ---------
Net (decrease) increase in cash and
cash equivalents................. (34,800) 16,740 83,282 1,432 (52,285)
Effect of exchange rate changes on
cash and cash equivalents........ (61) (19) (7,448) (10,767) 214
Cash at the beginning of the
period........................... 41,925 7,064 23,785 23,785 99,619
--------- --------- --------- --------- ---------
Cash at the end of the period...... $ 7,064 $ 23,785 $ 99,619 $ 14,450 $ 47,548
========= ========= ========= ========= =========
Supplemental Cash Flow Information:
Interest paid (net of amounts
capitalized)..................... $ 1,360 $ 9,597 $ 25,451 $ 3,471 $ 12,126
Income taxes paid.................. 3,463 206 285 304 880
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 102

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

1. BUSINESS AND ORGANIZATION

Chartered Semiconductor Manufacturing Ltd (the "Company") is an independent
semiconductor foundry providing wafer fabrication services and technologies. The
Company operates in Singapore and has service operations in nine countries in
North America, Europe and Asia. Its principal markets are the United States of
America, Taiwan, Europe and Japan.

The Company is a subsidiary of Singapore Technologies Pte Ltd ("ST"), which
is itself ultimately wholly-owned by Temasek Holdings (Private) Limited
("Temasek"). Temasek is the holding company through which the corporate
investments of the government of Singapore are held.

In March 1997, the Company, Hewlett-Packard Europe B.V. and EDB Investments
Pte Ltd formed Chartered Silicon Partners Pte Ltd ("CSP"), in which the Company
has a non-controlling 51% equity interest. In January 1998, the Company and
Lucent Technologies Microelectronics Pte Ltd formed Silicon Manufacturing
Partners Pte Ltd ("SMP"), in which the Company has a 49% equity interest. The
Company accounts for CSP and SMP on an equity investment basis. See Note 2(d).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) ACCOUNTING PRINCIPLES

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States ("US GAAP")
consistently applied for all periods.

(b) USE OF ESTIMATES

The preparation of the consolidated financial statements in accordance with
US GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
revenues and expenses during the reporting period. Actual results could differ
from these estimates.

The consolidated financial statements reflect the consolidated accounts of
Chartered Semiconductor Manufacturing Ltd and its majority owned and controlled
affiliates. Intercompany accounts and transactions have been eliminated in
consolidation.

(d) INVESTMENT IN CSP AND SMP

The equity accounting method is applied for the investment in CSP and SMP.
The Company's share of the results of their operations is included in the
consolidated statement of operations. The Company's equity interest in these
equity affiliates, including its share of accumulated post-formation results, is
included as investment in CSP and SMP in the consolidated balance sheet.

(e) FUNCTIONAL CURRENCY

Through June 30, 1998, the Company's functional currency was Singapore
dollars. Effective July 1, 1998, the Company changed its functional currency to
US dollars.

The Singapore dollar was the functional currency of the Company because,
historically, the Singapore dollar was the currency of primary economic
environment in which the operations of the Company were conducted. However,
significant changes in economic facts necessitated a change in the Company's
functional currency from the Singapore dollar to the US dollar. The Company's
business has changed in

F-8
<PAGE> 103
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

that a more significant portion of its revenue is derived from companies based
outside of Singapore, principally the United States. There continues to be less
financial dependence of the Company on its parent. There are ongoing changes in
sources of financing from Singapore dollars to US dollars. With more of the
Company's transactions and cash flows denominated in US dollars, the functional
currency changed effective July 1, 1998 from the Singapore dollar to the US
dollar.

Concurrently with the change in functional currency, the Company converted
the majority of its debt financing to US dollars by entering into forward
exchange contracts which had the effect of redenominating the non-US dollar
loans to US dollar loans.

The change in functional currency was recognized through the translation of
Singapore dollar amounts of the Company's non-monetary assets, principally
property, plant and equipment at June 30, 1998, to US dollars on July 1, 1998
with those US dollar amounts becoming the accounting basis for those assets at
July 1, 1998 and for subsequent periods. The $52,696 cumulative translation
adjustment at July 1, 1998 in shareholders' equity prior to the change remains
as a separate component of accumulated comprehensive income.

(f) FOREIGN CURRENCY TRANSACTIONS

Assets and liabilities which are denominated in foreign currencies are
converted into the functional currency at the rates of exchange prevailing at
the balance sheet date. Income and expenses are converted at the rates of
exchange at transaction dates prevailing during the year. Foreign currency
transaction gains or losses are included in results of operations, except as
described below with respect to forward foreign exchange contracts utilized as a
hedge against firm commitments.

(g) REVENUE RECOGNITION

Revenue represents the invoiced value of goods and services supplied,
excluding goods and services tax, less allowance for returns. Revenue is
recognized upon shipment of goods.

(h) GRANTS

Asset-related government grants consist of grants for the purchase of
equipment used for research and development activities. Asset-related grants are
presented in the consolidated balance sheet as deferred grants and are credited
to other income on the straight-line basis over the estimated useful lives of
the relevant assets.

Income-related government grants are subsidies of training and research and
development expenses. Income-related grants are credited to other income when it
becomes probable that expenditures already incurred will constitute qualifying
expenditures for purposes of reimbursement under the grants, which is typically
substantially concurrent with the expenditures. See Note 15.

(i) FAB START-UP COSTS

The Company expenses costs related to start-up activities, including fab
start-up costs, as they are incurred.

(j) RESEARCH AND DEVELOPMENT COSTS

Research and development costs, which are expensed as incurred, were
$13,018, $26,553 and $43,419 in 1996, 1997 and 1998, respectively, and $20,642
and $22,955 in the six months ended June 30, 1998 and 1999, respectively.

F-9
<PAGE> 104
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

(k) STOCK-BASED EMPLOYEE COMPENSATION

The Company measures stock-based employee compensation cost for financial
statement purposes in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"), and its related
interpretations and includes pro forma information in Note 23 in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". Compensation cost for stock options granted to
employees in connection with the Company's fixed option plan is measured as the
excess of fair market value of the stock subject to the option at the grant date
over the exercise price of the option. Compensation cost for options granted to
employees under the Company's variable option plans is recorded over the
requisite vesting periods based upon the current market value of the Company's
stock at the end of each period.

(l) 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 carrying amounts of
existing assets and liabilities in the financial statements and their respective
tax bases, and operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years 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 in income in the period that includes the
enactment date. A valuation allowance is recorded for loss carryforwards and
other deferred tax assets where it is more likely than not that such loss
carryforwards and deferred tax assets will not be realized.

(m) DERIVATIVES

Gains and losses on hedges of existing assets or liabilities are included
in the carrying amounts of those assets or liabilities and are ultimately
recognized in income as part of those carrying amounts. Gains and losses related
to qualifying hedges of firm commitments are deferred and are recognized in
income or as adjustments of carrying amounts when the hedged transaction occurs.
Any contracts held or issued that do not meet the requirements of a hedge are
recorded at fair value in the balance sheet and any changes in that fair value
recognized in income.

(n) NET INCOME (LOSS) PER SHARE

The computation of basic net income (loss) and diluted net income (loss)
per share are presented in conformity with Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share" for all periods presented.

F-10
<PAGE> 105
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

The following is a reconciliation of the numerators and denominators of the
basic and diluted net income (loss) per share computations prepared in
accordance with SFAS No. 128.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996 1997 1998
------------------------------------ ---------------------------- ----------------------------
PER PER PER
SHARE INCOME SHARE INCOME SHARE
INCOME SHARES AMOUNT (LOSS) SHARES AMOUNT (LOSS) SHARES AMOUNT
----------- ------------- ------ --------- ------- ------ --------- ------- ------
(NUMERATOR) (DENOMINATOR)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic net income (loss) per
share..................... $47,476 488,296 $0.10 $(119,621) 490,407 $(0.24) $(190,006) 784,541 $(0.24)
======= ===== ========= ====== ========= ======
Effect of dilutive
securities
Stock options and shares
subject to repurchase..... 528 -- --
------- ------- -------
Diluted net income (loss)
per share................. $47,476 488,824 $0.10 $(119,621) 490,407 $(0.24) $(190,006) 784,541 $(0.24)
======= ======= ===== ========= ======= ====== ========= ======= ======
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------
1998 1999
------------------------------------ ---------------------------
PER PER
INCOME SHARE INCOME SHARE
(LOSS) SHARES AMOUNT (LOSS) SHARES AMOUNT
----------- ------------- ------ -------- ------- ------
(NUMERATOR) (DENOMINATOR)
<S> <C> <C> <C> <C> <C> <C>
Basic net income (loss) per share....................... $(60,266) 685,871 $(0.09) $(48,520) 985,816 $(0.05)
======== ====== ======== ======
Effect of dilutive securities
Stock options and shares subject to repurchase.......... -- --
------- -------
Diluted net income (loss) per share..................... $(60,266) 685,871 $(0.09) $(48,520) 985,816 $(0.05)
======== ======= ====== ======== ======= ======
</TABLE>

For all the periods subsequent to 1996, the Company has excluded all
outstanding stock options and shares subject to repurchase by ST from the
calculation of diluted net income (loss) per share under SFAS No. 128 because
all such securities are anti-dilutive for those periods. The total number of
shares excluded from the calculations of diluted net income (loss) per share
were 13,156,240 and 27,015,600 for the years ended December 31, 1997 and 1998,
respectively, and 14,586,920 and 16,201,840 for the six months ended June 30,
1998 and 1999, respectively. All amounts have been restated to reflect the
impact of the capital restructuring described in Note 26.

