<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 3, 2000
Registration No. 333-93661
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM F-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------------
ST ASSEMBLY TEST SERVICES LTD
(Exact name of registrant as specified in its charter)
NOT APPLICABLE
(Translation of Registrant's name into English)
<TABLE>
<S> <C> <C>
REPUBLIC OF SINGAPORE 3674 NOT APPLICABLE
(State or other jurisdiction
of
incorporation or (Primary Standard Industrial (I.R.S. Employer
organization) Classification Code Number) Identification Number)
</TABLE>
5 YISHUN STREET 23
SINGAPORE 768442
(65) 755-5885
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
THE PRESIDENT
SINGAPORE TECHNOLOGIES ASSEMBLY AND TEST SERVICES, INC.
1450 MCCANDLESS DRIVE
MILPITAS, CALIFORNIA 95035
(408) 941-1500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies to:
<TABLE>
<S> <C> <C>
ALAN F. DENENBERG, ESQ. CHRISTINA ONG, ESQ. TIMOTHY G. MASSAD, ESQ.
RICHARD J.B. PRICE, ESQ. TAN TZE GAY, ESQ. CRAVATH, SWAINE & MOORE
SHEARMAN & STERLING ALLEN & GLEDHILL SUITE 2609, ASIA PACIFIC FINANCE TOWER
6 BATTERY ROAD 36 ROBINSON ROAD 3 GARDEN ROAD
#25-03 #18-01 CITY HOUSE CENTRAL, HONG KONG,
SINGAPORE 049909 SINGAPORE 068877 (852) 2509-7200
(65) 230-3800 (65) 225-1611
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement is declared effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
We are making a global offering of our ordinary shares, which may be in the
form of American Depositary Shares. The global offering will consist of a U.S.
offering, an international offering and a Singapore offering. The attached
prospectus relates to the U.S. offering only. The international prospectus will
be the same as the prospectus for the U.S. offering except that it will have a
different front and back cover page. The prospectus for the Singapore offering
will be the same as the international prospectus except that it will have a
special wrap with information required by Singapore law.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 3, 2000
PROSPECTUS
135,000,000 ORDINARY SHARES
DIRECTLY OR IN THE FORM OF AMERICAN DEPOSITARY SHARES
STATS LOGO
ST ASSEMBLY TEST SERVICES LTD
S$ PER ORDINARY SHARE
US$ PER ADS
------------------
We are offering 135,000,000 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
135,000,000 ordinary shares that we are offering, 90,000,000 are being offered
in the United States and Canada and 45,000,000 are being offered at the same
time outside the United States and Canada, in each case, directly or in the form
of ADSs. We are also offering 15,000,000 ordinary shares in Singapore through a
separate offering.
This is our initial public offering. We currently expect the initial public
offering price to be between US$12.00 and US$14.00 per ADS and S$2.00 and S$2.33
per ordinary share (the equivalent of US$1.20 and US$1.40 per ordinary share
based on an exchange rate of S$1.6670 to US$1.00 on December 31, 1999). We have
applied to have the ADSs approved for quotation on the Nasdaq National Market
under the symbol "STTS" and to have the ordinary shares approved for listing on
the Singapore Exchange Securities Trading Limited.
------------------
INVESTING IN OUR ORDINARY SHARES AND ADSS INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------
<TABLE>
<CAPTION>
PER ORDINARY
SHARE PER ADS TOTAL
----------------- ----------------- -----------------
<S> <C> <C> <C>
Public Offering Price S$ US$ US$
Underwriting Discount S$ US$ US$
Proceeds to STATS (before expenses) S$ US$ US$
</TABLE>
We have granted the U.S., international and Singapore underwriters a 30-day
option to purchase from us up to an aggregate of 22,500,000 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 , 2000.
------------------
Sole Global Coordinator, Bookrunner and Lead Manager
SALOMON SMITH BARNEY
------------------
CHASE H&Q SG COWEN
, 2000
<PAGE> 4
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................................................ 5
Use of Proceeds............................................. 17
Dividend Policy............................................. 18
Exchange Rates.............................................. 19
Capitalization.............................................. 20
Dilution.................................................... 21
Selected Consolidated Financial Data........................ 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 35
Management.................................................. 55
Certain Transactions........................................ 63
Principal Shareholders...................................... 65
Description of Share Capital................................ 66
Description of American Depositary Receipts................. 70
Taxation.................................................... 78
Shares Eligible for Future Sale............................. 83
Underwriting................................................ 85
Legal Matters............................................... 89
Experts..................................................... 89
Where You Can Find More Information......................... 90
Index to Consolidated Financial Statements.................. F-1
Annex A: The Republic of Singapore.......................... A-1
Annex B: The Securities Market of Singapore................. B-1
</TABLE>
UNTIL , 2000, ALL DEALERS THAT BUY, SELL OR TRADE THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THE GLOBAL 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 THE FINAL PROSPECTUS, WHICH IS THE SIXTH
BUSINESS DAY (IN NEW YORK AND SINGAPORE) FOLLOWING THE DATE OF THE FINAL
PROSPECTUS (PLEASE NOTE THAT FEBRUARY 7, 2000 IS NOT A BUSINESS DAY IN SINGAPORE
DUE TO THE CHINESE NEW YEAR). 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 THIS SETTLEMENT CYCLE.
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 AT S$1.70 PER $1.00, EXCEPT
AS OTHERWISE NOTED. 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 ABOVE, OR AT ALL.
i
<PAGE> 5
(This page intentionally left blank)
<PAGE> 6
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 ordinary shares or ADSs under "Risk Factors," before deciding
to buy our ordinary shares or ADSs. References in this prospectus to "STATS,"
"our company," "we," "our" and "us" refer to ST Assembly Test Services Ltd, a
limited liability company formed in the Republic of Singapore, and its
subsidiary.
THE COMPANY
We are a leading independent provider of a full range of semiconductor test
and assembly services, including:
- testing, including final testing and wafer probe, on a diverse selection
of test platforms, as well as additional test related services such as
burn-in process support, reliability testing, thermal and electrical
characterization, dry pack and tape and reel;
- assembly of leaded and laminate packages, as well as additional assembly
related services such as package design and leadframe and substrate
design;
- pre-production services, such as package development, supply chain
management and test software and related hardware development; and
- drop shipment services.
In the nine months ended September 30, 1999, 45.8% of our net revenues were
from test services and 54.2% of our net revenues were from assembly services. We
provide these test and assembly services to semiconductor companies that do not
have their own manufacturing facilities (fabless companies), vertically
integrated semiconductor device manufacturers (IDMs), and independent
semiconductor wafer foundries (foundries). Many of our customers are leaders in
communications semiconductors, including:
<TABLE>
<S> <C> <C>
Alcatel Microelectronics N.V Infineon Technologies Asia Pacific Pte Philips Electronics Asia Pacific Pte
Ltd Ltd
Analog Devices, Inc. Level One Communications, Inc. PMC-Sierra, Inc.
Broadcom Corporation (a subsidiary of Intel Corporation) TDK Corporation
Conexant Systems, Inc. Nortel Networks Corporation Texas Instruments Incorporated
</TABLE>
In the nine months ended September 30, 1999, approximately 61.6% of our net
revenues were from test and assembly services for semiconductors used in
communications applications. In addition, Chartered Semiconductor Manufacturing
Ltd, our affiliate, has been a significant customer since our inception.
We have developed particular expertise in testing mixed-signal
semiconductors. Mixed-signal testing can be very challenging due to the high
level of functional integration incorporated onto these semiconductors. We
believe that the mixed-signal semiconductor market is very attractive because
these semiconductors are used extensively in fast growing communications
applications such as data networking, broadband and mobile communications. In
the nine months ended September 30, 1999, approximately 73.3% of our net
revenues from test services were derived from testing mixed-signal
semiconductors.
We have been successful in attracting new customers with our test
capabilities and then expanding our relationship with such customers to include
assembly services tailored to their needs. We have developed a wide array of
traditional leadframe, advanced leadframe and laminate, including ball grid
array, or BGA, packages and are developing new advanced leaded and laminate
packages including a variety of advanced BGA and flip-chip packages.
We provide test and assembly services at our facility in Singapore where we
operate approximately 160 testers and approximately 250 wire bonders. Singapore
is a politically and economically stable nation with laws that protect our
customers' proprietary technology.
1
<PAGE> 7
We were incorporated in Singapore on October 31, 1994. We are 90.6%
beneficially owned by Singapore Technologies Pte Ltd, or Singapore Technologies,
(76.1% following the global offering, assuming the underwriters do not exercise
their overallotment option). Singapore Technologies is one of Singapore's
largest industrial conglomerates and is indirectly wholly-owned by the
Government of Singapore. In addition, we are 6.1% owned by EDB Investments Pte
Ltd, or EDBI, (5.1% following the global offering, assuming the underwriters do
not exercise their overallotment option). EDBI is a wholly-owned investment
holding arm of the Economic Development Board, a Singapore government agency.
Our principal executive and registered offices are located at 5 Yishun
Street 23, Singapore 768442. Our telephone number is (65) 755-5885. Our internet
address is www.stats.com.sg. INFORMATION CONTAINED ON OUR WEB SITE DOES NOT
CONSTITUTE A PART OF THIS PROSPECTUS.
2
<PAGE> 8
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. A total
of 150,000,000 ordinary shares, directly or in the
form of ADSs, will be offered (plus 22,500,000
ordinary shares subject to the underwriters'
overallotment option).
U.S. OFFERING.............. An offering in the United States and Canada of
90,000,000 ordinary shares, directly or in the form
of ADSs.
INTERNATIONAL OFFERING..... An offering outside the United States and Canada of
45,000,000 ordinary shares, directly or in the form
of ADSs, at the same time as the U.S. offering.
SINGAPORE OFFERING......... A public offering in Singapore of 15,000,000
ordinary shares at the same time as the U.S.
offering.
RESERVED SHARES............ Up to 7,500,000 ordinary shares (including ordinary
shares represented by ADSs) offered in the global
offering are subject to priority allocation to our
directors, officers and employees, employees of our
business associates, officers and employees of our
affiliates and to certain charitable organizations
in Singapore.
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 Receipts" for a summary of the material
features of the ADSs and ADRs.
OFFERING PRICE............. We currently expect the initial public offering
price to be between US$12.00 and US$14.00 per ADS
and S$2.00 and S$2.33 per ordinary share.
OVERALLOTMENT OPTION....... We have granted the underwriters a 30-day option to
purchase up to a total of 22,500,000 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........ 935,427,695 ordinary shares (including ordinary
shares represented by ADSs) will be outstanding
after the global offering. If the underwriters
exercise their overallotment option in full,
957,927,695 ordinary shares (including ordinary
shares represented by ADSs) will be outstanding.
USE OF PROCEEDS FROM THE
GLOBAL OFFERING............ The net proceeds of the global offering will be
used to repay our outstanding short-term debt, to
fund our capital expenditure requirements and to
fund acquisition projects from time to time.
LISTING.................... We have applied to have the ADSs approved for
quotation on the Nasdaq National Market under the
symbol "STTS" and to have the ordinary shares
approved for listing on the Singapore Exchange
Securities Trading Limited.
3
<PAGE> 9
SUMMARY FINANCIAL DATA
You should read the following summary financial data in conjunction with
our consolidated financial statements and the related notes, "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus. The summary historical financial data are derived from our financial
statements. Our consolidated financial statements for the fiscal years ended
December 31, 1996, 1997 and 1998 and the nine months ended September 30, 1998
and 1999, which have been audited by KPMG, independent auditors, are included
elsewhere in this prospectus. The summary financial data for the fiscal year
ended December 31, 1995 are derived from our audited consolidated financial
statements. However, we have not included our audited consolidated financial
statements for this period 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. The following table does not
present financial data for the fiscal year ended December 31, 1994 as we did not
commence operations until 1995. The results for the nine months ended September
30, 1999 do not necessarily indicate the results that may be expected for the
full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- -------------------
1995 1996 1997 1998(1) 1998 1999
------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER ORDINARY SHARE AND PER ADS DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues........................................ $ 8,058 $ 32,185 $ 88,373 $113,920 $ 79,233 $135,981
Gross profit (loss)................................. 146 (1,876) 20,525 26,854 18,394 42,399
Operating income (loss)............................. (3,327) (7,938) 4,510 6,216 3,598 9,624
Net income (loss)................................... (3,343) (7,555) (169) 1,124 397 8,486
Net income (loss) per ordinary share(2):
Basic............................................. $ (0.15) $ (0.02) -- -- -- $ 0.01
======= ======== ======== ======== ======== ========
Diluted........................................... $ (0.15) $ (0.02) -- -- -- $ 0.01
======= ======== ======== ======== ======== ========
Net income (loss) per ADS(2):
Basic............................................. $ (1.49) $ (0.21) $ -- $ 0.02 $ 0.01 $ 0.11
======= ======== ======== ======== ======== ========
Diluted........................................... $ (1.49) $ (0.21) $ -- $ 0.02 $ 0.01 $ 0.11
======= ======== ======== ======== ======== ========
Ordinary shares (in thousands) used in per ordinary
share calculation(2):
Basic............................................. 22,500 352,032 368,000 669,671 634,869 769,144
Diluted........................................... 22,500 352,032 368,000 670,976 635,864 777,085
ADSs (in thousands) used in per ADS calculation(2):
Basic............................................. 2,250 35,203 36,800 66,967 63,487 76,914
Diluted........................................... 2,250 35,203 36,800 67,098 63,586 77,708
OTHER DATA:
Depreciation and amortization....................... $ 2,103 $ 11,895 $ 25,477 $ 42,156 $ 30,659 $ 44,486
Capital expenditures................................ 35,235 77,845 126,257 43,062 39,968 64,799
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
--------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 16,716 $150,004
Working capital (deficit)................................... (44,946) 138,342
Total assets................................................ 286,281 419,569
Short-term debt and current installments of long-term
debt...................................................... 57,518 7,518
Long-term debt.............................................. 45,107 45,107
Shareholders' equity........................................ 125,099 308,387
</TABLE>
- ---------------
(1) Effective July 1, 1998, we changed our functional currency from the
Singapore dollar to the U.S. dollar. Please see Note 2(d) to our
consolidated financial statements.
(2) The data set forth does not give effect to ADSs or ordinary shares issued in
the global offering.
(3) The as adjusted data set forth is adjusted to give effect to the issuance of
150,000,000 ordinary shares in the global offering (including ordinary
shares represented by ADSs), and the application of the net proceeds from
such offering at an assumed initial public offering price of S$2.17 per
ordinary share and $13.00 per ADS.
4
<PAGE> 10
RISK FACTORS
An investment in our ordinary shares or ADSs 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 ordinary shares or ADSs. If any of the following risks actually occur, our
business, financial condition and results of operations would likely suffer. In
any such case, the market price of our ordinary shares or ADSs could decline,
and you may lose all or part of the money you paid to buy our ordinary shares or
ADSs.
OUR RESULTS FLUCTUATE FROM QUARTER TO QUARTER.
Our operating results have fluctuated and may continue to fluctuate
substantially from quarter to quarter due to a wide variety of factors,
including:
- general economic conditions in the semiconductor industry;
- a shift by IDMs between internal and outsourced test and assembly
services;
- general economic conditions in the markets addressed by end-users of
semiconductors;
- the seasonality of the semiconductor industry;
- the short-term nature of our customers' commitments;
- the rescheduling or cancellation of large orders;
- the timing and volume of orders relative to our capacity;
- changes in capacity utilization;
- the rapid erosion of the selling prices of packages;
- changes in our product mix;
- the timing of expenditures in anticipation of future orders;
- possible disruptions caused by the installation of new equipment;
- the inability to obtain adequate equipment on a timely basis; and
- any exposure to currency and interest rate fluctuations that may not be
adequately covered under our hedging policy.
As a result of all of these factors, we believe that period-to-period
comparisons of our operating results are not meaningful, and you should not rely
on such comparisons to predict our future performance. Unfavorable changes in
any of the above factors may adversely affect our business, financial condition
and results of operations. In addition, such unfavorable changes could cause
volatility in the price of our ordinary shares and ADSs.
For example, during the second quarter of 1998, the average selling prices
of many of our test and assembly services decreased because of an excess of
worldwide capacity relative to demand which resulted in intense competition
among independent test and assembly service providers. We expect intense
competitive conditions to continue. If we cannot offset declines in selling
prices by reducing our costs of delivering those services, increasing the number
of units tested or assembled, or shifting our focus to higher margin test and
assembly services, our business, financial condition and results of operations
could be adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of
Operations -- Quarterly Results."
5
<PAGE> 11
DOWNTURNS IN THE SEMICONDUCTOR INDUSTRY WILL ADVERSELY AFFECT OUR OPERATING
RESULTS.
Our profits are affected significantly by conditions in the semiconductor
industry. The market for semiconductors is categorized by:
- rapid technological change;
- evolving industry standards;
- intense competition; and
- fluctuations in end-user demand.
In addition, the semiconductor industry is cyclical and, at various times,
has experienced significant downturns because of production overcapacity and
reduced unit demand. Any future downturn in the semiconductor industry is likely
to adversely affect our business, financial condition and results of operations.
Our financial results for the second and third quarters of 1998 were adversely
affected by such a downturn.
DECISIONS BY OUR IDM CUSTOMERS TO CURTAIL OUTSOURCING MAY ADVERSELY AFFECT OUR
COMPANY.
Historically, we have been dependent on the trend in outsourcing of test
and assembly services by IDMs. Our IDM customers continually evaluate our
services against their own in-house test and assembly services. As a result, at
any time, IDMs may decide to shift some or all of their outsourced test and
assembly services to internally sourced capacity. Any such shift or a slowdown
in this trend is likely to adversely affect our business, financial condition
and results of operations.
OUR PROFITABILITY IS AFFECTED BY CAPACITY UTILIZATION RATES.
As a result of the capital intensive nature of our business, our operations
are characterized by high fixed costs. Consequently, insufficient utilization of
installed capacity can have a material adverse effect on our profitability.
Therefore, our ability to maintain or increase our profitability will continue
to be dependent, in large part, upon our ability to maintain high capacity
utilization rates. Capacity utilization rates may be affected by a number of
factors and circumstances, including:
- installation of new equipment in anticipation of future business;
- overall industry conditions;
- the level of customer orders;
- operating efficiencies;
- mechanical failure;
- disruption of operations due to expansion of operations, introduction of
new packages or relocation of equipment;
- disruption in supply of raw materials; or
- fire or other natural disasters.
For example, in 1998, our capacity utilization rates were negatively
affected by a decrease in demand for our test and assembly services resulting
from a downturn in the overall semiconductor industry. We cannot assure you that
our capacity utilization rates will not be materially adversely affected by
future declines in the semiconductor industry, declines in industries that
purchase semiconductors or other factors. Any inability on our part to maintain
or increase capacity utilization rates could have a material adverse effect on
our business, financial condition and results of operations.
6
<PAGE> 12
WE DEPEND ON A SMALL NUMBER OF CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR
REVENUES.
We are dependent on a small group of customers for almost all of our net
revenues. Our ten largest customers accounted for almost all of our net revenues
in 1996, 1997, 1998 and the nine months ended September 30, 1999. In 1998, our
four largest customers, Analog Devices, Inc., Broadcom Corporation, Chartered
Semiconductor Manufacturing Ltd (our affiliate) and Cirrus Logic, Inc. each
represented in excess of 10% of net revenues and in the aggregate represented
63.9% of our net revenues. In the nine months ended September 30, 1999, our four
largest customers, Analog Devices, Broadcom, Chartered Semiconductor and Level
One Communications, Inc. each represented in excess of 9% of our net revenues
and in the aggregate represented 65.8% of our net revenues. Chartered
Semiconductor accounted for 20.9% and 16.2% of our net revenues in 1998 and the
nine months ended September 30, 1999, respectively. Also, in 1996, 1997, 1998
and the nine months ended September 30, 1999, 44.8%, 67.8%, 64.1% and 69.5% of
our net revenues came from customers based in the United States. We anticipate
that for the forseeable future our ten largest customers will continue to
account for most of our net revenues and that we will continue to be
significantly dependent on net revenues from customers based in the United
States. Our ability to retain these customers, as well as other customers, and
to add new customers is important to the ongoing success of our company. The
loss of one or more of our key customers, or reduced orders from any of our key
customers, could have a material adverse effect on our business, financial
condition and results of operations. See "Business -- Customers."
A DECREASE IN DEMAND FOR COMMUNICATIONS EQUIPMENT AND PERSONAL COMPUTERS MAY
SIGNIFICANTLY DECREASE THE DEMAND FOR OUR SERVICES.
A significant percentage of our net revenues is derived from customers who
use our test or assembly services for semiconductors used in 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 services
provided by us may reduce our net revenues and therefore significantly reduce
our gross profit margin.
OUR CUSTOMERS ARE NOT CONTRACTUALLY OBLIGATED TO BUY OUR SERVICES OR PRODUCTS.
WE DO NOT HAVE ANY SIGNIFICANT BACKLOG.
None of our customers is obligated, pursuant to any contractual commitment
or otherwise, to purchase any minimum amount of our test or assembly services or
to provide us with binding forecasts for any period. As a result, we have no
significant backlog. The lack of significant backlog makes it difficult for us
to forecast our net revenues for any future period. We expect that in the
future, net revenues in any quarter will continue to be substantially dependent
on orders placed within that quarter. Moreover, all of our customers operate in
the cyclical semiconductor industry and have varied and may continue to vary
order levels significantly from period to period. However, our customers are
generally not responsible for any unused raw materials that result from a
forecast exceeding actual orders. Accordingly, we cannot assure you that any of
our customers will continue to place orders with us in the future at the same
levels as they had in prior periods.
WE MAY BE UNABLE TO OBTAIN TESTING OR ASSEMBLY EQUIPMENT WHEN WE REQUIRE IT.
The semiconductor test and assembly business is capital intensive and
requires investment in expensive capital equipment manufactured by a limited
number of suppliers, which are located principally in the United States, Europe
and Japan. The market for capital equipment used in semiconductor testing is
characterized, from time to time, by intense demand, limited supply and long
delivery cycles. Our operations and expansion plans are highly dependent upon
our ability to obtain a significant amount of such capital equipment from a
limited number of suppliers. If we are unable to obtain certain equipment,
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including testers and wire bonders, in a timely manner, we may be unable to
fulfill our customers' orders which would negatively impact our business,
financial condition and results of operations.
Generally, we have no binding supply agreements with any of our suppliers
and we acquire our equipment on a purchase order basis, which exposes us to
substantial risks. For example, increased levels of demand for the type of
capital equipment required in our business may cause an increase in the price of
such equipment and may lengthen delivery cycles, which could have a material
adverse effect on our business, financial condition and results of operations.
In addition, adverse fluctuations in foreign currency exchange rates,
particularly the Japanese yen, could result in increased prices for certain
equipment purchased by us, which could have a material adverse effect on our
business, financial condition and results of operations. See
"Business -- Facilities and Equipment -- Equipment."
OUR PROFITABILITY IS AFFECTED BY AVERAGE SELLING PRICES WHICH TEND TO DECLINE.
Decreases in the average selling prices of our test and assembly services
can have a material adverse effect on our profitability. The average selling
prices of test and assembly services have declined historically, with assembly
services in particular experiencing severe pricing pressure. This pricing
pressure for test and assembly services is likely to continue. Our ability to
maintain or increase our profitability will continue to be dependent, in large
part, upon our ability to offset decreases in average selling prices by
improving production efficiency, increasing unit volumes tested or assembled, or
by shifting to higher margin test and assembly services. If we are unable to do
so, our business, financial condition and results of operations could be
materially and adversely affected.
THE TESTING PROCESS IS COMPLEX AND THEREFORE MORE PRONE TO "BUGS" AND OPERATOR
ERROR.
Semiconductor testing is a complex process involving sophisticated testing
equipment and computer software. We develop computer software which is used to
test our customers' semiconductors. We also develop conversion software programs
which enable us to test semiconductors on different types of testers. Similar to
most software programs, these software programs are complex and may contain
programming errors or "bugs." In addition, the testing process is subject to
operator error by our employees who operate our testing equipment and related
software. Any significant defect in our testing or conversion software,
malfunction in our testing equipment or operator error could reduce our
production yields, damage our customer relationships and materially harm our
business.
WE MAY NOT BE ABLE TO DEVELOP OR ACCESS LEADING TECHNOLOGY WHICH MAY AFFECT OUR
ABILITY TO COMPETE EFFECTIVELY.
The semiconductor test and assembly market is characterized by rapid
technological change. We must be able to offer our customers test and assembly
services based upon the most advanced technology. This requirement could result
in significant capital expenditures in the future. Advances in technology
typically lead to rapid and significant price declines and decreased margins for
older package types and may also affect demand for test services. Technology
advances could also cause our test or assembly capabilities to be less
competitive with new technologies and, in certain cases, to be obsolete.
If we fail to develop advanced test and assembly services or to access
those developed by others in a timely manner, we could lose existing customers
or miss potential customers demanding these advanced services. Also, we would
miss the opportunity to benefit from the higher average selling prices which are
derived from newer and emerging test and assembly services. In addition, the
choice of test equipment is important to us because obtaining the wrong test
equipment or failing to understand market requirements will make us less
competitive and will lower our asset utilization. In order to remain
competitive, we must be able to upgrade or migrate our test equipment to respond
to changing technological requirements.
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THE ASSEMBLY PROCESS IS COMPLEX AND OUR PRODUCTION YIELDS MAY SUFFER FROM
DEFECTIVE PACKAGES AND THE INTRODUCTION OF NEW PACKAGES.
The assembly process is complex and involves a number of precise steps.
Defective packages primarily result from:
- contaminants in the manufacturing environment;
- human error;
- equipment malfunction;
- defective raw materials; or
- defective plating services.
These and other factors have, from time to time, contributed to lower
production yields. They may do so in the future, particularly as we expand our
capacity or change our processing steps. In addition, to be competitive, we must
continue to expand our offering of packages. Our production yields on new
packages typically are significantly lower than our production yields on our
more established packages.