(O) COMPREHENSIVE INCOME

On January 1, 1998, the Company applied SFAS No. 130, "Reporting
Comprehensive Income" with respect to reporting and presentation of
comprehensive income and its components in a full set of financial statements.
Comprehensive income (loss) consists of net income (loss) and foreign currency
translation adjustments and is presented in the consolidated statements of
operations and comprehensive income (loss).

(P) CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments that are readily
convertible into cash and have original maturities of three months or less.

F-11
<PAGE> 106
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

(q) INVENTORIES

Inventories are stated at the lower of cost, determined on the weighted
average basis, or market (net realizable value.

(r) TECHNOLOGY LICENSE AGREEMENTS

The Company has entered into technology license agreements requiring the
payment of licensing fees and royalties. The agreed fees and royalties are
recorded as a liability and an intangible asset. The intangible assets are
amortized to results of operations on the straight-line basis over their
estimated useful lives. See Note 7.

(s) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is calculated on the straight-line method over the
following periods:

<TABLE>
<S> <C> <C>
Buildings.............................. - 20 years (or, if shorter, the remaining period of the
lease of the land on which the buildings are erected)
Mechanical and electrical - 10 years
installations........................
Equipment and machinery................ - 5 years
Office and computer equipment.......... - 2 to 5 years
</TABLE>

The Company capitalizes interest with respect to major assets under
installation and construction until such assets are ready for use. See Note 9
for details of capitalized interest. Repairs and replacements of a routine
nature are expensed, while those that extend the life of an asset are
capitalized.

Plant and equipment under capital leases are stated at the present value of
minimum lease payments. Plant and equipment held under capital leases and
leasehold improvements are amortized straight-line over the shorter of the lease
term or estimated useful life of the asset.

(t) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognised is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

(u) OPERATING LEASES

Rental payments under operating leases are expensed on a straight-line
basis over the periods of the respective leases.

(v) CONCENTRATION OF RISK

The Company is an independent foundry that fabricates integrated circuits
on silicon wafers for customers in the semiconductor industry. The five largest
customers of the Company accounted for

F-12
<PAGE> 107
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

61%, 48% and 43% of net revenue in the years ended December 31, 1996, 1997 and
1998, respectively and 43% and 45% of net revenue in the six months ended June
30, 1998 and 1999, respectively (see Note 20). The Company believes that the
concentration of its credit risk in trade receivables is mitigated substantially
by its credit evaluation process, credit policies and credit control and
collection procedures.

In addition, certain of the Company's treasury management activities are
undertaken by ST or carried out together with other companies in the ST Group.
The Company participates in a pooled cash management arrangement and places
short-term advances with other companies in the ST Group. The Company also
contracts substantially all of its forward purchases of foreign exchange with
ST, where required for the purpose of hedging future foreign currency
commitments. See Notes 3 and 22(f).

(w) SEGMENT DISCLOSURES

Disclosures on business segments are made under SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," which meets the
requirements of SAS 23 "Reporting Financial Information by Segment". Under SFAS
No. 131, a public company reports descriptive information about its reportable
operating segments. Operating segments, as defined, are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company operates in a
single reportable segment.

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents at December 31, 1997 and 1998 and June 30, 1998
and 1999 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ ------------------
1997 1998 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash at banks and in hand........................... $14,362 $ 6,747 $ 6,247 $13,015
Cash equivalents -- ST pooled cash.................. 9,423 92,872 8,203 34,533
------- ------- ------- -------
$23,785 $99,619 $14,450 $47,548
======= ======= ======= =======
</TABLE>

Certain of the Company's treasury management activities are undertaken by
ST or its affiliates. The Company participates in a pooled cash management
arrangement under which the Company may place surplus cash with ST as short-term
advances of less than three months.

4. ACCOUNTS RECEIVABLE

Trade accounts receivable at December 31, 1997 and 1998 and June 30, 1998
and 1999 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------- ------------------
1997 1998 1998 1999
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Trade receivables.................................. $108,592 $76,264 $81,555 $95,718
Allowance for doubtful accounts.................... (3,957) (4,979) (3,881) (9,444)
-------- ------- ------- -------
$104,635 $71,285 $77,674 $86,274
======== ======= ======= =======
</TABLE>

F-13
<PAGE> 108
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

Movements in the allowance for doubtful accounts are as follows:

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- -------------------
1996 1997 1998 1998 1999
------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Beginning................................ $ -- $ 7,175 $3,957 $3,957 $4,979
Utilized in period....................... (15) -- -- -- --
Charge (credit) for the period........... 7,493 (2,058) 993 (105) 4,465
Translation adjustment................... (303) (1,160) 29 29 --
------ ------- ------ ------ ------
Ending................................... $7,175 $ 3,957 $4,979 $3,881 $9,444
====== ======= ====== ====== ======
</TABLE>

Other receivables at December 31, 1997 and 1998 and June 30, 1998 and 1999
consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ ----------------
1997 1998 1998 1999
------- ------- ------ ------
<S> <C> <C> <C> <C>
Advances to suppliers................................. $ 7,901 $ 4,944 $ 280 $ 87
Loans to employees.................................... 1,050 1,097 1,003 1,686
Deposits.............................................. 1,665 466 368 530
Receivable from research partners..................... 12,855 3,333 2,304 --
Others................................................ 3,246 2,863 5,261 4,770
------- ------- ------ ------
$26,717 $12,703 $9,216 $7,073
======= ======= ====== ======
</TABLE>

5. INVENTORIES

Inventories at December 31, 1997 and 1998 and June 30, 1998 and 1999
consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ ------------------
1997 1998 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Raw materials....................................... $19,737 $ 6,279 $17,726 $ 1,899
Work in process..................................... 24,271 17,206 8,630 18,787
Consumable supplies and spares...................... 15,712 10,184 12,744 6,597
------- ------- ------- -------
59,720 33,669 39,100 27,283
Allowance for inventory obsolescence................ (458) (4,193) (2,166) (340)
------- ------- ------- -------
$59,262 $29,476 $36,934 $26,943
======= ======= ======= =======
</TABLE>

F-14
<PAGE> 109
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

Movements in the allowance for inventory obsolescence are as follows:

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- -------------------
1996 1997 1998 1998 1999
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Beginning.................................. $ 20 $ 654 $ 458 $ 458 $ 4,193
Utilized in period......................... (2,751) (1,467) -- -- (3,859)
Charge for the period...................... 3,380 1,114 3,744 1,717 6
Translation adjustment..................... 5 157 (9) (9) --
------- ------- ------ ------ -------
Ending..................................... $ 654 $ 458 $4,193 $2,166 $ 340
======= ======= ====== ====== =======
</TABLE>

6. INVESTMENT IN CSP AND SMP

The investment in CSP and SMP at December 31, 1997 and 1998 and June 30,
1998 and 1999 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------- -------------------
1997 1998 1998 1999
------- -------- ------- --------
<S> <C> <C> <C> <C>
Cost.............................................. $ 6,108 $ 79,786 $64,736 $ 99,663
Share of retained post-formation loss............. (1,272) (21,706) (8,101) (39,694)
Translation adjustments........................... 154 407 407 407
------- -------- ------- --------
$ 4,990 $ 58,487 $57,042 $ 60,376
======= ======== ======= ========
</TABLE>

CSP and SMP are semiconductor foundries providing wafer fabrication
services and technologies. The Company accounts for its 51% investment in CSP
and its 49% investment in SMP using the equity method. Because the minority
owners of CSP have certain approval or veto rights which allow them to
participate in management, CSP is not consolidated. Under the terms of the
shareholders agreements, the Company is committed to making an equity investment
in CSP of up to $215,429, of which $40,600 has been invested, and in SMP of up
to $122,200, of which $59,063 has been invested.

Under the shareholders' agreement with the majority shareholder of SMP, in
arriving at the share of net income attributable to the Company, the Company is
entitled to the margins from sales to customers directed to SMP by the Company,
after deducting 49% share of the overhead costs of SMP. Accordingly, SMP's net
results are not expected to be shared in the same ratio as the equity holding.
The Company accounts for its due share of SMP's net results in accordance with
the terms in the foregoing agreement.

CSP and SMP commenced recording of sales in the quarter ended June 30, 1999
which amounted to $17,894 and $3,512, respectively in that quarter.