Our failure to maintain high standards or acceptable production yields, if
significant and prolonged, could result in lost customers, increased costs of
production, delays, substantial amounts of returned goods and claims by
customers relating thereto. Any of these problems could have a material adverse
effect on our business, financial condition and results of operations.
WE NEED A CLEAN ROOM ENVIRONMENT FOR OUR OPERATIONS.
Our testing and assembly operations take place in areas where air purity,
temperature and humidity are controlled. If we are unable to control our testing
or assembly environment, our test or assembly equipment may become nonfunctional
or the semiconductors we test and assemble may be defective. See
"Business -- Quality Control." If we experience prolonged interruption in our
operations due to problems in the clean room environment, this could have a
material adverse effect on our business, financial condition and results of
operations.
WE EXPECT TO INCUR SIGNIFICANT CAPITAL EXPENDITURES IN THE FUTURE AND THEREFORE
MAY REQUIRE ADDITIONAL FINANCING IN THE FUTURE.
To grow our business, we intend to increase our test and assembly capacity.
This will require substantial capital expenditures for additional equipment. We
will also be required to recruit and train new employees. These expenditures
will likely be made in advance of increased sales. We cannot assure you that our
net revenues will increase after these expenditures. Our failure to increase our
net revenues after these expenditures could have a material adverse effect on
our business, financial condition and results of operations.
In addition, we may need to obtain additional debt or equity financing to
fund our capital expenditures. Additional equity financing may result in
dilution to the holders of ADSs and ordinary shares. Additional debt financing
may be required which, if obtained, may:
- limit our ability to pay dividends or require us to seek consents for the
payment of dividends;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to pursue our growth plan;
- 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 our industry.
We cannot assure you that we will be able to obtain the additional
financing on terms that are acceptable to us or at all.
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<PAGE> 15
WE HAVE LIMITED OPERATING HISTORY UPON WHICH YOU MAY EVALUATE US AND HAVE HAD A
HISTORY OF LOSSES.
We have limited operating history upon which you may evaluate us. We began
operations in January 1995. In 1995, our net revenues were derived primarily
from wafer probe services performed for Chartered Semiconductor, our affiliate.
We experienced net losses in our first three years of operations. Although we
have grown rapidly and now provide a full range of test and assembly services to
a number of unaffiliated customers, we continue to face substantial risks,
expenses and difficulties as described elsewhere in this prospectus. If we are
unable to successfully address these risks and uncertainties, our business,
financial condition and results of operations could suffer.
WE ARE DEPENDENT ON RAW MATERIAL SUPPLIERS AND DO NOT HAVE ANY LONG-TERM SUPPLY
CONTRACTS WITH THEM.
We obtain the materials we need for our assembly services from outside
suppliers. We purchase all of our materials on a purchase order basis. We have
no long-term contracts with any of our suppliers. If we cannot obtain sufficient
quantities of materials at reasonable prices or if we are not able to pass on
higher materials costs to our customers, this could have a material adverse
effect on our business, financial condition and results of operations. See
"Business -- Facilities and Equipment -- Raw Materials."
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN OUR INDUSTRY.
The independent semiconductor test and assembly service industry is very
competitive and diverse and requires us to be capable of testing increasingly
complex semiconductors as well as bringing the most technologically advanced
packages to market as quickly as our competitors. The industry is comprised of
both large multi-national companies and small niche market competitors. We face
substantial competition from a number of competitors that are much larger in
size than us. These competitors include Advanced Semiconductor Engineering, Inc.
(Taiwan), Amkor Technology, Inc. (Korea and the Philippines), ASE Test Limited
(Taiwan and Malaysia), ASAT Ltd. (Hong Kong), ChipPAC Incorporated (Korea),
Siliconware Precision Industries Co., Ltd. (Taiwan) and Shinko Electric
Industries Co. Ltd. (Japan) and their facilities are primarily located in Asia.
Each of these companies has significant manufacturing capacity, financial
resources, research and development operations, marketing and other capabilities
and has been in operation for some time. Such companies have also established
relationships with many of our current or potential customers. Some of our
competitors have established testing facilities in North America and may
commence independent testing operations in Asia. These activities would compete
directly with us.
We also face competition from the internal capabilities and capacity of
many of our current and potential IDM customers. Many IDMs have greater
financial and other resources than we do and may rely on internal sources for
test and assembly services due to:
- their desire to realise higher utilization of their existing test and
assembly capacity;
- their unwillingness to disclose proprietary technology;
- their possession of more advanced testing or assembly technologies; and
- the guaranteed availability of their own test and assembly capacity.
We cannot assure you that we will be able to compete successfully in the
future against our existing or potential competitors or that our business,
financial condition and results of operations will not be adversely affected by
increased competition. See "Business -- Competition."
OUR INTELLECTUAL PROPERTY IS IMPORTANT TO OUR ABILITY TO SUCCEED IN OUR BUSINESS
BUT MAY BE DIFFICULT TO PROTECT.
Our ability to compete successfully and achieve future growth in net
revenues will depend, in part, on our ability to protect our proprietary
technology and the proprietary technology of our customers entrusted to us by
our customers during the testing process. We seek to protect proprietary
information and know-
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<PAGE> 16
how through the use of confidentiality and non-disclosure agreements and limited
access to and distribution of proprietary information. We also use trade secrets
to protect our proprietary information. We currently have one issued patent and
we have applied for 15 additional patents in the United States and certain other
countries. We cannot assure you that any of our filed applications for patents
will be granted, or, if granted, will not be challenged, invalidated or
circumvented or will offer us any meaningful protection. Further, 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. Additionally, we cannot assure you that our
competitors will not develop, patent or gain access to similar know-how and
technology, or reverse engineer our assembly services, or that any
confidentiality and non-disclosure agreements upon which we rely to protect our
trade secrets and other proprietary information will be adequate to protect our
proprietary technology. The occurrence of any such events could have a material
adverse effect on our business, financial condition and results of operations.
WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY RIGHTS DISPUTES.
Our ability to compete successfully will depend, in part, on our ability to
operate without infringing the proprietary rights of others. We have established
procedures designed to help prevent us from infringing the patented technology
of our competitors or other parties. When we are aware of intellectual property
of others that may pertain to or affect our business, we will attempt to either
avoid processes protected by existing patents, cross-license, or otherwise
obtain certain process or package technologies that we feel are required.
However, we have no means of ascertaining what patent applications have been
filed in the United States until they are granted. In addition, we may not be
aware of the intellectual property rights of others or familiar with the laws
governing such rights in certain countries in which our products are or may be
sold. As the number of patents, copyrights and other intellectual property
rights in our industry increases, and as the coverage of these rights increases,
we believe that companies in our industry will face more frequent patent
infringement claims. Although there are no pending or threatened intellectual
property lawsuits against us, we may face litigation or patent infringement
claims in the future. In the event that any valid claim is made against us, we
could be required to:
- stop using certain processes;
- cease manufacturing, using, importing or selling infringing packages;
- pay substantial damages;
- develop non-infringing technologies; or
- attempt to acquire licenses to use the infringed technology.
Although we may seek licenses from or enter into agreements with third
parties covering the intellectual property that we are allegedly infringing, we
cannot guarantee that any such licenses could be obtained on acceptable terms,
if at all.
We may also have to commence lawsuits against companies who infringe our
intellectual property rights. Such claims could result in substantial costs and
diversion of our resources.
Should any of the disputes described above occur, our business, financial
condition and results of operations could be materially and adversely affected.
See "Business -- Intellectual Property."
SINGAPORE TECHNOLOGIES WILL CONTINUE TO CONTROL OUR COMPANY FOLLOWING COMPLETION
OF THE GLOBAL OFFERING AND THEREBY MAY DELAY, DETER OR PREVENT ACTS THAT WOULD
RESULT IN A CHANGE OF CONTROL.
Following completion of the global offering, Singapore Technologies Pte Ltd
will beneficially own approximately 76.1% of our ordinary shares, or 74.3% if
the overallotment option is exercised in full. Singapore Technologies is
wholly-owned by Temasek Holdings (Private) Limited, the principal holding
company of the Government of Singapore. As a result, Singapore Technologies will
be able to exercise direct or indirect control over matters requiring
shareholder approval, including the election of directors
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<PAGE> 17
and approval of significant corporate transactions. Matters that typically
require shareholder approval include, among other things:
- the election of directors;
- our merger or consolidation with any other entity;
- any sale of all or substantially all of our assets; and
- the timing and payment of dividends.
This concentration of ownership may delay, deter or prevent acts that would
result in a change of control, which may be against the interests of holders of
our ADSs and ordinary shares. See "Management."
WE MAY HAVE CONFLICTS OF INTEREST WITH OUR AFFILIATES.
In the past, a substantial portion of our financing, as well as our net
revenues, have come from our affiliates, and we have paid a management fee to
Singapore Technologies for certain services. After the global offering, we will
continue to have certain contractual and other business relationships and engage
in material transactions with the Government of Singapore, Singapore
Technologies, EDBI and Chartered Semiconductor, which is controlled by Singapore
Technologies and is one of our key customers. Although any new material related
party transaction requires the approval of a majority of our Board of Directors
and, following the global offering, separate approval by the Audit Committee
will be required, circumstances may arise in which the interests of our
affiliates may conflict with the interests of our other shareholders. In
addition, both EDBI and Singapore Technologies make investments in various
companies. They have invested in the past, and may invest in the future, in
entities that compete with us. Currently, Vertex Asia Ltd and Vertex Investment
(II) Ltd, affiliates of Singapore Technologies, have investments in United Test
Assembly Center (S) Pte Ltd, a Singapore-based provider of semiconductor
assembly and testing services for semiconductor logic/ASIC and memory products.
In the context of negotiating commercial arrangements with affiliates, conflicts
of interest have arisen in the past and may arise, in this or other contexts, in
the future. We cannot assure you that conflicts of interest will be resolved in
our favor. See "Certain Transactions."
Sales to affiliates, principally to Chartered Semiconductor, in 1996, 1997,
1998 and the nine months ended September 30, 1999 were approximately 45.0%,
24.3%, 24.5% and 16.8%, respectively, of our net revenues. We expect the
proportion of our net revenues that is dependent on Chartered Semiconductor will
decrease as we continue to diversify our customer base, although we expect that
Chartered Semiconductor will continue to be an important customer.
WE DEPEND ON CERTAIN KEY EMPLOYEES. LOSS OF CERTAIN OF THEM COULD ADVERSELY
AFFECT OUR BUSINESS.
Our future performance will largely depend on our ability to attract and
retain key technical, customer support, sales and management personnel. The loss
of certain of such persons could have a material adverse effect on our business,
financial condition and results of operations. We do not maintain "key man" life
insurance.
WE COULD BE ADVERSELY AFFECTED BY THE YEAR 2000 PROBLEM.
Many computer systems and software products may not function properly in
the year 2000 and beyond due to a once-common programming standard that
represents years using two digits. This problem is often referred to as the
"year 2000" problem. Although year 2000 problems may become evident on January
1, 2000, additional year 2000 problems may become evident only after that date.
We believe that our systems are year 2000 compliant and, to date, our systems
have not experienced any year 2000 problems. While we continue to have
contingency plans in place for operational problems which may arise as a result
of the year 2000 problem, we cannot assure you that the year 2000 problem will
not potentially
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<PAGE> 18
pose significant operational problems or have a material adverse effect on our
business, financial condition and results of operations in the future.
We are not aware of any material year 2000 problems encountered by our
suppliers to date but have not yet obtained confirmations from our suppliers
that they did not experience year 2000 problems. Accordingly, we cannot
determine whether our suppliers have experienced year 2000 problems that may
impact their ability to supply us with equipment and services. Further, we
cannot determine the state of their year 2000 readiness on a going forward
basis. We cannot assure you that our suppliers will be successful in ensuring
that their systems have been and will continue to be or will be year 2000
compliant or that their failure to do so will not have an adverse effect on our
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Compliance."
A FIRE OR OTHER CALAMITY AT ONE OF OUR FACILITIES COULD ADVERSELY AFFECT OUR
COMPANY.
We conduct our testing and assembly operations at a limited number of
facilities. A fire or other calamity resulting in significant damage at any of
these facilities would have a material adverse effect on our business, financial
conditions and results of operations. While we maintain insurance policies
covering losses, including losses due to fire, which we consider to be adequate,
we cannot assure you that it would be sufficient to cover all of our potential
losses. Our insurance policies cover our buildings, machinery and equipment.
SINGAPORE LAW CONTAINS PROVISIONS THAT COULD DISCOURAGE A TAKEOVER OF OUR
COMPANY.
The Companies Act (Chapter 50) of Singapore and the Singapore Code on
Take-Overs and Mergers (the "Take-Over Code") 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
Take-Over Code. 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 own or
together with parties acting in concert with him) acquires an additional 3% of
our voting shares in any 12-month period. Accordingly, any person (i) acquiring
an interest either in 25% or more of our voting shares directly or in the form
of ADSs, or (ii) holding between 25% and 50% (both inclusive) of our voting
shares directly or in the form of ADSs (either on his own or together with
parties acting in concert with him) and who acquires an additional 3% of our
voting shares directly or in the form of ADSs in any 12-month period, must
extend a takeover offer for the remaining voting shares.
These 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.
OUR ADSS AND ORDINARY SHARES HAVE NEVER BEEN PUBLICLY TRADED. THE PRICES MIGHT
BE VOLATILE.
Prior to the global offering, there has not been a public market for our
ordinary shares or the ADSs. We cannot predict the extent to which a trading
market will develop or how liquid that market might become. The initial public
offering prices of the ADSs and ordinary shares will be determined by
negotiations between representatives of the underwriters and us and may not be
indicative of prices that will prevail in the trading market. See "Underwriting"
for a description of the factors considered in determining the initial public
offering prices.
The trading prices of the ADSs or ordinary shares could be subject to
fluctuations in response to quarterly variations in our results of operations,
changes in general economic conditions, changes in accounting principles or
other developments affecting us, our customers or our competitors, changes in
financial estimates by securities analysts, the operating and stock price
performance of other companies and other events or factors. The global financial
markets have experienced significant price and volume fluctuations and market
prices of shares of technology companies have been and continue to be extremely
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volatile. Volatility in the price of our ADSs and ordinary shares may be caused
by factors outside our control and may be unrelated or disproportionate to our
operating results.
FUTURE SALES OF SECURITIES BY OUR COMPANY OR EXISTING SHAREHOLDERS MAY ADVERSELY
AFFECT THE PRICE OF OUR ADSS AND OUR ORDINARY SHARES.
There will be 935,427,695 ordinary shares outstanding immediately following
the global offering without taking into account the underwriters' overallotment
option. The 150,000,000 ordinary shares, including ordinary shares represented
by ADSs, sold in the global offering will be freely tradable in the public
market unless purchased by our "affiliates," as defined in Rule 144 under the
Securities Act. The remaining 785,427,695 ordinary shares are "restricted
securities," as defined in Rule 144 under the Securities Act. They may be sold
in the public market in the form of ADSs, upon a deposit of such shares with the
Depositary, but only if they are registered under the Securities Act or if they
qualify for an exemption from the registration requirements of the Securities
Act. In addition, we have granted options under our Share Option Plan for a
total of 18,713,705 ordinary shares. If these options are exercised and the
ordinary shares are fully paid for, the ordinary shares would be freely
tradeable either in Singapore or in the form of ADSs on the Nasdaq National
Market (if the ordinary shares are deposited with the Depositary). See "Shares
Eligible for Future Sale" for a discussion of how many such ordinary shares may
be freely tradeable in the next year.
We and each of our executive officers, directors and the principal
shareholders named in this prospectus and certain employees have agreed not to
sell or otherwise dispose of or hedge any ordinary shares or ADSs or securities
convertible into or exchangeable for ordinary shares or ADSs, without the prior
written consent of Salomon Smith Barney Inc., for a period of 180 days from the
date of this prospectus, except for shares disposed of as bona fide gifts
approved by Salomon Smith Barney, Inc. and except, in the case of such principal
shareholders and selected employees who are not directors or executive officers,
for any of the 7,500,000 reserved shares acquired by them in the global
offering. The foregoing does not prohibit us from issuing any of the 22,500,000
ordinary shares directly or in the form of ADSs subject to the underwriters'
overallotment option or granting options pursuant to the Share Option Plan or
issuing ordinary shares pursuant to any such option or options outstanding on
the date of this prospectus. See "Shares Eligible for Future Sale."
Sales of substantial numbers of ADSs or ordinary shares in the public
market following the global offering could adversely affect the market price of
our ADSs and ordinary shares.
OUR EXISTING SHAREHOLDERS WILL BENEFIT FROM THE GLOBAL OFFERING.
Singapore Technologies and our other existing shareholders will benefit
from the global offering as it will create a market into which their ordinary
shares may be sold. In addition, although none of our existing shareholders is
selling shares in the global offering, assuming an offering price of $1.30 per
ordinary share, our current shareholders will have an aggregate unrealized gain
of $132.4 million as a result of the global offering.
EXCHANGE RATE FLUCTUATIONS MAY AFFECT THE VALUE OF OUR ADSS OR ORDINARY SHARES.
Our financial statements are prepared in U.S. dollars. Our net revenues are
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 currency
exchange position through the use of forward contracts, we are still affected by
fluctuations in foreign currency exchange rates among the U.S. dollar, the
Japanese yen, the Singapore dollar and other currencies. For example,
substantially all of our revenues and the majority of our cost of revenues are
denominated in U.S. dollars. For the nine month period ended September 30, 1999,
if the Singapore dollar had strengthened against the U.S. dollar by 2.0%, our
cost of revenues would have increased by 0.7%. Likewise, if the Singapore dollar
had weakened against the U.S. dollar by 2.0%, our cost of revenues would have
decreased by 0.7%. We are
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particularly affected by fluctuations in the exchange rate between the U.S.
dollar and the Singapore dollar. Any significant fluctuation in currency
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 the ADSs, and the value of any cash
dividends if paid in U.S. or Singapore dollars.
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 our management and
the members of our Board of Directors under Singapore law may be different from
those applicable to a corporation incorporated in the United States. For
example, controlling shareholders of U.S. companies have fiduciary duties to
minority shareholders while controlling shareholders in Singapore corporations
are not subject to such duties. 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.
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 Share
Capital" 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
15
<PAGE> 21
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 ADSs may be unable to
participate in rights offerings by us and may experience dilution of their
holdings as a result.
IT MAY BE DIFFICULT FOR YOU TO ENFORCE ANY JUDGMENT OBTAINED IN THE UNITED
STATES AGAINST US OR OUR AFFILIATES.
Our company is a limited liability company incorporated under the laws of
the Republic of Singapore. A majority 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 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 in or out of the United States
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.
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 Singapore Exchange Securities Trading Limited is relatively small and
more volatile than stock exchanges in the United States and certain other
European countries. As of September 30, 1999, there were 317 Singapore companies
listed on the Main Board of the then Stock Exchange of Singapore Limited and the
aggregate market capitalization of listed equity securities of these companies
was approximately $375.4 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 $229
million, with an annualized aggregate trading value of approximately $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 ordinary shares, to fluctuate, which may in
turn cause the market price of our ADSs to fluctuate. Please see "Annex B -- The
Securities Market of Singapore" for additional information regarding the
Singapore securities market.
YOU SHOULD NOT UNDULY RELY ON FORWARD-LOOKING STATEMENTS.
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipate," "believe," "expect," "future"
and "intend," and similar expressions, to identify forward-looking statements.
You should not place undue reliance on these forward-looking statements, which
apply only as of the date of this prospectus. Our actual results could differ
materially from those anticipated in these forward-looking statements for many
reasons, including the risks described above and elsewhere in this prospectus.
16
<PAGE> 22
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 $183.3 million, or $211.1 million if the underwriters exercise
their overallotment option in full, assuming an initial public offering price of
$13.00 per ADS and S$2.17 per ordinary share.
We intend to use approximately $60.0 million of the net proceeds of the
global offering to repay debt, $50.0 million of which was incurred in 1998 and
used to refinance other debt and $10.0 million of which was incurred in December
1999 and used for working capital purposes. As of December 31, 1999, this
indebtedness consisted of:
- $25.0 million from Den Danske Bank in a short-term loan maturing on
August 26, 2000 and bearing interest at a rate of 0.6% per annum above
the London Inter Bank Offering Rate for U.S. dollars. This rate was 6.0%
per annum as of September 30, 1999;
- $10.0 million from Den Danske Bank in a short-term loan maturing on
February 16, 2000 and bearing interest at a rate of 6.85% per annum; and
- $25.0 million from ST Treasury Services Ltd, a wholly-owned subsidiary of
Singapore Technologies, in a demand loan bearing interest at a rate of
5.8% per annum as of September 30, 1999.
We plan to use the remainder of the net proceeds to fund capital
expenditures, including the purchase of test and assembly equipment, working
capital and general corporate purposes, which may include acquisitions or
investments. The amounts that we actually expend for the purposes of capital
expenditures will vary significantly depending on a number of factors, including
general economic conditions in the semiconductor industry and the markets
addressed by end-users of semiconductors. As a result, we will retain broad
discretion in allocating the remainder of the net proceeds of the global
offering.
From time to time we may acquire or make investments in additional
businesses, products and technologies or establish joint ventures or strategic
partnerships that we believe will complement our current and future business.
Some of these acquisitions or investments could be material. However, we have no
specific agreements or undertakings with respect to any material acquisition or
investment at this time.
Pending the uses described above, we will invest the net proceeds in
short-term investments.
17
<PAGE> 23
DIVIDEND POLICY
We have never declared or paid any cash dividends on our ordinary shares.
We do not currently anticipate paying any cash dividends in 2000.
We may declare dividends by ordinary resolution of our shareholders 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, without the
approval of our shareholders, also declare an interim dividend. We must pay all
dividends out of profits or pursuant to Section 69 of the Companies Act of
Singapore. In making its determinations, our Board of Directors will consider,
among other things, future earnings, results of operations, capital
requirements, our general financial condition, general business conditions and
other factors which they may deem relevant. We may pay dividends in Singapore
dollars or U.S. dollars. Holders of ADS will receive any distributions in U.S.
dollars. See "Description of American Depositary Receipts -- Dividends and
Distributions."
18
<PAGE> 24
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 Exchange Securities Trading Limited 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. These transactions 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.
<TABLE>
<CAPTION>
SINGAPORE DOLLARS PER US$1.00
NOON BUYING RATE
-------------------------------------
YEAR ENDED DECEMBER 31, AVERAGE(1) HIGH LOW 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........................................................ 1.70 1.65 1.74 1.67
</TABLE>
- ---------------
(1) The average of the daily noon buying rate 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 September 30, 1999 for cable transfers in
Singapore dollars as certified for customs purposes by the Federal Reserve Bank
of New York which was S$1.70 per $1.00. This was also the average exchange rate
between the Singapore dollar and the U.S. dollar for the nine month period
ending September 30, 1999.
19
<PAGE> 25
CAPITALIZATION
The following table shows our cash and cash equivalents and capitalization
as of September 30, 1999:
- on an actual basis; and
- as adjusted to give effect to the sale of 150,000,000 ordinary shares
(directly or in the form of ADSs) in the global offering and the
application of net proceeds, assuming an initial public offering price of
$13.00 per ADS and S$2.17 per ordinary share, after deducting
underwriting discounts and estimated offering expenses.
You should read this table in conjunction with:
- our consolidated financial statements and the related notes included in
this prospectus; and
- the section in this prospectus entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
------------------------
AS
ACTUAL ADJUSTED(2)
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 16,716 $150,004
======== ========
Short-term debt and current installments of long-term
debt...................................................... $ 57,518 $ 7,518(3)
Long-term debt.............................................. 45,107 45,107
Shareholders' equity:
Ordinary shares, par value S$0.25 per share; 1,200,000,000
shares authorized; 796,145,600 shares issued and
outstanding, actual(1); 946,145,600 shares issued and
outstanding, as adjusted(2)............................ 131,423 153,482
Additional paid in capital................................ 29,305 190,534
Unearned compensation..................................... (19,216) (19,216)
Subscriptions receivable.................................. (5,193) (5,193)
Accumulated other comprehensive income (loss)............. (9,731) (9,731)
Retained deficit.......................................... (1,489) (1,489)
-------- --------
Total shareholders' equity............................. 125,099 308,387
-------- --------
Total capitalization................................. $227,724 $361,012
======== ========
</TABLE>
- ---------------
(1) Does not include 1,533,400 ordinary shares issuable upon exercise of options
granted under our Share Option Plan as of September 30, 1999. See
"Management -- Employee Benefit Plans."
(2) No adjustment has been made for the effect of the termination of the
Employees' Share Ownership Scheme subsequent to September 30, 1999. See
"Management -- Employee Benefit Plans" and Note 25 to the consolidated
financial statements.
(3) We have incurred an additional $10.0 million short-term loan in December
1999. See "Use of Proceeds".
20
<PAGE> 26
DILUTION
The net tangible book value of our company as of September 30, 1999 was
$125.1 million, or S$0.27 per ordinary share, the equivalent of $1.57 per ADS.
Net tangible book value per ordinary share is determined by dividing the net
tangible book value (total tangible assets less total liabilities) as of
September 30, 1999 by the number of outstanding ordinary shares at that date.
Based on the issuance by us of 150,000,000 ordinary shares in the global
offering (including ordinary shares represented by ADSs), at an initial public
offering price of S$2.17 per ordinary share (or $13.00 per ADS), after deducting
underwriting discounts and estimated offering expenses paid by us, the net
tangible book value of our company as of September 30, 1999 would have been
S$0.55 per ordinary share (the equivalent of $3.26 per ADS). This represents an
immediate increase in net tangible book value of S$0.28 per ordinary share (the
equivalent of $1.69 per ADS) to our existing shareholders and an immediate
dilution in net tangible book value of S$1.62 per ordinary share (the equivalent
of $9.74 per ADS) to new investors. The following table illustrates this per
ordinary share and ADS dilution:
<TABLE>
<CAPTION>
PER SHARE PER ADS
--------- -------
<S> <C> <C> <C> <C>
Assumed initial public offering price per ordinary share and
per ADS..................................................... S$2.17 $13.00
Net tangible book value per ordinary share and per ADS as of
September 30, 1999........................................ S$0.27 $1.57
Increase in net tangible book value per ordinary share and
per ADS attributable to new public investors.............. 0.28 1.69
------ -----
Net tangible book value per ordinary share and per ADS after
the global offering....................................... 0.55 3.26
------ ------
Dilution in net tangible book value per ordinary share and
per ADS to new public investors........................... S$1.62 $ 9.74
====== ======
</TABLE>
The following table summarizes as of September 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, it is
assumed that all new public investors purchase ordinary shares rather than ADSs.