F-15
<PAGE> 110
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

Shown below is aggregated summarized financial information for CSP and SMP:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------- ---------------------
1997 1998 1998 1999
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Current assets.................................. $ 596 $ 21,151 $ 56,082 $ 22,680
Technology license agreements................... -- -- -- 9,167
Property, plant and equipment................... 12,992 240,574 169,804 329,919
Short-term debt................................. -- (75,460) (65,925) (122,475)
Other current liabilities....................... (3,804) (38,642) (46,268) (42,339)
Long-term debt.................................. -- (31,000) -- (76,000)
Shareholders' equity............................ 9,784 116,623 113,693 120,952
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
----------------------- -------------------
1996 1997 1998 1998 1999
---- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenue...................................... $-- $ -- $ -- $ -- $21,406
Gross loss....................................... -- -- -- -- 11,366
Operating loss................................... -- 2,571 42,430 12,719 34,703
Net loss......................................... -- 2,494 41,256 13,788 36,234
</TABLE>

7. TECHNOLOGY LICENSE AGREEMENTS

Technology license agreements at December 31, 1997 and 1998 and June 30,
1998 and 1999 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997 1998 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Technology licenses, at cost.................... $ 31,660 $ 32,284 $ 34,412 $ 38,784
Accumulated amortization........................ (18,231) (25,368) (21,888) (34,810)
-------- -------- -------- --------
$ 13,429 $ 6,916 $ 12,524 $ 3,974
======== ======== ======== ========
</TABLE>

Future payments under the agreements are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997 1998 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Unconditional fixed obligations payable......... $ 36,750 $ 39,250 $ 39,250 $ 45,750
Total payments to date.......................... (22,980) (30,770) (25,480) (39,270)
-------- -------- -------- --------
13,770 8,480 13,770 6,480
-------- -------- -------- --------
Current installments (see note 14).............. 6,570 1,280 6,570 1,380
Non-current installments (see note 15).......... 7,200 7,200 7,200 5,100
-------- -------- -------- --------
$ 13,770 $ 8,480 $ 13,770 $ 6,480
======== ======== ======== ========
</TABLE>

8. DEVELOPMENT PROGRAM TERMINATION COSTS

During 1998, the Company discontinued its technology transfer and licensing
arrangement entered into for a development program which the Company decided to
terminate. In connection with the discontinuation of this development program,
certain equipment previously purchased and yet to be placed

F-16
<PAGE> 111
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

into production was identified by management in 1998 as redundant and to be
disposed of in the near term. The Company recorded a non-cash impairment loss of
$30,938 to adjust the carrying value of such equipment to $5,961, the estimated
fair value of such equipment less selling costs, and wrote off all unamortized
technology license costs of $838. The impaired equipment was removed from
service for all purposes at the time the impairment charge was recognized. The
Company is in the process of evaluating bids to purchase such equipment and
expects to sell it before the end of 1999. Additionally, the Company recorded a
$6,500 charge for a final cash settlement amount in 1999 for the termination of
the licensing arrangement.

9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 1997 and 1998 and June 30,
1998 and 1999 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------ ------------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
COST
Buildings................................. $ 93,782 $ 147,685 $ 146,671 $ 149,371
Mechanical and electrical installations... 198,641 268,606 260,008 266,233
Equipment and machinery................... 801,897 1,048,744 989,293 1,063,989
Office and computer equipment............. 59,336 63,112 64,072 64,322
Assets under installation and
construction............................ 215,738 11,555 70,897 75,011
---------- ---------- ---------- ----------
Total cost........................... 1,369,394 1,539,702 1,530,941 1,618,926
---------- ---------- ---------- ----------
ACCUMULATED DEPRECIATION
Buildings................................. 9,681 16,153 12,818 19,469
Mechanical and electrical installations... 41,273 70,502 54,627 81,374
Equipment and machinery................... 282,693 441,815 356,796 543,712
Office and computer equipment............. 19,251 29,262 24,860 33,263
---------- ---------- ---------- ----------
Total accumulated depreciation....... 352,898 557,732 449,101 677,818
---------- ---------- ---------- ----------
Property, plant and equipment (net)....... $1,016,496 $ 981,970 $1,081,840 $ 941,108
========== ========== ========== ==========
</TABLE>

Depreciation charged to results of operations amounted to $166,844 and
$219,900 for 1997 and 1998, and $100,054 and $133,174 for the six months ended
June 30, 1998 and 1999, respectively. Buildings consists of wafer plants,
including administrative offices, built on land licensed to ST and Technology
Parks Pte Ltd, and sub-leased to the Company. See Note 21.

Included in property, plant and equipment are assets acquired under capital
lease obligations with a cost and related accumulated depreciation of
approximately $25,300 and $11,900, respectively, at December 31, 1997, $24,000
and $16,000, respectively, at December 31, 1998, $25,600 and $14,600,
respectively, at June 30, 1998 and $24,000 and $18,500, respectively, at June
30, 1999.

Capitalized interest relating to property, plant and equipment amounted to
$6,300, $10,500 and $5,970 in the years ended December 31, 1996, 1997 and 1998,
respectively and $4,700 and $526 in the six months ended June 30, 1998 and 1999,
respectively.

F-17
<PAGE> 112
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

10. CAPITAL LEASES

Future minimum lease payments under the US dollar denominated capital
leases for equipment and machinery as of December 31, 1998 and June 30, 1999 are
as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ ------------------
1997 1998 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Payable in year ending December 31,
1998.............................................. $ 5,338 $ -- $ 2,669 $ --
1999.............................................. 5,363 5,363 5,363 2,694
2000.............................................. 6,387 6,387 6,387 6,387
2001.............................................. 8,106 8,106 8,106 8,106
------- ------- ------- -------
Total minimum lease payments........................ 25,194 19,856 22,525 17,187
Amounts representing interest at rates ranging from
5.90% to 6.06% per annum.......................... (3,371) (2,113) (2,715) (1,575)
------- ------- ------- -------
Present value of minimum lease payments............. 21,823 17,743 19,810 15,612
Less current installments of capital lease
obligations....................................... (4,078) (4,329) (4,201) (4,914)
------- ------- ------- -------
Obligations under capital leases, excluding current
installments...................................... $17,745 $13,414 $15,609 $10,698
======= ======= ======= =======
</TABLE>

The minimum lease payments are guaranteed by ST.

11. LONG-TERM DEBT

Long-term debt at December 31, 1997 and 1998 and June 30, 1998 and 1999
consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997 1998 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Singapore dollar loans at fixed rates of 4% to
4.25%......................................... $222,341 $408,277 $315,850 $392,626
Singapore dollar loans at floating rates........ 59,880 60,314 60,321 58,668
-------- -------- -------- --------
282,221 468,591 376,171 451,294
Less current installments....................... (9,213) (49,046) (9,280) (86,391)
-------- -------- -------- --------
Long-term debt, excluding current
installments.................................. $273,008 $419,545 $366,891 $364,903
======== ======== ======== ========
</TABLE>

All long-term debts are unsecured.

The fixed rate Singapore dollar loans are guaranteed by ST and contain
certain covenants which restrict the ability of the Company to pay dividends
without prior approval from the lender. The Company is not separately charged
for the guarantees by ST. The loans are repayable in semi-annual installments
and mature between 2002 and 2005.

The floating rate Singapore dollar loans comprise two loans of equal
amounts. Interest is charged at 2% above the lending bank's first tier savings
rate in respect of one loan (3.50% as of December 31, 1998; 3.13% as of June 30,
1999) and 1% above the arithmetic mean of Singapore inter-bank rates for
deposits quoted by specified banks to the lender (6.44% as of December 31, 1998;
3.25% as of June 30, 1999), respectively. The loans are repayable in June 2002
and February 2002 respectively. See note 22(f).

F-18
<PAGE> 113
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

Annual maturities of long-term loans as of December 31, 1998 and June 30,
1999 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ --------
<S> <C> <C>
Payable in year ending December 31, 1999.................... $ 49,046 $ 43,195
2000...................................................... 88,814 86,391
2001...................................................... 88,814 86,391
2002...................................................... 149,127 145,059
2003...................................................... 37,116 36,104
2004...................................................... 27,837 27,077
Thereafter................................................ 27,837 27,077
-------- --------
$468,591 $451,294
======== ========
</TABLE>

12. ACCRUED OPERATING EXPENSES

Accrued operating expenses at December 31, 1997 and 1998 and June 30, 1998
and 1999 consist of the following:

<TABLE>
<CAPTION>
1997 1998 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Accrual for employee bonuses and related expenses... $19,680 $14,732 $14,386 $22,606
Accrual for vacation liability...................... 1,942 2,237 2,313 2,409
Accrual for technology costs (see Note 22(g))....... 5,847 7,853 6,920 9,819
Unbilled raw materials.............................. 27,458 52,113 17,985 39,099
Accrual for interest costs.......................... 3,891 5,971 4,822 5,789
Others.............................................. 2,640 2,012 8,412 7,890
------- ------- ------- -------
$61,458 $84,918 $54,838 $87,612
======= ======= ======= =======
</TABLE>

Movements in accrual for technology costs are as follows:

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- ------------------
1996 1997 1998 1998 1999
--------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Beginning................................... $ 27,505 $4,261 $5,847 $5,847 $7,853
Charge (credit) for the period.............. (23,244) 1,586 2,006 1,073 1,966
-------- ------ ------ ------ ------
Ending...................................... $ 4,261 $5,847 $7,853 $6,920 $9,819
======== ====== ====== ====== ======
</TABLE>

13. ADDITIONAL CREDIT FACILITIES AND BANK OVERDRAFTS

As of June 30, 1999, the Company has unutilized banking facilities of
approximately $20,923 for short-term advances and bankers' guarantees and an
unutilized facility with ST of approximately $98,123.