<TABLE>
<CAPTION>
AVERAGE
ORDINARY SHARES TOTAL PRICE
PURCHASED CONSIDERATION
---------------- ---------------- PER ORDINARY
NUMBER PERCENT AMOUNT PERCENT SHARE
------ ------- ------ ------- ------------
<S> <C> <C> <C> <C> <C>
Existing shareholders.......................... 796.1 84.1% $160.7 45.2% $0.20
New public investors........................... 150.0 15.9% 195.0 54.8% 1.30
----- ----- ------ ------ -----
Total..................................... 946.1 100.0% $355.7 100.0% $0.38
===== ===== ====== ====== =====
</TABLE>
Please see "Management" for a description of our share option plans and
Note 20 to the consolidated financial statements.
The tables above also assume
- the underwriters have not exercised their overallotment option; and
- outstanding share options have not been exercised.
No adjustment has been made in the above tables for the effect of the
termination of the Employees' Share Ownership Scheme subsequent to September 30,
1999. See "Management -- Employee Benefit Plans" and Note 25 to the consolidated
financial statements.
To the extent that the overallotment or outstanding share options are
exercised there will be further dilution to new investors.
21
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated 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 consolidated
financial data are derived from our consolidated financial statements. Our
consolidated financial statements for the fiscal years ended December 31, 1996,
1997 and 1998 and the nine months ended September 30, 1998 and 1999, which have
been audited by KPMG, independent auditors, are included elsewhere in this
prospectus. The selected consolidated financial data for the fiscal year ended
December 31, 1995 are derived from our audited consolidated financial
statements. However, we have not included our audited consolidated financial
statements for this period in this prospectus. The following table does not
present financial data for the fiscal year ended December 31, 1994 as we did not
commence operations until 1995. The results for the nine months ended September
30, 1999 do not necessarily indicate the results that may be expected for the
full year.
Our consolidated financial statements are prepared in accordance with U.S.
GAAP.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -------------------
1995 1996 1997 1998(1) 1998 1999
------- ------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER ORDINARY SHARE AND PER ADS DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues.......................................... $ 8,058 $32,185 $88,373 $113,920 $ 79,233 $135,981
Cost of revenues...................................... 7,912 34,061 67,848 87,066 60,839 93,582
------- ------- ------- -------- -------- --------
Gross profit (loss)................................... 146 (1,876) 20,525 26,854 18,394 42,399
------- ------- ------- -------- -------- --------
Operating expenses:
Selling, general and administrative................. 3,473 6,062 13,858 16,772 11,951 19,194
Research and development............................ -- -- 2,157 3,482 2,666 5,125
Stock-based compensation............................ -- -- -- 384 179 8,456
------- ------- ------- -------- -------- --------
Total operating expenses.......................... 3,473 6,062 16,015 20,638 14,796 32,775
------- ------- ------- -------- -------- --------
Operating income (loss)............................... (3,327) (7,938) 4,510 6,216 3,598 9,624
Other income (expense):
Interest expense, net............................... 19 (401) (3,307) (8,244) (6,856) (4,118)
Foreign currency exchange gain (loss)............... (35) 604 (1,258) 857 2,805 1,873
Other non-operating income (expense), net........... -- 180 45 2,685 1,143 1,767
------- ------- ------- -------- -------- --------
Total other income (expense)...................... (16) 383 (4,520) (4,702) (2,908) (478)
------- ------- ------- -------- -------- --------
Income (loss) before income taxes..................... (3,343) (7,555) (10) 1,514 690 9,146
Income tax expense.................................... -- -- (159) (390) (293) (660)
------- ------- ------- -------- -------- --------
Net income (loss)..................................... $(3,343) $(7,555) $ (169) $ 1,124 $ 397 $ 8,486
======= ======= ======= ======== ======== ========
Net income (loss) per ordinary share(2):
Basic............................................... $ (0.15) $ (0.02) -- -- -- $ 0.01
======= ======= ======= ======== ======== ========
Diluted............................................. $ (0.15) $ (0.02) -- -- -- $ 0.01
======= ======= ======= ======== ======== ========
Net income (loss) per ADS(2):
Basic............................................... $(1.49) $(0.21) $ -- $0.02 $0.01 $0.11
======= ======= ======= ======== ======== ========
Diluted............................................. $(1.49) $(0.21) $ -- $0.02 $0.01 $0.11
======= ======= ======= ======== ======== ========
Ordinary shares (in thousands) used in per ordinary
share calculation(2):
Basic............................................... 22,500 352,032 368,000 669,671 634,869 769,144
Diluted............................................. 22,500 352,032 368,000 670,976 635,864 777,085
ADSs (in thousands) used in per ADS calculation(2):
Basic............................................... 2,250 35,203 36,800 66,967 63,487 76,914
Diluted............................................. 2,250 35,203 36,800 67,098 63,586 77,708
</TABLE>
- ---------------
(1) Effective July 1, 1998, we changed our functional currency from the
Singapore dollar to the U.S. dollar. See Note 2(d) to our consolidated
financial statements.
(2) The data set forth does not give effect to ADSs or ordinary shares issued in
the global offering.
22
<PAGE> 28
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999
------- -------- --------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 9,008 $ 2,422 $ 1,051 $ 12,692 $ 16,716
Working capital (deficit)................. (4,709) (43,726) (140,474) (24,606) (44,946)
Total assets.............................. 50,634 114,372 225,477 236,720 286,281
Short-term debt and current installments
of long-term debt....................... -- 37,071 130,165 50,000 57,518
Long-term debt............................ -- -- -- 54,282 45,107
Shareholders' equity...................... 28,417 54,714 45,706 108,038 125,099
</TABLE>
23
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our business, financial condition and results
of operations should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this prospectus. This
discussion contains forward-looking statements that reflect our current views
with respect to future events and financial performance. Our actual results may
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, such as those set forth under "Risk Factors" and
elsewhere in this prospectus. Our consolidated financial statements are reported
in U.S. dollars and have been prepared in accordance with U.S. GAAP.
OVERVIEW
We derive revenues from test services and assembly of leaded and laminate
packages. Net revenue represents the invoiced value of services rendered,
excluding goods and services tax, net of returns, trade discounts and
allowances. We recognize revenue upon shipment of semiconductors for which we
have provided services. Our net revenues from assembly services have grown at a
faster rate than our net revenues from testing services and we expect this trend
to continue as we provide more turnkey services to our customers. When we
provide full turnkey services, we perform both test and assembly services on the
same device. For that device, the unit price charged for assembly is generally
twice that of the unit price charged for testing. Therefore revenues per unit
from assembly services increase in absolute dollars more than for testing
services. While test services typically command lower unit prices than assembly
services, test services generate higher gross margins than assembly services.
The semiconductor industry is characterized by price erosion which can
impact our revenue and gross margin, unless we improve our capacity utilization
and reduce costs. Prices of our products of a given level of technology decline
over the product life cycle, commanding a premium in the earlier stages and
declining towards the end of the cycle. We have to continue to develop and offer
increasingly complex test and assembly services that meet the requirements of
our customers.
From 1996 to 1998, our net revenues grew from $32.2 million to $113.9
million and were $136.0 million for the nine months ended September 30, 1999.
From 1996 to 1998, almost all of our net revenues were derived from test
services and assembly of leaded packages. We derived revenues from assembly of
laminate packages for the first time in October 1998. We provide a full range of
test services and have developed substantial expertise in testing mixed-signal
and high performance digital semiconductors. We have been successful in
attracting new customers with these testing capabilities and then expanding our
relationship with such customers to include assembly services tailored to their
needs. We intend to continue to expand our test and assembly operations in order
to position ourselves to meet increased demand for outsourced test and assembly
services.
Our results of operations are generally affected by the capital-intensive
nature of our business. Most of our costs are fixed as our variable costs are
limited to the costs of materials, payroll and supplies. Our primary fixed costs
are for test and assembly equipment. Testers typically cost between $2.0 million
and $3.0 million each, compared with wire bonders which typically cost $100,000
each. Increases or decreases in capacity utilization rates can have a
significant effect on gross profit margins since the unit cost of test and
assembly services generally decreases as fixed charges, such as depreciation
expense for the equipment, are allocated over a larger number of units.
Depreciation expense as a percentage of revenues was 35.6%, 27.3%, 34.4% and
25.2% for 1996, 1997, 1998 and the nine months ended September 30, 1999. Our
results of operations are also affected by declines over time in the average
selling prices for packages. At times in the past, we have been able to offset,
at least in part, the effect of such declines on our gross profit margins by
successfully developing and marketing new higher margin packages, such as
advanced leadframe and laminate packages, and by taking advantage of economies
of scale and higher productivity resulting from higher volumes. However, we
cannot assure you that we will be successful at offsetting any such declines in
the future. See "Risk Factors -- Our results fluctuate from quarter to quarter,"
and "-- Our profitability is affected by capacity utilization rates."
24
<PAGE> 30
Our operating expenses consist principally of selling, general and
administrative expenses which include payroll-related expenses for
administrative staff, facilities-related expenses, management fees to our parent
Singapore Technologies, marketing expenses and provisions for bad debts on
accounts receivable. Our operating expenses also include research and
development expenditures which have been focused in two areas:
- the development of new test equipment, software and processes to enhance
efficiency and reliability and to shorten test time of semiconductors;
and
- the development of new, advanced packages to meet the customized needs of
our existing customers.
We are a part of the Singapore Technologies Group which provides us with
certain direct and indirect benefits. We have benefited from our close working
relationship with Chartered Semiconductor, which is also majority-owned by
Singapore Technologies and one of our major customers. In addition, from time to
time, Singapore Technologies and its affiliates have provided us with debt and
equity financing. Also, Singapore Technologies provides us with certain
management services, including corporate secretarial, internal audit, training,
executive resources and treasury services. We pay Singapore Technologies an
annual management fee for these services and will continue to do so after the
global offering. Prior to December 1999, this fee was based on certain
percentages of capital employed, sales, manpower and payroll. The new service
agreement into which we entered in December 1999 is a formula and service based
fee arrangement. Certain general and administrative expenses of Singapore
Technologies Assembly and Test Services, Inc., our subsidiary, are borne and
recharged to us by Chartered Semiconductor Manufacturing Inc., a United States
incorporated affiliate of Singapore Technologies. These expenses amounted to
$2.2 million and $1.0 million for 1997 and 1998, respectively, and $0.6 million
and $1.0 million for the nine months ended September 30, 1998 and September 30,
1999, respectively. We expect this amount will decrease significantly in the
future. See "Certain Transactions."
Prior to December 6, 1999, we had an Employees' Share Ownership Scheme
which was accounted for in accordance with variable plan accounting. As a
consequence, we recognized stock based compensation expense for options and
shares granted to employees under this scheme of $0.4 million and $8.5 million
during the year ended December 31, 1998 and the nine months ended September 30,
1999. As of December 6, 1999, we terminated this scheme. We will recognize
further stock based compensation expense under this scheme of $16.9 million in
the three months ended December 31, 1999. See Note 25 to our consolidated
financial statements.
We have recognized stock-based compensation expense for options granted
under the Share Option Plan in accordance with fixed plan accounting. Reported
stock-based 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. The fair market value of our ordinary shares was computed
based on calculating the fair market value of our total invested capital less
interest-bearing debt, assuming the exercise of the outstanding options at each
valuation date and adding the expected cash proceeds from the exercise of those
options. The fair market value of our total invested capital was estimated using
the income approach and the market approach, on a closely-held minority interest
basis.
We have been granted pioneer enterprise status under the Singapore Economic
Expansion Incentives (Relief from Income Tax) Act, Chapter 86 ("Relief from
Income Tax Act"), for approved subcontract assembly and testing of integrated
circuits, including wafer probe services, in Singapore for a five-year period
from January 1, 1996. During the pioneer enterprise status period income from
subcontract assembly and testing of integrated circuits, including wafer probe
services, is exempt from Singapore income tax, subject to compliance with the
conditions stated in the pioneer certificate and the Relief from Income Tax Act.
Income from any other sources is taxed at prevailing Singapore corporate tax
rates. Our pioneer status is renewable for an additional three years subject to
compliance with certain conditions. We expect that we will be in compliance with
such renewal conditions at the time of determining renewal eligibility.
25
<PAGE> 31
Until June 30, 1998, our functional currency was Singapore dollars.
Effective July 1, 1998, we changed our functional currency to U.S. dollars.
Historically, the Singapore dollar was our functional currency because the
Singapore dollar was the currency of the primary economic environment in which
our operations were conducted. However, significant changes in economic facts
necessitated a change in our functional currency from the Singapore dollar to
the U.S. dollar. Our business has changed in that a more significant portion of
our net revenues is derived from companies based outside of Singapore,
principally in the United States. The interdependencies among us and our parent
and other Singapore government controlled entities continue to diminish. There
are ongoing changes in sources of financing from Singapore dollars to U.S.
dollars. With more of our transactions and cash flows denominated in U.S.
dollars, we changed our functional currency effective July 1, 1998 from the
Singapore dollar to the U.S. dollar. Please see Note 2(d) to our consolidated
financial statements.
The change in functional currency was recognized through the translation of
Singapore dollar amounts of our assets and liabilities at June 30, 1998 to U.S.
dollars on July 1, 1998. In the case of our non-monetary assets such as
property, plant and equipment, those U.S. dollar amounts became the accounting
basis for those assets at July 1, 1998 and for subsequent periods. The $9.7
million cumulative translation adjustment at July 1, 1998 in shareholders'
equity prior to the change remains as a separate component of accumulated
comprehensive income (loss).
Assets and liabilities denominated in other currencies are converted into
the functional currency at the rates prevailing at the balance sheet date.
Income and expenses in other currencies are converted into the functional
currency at the rates of exchange at the transaction date.
We experience foreign currency exchange gains and losses arising from
transactions in currencies other than our functional currency. Prior to the
change in our functional currency, exchange gains and losses arose from
transactions denominated in currencies other than Singapore dollars, principally
in U.S. dollars. Following the change in our functional currency, exchange gains
and losses arose from transactions denominated in currencies other than U.S.
dollars, principally in Singapore dollars.
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of
net revenues for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues...................................... 105.8 76.7 76.4 76.8 68.8
----- ----- ----- ----- -----
Gross profit (loss)................................... (5.8) 23.1 23.6 23.2 31.2
----- ----- ----- ----- -----
Operating expenses:
Selling, general and administrative................. 18.8 15.7 14.7 15.1 14.1
Research and development............................ -- 2.4 3.1 3.3 3.8
Stock-based compensation............................ -- -- 0.4 0.2 6.2
----- ----- ----- ----- -----
Total operating expenses.......................... 18.8 18.1 18.2 18.6 24.1
----- ----- ----- ----- -----
Operating income (loss)............................... (24.6) 5.0 5.4 4.6 7.1
Other income (expense):
Interest expense, net............................... (1.2) (3.7) (7.2) (8.6) (3.0)
Foreign currency exchange gain (loss)............... 1.9 (1.4) 0.7 3.5 1.4
Other non-operating income (expense), net........... 0.5 0.1 2.4 1.4 1.3
----- ----- ----- ----- -----
Total other income (expense)...................... 1.2 (5.0) (4.1) (3.7) (0.3)
----- ----- ----- ----- -----
Income (loss) before income taxes..................... (23.4) (0.0) 1.3 0.9 6.8
Income tax expense.................................... -- (0.2) (0.3) (0.4) (0.5)
----- ----- ----- ----- -----
Net income (loss)..................................... (23.4)% (0.2)% 1.0% 0.5% 6.3%
===== ===== ===== ===== =====
</TABLE>
26
<PAGE> 32
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
Net revenues. Net revenues increased 71.7% from $79.2 million in the nine
months ended September 30, 1998 to $136.0 million in the nine months ended
September 30, 1999. This increase was due primarily to the increase in unit
volumes sold for test and assembly services. Net revenues from test services
increased 49.8% from $41.6 million in the nine months ended September 30, 1998
to $62.3 million in the nine months ended September 30, 1999. The increase in
test services net revenues was attributable primarily to increased demand and
greater testing capacity. Net revenues from assembly services increased 96.3%
from $37.6 million in the nine months ended September 30, 1998 to $73.7 million
in the nine months ended September 30, 1999. This increase was primarily the
result of greater demand for leadframe packages and, to a lesser extent, the
introduction of laminate packages in October 1998.
Cost of revenues and Gross profit margin. Cost of revenues increased 53.9%
from $60.8 million in the nine months ended September 30, 1998 to $93.6 million
in the nine months ended September 30, 1999, primarily due to higher
depreciation expense as a result of placing into service additional test and
assembly equipment and costs associated with increased test and assembly unit
volumes. Depreciation expense increased from $29.4 million in the nine months
ended September 30, 1998 to $34.3 million in the nine months ended September 30,
1999. Gross profit margin increased from 23.2% in the nine months ended
September 30, 1998 to 31.2% in the nine months ended September 30, 1999. The
increase in gross profit margin was due to the improved capacity utilization of
equipment associated with the increase in unit volumes.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 60.0% from $12.0 million, or 15.1% of net
revenues, in the nine months ended September 30, 1998 to $19.2 million, or 14.1%
of net revenues, in the nine months ended September 30, 1999. This increase was
due to the addition of personnel, particularly in the United States, including
the addition of 12 employees in sales and marketing positions to Singapore
Technologies Assembly and Test Services, Inc.
Research and development expenses. Research and development expenses
increased 88.9% from $2.7 million, or 3.3% of net revenues, in the nine months
ended September 30, 1998 to $5.1 million, or 3.8% of net revenues, in the nine
months ended September 30, 1999. The increase was attributable to higher
hardware and software depreciation ($0.7 million), supplies ($0.9 million) and
salaries and benefits ($0.8 million), in part relating to the establishment of
the test development center in San Jose, California.
Other income (expense). Other income (expense) includes interest expense,
net, foreign currency exchange gain (loss) and other non-operating income
(expense), net. Other expense in the nine months ended September 30, 1998 was
$2.9 million as compared to other expense of $0.5 million in the nine months
ended September 30, 1999. This difference of $2.4 million was mainly
attributable to a decrease in interest expense, net of $2.8 million. Interest
expense, net decreased from $6.9 million in the nine months ended September 30,
1998 to $4.1 million in the nine months ended September 30, 1999 as borrowings
were reduced by $62.5 million from the proceeds of the issuance of new shares to
Singapore Technologies and EDBI in March 1998 and the replacement of borrowings
with a lower interest rate loan of S$90.0 million. Foreign currency exchange
gains were $2.8 million for the nine months ended September 30, 1998 compared to
$1.9 million for the nine months ended September 30, 1999. The gain in the nine
months ended September 30, 1998 principally arose in the third quarter of 1998
due to the effect of the weakening Singapore dollar against the U.S. dollar on
the S$90.0 million loan. The further gain in the nine months ended September 30,
1999 principally arose from the effect of the continued weakening of the
Singapore dollar on this loan through to March 1999 when the loan was hedged.
Other non-operating income (expense), net consist of government grants and
rental income. In the nine months ended September 30, 1998, government grant
income was $0.1 million compared to $1.2 million in the nine months ended
September 30, 1999, and rental income in the nine months ended September 30,
1998 was $0.7 million compared to $0.5 million in the nine months ended
September 30, 1999.
Income tax expense. Income tax expense increased from $0.3 million in the
nine months ended September 30, 1998 to $0.7 million in the nine months ended
September 30, 1999 principally due to the recognition of a deferred tax expense
of $0.3 million. The current income tax expense for both periods is
27
<PAGE> 33
primarily due to Singapore tax on rental and interest income and U.S. tax on
income generated by Singapore Technologies Assembly and Test Services, Inc. in
the U.S.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net revenues. Net revenues increased 28.8% from $88.4 million in 1997 to
$113.9 million in 1998. This increase was primarily due to the increase in unit
volumes for test and assembly services. Net revenues from test services
increased 19.8% from $47.4 million in 1997 to $56.8 million in 1998. The
increase in test services net revenues was attributable primarily to growth in
test volumes reflecting expanded capacity. Revenues from assembly increased
39.3% from $41.0 million in 1997 to $57.1 million in 1998. This increase was
primarily due to greater demand for leadframe packages and, to a lesser extent,
the introduction of laminate packages in October 1998.
Cost of revenues and Gross profit margin. Cost of revenues increased 28.5%
from $67.8 million in 1997 to $87.1 million in 1998, primarily due to higher
depreciation as a result of placing into service additional test and assembly
equipment and costs associated with increased test and assembly unit volumes.
Depreciation expense increased from $24.1 million, or 27.3% of net revenues, in
1997 to $39.2 million, or 34.4% of net revenues, in 1998. Gross profit margin
increased from 23.1% in 1997 to 23.6% in 1998. The increase in gross profit
margin was attributable primarily to improved utilization of test and assembly
equipment.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 20.9% from $13.9 million, or 15.7% of net
revenues, in 1997 to $16.8 million, or 14.7% of net revenues, in 1998. The
increase was mainly due to an increase in payroll-related expenses ($1.1
million), management fees to Singapore Technologies ($0.1 million) and other
overhead expenses ($1.8 million), the major components of which are facility
related costs and sales and marketing expenses.
Research and development expenses. Research and development expenses
increased 59.1% from $2.2 million, or 2.4% of net revenues, in 1997 to $3.5
million, or 3.1% of net revenues, in 1998. The increase was due mainly to higher
salaries and benefits ($0.6 million), depreciation of hardware and software
($0.5 million) and supplies ($0.2 million).
Other income (expense). Other expense increased 4.4% from $4.5 million in
1997 to $4.7 million in 1998 primarily as a result of increased borrowings to
fund our capacity expansion program. Interest expense, net for 1998 was $8.2
million compared to $3.3 million in 1997. These expenses were offset in part by
a foreign currency exchange gain of $0.9 million compared to a foreign currency
exchange loss of $1.3 million in 1997. This loss was mainly attributable to the
strengthening of the U.S. dollar in 1997, which resulted in transaction losses
relating to our U.S. dollar denominated loan. Other non-operating income
(expense), net consist of government grant income, rental income and a provision
for relocation costs. In 1997, government grant income was $0.2 million compared
to $1.2 million in 1998 and rental income in 1997 was $0.3 million compared to
$0.8 million in 1998. We made a provision of $0.6 million in 1997 for relocation
costs associated with our move to our present facility.
Income tax expense. Income tax expense increased 145.2% from $0.2 million
in 1997 to $0.4 million in 1998. This was primarily due to the increase in
rental income from the lease of a portion of our facilities to TriTech
Microelectronics Ltd, our affiliate, and an increase in U.S. tax on income
generated by Singapore Technologies Assembly and Test Services, Inc. in the
United States.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net revenues. Net revenues increased 174.5% from $32.2 million in 1996 to
$88.4 million in 1997 primarily due to the increase in unit volume for test and
assembly services. This was a result of an increased customer base and the sale
of a greater range of higher margin leadframe packages. Net revenues from test
services increased 149.5% from $19.0 million in 1996 to $47.4 million in 1997.
The increase in test services net revenues came primarily from growth in final
test services offset by a decrease in wafer probe services. Net revenues from
assembly services increased 210.6% from $13.2 million in 1996
28
<PAGE> 34
to $41.0 million in 1997 as a result of additional customers and offering a
greater range of higher margin packages.
Cost of revenues and Gross profit margin. Cost of revenues increased 98.8%
from $34.1 million in 1996 to $67.8 million in 1997, primarily due to costs
associated with increased test and assembly unit volumes. Gross profit margin
increased from (5.8)% in 1996 to 23.1% in 1997, primarily due to significantly
improved asset utilization resulting from increased volumes. In addition, with
the increase in assembly unit volumes we obtained better pricing on materials
purchased.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 127.9% from $6.1 million, or 18.8% of net
revenues, in 1996 to $13.9 million, or 15.7% of net revenues, in 1997. The
increase was mainly due to the expansion of our sales team from 16 persons in
1996 to 26 in 1997. Expenses in 1997 included $2.2 million for sales and
marketing activities in the United States. In addition, utility expenses
increased by $1.4 million due to increased operating activities.
Research and development expenses. There were no research and development
activities undertaken in 1996. Research and development commenced in 1997 and
were $2.2 million, or 2.4% of net revenues.
Other income (expense). Other income of $0.4 million in 1996 decreased to
an expense of $4.5 million in 1997 primarily as a result of interest expense,
net and foreign currency exchange loss. Interest expense, net increased from
$0.5 million in 1996 to $3.3 million in 1997 due to increased borrowings to fund
capacity expansion. Short-term loans from Singapore Technologies increased from
$37.1 million in 1996 to $130.2 million in 1997. Foreign currency exchange loss
was $1.3 million in 1997 compared to a gain of $0.6 million in 1996. Other
non-operating income (expense), net consist of government grants and rental
income. In 1996, we recognized the first government grant income of $0.2
million.
Income tax expense. We incurred no income taxes in 1996 and incurred $0.2
million in income taxes in 1997, primarily due to rental income.
QUARTERLY RESULTS
The following table sets forth our unaudited results of operations for the
quarterly periods indicated. You should read the following table in conjunction
with our consolidated financial statements and related notes included elsewhere
in this prospectus. The results of operations in any quarter are not necessarily
indicative of the results of any future period. We expect that our quarterly
revenues may fluctuate significantly. See "Risk Factors -- Our results fluctuate
from quarter to quarter."
29
<PAGE> 35
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30, SEP. 30,
1997 1998 1998 1998 1998 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................ $36,436 $34,895 $22,322 $22,016 $34,687 $36,677 $45,616 $53,688
Cost of revenues........................ 22,735 22,756 19,338 18,745 26,227 28,435 30,455 34,692
------- ------- ------- ------- ------- ------- ------- -------
Gross profit (loss)..................... 13,701 12,139 2,984 3,271 8,460 8,242 15,161 18,996
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Selling, general and administrative... 6,031 4,401 3,790 3,760 4,821 5,456 6,515 7,223
Research and development.............. 750 1,033 981 652 816 1,230 1,536 2,359
Stock-based compensation.............. -- -- 17 162 205 899 858 6,699
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses............ 6,781 5,434 4,788 4,574 5,842 7,585 8,909 16,281
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)................. 6,920 6,705 (1,804) (1,303) 2,618 657 6,252 2,715
Other income (expense):
Interest expense, net................. (1,562) (2,935) (2,068) (1,853) (1,388) (1,398) (1,458) (1,262)
Foreign currency exchange gain
(loss).............................. (464) (1,397) 1,204 2,998 (1,948) 2,157 222 (506)
Other non-operating income (expense),
net................................. (232) 782 319 42 1,542 195 941 631
------- ------- ------- ------- ------- ------- ------- -------
Total other income (expense)........ (2,258) (3,550) (545) 1,187 (1,794) 954 (295) (1,137)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes....... 4,662 3,155 (2,349) (116) 824 1,611 5,957 1,578
Income tax expense...................... (104) (85) (107) (101) (97) (239) (273) (148)
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....................... $ 4,558 $ 3,070 $(2,456) $ (217) $ 727 $ 1,372 $ 5,684 $ 1,430
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET REVENUES
-------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30, SEP. 30,
1997 1998 1998 1998 1998 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................ 62.4 65.2 86.6 85.1 75.6 77.5 66.8 64.6
----- ----- ----- ----- ----- ----- ----- -----
Gross profit (loss)..................... 37.6 34.8 13.4 14.9 24.4 22.5 33.2 35.4
----- ----- ----- ----- ----- ----- ----- -----
Operating expenses:
Selling, general and administrative... 16.6 12.6 17.0 17.1 13.9 14.9 14.3 13.5
Research and development.............. 2.1 3.0 4.4 3.0 2.4 3.4 3.4 4.4
Stock-based compensation.............. -- -- -- 0.7 0.6 2.5 1.9 12.5
----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses............ 18.7 15.6 21.4 20.8 16.9 20.8 19.6 30.4
----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss)................. 18.9 19.2 (8.0) (5.9) 7.5 1.7 13.6 5.0
Other income (expense):
Interest expense, net................. (4.3) (8.4) (9.3) (8.4) (4.0) (3.8) (3.2) (2.4)
Foreign currency exchange gain
(loss).............................. (1.3) (4.0) 5.4 13.6 (5.6) 5.9 0.5 (0.9)
Other non-operating income (expense),
net................................. (0.6) 2.2 1.4 0.2 4.4 0.5 2.1 1.2
----- ----- ----- ----- ----- ----- ----- -----
Total other income (expense)........ (6.2) (10.2) (2.5) 5.4 (5.2) 2.6 (0.6) (2.1)
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before income taxes....... 12.7 9.0 (10.5) (0.5) 2.3 4.3 13.0 2.9
Income tax expense...................... (0.3) (0.2) (0.5) (0.4) (0.3) (0.6) (0.6) (0.3)
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....................... 12.4% 8.8% (11.0)% (0.9)% 2.0% 3.7% 12.4% 2.6%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
We experienced strong revenue growth in the second half of 1997 as a result
of the introduction of new packages as well as the expansion of our testing
capacity. Demand for semiconductors, particularly from the PC market, increased
significantly in late 1997 bringing greater demand for our services. In response
to these market conditions, we continued to purchase test and assembly
equipment.
Demand generally increased in the semiconductor industry for all of 1998
compared to 1997. However, beginning in the second quarter of 1998, our net
revenues decreased as we experienced reduced demand from our major customers for
our test and assembly services. This was due, in part, to a general decline in
demand in the semiconductor industry. Gross profit was also negatively impacted
by the market environment. The reduced demand from our customers resulted in
lower utilization rates of our capital equipment as new wire bonders and testers
were placed into service and not fully utilized. Also, our customers were under
significant price pressure from their customers and as a result put pressure on
us to
30
<PAGE> 36
lower prices for both test services and traditional leadframe packages. These
price decreases were partially offset by increases in sales of advanced
leadframe and laminate packages, which carry higher prices and gross profit
margins. Starting in the fourth quarter of 1998, conditions in the semiconductor
industry began to improve. As a result, we experienced increased demand from our
major customers, thus improving our utilization rates and financial performance.
A significant component of our cost of revenues is depreciation expense,
which is largely related to our test and assembly equipment. We begin
depreciating our equipment when it is placed into service. Often, there is a gap
between when our equipment is placed into service and when it achieves high
levels of utilization. As a result, placing into service new equipment can cause
our gross profit margins to vary significantly from quarter to quarter.
Selling, general and administrative expenses increased significantly
between the third and fourth quarters of 1997. The $2.7 million increase was due
mainly to facility-related expenses of $1.0 million which was a result of the
expansion of our floor area, payroll-related expenses of $0.4 million due to
increased staffing and sales and marketing expenses of $0.4 million.
Subsequently, selling, general and administrative expenses increased every
quarter since the second quarter of 1998, primarily due to increased staffing
levels due to our planned expansion of our business and operations. Research and
development expenses were between 2.1% and 4.4% of net revenues from the fourth
quarter of 1997 to the third quarter of 1999 and were expended primarily to
support the development of our BGA package technology.
Our quarterly operating results may vary significantly. Unfavorable changes
may adversely affect our business, financial condition and results of
operations. In addition, we intend to increase the level of operating expenses
and investments in manufacturing capacity in anticipation of future growth in
net revenues. To the extent our net revenues do not grow as anticipated, our
financial condition and operating results may be materially and adversely
affected due to the fixed nature of most of these expenses. See "Risk
Factors -- Our results fluctuate from quarter to quarter."
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through the issuance of new
shares to our shareholders and loans from our shareholders, related parties and
third-party financial institutions. Since 1996, Singapore Technologies has
provided to us $147.0 million and $61.9 million in debt and equity financing,
respectively. Since 1996, the Economic Development Board has provided to us
$54.3 million in debt financing and EDBI has provided to us $30.3 million in
equity financing. As of September 30, 1999, we had loans outstanding from our
shareholders and related parties of $77.6 million, additional debt of $25.0
million and cash and cash equivalents of $16.7 million.
LIQUIDITY
Net cash generated by operating activities was $47.9 million and $47.8
million in 1998 and the first nine months of 1999, respectively. The $47.9
million of cash generated in 1998 was primarily attributable to net operating
cash generated, before changes in operating working capital, of $42.3 million
and a decrease in accounts receivable of $8.5 million. The $47.8 million of cash
generated in the first nine months of 1999 was primarily attributable to net
operating cash generated, before changes in operating working capital, of $50.7
million, an increase in accounts receivable of $10.6 million and an increase of
$13.8 million in accrued operating expenses and other payables, excluding
liabilities for the purchase of fixed assets. The increase in accrued operating
expenses and other payables included in the operating working capital largely
arises from an increase in payroll-related provisions of approximately $7.1
million.
Our net cash used in investing activities primarily represents amounts paid
for property, plant and equipment and other capital expenditures. Over the past
three years, a significant amount of our capital expenditures has been spent on
test and assembly equipment. We have budgeted capital expenditures and
investments of approximately $99.2 million for the fourth quarter of 1999 and
$140.0 million for 2000. We expect to incur these capital expenditures primarily
for the acquisition of test and assembly equipment.
31
<PAGE> 37
From time to time we may acquire or make investments in additional businesses,
products and technologies or establish joint ventures or strategic partnerships
that we believe will complement our current and future business. Some of these
acquisitions or investments could be material. However, we have no specific
agreements or understandings with respect to any material acquisition or
investment at this time.
There were no new borrowings or issuance of shares other than pursuant to
our Employees' Share Ownership Scheme for the nine months ended September 30,
1999. In 1998, our net cash provided by financing activities increased primarily
due to borrowings of $79.3 million under long-term and short-term loans entered
into in mid-1998 and proceeds of $62.5 million from the issuance of new shares.
In 1998, we repaid or refinanced $107.6 million of our outstanding debt from the
proceeds of the sale of new shares and the issuance of additional debt.
CAPITAL RESOURCES
In 1996 and 1997, our borrowings came primarily from Singapore
dollar-denominated short-term loans from Singapore Technologies. The aggregate
amount of short term loans provided by Singapore Technologies for 1996 and 1997
are $37.0 million and $110.0 million, with no loans provided in 1998. The
average weighted interest rate for these loans was 5.4%, 5.1% and 7.8% in 1996,
1997 and 1998, respectively. These loans were repaid or refinanced in full in
1998.
In 1997, we obtained a grant of S$23.2 million ($13.9 million) for the
funding of certain research and development projects from the Singapore National
Science & Technology Board under its Research Incentive Scheme for Companies.
The grant is being disbursed to us over a maximum of five years ending December
31, 2001, in the form of reimbursement of a specified percentage of amounts
actually spent by us on manpower, research and development equipment, materials,
training and technology licensing fees. The grant does not require repayment.
Recognition of this grant income is included in our statement of operations
under "Other non-operating expense (income), net." The grant is disbursed based
on the amount of expenditures incurred. There are no conditions attached to the
grant other than completing the project to which the grant relates and the
certification of the costs incurred.
In 1998, we entered into an unsecured $25.0 million demand loan agreement
with ST Treasury Services Ltd, a wholly-owned subsidiary of Singapore
Technologies, denominated in U.S. dollars. The demand loan bears interest at a
rate of 5.8% at September 30, 1999.
On June 5, 1998, we entered into a S$90.0 million ($54.3 million) long-term
loan agreement with the Economic Development Board. The long-term loan is
denominated in Singapore dollars and bears interest at 1% over the prevailing
rate per annum declared by the Central Provident Fund Board, a statutory board
of the Singapore Government. The current prevailing rate is 3.5%. Interest is
payable semi-annually commencing September 1, 1998. Principal is payable in
seven semi-annual, equal installments commencing September 1, 2000. The loan
agreement specifies that the proceeds are to be used solely for the financing of
fixed productive assets in the semiconductor business. This loan matures on
September 1, 2003 and is guaranteed by Singapore Technologies. The loan
agreement restricts us from paying dividends, from incurring further
indebtedness and from undertaking any form of reconstruction, including
amalgamation with another company, which would result in a change in the control
of the Company, in each case without prior lender consent. To reduce our
Singapore dollar exposure on this loan, in the first quarter of 1999 we hedged
the principal amount due under such loan and will incur an additional annual
financing charge of 1.7% of the principal amount of such loan with respect to
such hedging transaction.
On July 13, 1998 we obtained an unsecured $25.0 million short-term loan
from Den Danske Bank which was denominated in U.S. dollars. The short-term loan
initially bore interest at LIBOR plus 0.5% and was due on August 26, 1999. The
short-term loan was extended for another year and now matures on August 24, 2000
with interest at LIBOR plus 0.6%. The interest rates payable on the loan from
Den Danske ranged between 5.5% and 6.2% during 1998.
32
<PAGE> 38
On December 16, 1999 we obtained an unsecured $10.0 million short-term loan
from Den Danske Bank which was denominated in U.S. dollars. This short-term loan
matures on February 16, 2000 and bears interest at 6.85% per annum.
We have entered into an agreement with Citibank, N.A. for a working capital
facility of $20.0 million which we have not drawn down. Interest on borrowings
under this facility will be charged at the bank's prevailing rate.
We intend to use the net proceeds from the global offering to repay in full
the short-term loans from Den Danske Bank and the demand loan from ST Treasury
Services Ltd. We expect that the net proceeds of the global offering, after
repayment of our loans, together with cash flows from operating activities, will
be adequate to fund our operations for at least the next two years.
YEAR 2000 COMPLIANCE
Many existing computer systems worldwide are programmed to process dates
using only two digits for the year of the date (e.g., "99" for 1999) rather than
four digits. Computer systems which process year 2000 transactions (and beyond)
with the year "00" may encounter significant processing inaccuracies and
potentially even system failure. We and third parties with whom we do business
rely on numerous computer programs for our day-to-day operations and may be
adversely affected by the year 2000 situation. Although year 2000 problems may
become evident on January 1, 2000, the year 2000 problem may continue to be a
risk after January 1, 2000.
At the date of this prospectus, our systems have not experienced any year
2000 problems. We presently believe that the year 2000 problem will not pose
significant operational problems for our business and operations on a going
forward basis. While we have contingency plans in place for operational problems
which may still arise as a result of year 2000 problems, we cannot assure you
that the year 2000 problem will not pose significant operational problems or
have a material adverse effect on our business, financial condition and results
of operations in the future. As of December 15, 1999, we had expensed
approximately $2.5 million for year 2000 compliance.
We are not aware of any material year 2000 problems encountered by our
suppliers to date but have not yet obtained confirmations from our suppliers
that they did not experience year 2000 problems. Accordingly, we cannot
determine whether our suppliers have experienced year 2000 problems that may
impact their ability to supply us with equipment and services. Further, we
cannot determine the state of their year 2000 readiness on a going forward
basis. We cannot assure you that our suppliers will be successful in ensuring
that their systems have been and will continue to be or will be year 2000
compliant or that their failure to do so will not have an adverse effect on our
business, financial condition and results of operations. See "Risk Factors -- We
could be adversely affected by the year 2000 problem."
FOREIGN CURRENCY EXCHANGE EXPOSURE
We have recently adopted a hedging policy that we believe adequately covers
any material exposure to our non-U.S. dollar assets and liabilities. To minimize
foreign currency exchange risk, we will selectively hedge our foreign currency
exposure through forward foreign currency swap contracts and options. We entered
into a forward foreign currency swap contract with respect to the principal
amount of the Singapore dollar-denominated long-term loan entered into with the
Economic Development Board. This will be terminated upon repayment of such loan
after the global offering. To date, our hedging activities have been immaterial.
However we cannot assure you that sudden or rapid movement in exchange or
interest rates will not have a material adverse effect on our business,
financial condition or results of operations.
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
33
<PAGE> 39
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
We may employ off-balance sheet derivative instruments such as interest
rate swaps and currency swaps, forward foreign currency contracts and foreign
currency option contracts to manage our interest rate and foreign exchange
exposure. These instruments are used solely to reduce or eliminate the financial
risks associated with our assets and liabilities and not for trading or
speculation purposes.
Our exposure to market risk associated with changes in interest rates
relates primarily to our debt obligations. Our policy is to manage interest rate
risk by borrowing a combination of fixed and floating rate obligations depending
upon market conditions.
We have established a foreign currency hedging program and may utilize
foreign currency swaps as well as foreign exchange forward contracts and
options. The goal of the hedging program is to effectively manage risk
associated with fluctuations in the value of the foreign currency, thereby
making financial results more stable and predictable.
Our currency, maturity and interest rate information relative to our
short-term and long-term debt and derivative financial instruments are disclosed
in Notes 9, 13 and 22 to the consolidated financial statements, respectively. We
anticipate the repayment of our short-term and long-term debt and the settlement
of our outstanding derivative contract in 1999, upon the completion of the
global offering.
The tables below provide information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates and foreign currencies as of the dates shown. Weighted average
variable rates were based on average interest rates applicable to the loans. The
information is presented in U.S. dollar equivalents, which is our reporting
currency. Actual cash flows are denominated in various currencies including U.S.
dollars and Singapore dollars.
<TABLE>
<CAPTION>
DECEMBER 31, 1998 SEPTEMBER 30, 1999
------------------ ------------------
TOTAL TOTAL
RECORDED FAIR RECORDED FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(U.S.$ EQUIVALENT IN THOUSANDS)
<S> <C> <C> <C> <C>
DEBT:
Fixed rate short-term debt: (US$)......................... $25,000 $25,000 $25,000 $25,000
Average interest rate..................................... 6.1% 5.8%
Variable rate short-term debt: (US$)...................... $25,000 $25,000 $25,000 $25,000
Average interest rate..................................... 5.8% 6.0%
Variable rate long-term debt (S$)......................... $54,282 $54,282 $52,625 $53,095
Average interest rate..................................... 5.3% 3.5%
Foreign Currency Contract:
Notional amount of $52,625 (S$)......................... -- -- $ 680 $ 1,150
Settlement rate (vs US$)................................ 1.73
</TABLE>
LIMITATIONS
Fair value estimates are made at a specific point in time and are based on
relevant market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
34
<PAGE> 40
BUSINESS
We are a leading independent provider of a full range of semiconductor test
and assembly services, including:
- testing, including final testing and wafer probe, on a diverse selection
of test platforms, as well as additional test related services such as
burn-in process support, reliability testing, thermal and electrical
characterization, dry pack and tape and reel;
- assembly of leaded and laminate packages, as well as additional assembly
related services such as package design and leadframe and substrate
design;
- pre-production services, such as package development, supply chain
management and test software and related hardware development; and
- drop shipment services.
We provide these test and assembly services to semiconductor companies
which do not have their own manufacturing facilities (fabless companies),
vertically integrated semiconductor device manufacturers (IDMs), and independent
semiconductor wafer foundries (foundries). While we provide our customers with a
broad range of test and assembly services for most types of semiconductors,
including high performance digital semiconductors, we have developed a
particular expertise in testing mixed-signal semiconductors. Many of our
customers are leaders in communications semiconductors, including:
<TABLE>
<S> <C> <C>
Alcatel Microelectronics N.V Infineon Technologies Asia Pacific Pte Ltd Philips Electronics Asia Pacific Pte Ltd
Analog Devices, Inc. Level One Communications, Inc. PMC-Sierra, Inc.
Broadcom Corporation (a subsidiary of Intel Corporation) TDK Corporation
Conexant Systems, Inc. Nortel Networks Corporation Texas Instruments Incorporated
</TABLE>
We provide test and assembly services at our facility in Singapore, where
we operate approximately 160 testers and approximately 250 wire bonders.
Singapore is a politically and economically stable nation with laws that protect
our customers' proprietary technology. We also have an assembly design center in
Milpitas, California and have recently established a test development center in
San Jose, California. Our U.S. facilities enable us to work more closely with
many of our customers.
We are part of the Singapore Technologies Group. The Singapore Technologies
Group is 100%-owned by Temasek Holdings (Private) Limited, the principal holding
company of the Government of Singapore. Temasek Holdings (Private) Limited owns
78.3% of Singapore Technologies and owns 100% of Singapore Technologies Holdings
Pte Ltd. which owns the remaining 21.7% of Singapore Technologies. Singapore
Technologies owns 100% of Singapore Technologies Semiconductors Pte Ltd which
also owns shares in our company. In addition, EDB Investments Pte Ltd, another
principal shareholder in our company, is wholly owned by the Economic
Development Board, a Singapore government agency. Accordingly, our company is
indirectly owned by the Government of Singapore.
INDUSTRY BACKGROUND
GENERAL
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, worldwide semiconductor device
market revenue increased from $77.3 billion in 1993 to $125.6 billion in 1998, a
compound annual growth rate, or CAGR, of 10.2%. In an October 1999 report, the
SIA estimates that worldwide semiconductor device market revenue will grow to
$233.7 billion in 2002.
The SIA forecasts that one of the principal drivers of growth in the
semiconductor industry during the next several years will be increased sales of
communications semiconductors used in applications such as
35
<PAGE> 41
computer modems, networks, cellular phones and internet and electronic commerce
hardware and appliances. The proliferation of digital technology, particularly
in communications applications, has increased demand for analog functionality,
which helps the digital electronics interact with the real world of sound,
light, heat and motion. Increasing cost pressures and size constraints are
prompting silicon providers to integrate high performance analog and digital
functionality into mixed-signal semiconductors. This functional integration of
analog and digital components onto single chips makes these mixed-signal
semiconductors more difficult to design and test than most other types of
semiconductors.
MANUFACTURING PROCESS
The production of a semiconductor is a complex process that requires
increasingly sophisticated engineering and manufacturing expertise. The
production process can be broadly divided into three primary stages:
- wafer fabrication, including wafer probe;
- assembly of bare semiconductors, or die, into finished semiconductors
(referred to as "assembly" or "packaging"); and
- final testing of assembled semiconductors.
Wafer Fabrication. The wafer fabrication process begins with the
generation of a mask that defines the circuit patterns for the transistors and
interconnect layers that will be formed on the raw silicon wafer. The
transistors and other circuit elements are formed by repeating a series of
process steps where photosensitive material is deposited onto the wafer; the
material is exposed to light through the mask in a photolithography process; and
finally the unwanted material is removed through an etching process, leaving
only the desired circuit pattern on the wafer.
Wafer Probe. Wafer probe is a process whereby each individual die on the
wafer is electrically tested in order to identify the operable semiconductors
for assembly.
Assembly. Assembly protects the semiconductor, facilitates its integration
into electronic systems and enables the dissipation of heat. In the assembly
process, the wafer is diced into individual die that are then attached to a
substrate with an epoxy adhesive. Leads on the substrate typically are then
connected by extremely fine gold wires to the input/output, or I/O, terminals on
the die through the use of automated equipment known as "wire bonders." Each die
is then encapsulated in a molding compound, thus forming the package.
Final Testing. Final testing is the last step in semiconductor production.
It is a highly complex process that uses sophisticated testing equipment and
customized software programs to electrically test a number of attributes of
assembled semiconductors, including functionality; speed; predicted endurance;
power consumption; and electrical characteristics. After final testing, the
semiconductors are shipped as directed by the customer for integration into the
end-products.
TRENDS TOWARD OUTSOURCING
Historically, IDMs conducted the majority of the semiconductor
manufacturing process in their own facilities, outsourcing only the
lower-technology aspects of the process and keeping what was at the time
regarded as advanced or proprietary technology in-house. Fabless companies,
which concentrated their efforts and resources on the design, marketing and sale
of semiconductors, emerged in the mid-1980s. Fabless companies outsource
virtually every step of the semiconductor production process, allowing them to
utilize the latest test and assembly technology without committing significant
amounts of capital and other resources to manufacturing their products. In a
July 1999 report, Dataquest estimates that fabless companies revenues have
increased as a percentage of the worldwide semiconductor market from 3.9% in
1994 to 6.8% in 1998 and are forecasted to grow to 9.8% in 2003. In the same
report, Dataquest estimates that fabless companies' revenues will increase from
$9.1 billion in 1998 to $23.9 billion in 2003, or at a CAGR of 21.4%.
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<PAGE> 42
In response to competition from fabless companies, IDMs began utilizing
outsourcing as a means of cost-effective access to state-of-the-art technology,
faster time to market and lower unit costs. Increasingly, IDMs have overcome
their reluctance to the outsourcing of advanced or proprietary technology and
have come to increasingly depend on independent test and assembly providers for
manufacturing support and advances in such technology. In a July 1999 report,
Dataquest estimates that in 1998 IDMs comprised 93.2% of the worldwide
semiconductor market. Given the IDMs' significant market share in the
semiconductor market, they present a significant opportunity for independent
test and assembly providers.
Electronic Trends Publications, or ETP, estimates in a 1999 report that the
market for assembly services in 1998 was $16.2 billion, of which $6.1 billion,
or 38.0%, was outsourced. ETP estimates in the same report that the market for
assembly services will be $29.1 billion in 2003, of which $12.9 billion, or
44.5%, will be outsourced.
There are several benefits that can be derived from the use of outsourced
test and assembly services which are driving the continued growth of the
industry:
Technological sophistication and complexity. The increasing
technological complexity of semiconductors, including systems-level
semiconductors which integrate multiple functions onto a single
semiconductor, has driven the need for increasingly complex test and
assembly services able to support these devices. More sophisticated
semiconductors require an increasing number of I/Os, higher operating
speed, higher thermal dissipation and smaller form-factors. As a result of
these requirements, semiconductor testing and assembly is increasingly
being seen as an enabling technology critical to the advancement of
semiconductor designs.
Independent providers of test and assembly services have developed
sophisticated expertise in semiconductor testing and assembly and have
dedicated substantial resources toward further technological innovation.
Because independent providers are able to spread the cost of these
development efforts over a broader range of customers and products, they
are able to offer access to leading technologies at price points below the
internal costs of IDMs. Because it is difficult to keep pace with
technological developments in test and assembly technology while
maintaining a leading position in the development of increasingly
sophisticated semiconductors, IDMs are increasingly relying on independent
test and assembly service providers for technological development and
innovation in, and as a strategic source of, test and assembly services.
Time to market. As the semiconductor market becomes increasingly
competitive and product life cycles continue to decrease, semiconductor
companies are seeking to shorten their time to market for new products. In
particular, these companies seek to shorten the test and assembly stages of
the production process to gain a competitive advantage in bringing products
to market quickly. As testing and assembly needs are identified for a
specific product, semiconductor companies frequently do not have the time
to develop the necessary capabilities to meet these needs nor the expertise
to implement these solutions in the necessary volumes for rapid product
rollouts. As a result, semiconductor companies are increasingly leveraging
the resources and capabilities of independent test and assembly service
providers to quickly deliver new products to the market. In addition, in
order to further accelerate their time to market, semiconductor companies
are increasingly requiring the test and assembly functions to be performed
at the same location.
Asset utilization. The testing and assembly of semiconductors is a
complex process that requires substantial capital investment in specialized
equipment and facilities. Semiconductor companies, trying to maximize
allocation of limited resources, reduce capital expenditures and control
research and development costs, are increasingly turning to the outsourcing
of test and assembly services.
In addition, semiconductor companies are facing shorter product life cycles
and more frequent new product introductions that cause greater fluctuations in
product volumes, lower production runs and increased volatility in capacity
requirements. As a result, it is becoming more difficult for these companies to
sustain high levels of capacity utilization of their test and assembly
equipment. Independent test and assembly services companies can allocate their
fixed cost investments across a wider portfolio of customers
37
<PAGE> 43
and products to maximize capacity utilization and extend the useful life of
equipment. Additionally, independent providers are able to reach improved price
points through the realization of economies of scale in their purchasing
activities.