The weighted average rate of interest payable on the bank overdrafts was
7.0% and 6.0% as of December 31, 1997 and 1998, and 8.0% and 6.0% as of June 30,
1998 and 1999, respectively.

F-19
<PAGE> 114
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

14. OTHER CURRENT LIABILITIES

Other current liabilities at December 31, 1997 and 1998 and June 30, 1998
and 1999 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ -----------------
1997 1998 1998 1999
------- ------- ------- ------
<S> <C> <C> <C> <C>
Obligations payable under technology license
agreements......................................... $ 6,570 $ 1,280 $ 6,570 $1,380
Customer deposits.................................... 16,277 22,795 62,513 76
Others............................................... 184 2,055 1,301 3,453
------- ------- ------- ------
$23,031 $26,130 $70,384 $4,909
======= ======= ======= ======
</TABLE>

Deposits are received from customers to secure the allocation of agreed
levels of wafer capacity. These non-interest bearing deposits are refundable at
the end of the agreed period of such allocated capacity, typically about five
years.

15. OTHER LIABILITIES

Other liabilities at December 31, 1997 and 1998 and June 30, 1998 and 1999
consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------- -----------------
1997 1998 1998 1999
------ ------- ------ -------
<S> <C> <C> <C> <C>
Obligations payable under technology license
agreements.......................................... $7,200 $ 7,200 $7,200 $ 5,100
Deferred grants (see below)........................... 1,225 2,873 1,003 1,753
Deferred gain on forward contracts.................... -- 20,012 -- 15,732
------ ------- ------ -------
$8,425 $30,085 $8,203 $22,585
====== ======= ====== =======
</TABLE>

The Company has obtained approval for funding of certain research and
development projects from the Economic Development Board of Singapore ("EDB"),
under the Research and Development Assistance Scheme ("RDAS") administered by
EDB. The program provides for funds to be disbursed to the Company over the
terms of the projects.

16. INCOME TAXES

The Company has been granted pioneer status under the Economic Expansion
Incentives (Relief from Income Tax) Act, Chapter 86 of Singapore (the "Act"),
for sub-micron technology manufacturing in four of its fabs, effective for ten
years from January 1, 1991, July 1, 1996 and January 1, 1998, and the earlier of
initial fab production date and December 31, 1999, respectively.

During the pioneer status period, the Singapore-resident income from
pioneer trade is exempt from income tax, subject to compliance with the
conditions stated in the certificate and the Act. Income derived from
non-pioneer trade during the pioneer period, however, is subject to income tax
at the prevailing enacted rate of tax.

In addition, two fabs have been granted post-pioneer status, which entitles
them to a concessionary tax rate of 10% for five years after the expiration of
their pioneer status in 2007 and 2008, respectively.

The tax-exempt profits arising from the pioneer trade can be distributed as
tax-exempt dividends which are not subject to Singapore income tax in the hands
of the holders of ordinary shares. Losses arising in the pioneer status period
are available for carryforward to be offset against profits arising in

F-20
<PAGE> 115
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

subsequent periods, including profits arising after the pioneer status period.
Profits arising during the pioneer status period offset any accumulated pioneer
loss carryforward balance. Pioneer loss carryforwards are available
indefinitely, subject to more than 50% of the Company's equity staying with the
same shareholders from the incurrence of the tax loss to its utilization.
However, there is no consolidated group taxation offset allowed between the
fabs. As of June 30, 1999, the Company has pioneer loss carryforwards of
$176,762.

The income tax expense for the years ended December 31, 1996, 1997 and 1998
and the six months ended June 30, 1998 and 1999 represents income tax payable on
non-pioneer trade income, principally interest income.

A reconciliation of the expected tax expense at the statutory rate of tax
to the actual tax expense is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income taxes computed at Singapore
statutory tax rate of 26%............. $ 12,431 $(31,009) $(49,177) $(15,528) $(12,660)
Pioneer status relief................... (12,110) -- -- -- --
Pioneer losses not recognized as
deferred benefit...................... -- 30,534 45,893 14,551 9,804
Non-deductible investee losses.......... -- -- 3,561 1,268 3,150
Settlement of prior years' tax claims... -- -- -- -- (880)
All other items, net.................... 16 830 588 252 414
-------- -------- -------- -------- --------
Income tax expense (benefit)............ $ 337 $ 355 $ 865 $ 543 $ (172)
======== ======== ======== ======== ========
</TABLE>

The pioneer status relief had the effect of increasing net income per
ordinary share by $0.02 for the year ended December 31, 1996.

As of December 31, 1997 and 1998 and as of June 30, 1998 and 1999, there
are no material deferred tax assets or liabilities since profits during the
pioneer status period are not taxable and all temporary differences are expected
to reverse within the pioneer status period. Accordingly, no deferred tax assets
or liabilities have been recognized.

17. SHARE CAPITAL

The Company's authorized share capital at June 30, 1999 was comprised of
3,076,923,079 ordinary shares of Singapore dollars S$0.26 par value each.

Share capital at December 31, 1997 and 1998 and June 30, 1998 and 1999
consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997 1998 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Issued share capital............................ $ 82,223 $160,272 $129,835 $160,475
Capital reduction (see below)................... 61,161 61,161 61,161 61,161
-------- -------- -------- --------
$143,384 $221,433 $190,996 $221,636
======== ======== ======== ========
</TABLE>

F-21
<PAGE> 116
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

On November 6, 1992, the Company reorganized its paid-up share capital by
the extinguishment of accumulated losses of $61,161 against the paid-up share
capital in a capital reduction sanctioned by the High Court of Singapore. The
capital reduction does not qualify as a quasi-reorganization under US GAAP and
accordingly has not been reflected in the financial statements.

Under Singapore law, all increases in share capital (including rights
issues) require prior shareholders' approval. Singapore law does not provide for
the issue of shares of no par value and, except with court approval, prohibits
the issue of shares at a discount to par value.

As of 30 June, 1999, the Company had 16,350,063 outstanding partly-paid
shares issued at an average price of S$1.20 under employee stock plans. See note
23.

The partly paid ordinary shares were issued under the 1995 and 1997
Employees' Share Ownership Plans. The subscription price of these partly paid
ordinary shares range from Singapore dollars S$0.93 to S$1.38 per share. The
expiration dates of the installment payments for these partly paid ordinary
shares range from November 2002 to April 2009.

18. ADDITIONAL PAID-IN CAPITAL

Additional paid-in capital as of December 31, 1997 and 1998 and June 30,
1998 and 1999 represents principally the excess of proceeds received from issues
of share capital (net of the costs of issue) over the par value of shares
issued, which under Singapore law must be credited to the share premium account.
The share premium may only be applied in paying up unissued shares to be issued
to shareholders, paying up in whole or in part the balance unpaid on shares in
issue, in writing off preliminary expenses and share and debenture issue
expenses and by provision for premiums payable on the redemption of redeemable
preferred shares. The Company has not utilized any amounts in the share premium
account for the above mentioned purposes.

19. RETAINED EARNINGS

Singapore law allows dividends to be paid only out of profits of the
Company, determined in accordance with Singapore GAAP. Shareholders of ordinary
shares are not liable for Singapore income tax on dividends paid by the Company
out of its tax exempt profits from pioneer activities.

20. BUSINESS SEGMENT DATA AND MAJOR CUSTOMERS

The Company operates in a single reportable segment, providing wafer
foundry services. All of the Company's products are manufactured and delivered
in Singapore.

The following table presents revenues by country of domicile of customer:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
USA............................... $303,532 $198,288 $265,398 $127,825 $230,080
Taiwan............................ 65,927 140,799 134,171 94,529 40,356
Singapore......................... 34,900 25,385 6,409 3,056 1,416
Others............................ 2,577 15,289 16,644 7,361 22,886
-------- -------- -------- -------- --------
$406,936 $379,761 $422,622 $232,771 $294,738
======== ======== ======== ======== ========
</TABLE>

F-22
<PAGE> 117
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

Revenues from major customers, as a percentage of total revenue, were as
follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------- --------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Customer A......................................... 0.1% 1.0% 9.6% 3.3% 12.4%
Customer B......................................... 9.8 14.0 7.6 9.7 10.0
Customer C......................................... 25.7 10.4 1.0 1.4 0.7
Customer D......................................... 3.1 14.6 9.3 15.8 1.3
Others............................................. 61.3 60.0 72.5 69.8 75.6
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>

The top five customers of the Company accounted for 61%, 48% and 43% of the
Company's net revenue in the years ended December 31, 1996, 1997 and 1998,
respectively and 43% and 45% of the Company's net revenue in the six months
ended June 30, 1998 and 1999, respectively.

As a result of such concentration of the customer base, loss or
cancellation of business from, or significant changes in scheduled deliveries or
decreases in the prices of products sold to, any of these customers could
materially and adversely affect the Company's results of operations or financial
position.

21. RELATED PARTY TRANSACTIONS

(a) ST

ST, one of Singapore's largest industrial conglomerates, is indirectly
wholly-owned by the Government of Singapore.

The Company transacts business with ST and its affiliates in the normal
course of their respective businesses, including ST Assembly Test Services Ltd
("STATS").

F-23
<PAGE> 118
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

In addition to the transactions with related parties disclosed in Notes 11,
the Company had the following significant transactions with related parties:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ST
Management fees.............................. $ 4,428 $ 5,719 $ 4,897 $2,306 $4,767
Reimbursement of expenses incurred on behalf
of the Company............................ 5,940 5,594 5,697 2,390 2,791
Rental for leasehold land from ST............ 1,435 2,128 2,020 740 1,164
Interest expense............................. 4,177 12,729 6,552 5,788 --
Affiliates of ST
Services purchased from STATS................ 8,376 13,261 22,700 7,964 8,648
Other services purchased..................... 2,297 3,034 1,362 1,484 717
Net revenue.................................. 33,597 20,917 6,247 1,713 1,313
Property, plant and equipment purchased...... 8,662 1,051 924 523 --
Other service income......................... 50 -- -- -- --
Building construction costs.................. 50,805 2,575 1,101 397 --
Interest expense............................. -- -- 2,310 -- 1
======= ======= ======= ====== ======
</TABLE>

The fabs of the Company are built on land held on long-term operating
leases from entities controlled by the Government of Singapore. Fab 1 is built
on land leased by the Company from Technology Parks Pte Ltd ("TPPL"), a private
company wholly-owned by Jurong Town Corporation ("JTC"), under a long-term lease
which expires in 2017, with an option, subject to certain conditions, to extend
by another 30 years. JTC is a statutory board established by the Singapore
government to develop and manage industrial estates in Singapore.

Fabs 2 and 3 occupy land leased by ST from JTC. The Company has entered
into sub-leases with ST in respect of the underlying land for the entire term of
the lease between ST and JTC. The leases expire in 2024 with an option, subject
to certain conditions, to extend for another 30 years. CSP's fab occupies land
leased by ST from JTC.

Rental rates on JTC and TPPL leases are subject to revisions at market
rates at periodic intervals in accordance with the rental agreements, with such
increases generally capped at 8% to 10% per annum.

ST provides management and corporate services to the Company. ST also
provides staff loans to senior management staff of the Company, including loans
related to subscription amounts associated with the employee share plans
described in Note 23. Management fees and expenses incurred on behalf of, or
allocated to, the Company by ST are charged to the Company under a service
agreement pursuant to which ST provides corporate support services to the
Company. The service agreement provides for the payment of an annual management
fee computed based on certain percentages of capital employed, revenue, manpower
and payroll. Short term financing is also provided by ST to the Company
(generally on 3 to 6 months renewable basis) using ST's cost competitive
corporate banking advantage in the banking community. Surplus funds are placed
with ST from time to time. Advances to and from ST bear interest at rates
comparable to rates offered by commercial banks in Singapore. The Company also
participates with ST in a cash management program managed by a bank. Under the
program, cash balances are pooled and daily cash surpluses or shortfalls may, on
a short-term basis, be lent to or borrowed from other ST

F-24
<PAGE> 119
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

affiliates participating in the arrangement at prevailing inter-bank rates. The
Company controls its bank accounts, subject to such program.

Tritech Microelectronics Ltd ("Tritech"), an ST affiliate and a fabless
designer of semiconductor products, was previously a major customer of the
Company. The sales to Tritech were made on substantially the same terms as those
available to third parties for similar products and volumes committed. The
Company has not made sales to Tritech since it was placed under judicial
management on July 2, 1999.

At December 31, 1997 and 1998 and June 30, 1998 and 1999, there were the
following amounts due from or to ST and its affiliates.

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------- ------------------
1997 1998 1998 1999
-------- ------- -------- ------
<S> <C> <C> <C> <C>
Amounts due from ST
Other receivables.............................. $ -- $ -- $ -- $ 8
Amounts due from ST affiliates
Accounts receivable
Trade, net of allowance for doubtful
accounts.................................. 2,038 1,481 265 856
Others...................................... 805 1,110 1,232 1,273
-------- ------- -------- ------
$ 2,843 $ 2,591 $ 1,497 $2,137
======== ======= ======== ======
Amounts due to ST
Short-term debt................................ 326,799 -- 123,765 1,877
Other current liabilities...................... 4,713 4,654 10,030 411
Amounts due to ST affiliates
Accounts payable, trade........................ 3,249 4,916 4,238 5,278
Other current liabilities...................... 1,493 1,037 530 1,008
-------- ------- -------- ------
$336,254 $10,607 $138,563 $8,574
======== ======= ======== ======
</TABLE>

The weighted average rate of interest payable on the short-term debt from
ST was 4.63% as of December 31, 1997, and 6.00% and 2.43% as of June 30, 1998
and 1999, respectively.

(b) LEASES

Rental expense paid to ST for the years ended December 31, 1996, 1997 and
1998 was $1,435, $2,128 and $1,646, respectively, and $740 and $1,164 for the
six months ended June 30, 1998 and 1999, respectively.

F-25
<PAGE> 120
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

Minimum future rental payments on non-cancellable operating leases of
factory land leased from ST as of December 31, 1998 and June 30, 1999 are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ --------
<S> <C> <C>
Payable in year ending December 31,
1999...................................................... $ 1,494 $ 726
2000...................................................... 1,494 1,453
2001...................................................... 1,494 1,453
2002...................................................... 1,494 1,453
2003...................................................... 1,494 1,453
2004...................................................... 1,494 1,453
Thereafter................................................ 28,697 27,844
------- -------
$37,601 $35,835
======= =======
</TABLE>

22. COMMITMENTS AND CONTINGENCIES

(a) LEASES

Rental expense, excluding amounts payable to ST disclosed in Note 21(a),
for the years ended December 31, 1996, 1997 and 1998 was $711, $2,058 and
$1,949, respectively, and $948 and $1,199 for the six months ended June 30, 1998
and 1999, respectively.

Minimum future rental payments on non-cancellable operating leases of
apartments, excluding amounts payable to ST disclosed in Note 21(b), as of
December 31, 1998 and June 30, 1999 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ --------
<S> <C> <C>
Payable in year ending December 31,
1999...................................................... $1,794 $ 775
2000...................................................... 1,168 1,725
2001...................................................... 859 986
2002...................................................... 211 238
2003...................................................... 211 238
2004...................................................... 211 238
Thereafter................................................ 2,750 3,035
------ --------
$7,204 $ 7,235
====== ========
</TABLE>

(b) TECHNOLOGY PARTNER AGREEMENT

In addition to the technology license agreements described in Note 7, the
Company has entered into an agreement with a technology partner under which the
Company is required to allocate wafer capacity, as part of the consideration for
the process technology the partner transferred and licensed to the Company. The
agreement will expire in 2002.

F-26
<PAGE> 121
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

The Company entered into subscription and participation agreements with
seven customers (the "Equity Investor Customers"), a technology partner and an
investor to raise equity for the establishment of a fab. Under the agreements,
the Equity Investor Customers, technology partner and the investor subscribed
for shares with the right to subscribe for new shares pro-rata to their interest
in the Company. The technology partner has the right to subscribe for $6,000
worth of shares in the Company, at a subscription price and on terms to be
mutually agreed between the Company and the technology partner. These rights,
which are still unexercised, will terminate upon the termination of the
subscription agreement. The Company and the technology partner intend to
terminate the subscription rights upon the initial public offering of the
Company. As of December 31, 1998 and June 30, 1999, the Company had 72,470,983
shares outstanding under these agreements, which had been exercised between
$2.03 and $2.44 per share in cash. 69,339,367 of these shares were issued with
an option to require ST to repurchase outstanding shares at a purchase price
based on the net tangible asset value of the Company at the date of exercise of
the option. The option is exercisable after the tenth anniversary of the date of
the subscription agreement, where no initial public offering has taken place by
that date.

The agreements provide the Equity Investor Customers and technology partner
with rights to wafer capacity.

(d) DEPOSIT AGREEMENTS

The Company entered into deposit and supply agreements with six customers
under which the customers are required to maintain deposits with the Company to
secure wafer capacity. As of June 30, 1999, deposits held by the Company
amounted to $42,805. These agreements, expiring on December 31, 2000 and
December 31, 2002, require the Company to make available capacity to customers
over the terms of the agreements.