STRATEGY
Our objective is to be a leading global supplier of a wide range of test
and assembly services to leading fabless companies, IDMs, and foundries. The
principal components of our strategy are to:
STRENGTHEN OUR POSITION AS A LEADER IN TESTING MIXED-SIGNAL SEMICONDUCTORS
We intend to strengthen our position as a leading provider of mixed-signal
testing services. Mixed-signal testing can be extremely difficult due to the
high level of functional integration in these semiconductors. We believe that
the mixed-signal semiconductor market is very attractive because these
semiconductors are used extensively in fast growing communications applications
such as data networking, broadband and mobile communications. We will continue
to offer high quality, leading process mixed-signal semiconductor test services
to strengthen our relationships with existing customers as well as to attract
potential new customers.
LEVERAGE OUR TEST SERVICES EXPERTISE TO GROW OUR ASSEMBLY SERVICES BUSINESS
We provide a full range of test services and have developed substantial
expertise in testing mixed-signal and high performance digital semiconductors.
We have been successful in attracting new customers with these testing
capabilities and then expanding our relationship with such customers to include
assembly services tailored to their needs. We intend to continue to expand our
business by attracting customers with our advanced testing capability. We
believe this distinguishes us from many of our competitors who emphasize their
assembly services.
OFFER A FULL RANGE OF TEST AND ASSEMBLY SERVICES
We provide a full range of test and assembly services and have developed a
flexible business model that allows our customers several options in choosing
the mix of services that best suits their needs. We believe that our customers
place great value on our willingness to offer them the selected services they
request without the obligation of purchasing other services we offer. We also
provide our customers with the opportunity to consolidate all of their testing
and assembly needs with us by offering a "back-end turnkey" service which
includes wafer probe, assembly, final test and drop shipment services. In
conjunction with Chartered Semiconductor or other foundries, our customers can
also benefit from our services on a "full turnkey" basis which includes wafer
fabrication. Our "back-end turnkey" and "full turnkey" solutions can
significantly reduce our customers' time-to-market by eliminating the time
required to ship semiconductor wafers to test and assembly facilities in
different locations.
CONTINUE TO EXPAND OUR RANGE OF PACKAGES
We plan to continue to expand our range of packages particularly by
offering advanced design packages to meet our customers' requirements. Working
in close consultation with our customers, we have developed a wide array of
traditional leadframe, advanced leadframe and laminate packages to meet the
specific needs of such customers. We have established a dedicated group of
engineers whose primary focus is the development of new advanced leaded and
laminate packages including a variety of advanced BGA and flip-chip packages. We
also have an assembly design center in Milpitas, California that enables us to
work more closely with many of our customers.
EMPHASIZE CUSTOMER SERVICE AND SUPPORT
Our objective is to work closely with our customers so that they consider
us an integral, strategic partner in their business. We believe that our
comprehensive customer service and support has been a significant factor in our
ability to attract and retain customers. Our broad, high quality service
offerings,
38
<PAGE> 44
dedicated customer account teams and commitment to finding solutions to our
customers' needs and problems have enabled us to develop important relationships
with many of our customers. We have received numerous awards in the area of
customer service from our major customers, including Broadcom, Cirrus Logic,
Hewlett-Packard Singapore (Sales) Pte Ltd, Level One and TDK Corporation.
SERVICES
We offer a comprehensive array of technologically advanced test, assembly
and pre-production services to address the needs of our customers and their end
customers. We also provide drop shipment services. In the nine months ended
September 30, 1999, 45.8% of our net revenues were from test services and 54.2%
of our net revenues were from assembly services.
TEST SERVICES
We offer final testing and wafer probe on a diverse selection of test
platforms, as well as additional test related services such as burn-in process
support, reliability testing, thermal and electrical characterization, dry pack
and tape and reel.
Testing
Testing includes both final testing and wafer probe. Final testing is the
last stage in semiconductor production which involves using sophisticated test
equipment and customized software programs to electronically test a number of
attributes of packaged semiconductors. Wafer probe is the step immediately prior
to the assembly of semiconductors and involves inspection of the processed wafer
for defects. Wafer probe services require similar expertise and testing
equipment to that used in final testing, and several of our testers (with the
substitution of different handlers or probers) are used for wafer probe
services. To date, substantially all wafer probe has been performed for
customers whose wafers are then assembled by us. In 1998 and in the nine months
ended September 30, 1999, 72.0% and 74.5%, respectively, of wafer probe revenues
were from sales to Chartered Semiconductor.
We have invested in state-of-the-art testing equipment that allows us to
test a broad variety of semiconductors, including mixed-signal, digital and
memory.
Mixed-signal Testing. We test a variety of mixed-signal semiconductors,
including those used in communications applications such as network routers,
switches and interface cards; broadband products such as cable set-top boxes;
and mobile telecommunications products such as cellular phones and base
stations. In addition to communications semiconductors, we test mixed-signal
semiconductors for personal computer components, such as graphics, CD-ROM and
hard disk drive controllers. Mixed-signal semiconductors require a large number
of functions to be tested which can only be done using specialized testing
equipment.
Digital Testing. We test a variety of digital semiconductors, including
high performance semiconductors used in PCs, disk drives, modems and networking
systems. Specific digital semiconductors tested include digital signal
processors, or DSPs, field programmable gate arrays, or FPGAs, microcontrollers,
central processing units, bus interfaces, and digital application specific
integrated circuits, or ASICs, and application specific standard products, or
ASSPs.
Memory Testing. We provide wafer probe services for a variety of memory
semiconductors, including Flash memory, SRAMs and ROMs.
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<PAGE> 45
The following table sets forth, for the periods indicated, the percentage
of our net revenues from testing services by type of semiconductor.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------- -----------------
1997 1998 1999
----- ----- -----------------
<S> <C> <C> <C>
Mixed-signal............................................. 56.8% 67.1% 73.3%
Digital.................................................. 39.6 30.6 25.6
Memory................................................... 3.6 2.3 1.1
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Additional Test-Related Services
We offer a variety of additional test-related services, including:
- "Burn-in process support". Burn-in is the process of electrically
stressing semiconductors, usually at high temperature and voltage, for a
period of time long enough to cause the failure of marginal
semiconductors. During burn-in process support, we perform an analysis of
burn-in rejects in order to determine the cause of failure.
- "Reliability testing". Reliability testing is the process of testing a
semiconductor to evaluate its life span. It is performed on a sample of
devices that have passed final testing.
- "Thermal and electrical characterization". Thermal and electrical
characterization is the process of testing a semiconductor for
performance consistency under thermal and electrical stress.
- "Dry pack". Dry pack is the process of heating the semiconductors in
order to remove moisture before packing and shipment to customers.
- "Tape and reel". Tape and reel is the process of transferring
semiconductors from tray or tube into a tape-like carrier for shipment to
customers.
ASSEMBLY SERVICES
Our assembly services include assembly of a broad range of leaded and
laminate packages. Packaging serves to protect the die and facilitate electrical
connections and heat dissipation. As part of customer support on assembly
services, we also offer package design and design of leadframes and substrates.
Packaging
We offer a broad range of advanced package formats designed to provide
customers with a full range of packaging solutions. We have focused our
packaging development primarily on high-pin count surface mount technology, or
SMT, packages. SMT packages typically incorporate leads or interconnects which
are soldered to the surface of the printed circuit board rather than inserted
into holes, as is the case in older pin-through-hole, or PTH, technology
packages. SMT packages accommodate a substantially higher number of leads than
PTH packages, enabling a reduction in the number of semiconductors used and a
reduction in the dimensions of the printed circuit board. Because SMT can enable
higher pin counts on a semiconductor device, SMT is typically the preferred
technology for most advanced semiconductors. Our SMT package formats include a
range of formats for leaded packages including quad flat packages, or QFPs, and
high pin-count plastic leaded chip carriers, or PLCCs, and for laminate packages
including ball grid array, or BGA, packages.
Our SMT packages are divided into three families: standard leadframe,
enhanced leadframe and laminate. The differentiating characteristics of our
packages include the size of the package, the number of electrical connections
or interconnects the package can support, the means of connection to the printed
circuit board and the thermal and electrical characteristics of the package.
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<PAGE> 46
Standard Leadframe Packages. Standard leadframe packages, which are the
most widely recognized package types, are characterized by a semiconductor die
encapsulated in a plastic mold compound with metal leads surrounding the
perimeter of the package. The semiconductor die is connected to the metal leads
by extremely fine gold wires in a process know as wire bonding.
We focus on higher pin count standard leadframe packages, including QFPs
and PLCCs. Our standard leadframe packages are used in a variety of
applications, including mobile phones, notebook computers and networking
systems.
PLCC graphic
QFP graphic
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<PAGE> 47
The following table summarizes our standard leadframe packages.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER OF
PACKAGE FORMAT LEADS DESCRIPTION APPLICATIONS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Metric Quad Flat 64-240 Traditional QFP designed Networking systems (ADSL),
Package -- MQFP........... for ASICs, FPGAs and DSPs multimedia applications and hard
disk drives
- ----------------------------------------------------------------------------------------------------------
Low Quad Flat Package -- 32-208 Advanced QFP with Mobile phones, notebook computers
LQFP................... thickness of 1.4 mm for and hard disk drives
use in low profile, space
constrained applications
- ----------------------------------------------------------------------------------------------------------
Thin Quad Flat Package -- 32-100 Advanced QFP with Mobile phones, notebook computers
TQFP................... thickness of 1.0 mm for and hard disk drives
use in low profile, space
constrained applications
- ----------------------------------------------------------------------------------------------------------
Plastic Leaded Chip 44-84 Traditional leadframe Personal computers and consumer
Carrier -- PLCC........ package designed for electronics
applications that do not
have space constraints and
do not require a high
number of interconnects
- ----------------------------------------------------------------------------------------------------------
Thin Shrink Small Outline 32 Traditional leadframe Telecommunications products, hard
Package -- TSSOP....... package designed for logic disk drives, recordable optical
and analog devices and disks, audio and video products
memory devices, such as and consumer electronics
Flash, SRAM, EPROM, EEPROM
and DRAM
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Enhanced Leadframe Packages. Our enhanced leadframe packages are similar
in design to our standard leadframe packages but are generally thinner and
smaller, have more leads and have advanced thermal and electrical
characteristics which are necessary for many of the leading-edge semiconductors
designed for communications applications.
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<PAGE> 48
The following table summarizes our enhanced leadframe packages.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
NUMBER OF
PACKAGE FORMAT LEADS DESCRIPTION APPLICATIONS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Drop-in Heat Sink Quad 64-208 Thermally enhanced QFP High speed networking
Flat Package -- DQFP..... with 30% greater thermal
dissipation than MQFP
--------------------------------------------------------------------------------------------------------
Exposed Drop-in Heat 44-208 Thermally enhanced QFP Networking systems, notebook
Sink Quad Flat with 60% greater thermal computers and multimedia systems
Package -- EDQFO...... dissipation than MQFP
--------------------------------------------------------------------------------------------------------
Die Pad Heat Sink Quad 100-208 Thermally enhanced QFP Hard disk drives
Flat Package -- with 60% greater thermal
DPHQFP................ dissipation than MQFP
--------------------------------------------------------------------------------------------------------
Heat Sink Quad Flat 44-84 Thermally enhanced QFP Graphic chipsets
Package -- HQFP....... with 80% greater thermal
dissipation than MQFP
--------------------------------------------------------------------------------------------------------
</TABLE>
Laminate Packages. Our laminate packages include BGA packages which employ
leads, also known as interconnects, on the bottom of the package in the form of
small bumps, or balls, in a matrix or array pattern and utilize a plastic or
tape laminate substrate rather than a leadframe substrate. The BGA format
enables a higher density of interconnects within a smaller surface area.
BGA packaging was designed to address the need for higher lead counts and
smaller package size required by advanced semiconductors used in applications
such as portable computers and wireless telecommunications. As the required
number of leads surrounding the package increased, packagers decreased the
pitch, or distance between leads, in order to minimize the size of the package.
The nearness of one lead to another resulted in electrical shorting problems and
required the development of increasingly sophisticated and expensive techniques
for producing circuit boards to accommodate the high number of leads.
The BGA format solved this problem by employing leads on the bottom of the
package in the form of small bumps or balls. These balls can be evenly
distributed across the entire bottom surface of the package, allowing greater
distance between the individual leads. For the highest lead count devices, the
BGA format can be manufactured less expensively and requires less delicate
handling.
The following diagram is an example of one of our BGA packages, the Plastic
BGA or PBGA:
PBGA graphic
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<PAGE> 49
Our BGA packages are typically used in semiconductors that require enhanced
performance, including DSPs, microprocessors and microcontrollers, ASICs, FPGAs,
memory and PC chip sets. Our BGA packages typically have between 196 and 600
balls. Our BGA packages are described below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
NUMBER OF
PACKAGE FORMAT BALLS DESCRIPTION APPLICATIONS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Enhanced BGA -- EBGA..... 256-432 High pin count, thermally Telecommunications, networking
enhanced BGA package systems and set- top boxes
suitable for high power
applications which
require heat sink attach
for thermal dissipation
--------------------------------------------------------------------------------------------------------
Flexible Enhanced 256-600 BGA characterized by a Telecommunications, networking
Plastic flex-taped substrate systems, set-top boxes and digital
BGA -- FEBGA.......... replacing the laminate cameras
substrate
--------------------------------------------------------------------------------------------------------
Small Thin Plastic 6-176 Smaller and thinner BGA Mobile phones, notebook computers,
BGA -- STPBGA......... designed for applications personal digital assistants,
which are space global positioning systems and
constrained digital cameras
--------------------------------------------------------------------------------------------------------
</TABLE>
Packages Under Development
We are currently developing packages and related processes based on
flip-chip interconnect technology for use in various market sectors. Flip-chip
packages employ advanced interconnect technology and deliver improved thermal
and frequency characteristics to high performance semiconductors that require a
large number of interconnects in a small package.
Flip-chip interconnect packaging allows even higher density for a given die
area than standard BGA packaging. Like BGA, flip-chip packages use balls to
connect to the printed circuit board. Within the flip-chip package, however, the
die is connected to these balls by the use of an array of solder bumps on the
bottom of the die as opposed to the traditional method used in BGA of wire
bonding the die to the balls. The use of solder bump interconnects to the balls
enables a higher density of interconnects resulting in the potential for smaller
packages and improved thermal and frequency characteristics.
Flip Chip BGA Graphic
Flip-chip packages are designed to be used in smart card applications, high
performance networking and graphics and processor applications. We anticipate
our flip-chip packages typically will have between 6 and 1500 I/Os.
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<PAGE> 50
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
NUMBER OF
PACKAGE FORMAT I/OS DESCRIPTION APPLICATIONS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Flip Chip BGA............ 200-800 Developed for mid-range ASICs and high performance
applications that require networking and processor solutions
lower package cost
through reduced die size
and elimination of lower
yielding wire bond
processes
--------------------------------------------------------------------------------------------------------
High Performance Flip 800-1500 BGA packages developed WAN/LAN servers, high-end PCs and
Chip BGA (Flip Chip for high-end applications high-speed Internet communications
FEBGA)................ that require high applications
electrical and high
thermal performance
requirements
--------------------------------------------------------------------------------------------------------
Flip Chip Chip Size 6-200 Developed for low I/O Portable and hand-held devices
Package (CSP)......... applications that require
small footprint, reduced
thickness and reduced
cost
--------------------------------------------------------------------------------------------------------
Direct Chip Attach (DCA) 6-50 Semiconductor die that Proximity sensors, mobile phones,
Flip Chip............. attaches directly to the personal digital assistants and
printed circuit board pagers
without a package.
Developed for radio
frequency applications
--------------------------------------------------------------------------------------------------------
</TABLE>
We are also developing new materials and processes to support our
customers' future flip-chip requirements. See "-- Research and
Development -- Assembly Services."
In addition, we continue to increase our support functions for thermal,
electrical, stress and package and board level reliability characterization. We
offer a full range of thermal simulation and actual testing for all of our
existing packages and packages under development. We have a full service
reliability laboratory that can stress test assembled semiconductors. In
conjunction with local institutes and laboratories, we can also perform board
level reliability testing of surface mount assembled packages.
We have begun working with customers to develop wafer backgrinding and die
saw of wafers for gallium arsenide (GaAs) devices. This is an important
development in support of our commitment to develop packages and services in
response to the specialized needs of our customers. In conjunction with a
specific customer, we have made investments in capital, technology and personnel
in support of this project.
PRE-PRODUCTION SERVICES
We have developed pre-production services to address the growing needs of
our customers. Our pre-production services for assembly include package
development and supply chain management, and for testing include software and
hardware development. We offer these services in both Singapore and our
facilities in California.
Package Development. Our package development group interacts with
customers early in the design process to optimize package design and
manufacturability. For each project, our engineers create a design strategy in
consultation with our customer to address the customer's requirements, package
attributes, design guidelines and previous experience with similar products.
After a design is finished, we provide quick-turn prototype services. By
offering package design and prototype development, we can reduce our
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<PAGE> 51
customer's development costs, accelerate time-to-volume production and ensure
that new designs can be properly packaged at a reasonable cost.
Supply Chain Management. We provide a full range of materials procurement
and management services and work in partnership with key raw material and
equipment suppliers to ensure reliable production readiness at reasonable cost.
We manage inventory with automated materials handling processes using integrated
Oracle software systems.
Test Software and Hardware Development. We work closely with our customers
to provide sophisticated software engineering services, including test program
development, conversion and optimization. Generally, testing requires customized
software to be developed for each particular semiconductor. Software is
typically provided by the customer and may be converted by us for use on one or
more of our tester platforms. Once a conversion test program has been developed,
we perform trial tests to correlate the test software. Customer feedback on the
test results enables us to adjust the conversion test programs prior to actual
production testing. We assist our customers in collecting and analyzing the test
results and develop engineering solutions to improve their design and production
process. We also provide customers with test development services where we will
develop the test software program based on test specifications provided by the
customer.
DROP SHIPMENT SERVICES
We provide drop shipment services including the delivery of final tested
semiconductors to our customers' end-customers in any part of the world. We
directly bill our customers for the cost of drop shipment. We believe that our
ability to offer drop shipment services is an important factor in maintaining
existing customers as well as attracting new customers.
RESEARCH AND DEVELOPMENT
Our research and development efforts are focused on developing test and
assembly services required by our existing customers and that are necessary to
attract new customers. As of December 15, 1999, we employed 57 engineers
dedicated to our research and development activities. In addition, our
management and other operational personnel are also involved in research and
development activities. We expect to continue to invest significant resources in
research and development.
TEST SERVICES
We focus on developing new equipment, software and processes to enhance
efficiency and reliability and to shorten test times. Our current projects
include creating multi-site testing, test program optimization and hardware
improvements designed to permit improved utilization of existing test equipment.
When necessary we also design and build specialized equipment that is not
available from outside vendors.
In addition to the research and development work being done at our
facilities in Singapore, we have established a new test development center
located in San Jose, California. Our new test development center is designed to
help our existing and potential U.S. customers reduce the time to market.
Specifically, the new test development center is expected to:
- develop and debug test software prior to production;
- complete test software conversions for customers; and
- offer our U.S. and offshore customers, in conjunction with our Singapore
facility, continuous access to our development capabilities.
ASSEMBLY SERVICES
We have established a dedicated group of engineers whose primary focus is
the development of new, advanced packages. Because we typically offer our
assembly services to our existing test customers, we are
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<PAGE> 52
in a position to better understand their packaging needs. As a result, we focus
our assembly research and development efforts in part on developing packages
tailored to their individual needs. In addition, we are a member of the
Singapore Institute of Microelectronics, or IME, that is dedicated to developing
emerging technologies. Working with IME gives us access to technical libraries,
high technology analytical laboratories and equipment, and design resources
without extensive capital investment by us. IME is a non-profit government
sponsored development center with the main goal of increasing the technical
expertise, knowledge base and capability of Singapore. Many multinational
corporations, local companies, and electronics industry suppliers are members,
including companies such as Hewlett-Packard, Lucent Technologies and National
Semiconductor.
MARKETING AND SALES
Our marketing strategy is to target potential customers who are industry
leaders in technology development; require mixed-signal or high performance
digital testing capabilities or require high-end assembly packages; and present
significant volume growth opportunities. In addition, we target new fabless
start-up companies participating in fast-growing market segments.
We believe our customers place great value on our willingness to offer them
the test and assembly services they request without the obligation of purchasing
other services we offer. Our customers can also take advantage of our services
on a "back-end turnkey" basis which includes wafer probe, assembly, final test
and drop shipment services. In addition to the services we provide our customers
directly, in conjunction with Chartered Semiconductor or other foundries, we can
offer our customers services on a "full turnkey" basis which includes wafer
fabrication.
We believe that we have benefited significantly from our relationship with
Chartered Semiconductor and that our proximity to and close working relationship
with Chartered Semiconductor has enabled us to provide value added services to
our customers. From time to time we engage in joint marketing efforts with
Chartered Semiconductor. We intend to establish strategic relationships with
other third party providers of complementary semiconductor services, such as
foundry services, if these relationships benefit our business.
We market our services through a direct sales force strategically located
in offices in Singapore; the United Kingdom; Japan; Milpitas and Irvine,
California; Boston, Massachusetts; Raleigh-Durham, North Carolina; Dallas, Texas
and Phoenix, Arizona. Our basic sales unit is the account team which consists of
a sales manager, account managers and customer service representatives.
Qualified technical product managers support each account team.
We price our test services principally on the basis of the amount of time,
measured in CPU seconds, taken by the testing equipment, including testers and
handlers, to execute the test programs that are specific to the customer's
semiconductors. The price per CPU second for each particular semiconductor is
determined based on a number of factors including the complexity of the
semiconductor; number of functions tested; time required to test the
semiconductor pursuant to the customer's specifications; labor cost; ability of
the equipment to parallel test (test multiple semiconductors simultaneously);
and cost of the equipment to perform the test services. For example, testing
complex, high-performance semiconductors is priced significantly higher per CPU
second than testing less complex or lower performance semiconductors. Wafer
probe pricing is determined based on similar factors, including the cost of the
equipment used to perform the testing services; labor cost; time required to
test the semiconductor pursuant to the customer's specifications and the number
of die tested per wafer. Assembly services are priced competitively against the
market and vary depending on such factors as material cost and depreciation
expense. Design costs are not material but when incurred are charged to a
customer separately or built into the unit price.
CUSTOMERS
We provide test and assembly services to a growing number of customers
worldwide consisting primarily of fabless companies, IDMs and foundries.
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<PAGE> 53
Our ten largest customers accounted for almost all of our net revenues in
1996, 1997, 1998 and the nine months ended September 30, 1999. In 1998, our four
largest customers, Analog Devices, Inc., Broadcom Corporation, Chartered
Semiconductor Manufacturing Ltd (our affiliate) and Cirrus Logic, Inc. each
represented in excess of 10% of net revenues and in the aggregate represented
63.9% of our net revenues. In the nine months ended September 30, 1999, our four
largest customers, Analog Devices, Broadcom, Chartered Semiconductor and Level
One each represented in excess of 9% of our net revenues and in the aggregate
represented 65.8% of our net revenues. Chartered Semiconductor accounted for
20.9% and 16.2% of our net revenues in 1998 and the nine months ended September
30, 1999, respectively. We anticipate that our ten largest customers will
continue to account for a high percentage of our net revenues for the foreseable
future. In 1996, 1997, 1998 and the nine months ended September 30, 1999, 45.0%,
24.3%, 24.5% and 16.8% of our net revenues were derived from sales of test or
assembly services to our affiliates, principally Chartered Semiconductor.
The following table sets forth some of our customers:
<TABLE>
<S> <C> <C>
Actel Corporation DynaChip Corporation PMC-Sierra, Inc.
Advanced System Products, Inc. Ericsson Components AB Philips Electronics Asia
Alcatel Microelectronics N.V. Fairchild Semiconductor Pacific
Analog Devices, Inc. International, Inc. Pte Ltd
Broadcom Corporation Infineon Technologies Asia Sigmatel, Inc.
Centillium Technology Pacific Pte Ltd STMicroelectronics Pte Ltd
Corporation Level One Communications, Inc. Standard Microsystems
Chip Express Corporation Marvell Technology Group Ltd Corporation
Cirrus Logic, Inc. Motorola Inc. Synaptics, Inc.
Conexant Systems, Inc. National Semiconductor TDK Corporation
Chartered Semiconductor Corporation TeraLogic, Incorporated
Manufacturing Ltd Nortel Networks Corporation Texas Instruments Incorporated
Dallas Semiconductor Oak Technology, Inc Wolfson Microelectronics Ltd.
Corporation
</TABLE>
The following table sets forth for the periods indicated the percentage of
our net revenues derived from testing and assembly of semiconductors used in
communications, personal computers and other applications.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------- -----------------
1997 1998 1999
----- ------ -----------------
<S> <C> <C> <C>
Communications.......................................... 19.7% 38.6% 61.6%
Personal Computers...................................... 67.6 49.7 32.0
Other................................................... 12.2 11.7 6.4
----- ------ -----
Total................................................. 100.0% 100.0% 100.0%
===== ====== =====
</TABLE>
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<PAGE> 54
We characterize 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 revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------- -----------------
GEOGRAPHICAL AREA 1997 1998 1999
----------------- ----- ----- -----------------
<S> <C> <C> <C>
United States........................................... 67.8% 64.1% 69.5%
Europe.................................................. 0.0 0.0 3.0
Singapore............................................... 24.4 24.6 16.8
Rest of Asia............................................ 7.8 11.3 10.7
----- ----- -----
Total................................................. 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Our customers generally do not place their purchase orders far in advance.
As a result, we do not typically operate with any significant backlog.
CUSTOMER SERVICE
We place a strong emphasis on quality customer service which we believe is
a significant factor in our customer's selection of us for their test and
assembly services. Our broad service offerings, dedicated customer account teams
and commitment to finding solutions to our customers' needs and problems have
enabled us to develop important relationships with many of our customers. We
have received numerous awards in the area of customer service from our
customers, including Broadcom, Cirrus Logic, Hewlett-Packard, Level One and TDK
Corporation.
Our objective is to work very closely with our customers so that they
consider us an integral, strategic partner in their business. For example, we
work closely with our customers during the pre-production period by providing
technical input and guidance to assist in the development of test programs and
packages. Our computer software enables customers to obtain information
regarding work in process via the Internet. We have located our assembly design
center in Milpitas, California and have recently established a test development
center in San Jose, California to enable us to work more closely with a large
number of our customers who are located in the U.S.
QUALITY CONTROL
Customers require that our facilities and procedures undergo a stringent
vendor qualification process. The qualification process typically takes from two
to six weeks but can take longer depending on the requirements of the customer.
For test qualification, a process known as correlation is first undertaken.
During this correlation process, which typically takes from two days to two
weeks, the customer provides us with sample semiconductors to be tested and
either provides us with the test program or requests that we develop a
conversion program.
We maintain a quality control staff comprised of engineers, technicians and
other employees whose responsibility is to monitor our test and assembly
processes to ensure they meet our quality standards. 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 process improvement.
Our test and assembly operations are undertaken in clean rooms where air
purity, temperature and humidity are controlled. To ensure stability and
integrity of our operations, we maintain clean rooms at our facilities that meet
U.S. federal 209E class 10,000 and 100,000 standards. We may in the future
experience production interruptions due to technical problems in the clean room
environment. Any interruption in our operations could have a material adverse
effect on our results of operations. See "Risk Factors -- We need a clean room
environment for our operations."
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<PAGE> 55
Our test and assembly operations in Singapore are ISO 9001, 9002 and 14001
certified. All three standards are issued and certified by the International
Standards Organization. ISO 14001 is an international standard on environmental
management system, to support environmental protection and prevention of
pollution in balance with socio-economic needs. ISO 9002 standards set forth
what is required to ensure production of quality products and services. ISO 9001
standards set forth a quality management system and address design, development,
production, installation and servicing. The ISO certification process involves
periodically subjecting production processes and quality management systems to
stringent third party review and verification. ISO certification is required for
sales of products to certain customers that look to an ISO certification as a
threshold indication of our quality control standards. In addition, we attained
Level 1 Semiconductor Assembly Council, or SAC, certification in November 1999.
SAC certification is one of the most prestigious certifications in the
semiconductors manufacturing industry.
FACILITIES AND EQUIPMENT
FACILITIES
We presently operate from a 560,000 square foot facility in Singapore which
opened in November 1997. In addition to our test and assembly operations, this
facility houses our corporate executive, administrative, sales and marketing and
finance offices. We constructed this facility on land leased from the Housing
Development Board, a statutory board of the Government of Singapore, for a term
expiring March 2026 with an option for renewal. The facility is designed to
accommodate:
- 300,000 square feet of test space;
- 120,000 square feet of assembly space;
- 500 testers;
- 720 wire bonders; and
- 72 mold systems.
In addition to our headquarters in Singapore, we also have an assembly
design center in Milpitas, California and a test development center in San Jose,
California.
EQUIPMENT
Our operations and expansion plans depend on us being able to obtain an
adequate supply of test and assembly equipment on a timely basis. We work
closely with our major equipment suppliers to ensure that equipment is delivered
on time and such equipment meets our stringent performance specifications.
Equipment commodity teams comprising employees from each of engineering,
maintenance and purchasing have been formed to manage and procure equipment that
meet our customers' current and future needs. The teams conduct a regular review
of future technology roadmaps, cost performance targets, which include cost of
spares, uptime and speed, as well as upgradability and flexibility. The teams'
activities also include regular benchmarking, setting expectations and design
requirements for future generations of equipment and beta-site testing of
equipment. These activities provide a basis for us to determine our ongoing
equipment needs.
With the exception of a few key suppliers that provide reserved equipment
delivery slots and price discount structures, we have no binding supply
agreements with any of our suppliers. A reserved equipment delivery slot is one
which allows us to obtain an accelerated delivery of the equipment over and
above the delivery schedule previously committed by the supplier. Typically,
price discounts are offered for volume purchases. We acquire our test and
assembly equipment on a purchase order basis, which exposes us to substantial
risks. The unavailability of new test or assembly equipment; the failure of such
equipment or other equipment acquired by us to operate in accordance with our
specifications or requirements; or delays in the delivery of such equipment,
could delay implementation of our expansion plans and could
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<PAGE> 56
materially and adversely affect our results of operations or financial
condition. See "Risk Factors -- We may be unable to obtain testing and assembly
equipment when we require it."
Testing Equipment
Testing equipment is one of the most critical components of the testing
process. We generally seek to maintain testers from different vendors with
similar functionality and the ability to test a variety of different
semiconductors. In general, particular semiconductors can be tested on only a
limited number of specially configured testers. As part of the qualification
process, customers will specify the equipment on which their semiconductors may
be tested, and we then develop test program conversion software that enable us
to test these semiconductors on multiple equipment platforms. This portability
between testers enables us to allocate semiconductors tested across our
available test capability and thereby improve capacity utilization rates. We
purchase testing equipment from major international manufacturers, including
Advantest Singapore Pte Ltd, Credence Systems Corporation, Agilent Technologies,
LTX Corporation, Schlumberger Measurement & Systems Pte Ltd and Teradyne Inc.
We operate approximately 160 testers, including 112 for mixed-signal
testing, 35 for digital testing and 13 for memory testing and in certain cases
where a customer has specified testing equipment that is not widely applicable
to other products that we test, we have required the customer to provide the
equipment on a consignment basis. Presently 18 of the aggregate 160 testers we
operate are on consignment and 8 of the 18 are used for mixed-signal testing.
In addition to testing equipment, we maintain a variety of other types of
equipment, such as automated handlers and probers (with special handlers for
wafer probing), scanners, reformers and PC workstations for use in software
development.
Assembly Equipment
The primary equipment used in assembly includes wire bonders and mold
systems. We own and operate approximately 250 wire bonders and approximately 36
mold systems. Certain of our wire bonders allow for interchangeability between
lead frame and laminate packages. We purchase wire bonders from major
international manufacturers, including Kulicke & Soffa Industries, Inc. and ESEC
Asia Pacific Pte Ltd. We purchase mold systems from major international
manufacturers, including Apic Yamada Corporation and Dai-Ichi Seiko Co Ltd. We
have recently purchased gallium arsenide wafer saw and backgrind equipment.
RAW MATERIALS
Our assembly operations depend on obtaining an adequate supply of raw
materials on a timely basis. The principal raw materials used in assembly are
leadframe or laminate substrates, gold wire and molding compound. We generally
purchase raw materials based on the non-binding forecasts provided to us by our
customers. However, our customers are generally not responsible for any unused
raw materials that result from a forecast exceeding actual orders. We work
closely with our primary suppliers, providing them with a six-month rolling
forecast and weekly requirement schedules. Accordingly, our suppliers are better
able to supply us with raw materials. We are not dependent on any one supplier
for a substantial portion of our raw material requirements. The unavailability
of an adequate supply of raw materials could materially and adversely affect our
business, financial condition and results of operations. See "Risk Factors -- We
are dependent on raw material suppliers and do not have any long-term supply
contracts with them."
COMPETITION
The independent semiconductor test and assembly service industry is very
competitive and diverse. In order to compete, we must offer state-of-the-art
testing services and bring the most technologically advanced packages to market
as quickly as our competitors and at comparable prices. Test and assembly
services are provided by both large multi-national companies and small niche
market competitors. We face substantial competition from a number of competitors
that are much larger in size. These competitors'
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<PAGE> 57
facilities are primarily located in Asia and include Advanced Semiconductor
Engineering, Inc. (Taiwan), Amkor Technology, Inc. (Korea and Philippines), ASE
Test Limited (Taiwan and Malaysia), ASAT, Ltd. (Hong Kong), ChipPAC Incorporated
(Korea), Siliconware Precision Industries Co., Ltd. (Taiwan), and Shinko
Electric Industries Co. Ltd. (Japan).
Each of these companies has significant manufacturing capacity, financial
resources, research and development, operations, marketing and other
capabilities and has been in operation for some time. Such companies have also
established relationships with many of our current or potential customers.
We also face competition from the internal capabilities and capacity of
many of our current and potential IDM customers. Many IDMs have greater
financial and other resources than we do and may rely on internal sources for
test and assembly services due to:
- their desire to realize higher utilization of their existing test or
assembly capacity;
- their unwillingness to disclose proprietary technology;
- their possession of more advanced testing or assembly technologies; and
- the guaranteed availability of their own test or assembly capacity.
The principal elements of competition in the independent semiconductor
assembly industry include variety of packages offered, price, location,
available capacity, cycle time, engineering capability, technical competence,
customer service and flexibility. If our competitors are able to bring their new
packages to market faster or at lower prices than we can, our net revenues may
be affected. In the area of test services, we compete on the basis of quality,
cycle time, pricing, location, available capacity, software development,
engineering capability, technical competence, customer service and flexibility.
Our competitors in the independent testing market are both those listed above as
well as smaller niche companies, offering limited services, which compete
principally on the basis of engineering capability, location and available
capacity.
While we believe that we compete favorably with our principal competitors,
we cannot assure you that we will be able to compete successfully in the future
against our existing or potential competitors or that our operating results will
not be adversely affected by increased price competition. See "Risk Factors --
Our industry is very competitive."
INTELLECTUAL PROPERTY
Our operational success will depend in part on the ability to develop and
protect our intellectual property. We currently have one issued patent and we
have applied for 15 additional patents in the United States related to various
aspects of our semiconductor test and assembly. We have also applied for patents
in certain other countries where appropriate. If the patents are granted, we may
seek to cross-license or share our intellectual property portfolio at a future
time if it is advantageous for us to do so. We expect to file patent
applications primarily in the United States, Singapore, Taiwan and the European
Union, but may also file in other countries to protect our proprietary
technologies, where appropriate.
We have licensed patent rights from Motorola, Inc. to use technology in
manufacturing BGA packages under an agreement which will expire in 2002 and is
subject to renewal. Under this agreement, we are required to pay Motorola a
royalty based upon the number of pads on each BGA package.
When we are aware of intellectual property of others that may pertain to or
affect our business, we will attempt to either avoid processes protected by
existing patents, cross-license or otherwise obtain certain process or package
technologies. In addition, we execute confidentiality and non-disclosure
agreements with our customers and consultants and limit access to and
distribution of our proprietary information.
Our continued success will rely in part on the technological skills and
innovation of our personnel and our ability to develop and maintain proprietary
technologies. The departure of any of our management or technical personnel and
the breach of their confidentiality and non-disclosure obligations or our
failure to
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<PAGE> 58
achieve our intellectual property objectives could have a material adverse
effect on our business, financial condition and results of operations.
Our ability to compete successfully and achieve future growth will depend,
in part, on our ability to protect our proprietary technology and the
proprietary technology of our customers entrusted to us by our customers during
the testing process and to avoid infringement of existing and future
intellectual property of others. We cannot assure you that patents will be
issued for pending or future applications or that, if patents are issued, they
will not be challenged, invalidated or avoided, or that rights granted
thereunder will provide adequate protection or other commercial value to us. The
laws of certain countries in which our services are or may be sold may not
protect our packages and our intellectual property rights to the same extent as
the laws of the United States or other countries where our intellectual property
may be filed or registered. In addition, certain countries in which our services
are or may be sold could have rights or laws governing intellectual property
about which we are unaware.
In the event that any valid claim is made against us, we would be required
to:
- stop using certain processes;
- cease manufacturing, using, importing or selling infringing packages;
- pay substantial damages;
- develop non-infringing technologies; or
- attempt to acquire licenses to use the infringed technology.
As the number of patents, copyrights and other intellectual property rights
in our industry increases, and as the coverage of these rights and the
functionality of the packages in the market further overlap, we believe that
companies in our industry may face more frequent patent infringement claims.
Although there are no pending or threatened intellectual property lawsuits
against us, we may face litigation or patent infringement claims in the future.
We may also have to commence lawsuits against companies who infringe our
intellectual property rights. Such claims could result in substantial costs and
diversion of our resources.
A third party claiming infringement may also obtain an injunction or other
equitable relief, which could effectively block the distribution or sale of
allegedly infringing packages. Although we may seek licenses from third parties
covering the intellectual property that we are allegedly infringing, we cannot
guarantee that any such licenses could be obtained on acceptable terms, if at
all.
ENVIRONMENTAL MATTERS AND COMPLIANCE
Our test and assembly operations do not generate significant pollutants.
Our operations are subject to regulatory requirements and potential liabilities
arising under Singapore laws and regulations governing among other things, air,
emissions, waste water discharge, waste storage, treatment and disposal, and
remediation of releases of hazardous materials. We have implemented an
environmental monitoring system. We send samples of our air emissions, treated
water and sludge to third party accredited laboratories for testing to ensure
our compliance with the environmental laws and regulations that apply to us. We
believe that we are in compliance with all applicable environmental laws and
regulations. Expenditures on environmental compliance currently represent an
insignificant portion of our operating expenses. We are certified ISO 14001 by
the Productivity and Standards Board (Singapore) and the Japan Audit Compliance
Organization.
EMPLOYEES
As of December 15, 1999, we had 1,677 employees worldwide of whom 1,125
were operations personnel, 268 were engineering personnel, 75 were sales and
marketing personnel and 209 were general, administrative and executive
management personnel. We actively recruit to attract the highest quality
personnel in the region.
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<PAGE> 59
Our employees are not covered by any collective-bargaining arrangement. We
believe that our relationship with our employees is good and we have had very
low employee turnover. We maintain confidentiality and non-competition
agreements with all of our key employees through our letters of appointment with
them.
LEGAL PROCEEDINGS
We believe that we are not a party to any legal proceedings which would,
individually or in the aggregate, have a material adverse effect on our
financial condition or results of operations.
INSURANCE
We maintain insurance policies covering losses, including losses due to
business interruption and losses due to fire, which we consider to be adequate.
Our insurance policies cover our buildings, machinery and equipment. Significant
damage to our production facilities, whether as a result of fire or other
causes, would have a material adverse effect on our business, financial
condition and results of operations. We are not insured against the loss of any
of our key personnel.
ENFORCEMENT OF CIVIL LIABILITIES
We are incorporated in Singapore. Most of our directors and executive
officers named in this prospectus live outside the United States. Also, most of
our assets are located outside the United States. As a result, you may not be
able to:
- effect service of process upon us or these persons within the United
States; or
- enforce against us or these persons in United States courts, judgments
obtained in United States courts. These include judgments relating to the
federal securities laws of the United States.
Our Singapore legal adviser, Allen & Gledhill, has advised us 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.
Our Singapore legal adviser has also advised us that there is doubt as to
whether Singapore courts will enter judgments in original actions brought in
Singapore courts based only upon the civil liability provisions of the federal
securities laws of the United States.
The President of Singapore Technologies Assembly and Test Services, Inc.,
will act as our agent to receive service of process with respect to any action
brought against us in:
- the United States District Court for the Southern District of New York
under the securities laws of the United States or any State of the United
States; or
- the Supreme Court of the State of New York in the County of New York
under the securities laws of the State of New York.
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<PAGE> 60
MANAGEMENT
Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
BOARD OF DIRECTORS AND CERTAIN EXECUTIVE
OFFICERS
Tan Bock Seng(1).......................... 56 Chairman of the Board of Directors & Chief
Executive Officer
Lim Ming Seong(2)(3)...................... 52 Deputy Chairman of the Board of Directors
Lee Joon Chung............................ 42 Director and President
Sum Soon Lim(1)........................... 56 Director
Steven Hugh Hamblin(2).................... 51 Director
Koh Beng Seng(1).......................... 49 Director
Liow Voon Kheong.......................... 48 Director
Premod Paul Thomas(2)..................... 42 Director
Charles Richard Wofford(1)(3)............. 66 Director
June Chia Lihan........................... 46 Alternate Director to Mr. Lee(4)
Executive Vice President, Sales and
Marketing
Gan Chee Yen.............................. 40 Alternate Director to Mr. Thomas(4)
Lai Yeow Hin.............................. 35 Alternate Director to Mr. Liow(4)
OTHER EXECUTIVE OFFICERS
Wong Kok Kit.............................. 37 Chief Financial Officer
Lee Hoong Leong........................... 42 Vice President, Leaded Business
Tan Chee Keong............................ 38 Vice President, Test Business
John Briar................................ 37 Vice President, Packages Technology
Development
Steve Liew................................ 39 Vice President, Array Business
Choong Chan Yong.......................... 41 Vice President, Sales and Marketing
John McCarvel............................. 43 President, Singapore Technologies Assembly
and Test Services, Inc.
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Budget Committee.
(3) Member of the Executive Resource and Compensation Committee.
(4) Under Singapore companies law, a director appointed by a company may, if
permitted by the Articles of Association of such company, appoint an
alternate director to act in place of such director should the director be
unable to perform his or her duties as director of such company for a period
of time. See "-- Board of Directors."
None of our Directors, Executive Officers or substantial shareholders is
related to another.
TAN BOCK SENG
Tan Bock Seng has served as a director since January 1995 and has been our
Chairman and Chief Executive Officer since May 1998. He became a member of our
Audit Committee in April 1999. Mr. Tan has 29 years of experience in the
semiconductor industry and has held key positions in several multinational
corporations, including Fairchild Singapore Pte Ltd and Texas Instruments
Singapore Pte Ltd. He was President of Chartered Semiconductor from 1993 to 1998
and Managing Director of National Semiconductor, Singapore, from 1988 to 1993.
Mr. Tan received his Bachelor of Science in Mathematics from the University of
Singapore.
LIM MING SEONG
Lim Ming Seong became our Deputy Chairman in June 1998 and was appointed
Chairman of the Budget Committee in April 1999. He was also a member of the
Employees' Share Ownership Scheme
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<PAGE> 61
Committee, which has subsequently been replaced by the Executive Resource and
Compensation Committee of which he is a member. Mr. Lim is the Group Director of
Singapore Technologies, Deputy Chairman of the Board of Directors of Chartered
Semiconductor 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 Applied 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.
LEE JOON CHUNG
Lee Joon Chung has been our President since February 1997 and was appointed
to our board of directors in October 1998. Prior to serving as President, Mr.
Lee was our General Manager from January 1995 to February 1997. From 1990 to
1994, Mr. Lee was with Microchip Technology and served as its Vice President of
Far East Operations from July 1993 until February 1994. Mr. Lee received his
Bachelor of Science in Mechanical Engineering from the University of Alberta,
Canada.
SUM SOON LIM
Sum Soon Lim was appointed to our Board of Directors in January 1998 and
became Chairman of the Audit Committee in April 1999. Mr. Sum is currently a
part-time corporate advisor to Singapore Technologies and is on the Board of
Directors of Chartered Semiconductor. Prior to accepting his position with
Singapore Technologies, Mr. Sum worked for 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 Bachelor of Science (Honors)
in Production Engineering from the University of Nottingham, England.
STEVEN HUGH HAMBLIN
Steven Hugh Hamblin was appointed to our Board of Directors in June 1998
and became a member of the Budget Committee in April 1999. Mr. Hamblin joined
Compaq Computer Corporation in 1984 and was its Vice-President, System Division
Operations from 1995 to 1996. He was with Texas Instruments for ten years before
leaving as its Division Controller, Semiconductor Group, to join General
Instrument, Microelectronics Division, New York in 1983 as its Group Financial
Executive. Mr. Hamblin received his Bachelor of Science in Civil Engineering
from the University of Missouri, Columbia and his Master of Science in
Industrial Administration from Carnegie-Mellon University.
KOH BENG SENG
Koh Beng Seng was appointed to our Board of Directors in February 1999 and
became a member of the Audit Committee in April 1999. He is currently Senior
Advisor to Asia Pulp & Paper Co. Ltd and an advisor to the International
Monetary Fund. He is on the Board of Directors of Chartered Semiconductor. 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.
LIOW VOON KHEONG
Liow Voon Kheong was appointed to our Board of Directors in October 1997.
Mr. Liow is presently Assistant Managing Director (Operations) of the Economic
Development Board, General Manager of EDB Investments Pte Ltd, Director/General
Manager of EDB Ventures Pte Ltd and EDB Ventures 2 Pte
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<PAGE> 62
Ltd and General Manager of PLE Investments Pte Ltd. Mr. Liow started his career
with the Economic Development Board in 1976. He received his Bachelor of
Engineering (Electrical & Electronics) and his Diploma in Business
Administration from the University of Singapore.
PREMOD PAUL THOMAS
Premod Paul Thomas was appointed to our Board of Directors in March 1998
and became a member of the Budget Committee in April 1999. Mr. Thomas is
Director (Finance) of Singapore Technologies and is an Alternate Director on the
Board of Directors of Chartered Semiconductor. Before joining Singapore
Technologies 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 Bachelor of Commerce (First 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.
CHARLES RICHARD WOFFORD
Charles Richard Wofford was appointed to our Board of Directors in February
1998 and became a member of the Audit Committee and the Executive Resource and
Compensation Committee in April and August 1999, respectively. Mr. Wofford is
presently the Vice-Chairman of FSI International. Mr. Wofford was with Texas
Instruments for 33 years before leaving as Senior Vice-President to join Farr
Company in 1991. He was the Chairman, CEO and President of Farr Company from
1992 to 1995. He received his Bachelor of Arts in Mathematics and Psychology
from Texas Western College.
JUNE CHIA LIHAN
June Chia Lihan was appointed Alternate Director to Lee Joon Chung in
October 1998. Ms Chia joined us in 1994 and became our Executive Vice-President,
Worldwide Sales & Marketing in April 1998. From 1991 to 1994, Ms. Chia was with
Nortel Australis and served as its Director of Manufacturing Operations from
early 1993 to July 1994. Ms. Chia received her Bachelor of Engineering (First
Class Honors) from the University of Singapore and her MBA from the National
University of Singapore.
GAN CHEE YEN
Gan Chee Yen was appointed alternate Director to Premod Paul Thomas in July
1999. Mr. Gan has been in the finance accounting field for more than 15 years
and is currently the Group Financial Controller of Singapore Technologies. He
was the Senior Manager of Singapore Technologies Marine Ltd before joining
Singapore Technologies in September 1996 as the Group Financial Controller. Mr.
Gan received his Bachelor of Accountancy from the National University of
Singapore.
LAI YEOW HIN
Lai Yeow Hin was appointed Alternate Director to Liow Voon Kheong in
October 1997. Mr. Lai started his career with the Singapore Economic Development
Board in the electronics industry in 1990. He is presently holding concurrent
positions as Chief Information Officer and Deputy Director, Electronics
(Industry Development Division), Economic Development Board. From December 1992
to January 1996, Mr. Lai was the Director of the Economic Development Board's
office in Los Angeles. He was a Founding Director of the Singapore American
Business Association of Southern California from 1994 to 1996. Currently, Mr.
Lai is a member of the management board of the Centre for Wireless
Communications at the National University of Singapore and a member of the
management board of the Centre for Signal Processing at the Nanyang
Technological University. Mr. Lai received his Master of Science (Electrical
Engineering) from the University of Illinois (Urbana-Champaign).
WONG KOK KIT
Wong Kok Kit joined us in February 1998 and became our Chief Financial
Officer in May 1999. Mr. Wong has more than 14 years of professional experience
in finance and accounting. From 1990 to
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<PAGE> 63
1998, he worked for Seagate Technology in various financial capacities, serving
as its Finance Director for seven years. Mr. Wong received his Bachelor of
Business Administration from the National University of Singapore in 1985.
LEE HOONG LEONG
Lee Hoong Leong joined us in April 1996 and became our Vice President of
Leaded Business in May 1998. Mr. Lee has held a number of management positions
at Texas Instruments and National Semiconductor Singapore in operations
management, logistics, quality assurance and equipment engineering. Mr. Lee
received his Bachelor of Engineering (Mechanical) from the University of
Singapore in 1980.
TAN CHEE KEONG
Tan Chee Keong joined us in June 1996 and became our Vice President of Test
Business in April 1998. Prior to joining us, Mr. Tan was Operations Manager with
Cyrix Asia Pacific from 1993 to 1996 and Supervising Engineer with Advanced
Micro Devices Singapore Pte Ltd from 1987 to 1993. Mr. Tan received his Bachelor
of Science from University of London in 1984.
JOHN BRIAR
John Briar joined us in September 1997 and became our Vice President of
Packages Technology Development in April 1999. Prior to joining us, Mr. Briar
had more than ten years of package development and managerial experience with
Northern Telecom, Compaq, Amkor and Alphatec Electronics. Mr. Briar received his
Bachelor of Science from the University of Central Florida in 1989.
STEVE LIEW
Steve Liew joined us in September 1998 and became our Vice President of
Array Business in May 1999. Prior to joining us, he was Director, CABGA
Operations with Amkor/Anam Advanced Packaging Inc in the Philippines. Mr. Liew
held various managerial positions in Amkor/Anam from 1994 to 1998. Before
joining Amkor, he had over 16 years of experience working in semiconductor
assembly and packaging with Advanced Micro Devices, Western Digital, Silicon
System and General Electric. Mr. Liew received his Bachelor of Science from
California State University in 1984 and his MBA from University of La Verne, CA
in 1991.
CHOONG CHAN YONG
Choong Chan Yong has been our Vice President of Sales and Marketing since
February 1999. From 1991 to 1999, Mr. Choong worked for Chartered Semiconductor
in various management capacities, most recently as President -- Asia/Japan. Mr.
Choong began his career as an engineer for Texas Instruments and later moved to
National Semiconductor where he worked as Manufacturing Section Manager and then
as Planning Manager. Mr. Choong received his Bachelor of Science from Ohio State
University in 1983.