(e) CAPITAL EXPENDITURE

The Company had the following capital commitments as of December 31, 1997
and 1998 and June 30, 1998 and 1999:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997 1998 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Contracts for capital expenditure............... $399,954 $362,761 $649,165 $407,078
</TABLE>

(f) FORWARD FOREIGN EXCHANGE CONTRACTS

The Company had the following notional amounts of forward foreign exchange
contracts as of December 31, 1997 and 1998 and June 30, 1998 and 1999:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------- -------------------
1997 1998 1998 1999
------- -------- ------- --------
<S> <C> <C> <C> <C>
Forward foreign exchange contracts................ $42,550 $522,087 $21,329 $511,113
</TABLE>

In conjunction with the change in the functional currency effective July 1,
1998, the Company entered into forward foreign exchange contracts to hedge the
principal and interest obligations associated with its Singapore dollar
denominated loans with the effect of redenominating them to US dollars.

F-27
<PAGE> 122
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
identified foreign currency risks (prior to July 1, 1998, principally Japanese
yen and US dollars; subsequent to June 30, 1998, principally Japanese yen and
Singapore dollars). See Note 2(e). Foreign currency forward contracts are
generally used to reduce the potential impact of increases in foreign currency
exchange rates on existing long-term debt, and to a lesser extent are used to
hedge foreign currency purchase commitments. The term of forward contracts
rarely exceeds five years. Foreign currency forward contracts used to hedge firm
commitments are carried at market value and are recorded as other assets or
other liabilities in the accompanying consolidated balance sheet. Changes in
market values of these agreements are deferred, and included in the basis of the
hedged asset upon purchase.

The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its foreign currency exchange contracts. The Company
anticipates, however, that counterparties will be able to fully satisfy their
obligations under the contracts. The Company does not obtain collateral or other
security to support financial instruments subject to credit risk but monitors
the credit standing of counterparties. See also Note 2(v).

(g) CONTINGENCIES

As is typical in the semiconductor industry, the Company has from time to
time received communications from third parties asserting patents that cover
certain of the Company's technologies and alleging infringement of certain
intellectual property rights of others. The Company has acquired certain
technology licenses for use in its business and may seek to obtain other
licenses in the future. There can be no assurance that the Company will be able
to obtain such future licenses on commercially reasonable terms, or at all.

The Company has accrued a liability for, and charged to its results of
operations in the periods presented, the estimated costs of obtaining such
licenses for third party technology. During 1996, the Company changed its
estimate of costs to obtain certain licenses and recorded a reduction in accrued
liabilities for technology licences of $23,244. The amounts so accrued were
$5,847 and $7,853 as of December 31, 1997 and 1998, respectively and $6,920 and
$9,819 as of June 30, 1998 and 1999, respectively. No assurance can be given
that such provisions are adequate.

23. SHARE OPTIONS AND INCENTIVE PLANS

The Company determines the fair market values of the ordinary shares
underlying each option grant by averaging (i) discounted cashflow valuation;
(ii) last twelve months' revenue multiplied by a composite industry comparable
revenue to market capitalization factor and (iii) book value at each grant date
multiplied by a composite industry comparable book value to market
capitalization factor.

(a) 1995 OWNERSHIP PLAN

Effective September 28, 1995, the Company adopted the Chartered
Semiconductor Manufacturing Employees' Share Ownership Plan (the "1995 Ownership
Plan"). The plan is administered by a committee nominated by the directors and
provides for the grant of options to employees and directors of the Company and
certain of its affiliates. The exercise period of the options was 30 days and
the subscription price for each share which may be purchased upon exercise of
the options was determined by the committee but could not be less than Singapore
dollars S$0.80. The subscription price was payable in installments, the first
installment of 5% of the subscription price being payable upon exercise of the
option, the second installment of 95% of the subscription price being payable
over a period between the second

F-28
<PAGE> 123
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

and fifth years following the date the option is granted, however, such
cumulative second installment due may be deferred and payable at each successive
anniversary date. Interest was payable on outstanding installments at 8% per
annum, but in 1997, the plan was revised to allow ST to bear all interest on
behalf of the employees.

Where employees failed to pay the second installment within seven years of
the date of grant of the option, the employees were required to sell their
shares to an ST affiliate at the greater of 5% of the market value of the
shares, as determined by the committee, or 5% of the net asset value of the
shares. Employees leaving the employment of the Company were entitled to retain
those shares which had been fully paid for, while shares not fully paid for were
either required to be sold to the ST affiliate or, in certain circumstances,
were allowed to be fully paid. Shares which were not fully paid for could not be
sold. Shares which were fully paid for were required to be offered to the ST
affiliate at the greater of the market value of the shares, as determined by the
committee, or net asset value of the shares before they could be sold to any
other party.

The 1995 Ownership Plan was accounted for in accordance with variable plan
accounting.

Total compensation expense (income) recognized for stock-based compensation
under the plan for the years ended December 31, 1996, 1997 and 1998 were $332,
$1,853 and $(2,609) respectively and for the six months ended June 30, 1998 and
1999 were $(1,362) and $2,765 respectively.

Information for December 31, 1996, 1997 and 1998 and June 30, 1998 and 1999
is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Shares outstanding at beginning of period (in
thousands)..................................... 7,898 13,451 12,859 12,859 11,436
Shares granted during period (in thousands)...... 5,553 1,103 -- -- --
Shares outstanding at period end (in
thousands)..................................... 13,451 12,859 11,436 12,658 11,009
Subscription price for shares issued in 1995
at............................................. $ 0.77 $ 0.77 $ 0.77 $ 0.77 $ 0.77
Subscription price for shares issued in 1996
from........................................... $ 0.92 $ 0.92 $ 0.92 $ 0.92 $ 0.92
to............................................. $ 0.98 $ 0.98 $ 0.98 $ 0.98 $ 0.98
Subscription price for shares issued in 1997
at............................................. $ -- $ 0.83 $ 0.83 $ 0.83 $ 0.83
Weighted average grant date fair value of
options........................................ $ 1.36 $ 1.31 $ -- $ -- $ --
Subscription receivable at period end............ $10,943 $10,565 $ 9,247 $10,307 $ 8,866
</TABLE>

The fair value of option grants is estimated using the Black-Scholes option
pricing model with the following assumptions used: dividend yield of 0% and
expected lives of 10 years. The weighted average expected volatility used for
option grants was 60.0% and 57.0% in 1996 and 1997, respectively. The weighted
average risk free interest rate used was 6.59% and 6.84% in 1996 and 1997,
respectively.

(b) 1997 OWNERSHIP PLAN

Effective November 27, 1997, the Company adopted the Chartered
Semiconductor Manufacturing Employees' Share Ownership Plan 1997 (the "1997
Ownership Plan"). The terms of the 1997 Ownership Plan are substantially similar
to the 1995 Ownership Plan except that (i) interest was not charged on
outstanding and unpaid installments and (ii) the cumulative unpaid second
installments due could be deferred and paid at each successive anniversary date
but were not due until ten years after the date of grant of the option.

The 1997 Ownership Plan was accounted for in accordance with variable plan
accounting.

F-29
<PAGE> 124
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

Total compensation expense (income) recognized for stock-based compensation
under the plan for the years ended December 31, 1997 and 1998 were $171 and
$(171) respectively and for the six months ended June 30, 1998 and 1999 were $29
and $485 respectively.

Information for December 31, 1997 and 1998 and June 30, 1998 and 1999 is as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------- ---------------
1997 1998 1998 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares outstanding at beginning of period (in thousands).... -- -- -- 4,021
Shares granted during period (in thousands)................. 2,792 2,549 1,231 1,207
Shares outstanding at period end (in thousands)............. -- 4,021 2,790 5,339
Subscription price for shares issued in 1997 at............. $ 0.74 $ 0.74 $ 0.74 $ 0.74
Subscription price for shares issued in 1998 from........... -- $ 0.59 $ 0.84 $ 0.59
to........................................................ -- $ 0.84 $ 0.84 $ 0.84
Subscription price for shares issued in 1999 at............. -- -- -- $ 0.55
Weighted average grant date fair value of options........... $ 1.50 $ 1.13 $ 1.30 $ 1.05
Subscription receivable at period end....................... -- $3,094 $2,055 $3,865
</TABLE>

The fair value of option grants is estimated using the Black-Scholes option
pricing model with the following assumptions used: dividend yield of 0% and
expected lives of 10 years. The weighted average expected volatility used for
option grants was 55.0% and 70.0% in 1997 and 1998, respectively, and 67.0% and
71.0% in the six months ended June 30, 1998 and 1999, respectively. The weighted
average risk free interest rate used was 5.96% and 5.29% in 1997 and 1998,
respectively and 5.84% and 5.52% in the six months ended June 30, 1998 and 1999,
respectively.

Effective March 30, 1999, the Company adopted the Chartered Semiconductor
Manufacturing Ltd Share Ownership Plan 1999 (the "1999 Ownership Plan") which
provides for a maximum of 107 million shares (subject to adjustment under the
plan) to be reserved for option grants. Options granted under the plan may
include nonstatutory options as well as incentive stock options intended to
qualify under Section 422 of the United States Internal Revenue Code.

The plan is administered by a committee appointed by the directors.
Employees, outside directors and consultants are eligible for the grant of
options except for (i) employees of affiliates, and outside directors and
consultants, who are not eligible for the grant of incentive stock options; and
(ii) employees, outside directors and consultants of affiliates resident in the
United States, who are not be eligible for the grant of options.

The exercise price of an incentive stock option is the fair market value of
the shares at the date of the grant. The exercise price of nonstatutory options
cannot be less than 85% of the fair market value of the shares at the date of
the grant. In certain circumstances, the exercise price may be higher than the
fair market value but in no event will the exercise price be below the par value
of the share.

Option periods do not exceed 10 years from the date of grant. Upon leaving
the employment of the Company, outstanding options remain exercisable for a
specified period.

During the six months ended June 30, 1999, the Company granted options to
subscribe for 6,074,017 shares at an exercise price of Singapore dollars $0.93
(U.S. $0.54). The grant date fair value of the shares was estimated to be U.S.
$0.68. The options vest over five years and expire on dates ranging from April
2004 to April 2009. All the options were outstanding as of June 30, 1999. The
1999 Ownership Plan is

F-30
<PAGE> 125
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

accounted for in accordance with fixed-plan accounting under APB 25. Total
compensation cost with respect to this option grant was $770, which will be
recognized over the vesting period. Total compensation expense recognized for
the six months ended June 30, 1999 totalled $39.

The fair value of the 1999 option grant is estimated using the
Black-Scholes option pricing model with the following assumptions used: dividend
yield of 0% risk free interest rate of 5.52%, expected volatility of 72% and
expected lives of 10 years. The weighted average fair value of options granted
estimated on the date of grant using the Black-Scholes option pricing model was
$0.77.

Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS 123, the Company's net income would
have been reduced or increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- -------------------
1996 1997 1998 1998 1999
------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net income (loss)
As reported.............................. $47,476 $(119,621) $(190,006) $(60,266) $(48,520)
Pro forma................................ 46,250 (119,790) (195,464) (62,864) (46,809)
Basic net income (loss) per share
As reported.............................. 0.10 (0.24) (0.24) (0.09) (0.05)
Pro forma................................ 0.09 (0.24) (0.25) (0.09) (0.05)
Diluted net income (loss) per share
As reported.............................. 0.10 (0.24) (0.24) (0.09) (0.05)
Pro forma................................ 0.09 (0.24) (0.25) (0.09) (0.05)
</TABLE>

24. FAIR VALUES OF FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1997 1998
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents.......................... $ 23,785 $ 23,785 $ 99,619 $ 99,619
Accounts receivable................................ 131,352 131,352 83,988 83,988
Amounts due from ST and affiliates................. 3,509 3,509 9,254 9,254
Liabilities:
Accounts payable................................... 112,017 112,017 31,359 31,359
Bank overdrafts...................................... 1,378 1,378 3,082 3,082
Amounts due to ST and affiliates................... 336,254 336,254 10,607 10,607
Long-term debt..................................... 282,221 247,687 468,591 458,031
Technology obligations payable..................... 7,200 5,920 7,200 6,879
Derivatives:
Forward foreign exchange........................... -- (4,026) 4,199 42,620
</TABLE>

F-31
<PAGE> 126
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
JUNE 30,
---------------------------------------------
1998 1999
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents.......................... $ 14,450 $ 14,450 $ 47,548 $ 47,548
Accounts receivable................................ 86,890 86,890 93,347 93,347
Amounts due from ST and affiliates................. 5,349 5,349 12,578 12,578
Liabilities:
Accounts payable................................... 48,958 48,958 38,114 38,114
Bank overdrafts.................................... 5,043 5,043 1,210 1,210
Amounts due to ST and affiliates................... 138,563 138,563 8,574 8,574
Long-term debt..................................... 376,171 340,212 451,294 444,408
Technology obligations payable..................... 7,200 6,118 5,100 4,921
Derivatives:
Forward foreign exchange........................... -- 7,200 4,154 35,303
</TABLE>

Cash and cash equivalents, bank overdrafts, amounts owing by ST and
affiliates, accounts receivable and accounts payable. The carrying amounts
approximate fair value in view of the short term nature of these balances.

Long-term debt. The fair value is based on current interest rates
available to the Company for issuance of debts of similar terms and remaining
maturities.

Technology obligations payable. The fair value is based on the discounted
present value of future payment obligations.

Forward foreign exchange contracts. The fair value is estimated by
reference to market quotations for forward contracts with similar terms adjusted
where necessary for maturity differences, and was a net asset (liability) of
approximately $(4,026) and $42,620, respectively, at December 31, 1997 and 1998
and $7,200 and $35,303, respectively, at June 30, 1998 and 1999.

Limitations. Fair value estimates are made at a specific point in time,
and are based on relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve uncertainties
and matters of significant judgement and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.

25. RECENT CHANGES IN U.S. GAAP

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133, as recently amended, is effective for
fiscal years beginning after June 15, 2000. Management believes the adoption of
SFAS No. 133 will not have a material effect on the Company's financial position
or results of operations.

F-32
<PAGE> 127
CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998 AND JUNE 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

26. SUBSEQUENT EVENT

At an extraordinary general meeting of shareholders held on September 13,
1999, the first stage of a restructuring of the Company's capital was approved.
The first stage of the restructuring involves the issuance of one additional
fully paid A ordinary share and the cancellation of 20 partly-paid A ordinary
shares for every 20 partly paid A ordinary shares. The first stage of the
restructuring was approved by the High Court of Singapore and was effective on
September 30, 1999. Subsequently, as part of the second stage of the capital
restructuring, the shareholders of the Company on October 14, 1999 approved the
following:

- cancellation of unissued A ordinary shares and B ordinary shares and the
redesignation of all issued A ordinary shares and B ordinary shares as
one class of ordinary shares;

- a share split which results in each ordinary share with a par value of
S$0.4888 being sub-divided into 1.88 ordinary shares with a par value of
S$0.26 each; and

- adoption of new Articles of Association.

All share and per share amounts have been presented herein to reflect the
impact of this capital restructuring.

F-33
<PAGE> 128

ANNEX A

THE REPUBLIC OF SINGAPORE

The information in this section has been extracted from published sources
and has not been independently verified by Chartered.

THE COUNTRY

The Republic of Singapore is situated on the southern tip of the Malay
Peninsula and has a total land area of approximately 648.1 sq. km. Singapore has
a population of about 3,865,600 of which approximately 77% are Chinese, 14% are
Malays, 7.6% are Indians and 1.4% are of other ethnicities. The official
languages of Singapore are Malay, Mandarin, Tamil and English. The national
language is Malay. English is the language of administration and the predominant
language of commerce. The population has a literacy rate of approximately 93%.

Singapore was established as a trading station by Sir Thomas Stamford
Raffles of the East India Company in 1819. In 1826, Singapore, along with Penang
and Malacca, became a British Crown Colony under the name of "Straits
Settlements." Following World War II, Singapore became a separate Crown Colony
while Penang and Malacca were incorporated into the Federation of Malaya. In
June 1959, Singapore became a self-governing democracy within the British
Commonwealth and in June 1963, joined the Federation of Malaya, Sarawak and
North Borneo to form Malaysia. Singapore became a sovereign, independent nation
on August 9, 1965 after separating from Malaysia.

Singapore is a republic with a parliamentary system of government.
Singapore maintains friendly ties with many nations. It maintains close ties
with other Southeast Asian countries, through bilateral relationships and
through its membership in the economic and political association known as the
Association of Southeast Asian Nations or Asean. Singapore enjoys good relations
with the United States, China, Japan and Western European nations. Closer
relations between Singapore and Russia and other Eastern European countries are
also being developed. Singapore is a member of the United Nations as well as
such international organizations as the International Monetary Fund, the
International Bank for Reconstruction and Development, the Asian Development
Bank, the Asia-Pacific Economic Cooperation and the British Commonwealth.
Singapore is a signatory to the General Agreement on Tariffs and Trade and a
member of the World Trade Organization.

THE ECONOMY

Singapore has an urban economy whose largest sectors are manufacturing,
finance and trade. Given the small size of its economy, Singapore produces goods
and services for external markets. Exports in value terms amount to some 130% of
gross domestic product, or GDP. Singapore does not have any significant natural
resources, other than a deep water harbor. However, a strategic geographical
location, together with a well developed infrastructure and political stability,
have made it an international business and financial center.

Singapore has enjoyed strong economic growth for more than a decade. Real
GDP grew at an average annual rate of 9.3% between 1987 and 1997. The economy
was in mild recession in 1998, with output contracting about 1.5% in each of the
last two quarters of the year. But for the year, was up 0.3%. The economy's
recovery this year has been stronger and earlier than expected. GDP grew 0.8%
year-over-year in the first quarter of this year; private economists have
projected stronger growth of 4 to 5% for the second quarter.