JOHN MCCARVEL
John McCarvel joined us in January 1999 and became President of Singapore
Technologies Assembly and Test Services, Inc. in July 1999. From 1996 to 1998,
Mr. McCarvel served as Vice President of Strategic Business Development at
Micron Custom Manufacturing Services, Inc. He was with Dovatron International
from 1990 to 1996, in various key positions including President of Western
Operations (USA); Vice President of Worldwide Sales (based in France); and Vice
President of Pacific Rim Operations (based in Singapore). From 1985 to 1990, he
served as Corporate Controller (San Jose) and Director of Operations (based in
Singapore) for Adaptec. Mr. McCarvel received his Bachelor of Science from
Carroll College in 1985 and his MBA from the University of California in 1990.
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<PAGE> 64
BOARD OF DIRECTORS
Our Articles of Association set the minimum number of directors at two. We
currently have nine directors and three 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
Singapore Technologies and its affiliates will own approximately 76.1% 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.
Our Articles of Association permit a director to appoint an alternate
director to act in place of such director should the director be unable to
perform his or her duties as director for a period of time. Under Singapore law,
the alternate director is not merely an agent of the director but is accountable
to the company for his or her actions as director during the period for which he
or she acts as alternate director.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of our Board of Directors currently consists of Sum
Soon Lim (Chairman), Charles Richard Wofford, Koh Beng Seng and Tan Bock Seng.
The Audit Committee:
- reviews the scope and results of the audits provided by our internal and
independent auditors;
- reviews and evaluates our administrative, operating, and internal
accounting controls;
- reviews material related party transactions; and
- reviews the integrity of the financial information presented to our
shareholders.
The Executive Resource and Compensation Committee currently consists of Ms.
Ho Ching (Chairman), Lim Ming Seong, and Charles Richard Wofford. Ms. Ho Ching
is neither a director nor an executive officer of our company. She is the
President & Chief Executive Officer of Singapore Technologies and was nominated
by Singapore Technologies and co-opted to the committee. She serves on the
boards of some companies within the Singapore Technologies Group. Our Articles
of Association allows non-board members to serve on board committees, other than
the Audit Committee which must comprise only board members under Singapore law.
The Executive Resource and Compensation Committee:
- establishes compensation policies and incentive programs 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 talented
executives.
The Budget Committee currently consists of Lim Ming Seong (Chairman),
Premod Paul Thomas, and Steve Hugh Hamblin. The Budget Committee meets with our
senior management three times a year to review our quarterly financial
performance against our annual budget and to review our annual budget.
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<PAGE> 65
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
In 1998, the aggregate amount of compensation paid by us to all our
directors and executive officers listed above was approximately $1.6 million. In
1998, our directors received remuneration broken down as follows:
<TABLE>
<CAPTION>
EXECUTIVE NON-EXECUTIVE
DIRECTORS DIRECTORS TOTAL
--------- ------------- -----
<S> <C> <C> <C>
US$250,000 and above................................. 1 -- 1
US$150,000 to 249,999................................ 2 -- 2
US$0 to US$149,999................................... -- 8 8
</TABLE>
The Company does not have any pension, retirement or other similar
post-retirement benefits.
Non-executive directors receive annual directors' fees except that
directors' fees for those employed by Singapore Technologies are paid to
Singapore Technologies and for those employed by EDBI are paid to EDBI. Those
who are not employed by Singapore Technologies or EDBI also receive compensation
for attending meetings of the board of directors. Directors are reimbursed for
reasonable expenses they incur in attending meetings of the board and its
committees. They may also receive compensation for performing additional or
special duties at the request of the Board. Alternate Directors do not receive
any compensation for serving or attending meetings of the Board. Mr. Tan Bock
Seng and Mr. Lee Joon Chung, who are executive directors of the Company, do not
receive directors' fees.
EMPLOYEE BENEFIT PLANS
EMPLOYEES' SHARE OWNERSHIP SCHEME
Prior to December 6, 1999, we had an Employees' Share Ownership Scheme for
employees and directors of STATS and its subsidiary, and of related companies
within the Singapore Technologies Group. Under the scheme, options were granted
based on rank, performance, years of service, contributions and potential for
future development of the individual. The subscription price was payable in
installments, with a first installment of 5% payable upon exercise of the option
and the remaining amount due over a period of ten years following exercise. The
exercise period was 30 days. Because shares were allotted and share certificates
registered in the name of the holder following exercise (but prior to full
payment), the scheme provided for the creation of partly paid shares. When we
terminated the scheme, we replaced the unpaid portion of some partly paid shares
with stock options under our Share Option Plan as described below.
In May 1998, options to subscribe for 12,916,000 shares at a purchase price
of S$0.42 per share were granted under the scheme, of which 12,174,000 were
exercised. In November 1998, options to subscribe for an additional 8,961,000
shares at a purchase price of S$0.25 per share were granted, of which 8,600,000
were exercised. In May 1999, options to subscribe for 8,397,200 shares at a
purchase price of S$0.25 per share were granted, of which 7,371,600 were
exercised. The shares were partly paid and issued under the exercised options.
All unexercised options have lapsed.
We recognized share compensation expense for options granted to employees
under the scheme. For each reporting period, compensation cost for shares
granted under the scheme to employees was recorded over the requisite vesting
period based on the current market value of our ordinary shares at the end of
the relevant period.
In connection with the global offering, we terminated the scheme effective
December 6, 1999. Of the 28,125,600 partly paid shares then outstanding,
17,407,695 became fully paid shares upon payment of the second installment of
the subscription price, 1,112,400 partly paid shares held by a subsidiary of
Singapore Technologies were cancelled without replacement and the remaining
9,605,505 partly paid shares were cancelled and replaced with share options
under our Share Option Plan. These new options have the same exercise price as
the original partly paid shares.
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SHARE OPTION PLAN
Effective as of May 28, 1999, we adopted our 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 Share Option Plan may be nonstatutory options
or incentive stock options intended to qualify under Section 422 of the United
States Internal Revenue Code.
The aggregate number of shares that may be issued under the Share Option
Plan and under all of our other share incentive and options schemes or
agreements may not exceed 85 million shares (subject to anti-dilution adjustment
pursuant to the Share Option 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 Share Option Plan and all other share incentive and option schemes approved
by our Board of Directors.
The Share Option Plan is administered by the Executive Resource and
Compensation Committee. 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 stock options; and
- employees, outside directors and consultants of our affiliates who are
residents 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 or of the shares of our parent or
subsidiary 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 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. The exercise price of
a nonstatutory option shall not be less than 85% of the fair market value of a
share on the date of grant. In no event will the exercise price for a share be
below the par value of that share.
Options granted to persons other than officers, outside directors and
consultants shall become exercisable at least as rapidly as 20% per year over
the five-year period commencing on the date of grant.
The exercisability of options outstanding under the Share Option Plan may
be fully or partially accelerated under certain circumstances such as a change
in control of our company, as defined in the Share Option Plan. In addition, if
we undertake an underwritten initial public offering, outstanding options will
accelerate by 12 months if the optionee's service has not been terminated and
his or her option agreement does not provide otherwise.
Each grant under the Share Option Plan is evidenced by a share option
agreement and the term of options granted may not exceed ten 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.
The Executive Resource and Compensation Committee may modify, extend or
assume outstanding options or may accept the cancellation of outstanding options
in return for the grant of new options for the same or a different number of
shares and at the same or a different exercise price. No modification of an
option shall, without the consent of the optionee, impair the optionee's rights
or increase the optionee's obligations under such option.
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<PAGE> 67
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
Executive Resource and Compensation Committee may determine.
In the event of certain changes in our capitalization, the Executive
Resource and Compensation Committee will make appropriate adjustments in one or
more of the number of shares available for future grants under the Share Option
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 Share Option Plan will terminate automatically on May 28, 2009. The
Executive Resource and Compensation Committee may amend, suspend or terminate
the Share Option Plan at any time and for any reason, provided that any
amendment which increases the number of shares available for issuance under the
Share Option Plan, or which materially changes the class of persons who are
eligible for the grant of incentive stock options, will be subject to the
approval of our shareholders.
As of June 12, 1999, options to purchase an aggregate of 1,570,400 shares
at S$0.25 per share have been granted to eligible holders under the Share Option
Plan. At the close of the option offer period, on July 11, 1999, 1,563,400
options were accepted. As of November 22, 1999, options to purchase an aggregate
of 7,663,800 shares at the higher of S$2.00 or the initial public offering price
have been granted to eligible holders under the Share Option Plan of which
140,000 and 4,150,000 were granted to non-executive directors and executive
officers, respectively. At the close of the option offer period on December 7,
1999, 7,601,000 options were accepted. The options vest over five years and
expire ten years from the date of grant which is June 12, 2009 and November 22,
2009, respectively (except in the case of options held by non-executive
directors which expire five years from the date of grant). A total of 18,713,705
options were outstanding as of the date of this prospectus, including 361,000
and 10,022,500 options held by non-executive directors and executive officers,
respectively.
Total compensation cost is measured based on the difference between the
fair value of the shares and the price at which the shares are offered under the
plan at the time the shares are granted. Compensation expense is provided
generally over the vesting period on a systematic basis. See Note 20 to our
consolidated financial statements.
EMPLOYMENT AGREEMENTS
Each of our employees, including our executive officers, is a party to an
employment agreement with us which sets forth compensation and related terms of
such person's employment. All such persons are employed until an appropriate
termination notice is given, or payment in lieu of notice is given, by either
party. We maintain confidentiality and non-competition agreements with all of
our key employees through our letters of appointment with them.
At present, there is no pending litigation or proceeding involving any of
our directors, officers, employees or agents where indemnification would be
required or permitted. We are not aware of any pending or threatened litigation
or proceeding that might result in a claim for such indemnification.
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<PAGE> 68
CERTAIN TRANSACTIONS
We are part of the Singapore Technologies Group. The Singapore Technologies
Group is a leading technology-based multi-national conglomerate based in
Singapore. The Singapore Technologies Group provides a full array of
multi-disciplinary capabilities, ranging from research and development, design
and engineering, precision and high value-added manufacturing, major
infrastructure development and management in the following five core business
groups: Engineering, Technology, Infrastructure, Financial Services and
Property. Other companies in the Singapore Technologies Group include Chartered
Semiconductor.
The Singapore Technologies Group is 100%-owned by Temasek Holdings
(Private) Limited, the principal holding company through which the corporate
investments of the Government of Singapore are held. Temasek Holdings (Private)
Limited owns 78.3% of Singapore Technologies. The remaining 21.7% is owned by
Singapore Technologies Holdings Ltd, which is in turn 100%-owned by Temasek
Holdings (Private) Limited.
We engage in transactions with companies in the Singapore Technologies
Group in the normal course of our business. Such transactions are generally
entered into on normal commercial terms. We are in the process of negotiating a
turnkey contract with Chartered Semiconductor for our wafer sort, assembly and
test services. In 1996, we hired ST Architects & Engineers Pte Ltd, a Singapore
Technologies Group company, to provide us with professional services in relation
to the construction of our Singapore facility. We paid ST Architects an
aggregate of approximately $2.1 million under the contract. In addition, the
construction contract of $38.0 million was awarded to a Singapore Technologies
Group company, Singapore Technologies Construction Pte Ltd (now called Sembcorp
Construction Pte Ltd). The construction of our facility was completed in August
1998.
We lease the land on which our Singapore facility is situated pursuant to a
long-term operating lease from the Housing Development Board, a statutory board
of the Government of Singapore. The lease is for a 30-year period commencing
March 1, 1996, and is renewable for a further 30 years subject to the
fulfillment of certain conditions. The rent is S$84,333 ($49,500) per month
subject to revision to market rate in March of each year, with the increase
capped at 4% per annum.
On April 14, 1998, we entered into an agreement with TriTech, an entity in
the Singapore Technologies Group, to sublease the 5th floor of our Singapore
facility for a term of 36 months. This agreement terminated on October 15, 1999.
The monthly rental is S$81,000 ($49,000) per month subject to revision in March
of each year, with any increases capped at the percentage by which our rent for
the entire facility increases. TriTech has been in liquidation since October 15,
1999. Although the judicial manager has paid us the rent from May 1999 until
now, TriTech still owes us half a months' rental for the period April 1999.
In the nine months ended September 30, 1999, we paid a management fee of
$1.9 million to Singapore Technologies for various management and corporate
services provided pursuant to the Singapore Technologies Management and Support
Services Agreement dated March 3, 1997. This fee was $0.5 million, $0.9 million
and $1.1 million in 1996, 1997 and 1998. The services rendered by Singapore
Technologies include internal auditing, training, executive resources, treasury,
and corporate secretarial services. These services are provided by Singapore
Technologies to all members of the Singapore Technologies Group, including us.
We currently pay Singapore Technologies an annual management fee which prior to
December 1999 was based on certain percentages of capital employed, sales,
manpower and payroll. The new service agreement into which we entered in
December 1999 is a formula and service based fee arrangement. In addition, we
reimburse Singapore Technologies for the third-party costs and expenses it
incurs on our behalf. The service agreement expires in the event we cease to be
a subsidiary of Singapore Technologies. It can be terminated by Singapore
Technologies upon our prolonged failure to pay the management fees due to
Singapore Technologies (but cannot be terminated by us).
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Our insurance coverage is held under various insurance policies which are
negotiated and maintained by Singapore Technologies but billed directly to us.
This enables us to benefit from the group rates negotiated by Singapore
Technologies.
Singapore Technologies provided us with short-term financing (generally on
a 3 to 6 month renewable basis) which loans were repaid in full in 1998. The
aggregate amount of short term loans provided by Singapore Technologies for 1996
and 1997 are $37.0 million and $110.0 million. The average weighted interest
rate for these loans was 5.4%, 5.1% and 7.8% in 1996, 1997 and 1998,
respectively. We also participate with certain affiliated companies in a
Singapore Technologies Group cash management program in which daily cash
surpluses or shortfalls are lent to or borrowed among affiliated companies at a
rate determined on an arms-length basis. We will no longer participate in this
program after the global offering.
In 1998, we obtained a demand loan from ST Treasury Services Ltd, a
wholly-owned subsidiary of Singapore Technologies, and a long-term loan with the
Economic Development Board. The loan agreement restricts us from paying
dividends, from incurring further indebtedness and from undertaking any form of
reconstruction, including amalgamation with another company, which would result
in a change in the control of the Company, in each case without prior lender
consent. The loan is unsecured, but is supported by a corporate guarantee given
by Singapore Technologies. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
In 1997, we established Singapore Technologies Assembly and Test Services,
Inc., a wholly-owned subsidiary incorporated in the State of Delaware which
provides our United States sales and marketing, research and development, design
and support services. Singapore Technologies Assembly and Test Services, Inc.
obtains human resources, finance and information technology services from
Chartered Semiconductor Manufacturing Inc., the U.S. subsidiary of Chartered
Semiconductor. These general and administrative expenses are borne and recharged
to us by Chartered Semiconductor Manufacturing Inc. These expenses amounted to
$2.2 million and $1.0 million for 1997 and 1998, respectively, and $0.6 million
and $1.0 million for the nine months ended September 30, 1998 and September 30,
1999, respectively. The service fee is determined at the end of each year for
the upcoming year. We expect the amount of such expenses to decrease
significantly in the future as we hire our own employees.
All new material related party transactions among our company and its
officers, directors, principal shareholders and their affiliates require
approval of a majority of the board of directors and must be on terms such
directors believe are no less favorable to our company than could be obtained
from unaffiliated parties. In addition, after the global offering all material
related party transactions must be separately approved by the Audit Committee.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of shares as of December 15, 1999 based upon an aggregate
of 785,427,695 ordinary shares outstanding as of such date, and as adjusted to
reflect the sale of the ordinary shares offered hereby for each person or group
that we know owns more than 5% of our ordinary shares and all of our directors
and executive officers as a group. The table assumes that none of such persons
acquires shares in the global offering.
Beneficial ownership is determined in accordance with rules of the U.S.
Securities and Exchange Commission and includes shares over which the indicated
beneficial owner exercises voting and/or investment power. Shares of common
stock subject to options currently exercisable or exercisable within 60 days are
deemed outstanding for computing the percentage ownership of the person holding
the options but are not deemed outstanding for computing the percentage
ownership of any other person.
<TABLE>
<CAPTION>
BEFORE THE GLOBAL OFFERING AFTER THE GLOBAL OFFERING
--------------------------- ---------------------------
NUMBER OF NUMBER OF
SHARES PERCENTAGE SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED OWNED OWNED
------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Singapore Technologies Pte Ltd(1)............ 511,282,398 65.1% 511,282,398 54.7%
Singapore Technologies Semiconductors Pte
Ltd(1)..................................... 200,695,652 25.5% 200,695,652 21.4%
EDB Investments Pte Ltd(2)................... 48,021,950 6.1% 48,021,950 5.1%
All directors and executive officers as a
group(3)................................... 13,332,500 1.7% 13,332,500 1.4%
</TABLE>
- ---------------
(1) Temasek Holdings (Private) Limited, the principal holding company of the
Government of Singapore, owns 78.3% of Singapore Technologies and owns 100%
of Singapore Technologies Holdings Ltd. which owns the remaining 21.7% of
Singapore Technologies which, in turn, owns 100% of Singapore Technologies
Semiconductors Pte Ltd. Temasek Holdings (Private) Limited may therefore be
deemed to beneficially own the shares directly owned by Singapore
Technologies and Singapore Technologies Semiconductors Pte Ltd.
(2) EDB Investments Pte Ltd is a wholly owned investment holding arm of the
Economic Development Board, a Singapore government agency. The Economic
Development Board may therefore be deemed to beneficially own the shares
directly owned by EDB Investments Pte Ltd.
(3) In addition, all directors and executive officers as a group own and will
own 10,383,500 options under the Share Option Plan, before and after the
global offering.
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DESCRIPTION OF SHARE CAPITAL
The following statements are brief summaries of the capital structure of
STATS and of the more important rights and privileges of shareholders conferred
by the laws of Singapore and STATS' amended Articles of Association (the
"Articles"). These statements summarize the material provisions of the Articles
but are qualified by reference to the Articles, which have been filed as an
exhibit to the registration statement of which this Prospectus forms a part. The
Articles are available for examination at the registered office of STATS in
Singapore.
ORDINARY SHARES
Our authorized capital is S$300,000,000 consisting of 1,200,000,000
ordinary shares of par value S$0.25 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 December 15, 1999, 785,427,695 ordinary shares were issued and
outstanding. All of our ordinary shares are in registered form. All issued
ordinary shares are entitled to the voting rights described under "-- Voting
Rights." We may, subject to the provisions of the Companies Act and the rules of
the Singapore Exchange Securities Trading Limited, 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 Businesses 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 ten days a year.
TRANSFER OF ORDINARY SHARES
There is no restriction on the transfer of fully paid ordinary shares
except where required by law, the listing rules of any stock exchange on which
we are listed or the rules or by-laws of such stock exchange.
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<PAGE> 72
Our Board of Directors may 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 a
form approved by any stock exchange on which we are listed. Our Board of
Directors may also decline to register any instrument of transfer unless, among
other things, it has been duly stamped and is 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 of our shareholders, 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 without the approval of our shareholders.
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 check 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
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<PAGE> 73
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.
BONUS AND RIGHTS ISSUE
Our Board of Directors may, with approval by 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.
TAKE-OVERS
The Companies Act and the Singapore Code on Take-Overs 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 Take-Overs 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 and in which judgment is given in their favor
or in which they are acquitted or in connection with any application under any
statute for relief from liability in respect thereof in which relief is granted
by the court. 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 "-- Take-Overs" 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.
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<PAGE> 74
SUBSTANTIAL SHAREHOLDINGS
Under the Companies Act, a person has a substantial shareholding in a
company if he has an interest (or interests) in one or more voting shares in the
company and the nominal amount of that share (or the aggregate of the nominal
amounts of those shares) is not less than 5 per cent. of the aggregate of the
nominal amount of all voting shares in the company. A person having a
substantial shareholding in a company is required to make certain disclosures
under the Companies Act, including the particulars of his interests in that
company and the circumstances by which he has such interests.
MINORITY RIGHTS
The rights of minority shareholders of Singapore-incorporated companies are
protected under Section 216 of the Companies Act (Chapter 50) of Singapore,
which gives the Singapore courts a general power to make any order, 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 RECEIPTS
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 depositary bank pursuant to a deposit
agreement. A copy of the deposit agreement is on file with the SEC under cover
of a registration statement on Form F-6. You may obtain a copy of the deposit
agreement from the 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 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 will also represent any other property received by the depositary bank 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 ADSs, you will become a party to the deposit
agreement and therefore will be bound to its terms and to the terms of the ADR
that represents your ADSs. The deposit agreement and the ADR specify our rights
and obligations as well as your rights and obligations as owner of ADSs and
those of the depositary bank. As an ADS holder you appoint the depositary bank
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 bank may create ADSs on your behalf if you or your broker
deposit ordinary shares with the custodian. The depositary bank 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 bank 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 bank 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 bank. 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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<PAGE> 76
- 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 incorrect in any way, we
and the depositary bank 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 bank for cancellation and then receive the underlying ordinary shares
at the custodian's offices. In order to withdraw the 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, if any, 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 bank 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 bank. Upon receipt of such notice, the
depositary bank 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 bank
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 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 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
thereof to the depositary bank and will indicate whether we wish the
distribution to be made available to you. In such case, we will assist the
depositary bank in determining whether such distribution is lawful and
reasonably practical.
The depositary bank will make the election available to you only if it is
reasonably practical and if we have provided all of the documentation
contemplated in the deposit agreement. In such case, the depositary bank 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 bank and we will assist the
depositary bank in determining whether it is lawful and reasonably practicable
to distribute rights to purchase additional ADSs to holders.
The depositary bank 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 bank 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 bank will sell any rights that are not exercised or not
distributed if such sale is lawful and reasonably practicable. The proceeds of
such 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, 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 bank may sell all or a
portion of the property received.
The depositary bank 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 bank 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 bank. If it is reasonably practicable
and if we provide the depositary bank all of the documentation contemplated in
the deposit agreement, the depositary bank 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 bank 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
bank. 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 bank 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 re-classification 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
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depositary bank may in such circumstances deliver new ADSs to you or call for
the exchange of your 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 shares
represented by your ADSs. The voting rights of holders of ordinary shares are
described in "Description of Share Capital."
The depositary bank will mail to you any notice of shareholders' meeting
received from us together with information explaining how to instruct the
depositary bank to exercise the voting rights of the securities represented by
ADSs.
If the depositary bank 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 bank 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
bank 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 bank:
<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 cash dividend or ADSs pursuant to stock
dividends or other free distributions..................... Up to 2c 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
bank. 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 bank. You will receive
prior notice of such changes.
AMENDMENTS AND TERMINATION
We may agree with the depositary bank to modify the deposit agreement at
any time without your consent. We undertake to give holders 30 days' prior
notice of any modifications that would prejudice any of their substantial rights
under the deposit agreement (except in very limited circumstances enumerated in
the deposit agreement).
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You will be bound by the modifications to the deposit agreement if you
continue to hold your ADSs after the modifications to the deposit agreement
become effective. The deposit agreement cannot be amended to prevent you from
withdrawing the shares represented by your ADSs, except as permitted by law.
We have the right to direct the depositary bank to terminate the deposit
agreement. Similarly, the depositary bank may in certain circumstances on its
own initiative terminate the deposit agreement. In either case, the depositary
bank 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 bank 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 bank may
sell the securities held on deposit. The depositary bank 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
bank 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 bank will maintain ADS holder records at its depositary
office. You may inspect these records at such 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 bank 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 bank's
obligations to you. We and the depositary bank are obligated only to take the
actions specifically stated in the depositary agreement without negligence or
bad faith. Please note the following:
- The depositary bank 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 bank 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 bank will not be obligated to perform any act that
is inconsistent with the terms of the deposit agreement.
- We and the depositary bank 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,
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any provision of any securities on deposit or by reason of any act of God
or war or other circumstances beyond our control.
- We and the depositary bank disclaim any liability by reason of any
exercise of, or failure to exercise, any discretion provided for in the
deposit agreement or in our Memorandum and Articles of Association or in
any provisions of securities on deposit.
- We and the depositary bank 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 bank also disclaim liability for the inability by a
holder to benefit from any distribution, offering, right or other benefit
which is made available to holders of ordinary shares but is not, under
the terms of the deposit agreement, made available to you.
- We and the depositary bank 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 bank may, in 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 the ADSs to be
fully collateralized before any ADSs are pre-released. The depositary bank 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 bank 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 bank 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 bank 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 bank and the
custodian may require to fulfill legal obligations. You are required to
indemnify us, the depositary bank and the custodian for any claims with respect
to taxes based on any tax benefit obtained for you.
FOREIGN CURRENCY CONVERSION
The depositary bank 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.
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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 bank 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 TAX CONSIDERATIONS
In this section we discuss 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, special counsel to the Company. This discussion does not purport to be
a comprehensive description of all 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. YOU
SHOULD CONSULT YOUR OWN TAX ADVISERS AS TO THE SINGAPORE TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITIONS OF THE SECURITIES.
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. 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 and
subject as discussed below, 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.
TAXATION OF DIVIDENDS
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. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation -- Overview" 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 finalised 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
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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 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.
Purchasers of the ordinary shares or ADSs offered in the global offering
may be required to pay stamp taxes and other charges in accordance with the laws
and practices of the country of purchase in addition to the offering price per
ordinary share or ADS set forth on the cover page of this prospectus.
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$12,000,000 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.
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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 INCOME TAXATION
The following summary describes the material United States federal income
tax consequences relating to an investment in ordinary shares or ADSs of the
Company as of the date hereof. The summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), existing final, temporary and proposed
Treasury Regulations, rulings and judicial decisions, all of which are subject
to prospective and retroactive changes. We will not seek a ruling from the
Internal Revenue Service (the "IRS") with regard to the United States federal
income tax treatment relating to investment in ordinary shares or ADSs and,
therefore, there can be no assurance that the IRS will agree with the
conclusions set forth below.