Singapore has achieved a high level of economic development. Per capita
income, in Singapore dollar terms has risen from S$2,800 in 1970 to S$37,800 in
1997 before falling to $36,538 last year; representing annual gains of about 10%
compounded. In US dollars, the increase in per capita income has been even
greater, 12% per annum, due to the steady appreciation of the Singapore dollar
over the period.

A-1
<PAGE> 129

In 1975, it took S$2.50 to buy one US$1 and S$5.00 to buy L1 sterling.
Today, it takes about S$1.68 to buy US$1 and S$2.69 to buy L1 (i.e., Singapore's
purchasing power has gained tremendously, giving its residents greater command
over goods and services abroad).

The following table sets forth key economic indicators of the Singapore
economy for 1994 to 1998.

<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999(1)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
GDP at 1990 market prices (S$m)........... 95,209 102,982 110,734 120,713 121,130 32,053
% change from prior year................ 11.4% 8.2% 7.5% 9.0% 0.3% 6.7%
GDP at current prices (S$m)............... 106,577 118,424 128,892 142,361 141,242 N/A
% change from prior year................ 14.6% 11.1% 8.8% 10.4% -0.8% N/A
Per capita GDP (S$)....................... 31,686 34,153 35,685 38,098 36,538 N/A
Consumer Price Index (% change)........... 3.1% 1.7% 1.4% 2.0% -0.3% 0.1%
Unemployment (%).......................... 2.0% 2.0% 2.0% 1.8% 3.2% 4.6%
Total demand (%).......................... 15.3% 12.6% 8.8% 7.9% -5.0% 6.6%
Domestic demand (%)....................... 4.0% 9.0% 12.1% 10.2% -5.1% 5.8%
External demand (%)....................... 20.5% 14.0% 7.6% 7.0% -4.9% 6.9%
</TABLE>

- ---------------
(1) Through second quarter ended, June 30, 1999.

Source: Department of Statistics; Monetary Authority of Singapore, 1999.

A-2
<PAGE> 130

ANNEX B

THE SECURITIES MARKET OF SINGAPORE

SINGAPORE STOCK EXCHANGE LIMITED

The SES was incorporated on May 24, 1973. The SES is the only securities
exchange in Singapore and is the leading organized market for debt and equity
securities of Singapore companies. The SES operates two trading facilities: the
Main Board and the Singapore Stock Exchange Dealing and Automated Quotation
System or SESDAQ. The securities of certain non-Singapore companies listed on
foreign stock exchanges are traded through the SES on an over-the-counter market
known as "CLOB International." Trading on the SES is effected on a computerized
quotation system known as the Central Limit Order Book, or CLOB, Trading System.
Most trades on the Main Board and SESDAQ are executed on a "ready" basis, which
generally requires delivery to be made seven calendar days after the transaction
date and payment to be made within 24 hours of the due date of delivery.

As of June 30, 1999, the SES had a membership of 30 stockbroking firms, 24
of which are domestic member firms and seven are international members. It also
has a governing committee composed of four elected stockbroking members and five
members who are appointed by the elected members, with the approval of the
Monetary Authority of Singapore, or MAS, to represent interests outside the
stockbroking community. The SES's rules have been instituted with the approval
of the Minister for Finance, and its policies and operations are subject to MAS
supervision.

The following table sets forth, for the periods indicated, certain
information with respect to the SES.

<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total capitalization(1) (S$million).......... 256,124 282,551 255,862 329,268 263,168
Annual trading value(2) (S$million).......... 123,520 83,866 86,722 110,462 96,982
Annual trading volume(2) (million shares).... 45,540 33,919 30,512 47,362 69,648
Number of listed companies (SES Main
Board)..................................... 229 248 266 294 307
</TABLE>

- ---------------
(1) SES Mainboard.

(2) Includes CLOB International, excludes SESDAQ. 1997 and 1998 figures include
non-Singapore dollar trades.

Source: SES Fact Book, 1998, 1999.

REPORTING REQUIREMENTS

An SES-listed company is required under the SES Listing Manual to make
immediate announcements on certain matters to the SES for immediate release.
These matters include: any proposed alteration in the Memorandum and Articles of
Association; any appointments or resignations of its directors, chief executive
officer, general manager (or other executive officers of equivalent rank),
registrar or auditors; the date, time and place of any general meeting and
resolutions put to the general meeting, whether or not the resolutions were
passed; certain acquisitions or disposals by the SES-listed company (for
example, acquisition of shares resulting in a company becoming a subsidiary of
the SES-listed company or acquisition or disposal of shares or assets where, for
instance, the value of the assets acquired or disposed exceeds 5% of the assets
of the SES-listed company and its subsidiaries); and any recommendation or
declaration of a dividend, the rate amount per share and date of payment. In
particular, the SES-listed company is obligated to release to the SES half
yearly consolidated financial statements and annual financial statements as soon
as available and in any event not later than three months after the expiry of
the relevant half year or financial year. The financial statements are to be
prepared in the form set out in the SES Listing Manual and, in respect of the
half year financial statements, must include a review of the performance of the
SES-listed company, setting out any material factors affecting the earnings or
turnover of the SES-listed company and the group and a commentary on

B-1
<PAGE> 131

current year prospects and, in respect of the full year financial statements,
must include a breakdown of the group turnover and profit by product or business
activity and by geographical location for the financial year reported on and the
previous year and a commentary on current year's prospects, including factors
likely to influence the future prospects of the SES-listed company.

An SES-listed company is further required to issue an annual report to its
members and the SES within six months from the end of its financial year. The
annual report must contain the information set out in the Listing Manual
including: (i) a review of the operating and financial performance of the SES-
listed company and its principal subsidiaries in the last financial year and
since the end of the last financial year; (ii) a statement of the interests of
directors in the shares of the SES-listed company and material contracts
involving directors' interests; and (iii) its annual audited accounts.

An SES-listed company is required to disclose to the SES for public release
any material information of a factual nature relating to the group which is
necessary to avoid the establishment of a false market in its shares or which
would be likely materially to affect the price of its securities (for example,
the entry into a joint venture, the borrowing of a significant amount of funds,
significant litigation).

REGULATION

The Singapore securities industry is overseen primarily by the MAS. The
Securities Industry Act, or the Act, provides that the SES must obtain the
approval of the MAS for all changes in the rules governing the SES and its
member companies and the listing rules, and that dealers, investment advisors
and their representatives may only operate under a license granted by the MAS.
The Act prohibits a variety of fraudulent trading practices.

The MAS is empowered by the Act to conduct investigations whenever it has
reason to suspect that a person has committed an offense under the Act or has
been guilty of fraud or dishonesty in relation to a dealing in securities. The
MAS has wide powers to compel, under conditions of secrecy, the production of
books and disclosure of other information.

The Securities Industry Council, or SIC, is an advisory body established in
1973 under the Act The Minister for Finance appoints representatives from both
the private and public sectors to be members of the SIC. The SIC advises the
Minister for Finance on all matters relating to the securities industry.

MARKET INDICES

There are many published indices which track the performance of securities
listed on the Main Board. The most commonly used index is the Straits Times
Industrial Index, or STII. The STII tracks 30 industrial and commercial
concerns, all of which are Singapore incorporated companies. The STII is not
weighted. Another index used to measure the performance of the SES Main Board is
the SES All Share Index. The SES All Share Index is a capitalization-weighted
index of all stocks traded on the Main Board, and is designed to provide a
measure of the overall price movement in the stock market. The Index was
developed with a base value of 100 as of January 2, 1975.

The following table sets forth the high close, low close and year-end
levels of the STII and the SES All Share Index for each of the periods
indicated.

<TABLE>
<CAPTION>
STII SES ALL SHARE INDEX
------------------------------------- -------------------------------------
PERIOD END PERIOD END
HIGH CLOSE LOW CLOSE CLOSE HIGH CLOSE LOW CLOSE CLOSE
---------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1994.................. 2,471.90 2,036.30 2,239.56 641.61 506.84 533.57
1995.................. 2,287.42 1,916.94 2,266.54 558.94 472.90 555.39
1996.................. 2,218.45 2,176.52 2,216.79 540.77 525.39 513.49
1997.................. 1,753.63 1,514.83 1.529.84 455.71 414.48 425.94
1998.................. 1,553.75 805.04 1,392.73 437.98 253.20 382.51
</TABLE>

- ---------------
Source: SES Fact Book.

B-2
<PAGE> 132

[Description of inside back cover artwork: The back cover will contain a
description of our electronic design automation ("EDA") and intellectual
property qualification process. It will also contain graphics showing our EDA
program and customer teams.]
<PAGE> 133

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225,000,000 ORDINARY SHARES
DIRECTLY OR IN THE FORM OF AMERICAN DEPOSITARY SHARES

CHARTERED SEMICONDUCTOR MANUFACTURING LTD

CHARTERED LOGO

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

PROSPECTUS

OCTOBER 29, 1999
------------

SALOMON SMITH BARNEY

CREDIT SUISSE FIRST BOSTON

HAMBRECHT & QUIST

SG COWEN

SOUNDVIEW TECHNOLOGY GROUP

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