The summary does not purport to address all United States federal income
tax consequences that may be relevant to a particular investor and you may want
to consult your own tax advisor regarding your specific tax situation. The
summary, to the extent that it states matters of law or legal conclusions and
subject to the qualifications herein, represents the opinion of Shearman &
Sterling, special U.S. counsel to STATS. The summary applies only to holders who
hold ordinary shares or ADSs as capital assets within the meaning of Code
Section 1221, and does not address the tax consequences that may be relevant to
investors in special tax situations including, for example:
- insurance companies,
- tax-exempt organizations,
- dealers in securities or currency,
- banks or other financial institutions,
- investors that hold ordinary shares or ADSs as part of a hedge, straddle
or conversion transaction, or
- holders that own, directly or indirectly, ten percent or more of the
total combined voting power of the shares of the Company.
Further, this summary does not address the alternative minimum tax
consequences of an investment in ordinary shares or ADSs or the indirect
consequences to holders of equity interests in entities that own ordinary shares
or ADSs. In addition, this summary does not address the state, local and foreign
tax consequences of an investment in the ordinary shares or ADSs.
TAXATION OF U.S. HOLDERS
The following discussion applies to you if you are:
- a citizen or resident of the United States,
- a corporation, or any other entity taxable as a corporation created or
organized in or under the laws of the United States or any State thereof,
including the District of Columbia,
- an estate the income of which is subject to United States federal income
tax regardless of its source, or
- a trust if (a) a court within the United States is able to exercise
primary supervision over its administration and (b) one or more United
States persons have the authority to control all substantial decisions of
the trust.
For United States federal income tax purposes, if you are the beneficial
owner of ADSs you will be treated as the beneficial owner of the underlying
shares represented by the ADSs.
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DISTRIBUTIONS ON ORDINARY SHARES OR ADSS
Distributions made by us with respect to ordinary shares or ADSs generally
will be taxable to you as ordinary income to the extent of our current or
accumulated earnings and profits (as determined for United States federal income
tax purposes). Distributions in excess of our current or accumulated earnings
and profits will be treated first as a non-taxable return of capital reducing
your tax basis in the ordinary shares or ADSs. Any such distribution in excess
of your tax basis in the ordinary shares or ADSs will be treated as capital gain
and will be either long-term or short-term capital gain depending upon whether
you have held the ordinary shares or ADSs for more than one year.
Dividends paid by us generally will not be eligible for the dividends
received deduction available to certain United States corporate shareholders
under Code Sections 243 and 245.
The amount of any cash distribution paid in Singapore dollars will equal
the U.S. dollar value of the distribution, calculated by reference to the
exchange rate in effect at the time the dividends are received. You should not
recognize any foreign currency gain or loss if such foreign currency is
converted into U.S. dollars on the date received. If the Singapore dollars are
not converted into U.S. dollars on the date of receipt, however, gain or loss
may be recognized upon a subsequent sale or other disposition of the Singapore
dollars. Such foreign currency gain or loss, if any, will be United States
source ordinary income or loss for United States federal income tax purposes.
As noted above, Singapore taxes are paid by us and deemed to have been
distributed to and paid by our shareholders. You will not be subject to U.S. tax
on such amounts, and you will not be eligible for foreign tax credits for such
amounts against your U.S. federal income tax liability. Dividends received with
respect to the ordinary shares or ADSs will be treated as foreign source income,
which may be relevant in calculating your foreign tax credit limitation. The
limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. For this purpose, dividends paid with
respect to the ordinary shares or ADSs generally will constitute "passive
income" or, in the case of certain holders, "financial services income."
SALE OR EXCHANGE OF ORDINARY SHARES OR ADSS
You will generally recognize capital gain or loss upon the sale or exchange
of the ordinary shares or ADSs measured by the difference between the amount you
receive and your tax basis in the ordinary shares or ADSs. Such gain or loss
will be long-term capital gain or loss if the ordinary shares or ADSs have been
held for more than one year. In general, any capital gain or loss recognized
upon the sale or exchange of ADSs will be treated as United States source income
or loss, as the case may be, for United States foreign tax credit purposes. Your
ability to deduct capital losses is subject to limitations.
PASSIVE FOREIGN INVESTMENT COMPANY
A foreign corporation will generally be treated as a "passive foreign
investment company," or PFIC, if, after applying certain "look-through" rules,
either:
- 75% or more of its gross income for the taxable year is passive income,
or
- on average for the taxable year (by value or, if we so elect, by adjusted
basis) 50% or more of its assets produce or are held for this production
of passive income.
We do not believe that we are currently a PFIC. We do not anticipate that
we will be a PFIC in the future because we expect that, based upon our current
income and assets and the manner we anticipate we will conduct our business in
the future, less than 75% of our annual gross income will be passive income and
less than 50% of our assets will be passive assets. However, there can be no
assurance that we are not or will not be treated as a PFIC in the future. If we
were to be treated as a PFIC, you may be required, in certain circumstances, to
pay an interest charge together with the tax calculated at maximum rates on
certain "excess distributions," including any gain on the sale of ADSs. You
should consult your own tax advisors regarding the tax consequences of owning
ADSs of a PFIC.
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TAXATION OF NON-U.S. HOLDERS
The following discussion applies to you if you are not described in the
previous section.
DISTRIBUTIONS ON ORDINARY SHARES OR ADSS
You generally will not be subject to United States federal income tax or
withholding tax on dividends received from us with respect to ordinary shares or
ADSs unless such income is considered effectively connected with the conduct of
a United States trade or business.
SALE OR EXCHANGE OF ADSS
You generally will not be subject to United States federal income tax on
any gain realized upon the sale or exchange of ordinary shares or ADSs, unless:
- such gain is effectively connected with the conduct of a United States
trade or business, or
- if you are an individual, you are present in the United States for 183
days or more during the taxable year of disposition and certain other
conditions are met.
If you are engaged in a United States trade or business, the income from
the ordinary shares or ADSs (including dividends and the gain from the sale or
exchange thereof) that is effectively connected with the conduct of such trade
or business will generally be subject to regular United States federal income
tax on such income in the same manner as discussed in the previous section. In
addition, if you are a corporation, your earnings and profits that are
attributable to such effectively connected income (subject to certain
adjustments) may be subject to an additional branch profits tax at a rate of 30%
(or such lower rate as may be specified by an applicable treaty).
BACKUP WITHHOLDING
Distributions made by us with respect to the ordinary shares or ADSs and
gross proceeds received from the disposition of the ordinary shares or ADSs may
be subject to certain information reporting requirements to the IRS and to 31%
backup withholding tax. However, backup withholding generally will not apply to
payments made to certain exempt recipients such as a corporation or financial
institution or to a holder who furnishes a correct taxpayer identification
number or provides a certificate of foreign status and provides certain other
required information.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to you will be refunded or credited
against your United States federal income tax liability, if any, provided that
the required information is furnished to the IRS in a timely manner.
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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
935,427,695 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 150,000,000 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 785,427,695 ordinary shares will be
deemed "restricted securities" as defined under Rule 144. Restricted securities
may be sold in the public market only if registered or if they qualify for an
exemption from registration under the Securities Act, including Rule 144, Rule
701 or Regulation S. The ordinary shares sold in 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)
(9,354,277 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. Certain
resales may be permitted pursuant to Sections 903 and 904 of Regulation S even
if the Rule 144 holding periods are not satisfied. Singapore Technologies,
Singapore Technologies Semiconductors Pte Ltd and EDBI may be deemed affiliates
of our company. Therefore, sales by them in the United States of the 760,000,000
ordinary shares owned by them following the global offering may continue to be
subject to the volume limitations of Rule 144.
Rule 701 permits resales of shares issued under our Share Option Plan in
reliance upon Rule 144 but without compliance with certain restrictions,
including the holding period requirement, imposed under Rule 144. Pursuant to
Rule 701 and Rule 144, shares issued pursuant to such plan would, following
deposit with the Depositary, be freely tradeable in the public market (in the
form of ADSs) beginning 90 days after the date of this prospectus, assuming
resale is permitted under such plans.
Each of our directors and executive officers, Singapore Technologies,
Singapore Technologies Semiconductors Pte Ltd, EDBI and certain employees who
will collectively hold an aggregate of 773,332,500 ordinary shares (plus
10,383,500 options to acquire 10,383,500 additional 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, except
for shares disposed of as bona fide gifts approved by Salomon Smith Barney, Inc.
and except, in the case of such principal shareholders and selected employees
who are not
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directors or executive officers, for any of the 7,500,000 reserved shares
acquired by them in the global offering.
We have been advised that these shareholders do not have any present
intention to dispose of their ordinary shares, however, we cannot assure you
that these holders will not dispose of their ordinary shares. 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 underwriters' overallotment option or issuing shares
pursuant to our Share Option Plan. We intend to file a registration statement on
Form S-8 under the Securities Act within 90 days of the closing of the global
offering to register all of the ordinary shares that are or may become subject
to options under our Share Option Plan, thus permitting the resale of such
ordinary shares by nonaffiliates in the public market without restriction under
the Securities Act. Please see "Risk Factors -- Future sales of securities by
our company or existing shareholders may adversely affect the price of our ADSs
and our ordinary shares."
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UNDERWRITING
The global offering consists of:
- the U.S. offering of an aggregate of 90,000,000 ordinary shares directly
or in the form of ADSs in the United States and Canada;
- the International offering of an aggregate of 45,000,000 ordinary shares
directly or in the form of ADSs outside the United States and Canada; and
- the Singapore offering of an aggregate of 15,000,000 ordinary shares in
Singapore.
Salomon Smith Barney Inc. is acting as the global coordinator and sole book
running manager for the global offering.
Subject to the terms and conditions stated in the U.S. underwriting
agreement dated , 2000, each of the U.S. underwriters named below 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....................................
Hambrecht & Quist LLC.......................................
SG Cowen Securities Corporation.............................
-----------
Total..................................................... 90,000,000
===========
</TABLE>
Subject to the terms and conditions stated in an international underwriting
agreement dated , 2000, each of the international underwriters named
below 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......................
Credit Suisse First Boston (Singapore) Limited..............
Hambrecht & Quist LLC.......................................
Societe Generale............................................
-----------
Total..................................................... 45,000,000
===========
</TABLE>
Subject to the terms and conditions stated in a Singapore Management and
Underwriting Agreement dated , 2000, each of the Singapore underwriters,
for whom Citicorp Investment Bank (Singapore) Limited is acting as lead manager
and underwriter and Overseas Union Bank Limited is acting as the co-lead manager
and underwriter, has agreed to purchase, and we have agreed to sell such
Singapore underwriters 15,000,000 ordinary shares.
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. underwriters, the international underwriters and the 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 per ADS or per ordinary share
for the U.S. offering, the international offering and the Singapore offering
will be identical (taking into account the number of ordinary shares comprised
in an ADS and at the exchange rate of the date such prices are agreed to). The
underwriters expect that delivery of the ordinary shares, directly or in the
form of ADSs, will be made against payment
85
<PAGE> 91
therefor on or about the date specified in the last paragraph of the cover page
of the final prospectus, which is the sixth business day (in New York and
Singapore) following the date of the final prospectus (please note that February
7, 2000 is not a business day in Singapore due to the Chinese New Year). Trading
of the ordinary shares, directly or in the form of ADSs, on the date of the
final prospectus may be affected by this settlement cycle. The closing of the
U.S. offering, the International Offering and the Singapore Offering are
conditional upon each other.
The U.S. underwriters, the international underwriters and the 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$ per
ordinary share ($ per ADS). The underwriters may allow, and such dealers may
reallow, a concession not exceeding S$ per ordinary share ($ 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 underwriters have advised us that the underwriters do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
At our request, the underwriters have reserved up to 7,500,000 ordinary
shares (including ordinary shares represented by ADSs) (the "Directed Shares")
for sale at the initial public offering price to persons who are our directors,
officers and employees, employees of our business associates, officers and
employees of our affiliates and to certain charitable organizations in
Singapore, and who have advised us of their desire to purchase such shares. The
number of ordinary shares available for sale to the general public will be
reduced to the extent of sales of Directed Shares to any of the persons for whom
they have been reserved. Any shares not so purchased will be offered by the
underwriters on the same basis as all other ordinary shares offered hereby. We
have agreed to indemnify those underwriters against certain liabilities and
expenses, including liabilities under the Securities Act, in connection with
sales of the directed shares.
We have granted to the U.S., international and Singapore underwriters an
option, exercisable for 30 days from the date of this prospectus, to purchase up
to 22,500,000 additional ordinary shares (including ordinary shares represented
by ADSs) at the applicable initial public offering price, less the applicable
underwriting discount. The U.S., international and Singapore underwriters may
exercise this option solely to cover overallotments, if any, in connection with
the global offering. To the extent that such option is exercised, each U.S.
underwriter, international underwriter 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. underwriter's, international underwriter's or
Singapore underwriter's initial commitment.
The U.S. underwriters, the international underwriters and the 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. underwriters, the international underwriters and the
Singapore underwriters also have agreed that they may sell ordinary shares or
ADSs between 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.
STATS, each of our directors, executive officers, the principal
shareholders named in this prospectus and certain employees 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. dispose of or
hedge any ordinary shares or ADSs or any securities convertible into or
exchangeable or exercisable for ordinary shares or ADSs except for shares
disposed of as bona fide gifts approved by Salomon Smith Barney Inc. and except,
in the case of such principal shareholders and selected employees who are not
directors or officers, for any of the 7,500,000 reserved shares acquired by them
in the global offering. The foregoing does not prohibit us from issuing the
ordinary shares or ADSs subject to the underwriters' overallotment option or
issuing shares or ADSs under the Share Option Plan and pursuant to options
outstanding on the date of
86
<PAGE> 92
this prospectus. 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 Barney Inc. has advised us that it does not presently have an
intention to release prematurely any of the securities 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 prices
for the ordinary shares and the ADSs will be determined through negotiations
between us and the representatives. Among the factors considered in determining
the initial public offering prices will be our record of operations, our current
financial condition, our future prospects, our markets, the economic conditions
in and future prospects for 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
the global offering will not be lower than the prices 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 the global offering.
Application has been made to have the ADSs included for quotation on the
Nasdaq National Market under the symbol "STTS" and for the ordinary shares to be
approved for listing on the Singapore Exchange Securities Trading 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 both no exercise and full exercise
of the underwriters' option to purchase additional ordinary shares (including
ordinary shares represented by ADSs).
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Ordinary Share.......................................... $ $
Per ADS..................................................... $ $
Total..................................................... $ $
</TABLE>
In connection with the Singapore offering, we have agreed to pay the
Singapore underwriters underwriting and selling commissions of approximately
$0.03 per ordinary share or a total of approximately $438,750 assuming an
initial public offering price of $1.30 per ordinary share and a management fee
of S$100,000.
In connection with the global offering, Salomon Smith Barney Inc. and
Salomon Brothers International Limited, on behalf of the underwriters, may
purchase and sell ordinary shares or ADSs in the open market. These transactions
may include overallotment, covering transactions and stabilizing transactions.
Overallotment involves syndicate sales of ordinary shares or ADSs in excess of
the number of ordinary shares (including ordinary shares represented by ADSs) to
be purchased by the underwriters in the global offering, which creates a
syndicate short position. Syndicate covering transactions involve purchases of
the ordinary shares or ADSs 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 ordinary shares or ADSs made for the
purpose of preventing or retarding a decline in the market price of the ordinary
shares or ADSs while the offering is in progress. The underwriters may also
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 ordinary
shares or ADSs originally sold by that underwriter.
Any of these activities may cause the price of the ordinary shares or the
ADSs 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 Singapore
Exchange Securities Trading Limited, in the over-the-counter market or otherwise
and, if commenced, may be discontinued at any time.
87
<PAGE> 93
We estimate that our total expenses of the global offering will be
$2,000,000. We have agreed to reimburse the U.S., international and Singapore
underwriters for certain expenses incurred in connection with the global
offering.
Some of the U.S., international and Singapore underwriters or their
affiliates have been retained to perform certain investment banking, commercial
banking and advisory services for us from time to time for which they have
received customary fees and expenses. The U.S., international and Singapore
underwriters 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 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.
Each underwriter in the U.S. offering has agreed that it will not offer or
sell any ADSs in any province or territory of Canada, except in accordance with
applicable Canadian securities laws pursuant to an exemption from the prospectus
filing requirement and an exemption from the dealer registration requirement
(where a dealer registration exemption is not available, offers or sales shall
be made only by a registered dealer) in the relevant province or territory in
Canada where such offer or sale is made.
Each underwriter in the International offering and the Singapore offering
has agreed that:
- It has not offered or sold, and will not offer or sell, any shares or
ADSs in the United Kingdom by means of any document, other than to
persons whose ordinary business is to buy, hold, manage or dispose of
investments, whether as principal or agent, for purposes of their
businesses or otherwise in circumstances that do not constitute an offer
to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; and
- It has complied and will comply with all applicable provisions of the
Financial Services Act 1986 of the United Kingdom with respect to
anything done by them in relation to the shares or ADSs in, form or
otherwise involving the United Kingdom; and
- It has only issued or passed on and will only issue or pass on, to any
person in the United Kingdom, any document received by them in connection
with the issue of shares or ADSs, if that person is of a kind described
in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements)(Exemptions) Order 1996 (as amended) or is a person to
whom the document may other wise lawfully be issued or passed on; and
- It has not offered or sold and will not offer or sell, directly or
indirectly, in Japan or to or for the account of any resident of Japan
any shares or ADSs, except (1) under an exemption from the registration
requirements of the Securities and Exchange Law of Japan and (2) in
compliance with any other applicable requirements of Japanese Law; and
- It will send to any dealer who purchases from it any shares or ADSs a
notice stating in substance that, by purchasing shares or ADSs, the
dealer represents and agrees that it has not offered or sold, and will
not offer or sell, any of the shares or ADSs, directly or indirectly, in
Japan or to or for the account of any resident thereof except pursuant to
any exemption from the registration requirements of the Securities and
Exchange Law of Japan, and that the dealer will send to any other dealer
to whom it sells any shares or ADSs a notice containing substantially the
same statement as is contained in this sentence; and
- It has not and will not offer or sell any shares or ADSs or distribute
any document or other material relating to the shares or ADSs, either
directly or indirectly, to the public or any member of the public in
Singapore other than (1) to an institutional investor or other person
specified in Section 106C of the Companies Act, Chapter 50 of Singapore
or (2) to a sophisticated investor specified in Section 106D of the
Companies Act Chapter 50 of Singapore; and
88
<PAGE> 94
- It has not offered or sold and will not offer or sell any shares or ADSs
in Hong Kong by means of any document, other than to persons whose
ordinary business it is to buy or sell shares or debentures, whether as
principal or agent, except in circumstances which do not constitute an
offer to the public within the meaning of the Companies Ordinance
(Chapter 32) of Hong Kong; and
- It has not issued and will not issue any invitation or advertisement
relating to the shares or ADSs in Hong Kong, except if permitted to do so
by the securities law of Hong Kong, other than with respect to shares or
ADSs intended to be disposed of to persons outside Hong Kong or to be
disposed of in Hong Kong only to persons whose business involves the
acquisition, disposal or holding of shares whether as principal or agent.
Purchasers of the ordinary shares or ADSs offered in the global offering
may be required to pay stamp taxes and other charges in accordance with the laws
and practices of the country of purchase in addition to the offering price per
ordinary share or ADS set forth on the cover page of this prospectus.
LEGAL MATTERS
Shearman & Sterling, Singapore and New York, New York will pass on certain
legal matters in connection with the global offering as to New York law for us.
In giving its opinion Shearman & Sterling may rely on the opinion of Allen &
Gledhill, Singapore, our special Singapore counsel. Cravath, Swaine & Moore,
Hong Kong and New York, New York will pass on certain legal matters in
connection with the global offering as to New York law for the underwriters.
Allen & Gledhill will pass on certain other matters in connection with the
global offering as to Singapore law and the validity of our ordinary shares.
EXPERTS
KPMG, independent auditors, have audited our consolidated financial
statements included in this prospectus and registration statement for the years
ended December 31, 1996, 1997 and 1998 and for the nine months ended September
30, 1998 and 1999 as set forth in their report, which is included in this
prospectus and registration statement. Our consolidated financial statements
have been included in this prospectus in reliance on their report, given on
their authority, as experts in accounting and auditing.
89
<PAGE> 95
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 to
register our 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 intend to file these reports within the same time
periods that apply to the filing by domestic issuers of annual reports on Form
10-K. The SEC's rules generally require that domestic issuers file an annual
report on Form 10-K within 90 days after the end of each fiscal year. These
reports and other 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 Receipts" with annual reports, which will include a review of
operations and annual audited consolidated financial statements 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 Receipts"
for further details on the responsibilities of the depositary.
90
<PAGE> 96
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report on the Consolidated Financial
Statements............................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998 and September 30, 1998 and 1999................... F-3
Consolidated Statements of Operations and Comprehensive
Income (Loss) for the years ended December 31, 1996,
1997 and 1998, and nine months ended September 30, 1998
and 1999............................................... F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996, 1997 and 1998, and nine
months ended September 30, 1998 and 1999............... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998, and nine months ended
September 30, 1998 and 1999 ........................... F-7
Notes to the Consolidated Financial Statements............ F-8
</TABLE>
F-1
<PAGE> 97
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
ST Assembly Test Services Ltd:
We have audited the accompanying consolidated balance sheets of ST Assembly
Test Services Ltd and Subsidiary as of December 31, 1997 and 1998 and September
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 nine months ended September 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 Guideline
and Statements of Auditing Practice 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
ST Assembly Test Services Ltd and Subsidiary as of December 31, 1997 and 1998,
and September 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 nine months ended September 30, 1998 and 1999, in conformity with
generally accepted accounting principles in the United States.
KPMG
Singapore
November 30, 1999,
except as to Note 25 which is as of December 8, 1999
F-2
<PAGE> 98
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1998 AND SEPTEMBER 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------- -------------------
1997 1998 1998 1999
NOTE -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents....................... 3 $ 1,051 $ 12,692 $ 12,511 $ 16,716
Accounts receivable, net........................ 4 28,897 20,653 13,369 31,449
Amounts due from ST affiliates.................. 21 4,059 6,293 2,892 6,530
Other receivables............................... 5 1,038 2,312 345 6,194
Inventories..................................... 6 4,027 6,594 3,949 7,604
Prepaid expenses................................ 225 119 182 347
-------- -------- -------- --------
Total current assets.......................... 39,297 48,663 33,248 68,840
Property, plant and equipment, net.............. 7 186,180 188,057 196,167 216,761
Other receivables............................... -- -- -- 680
-------- -------- -------- --------
Total Assets.................................. $225,477 $236,720 $229,415 $286,281
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank overdrafts................................. 8 $ 2,975 $ -- $ -- $ --
Short-term debt................................. 9 130,165 50,000 50,000 50,000
Current installments of long-term debt.......... 13 -- -- -- 7,518
Accounts payable................................ 6,863 8,824 2,925 7,408
Amounts due to ST and ST affiliates............. 21 2,873 4,311 5,104 5,297
Accrued operating expenses...................... 10 6,661 5,093 5,123 16,019
Other payables.................................. 11 30,141 4,720 6,243 27,021
Income taxes payable............................ 93 321 261 523
-------- -------- -------- --------
Total current liabilities..................... 179,771 73,269 69,656 113,786
Deferred grant.................................. 12 -- 1,131 -- 1,989
Deferred income taxes........................... -- -- -- 300
Long-term debt.................................. 13 -- 54,282 52,653 45,107
-------- -------- -------- --------
Total Liabilities............................. 179,771 128,682 122,309 161,182
-------- -------- -------- --------
</TABLE>
F-3
<PAGE> 99
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------- -------------------
1997 1998 1998 1999
NOTE -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Share capital...................................
Ordinary shares -- par value S$1.00 as of
December 31, 1997, S$0.25 as of September
30, 1998, December 31, 1998 and September
30, 1999...................................
Authorized -- 300,000,000 as of December 31,
1997, 1,200,000,000 as of September 30,
1998, December 31, 1998 and September 30,
1999.......................................
Issued ordinary shares -- 92,000,000 as of
December 31, 1997, 780,174,000 as of
September 30, 1998 and December 31, 1998
and 796,145,600 as of September 30, 1999... 14 64,900 129,042 129,042 131,423
Additional paid-in capital...................... 15 -- 5,389 1,979 29,305
Unearned compensation........................... -- (3,756) (551) (19,216)
Subscriptions receivable........................ -- (2,931) (2,931) (5,193)
Accumulated other comprehensive income (loss)... (8,095) (9,731) (9,731) (9,731)
Retained deficit................................ 16 (11,099) (9,975) (10,702) (1,489)
-------- -------- -------- --------
Total Shareholders' Equity.................... 45,706 108,038 107,106 125,099
-------- -------- -------- --------
Total Liabilities and Shareholders' Equity.... $225,477 $236,720 $229,415 $286,281
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 100
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998,
AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------- -------------------
1996 1997 1998 1998 1999
NOTE --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenues......................... $ 32,185 $ 88,373 $113,920 $ 79,233 $135,981
Cost of revenues..................... 34,061 67,848 87,066 60,839 93,582
-------- -------- -------- -------- --------
Gross profit (loss).................. (1,876) 20,525 26,854 18,394 42,399
-------- -------- -------- -------- --------
Operating expenses:
Selling, general and
administrative.................. 6,062 13,858 16,772 11,951 19,194
Research and development........... -- 2,157 3,482 2,666 5,125
Stock-based compensation........... -- -- 384 179 8,456
-------- -------- -------- -------- --------
Total operating expenses........ 6,062 16,015 20,638 14,796 32,775
-------- -------- -------- -------- --------
Operating income (loss).............. (7,938) 4,510 6,216 3,598 9,624
-------- -------- -------- -------- --------
Other income (expense):
Interest income.................... 94 5 147 2 433
Interest expense................... (495) (3,312) (8,391) (6,858) (4,551)
Foreign currency exchange gain
(loss).......................... 604 (1,258) 857 2,805 1,873
Other non-operating income
(expense) net................... 17 180 45 2,685 1,143 1,767
-------- -------- -------- -------- --------
Total other income (expense).... 383 (4,520) (4,702) (2,908) (478)
-------- -------- -------- -------- --------
Income (loss) before income taxes.... (7,555) (10) 1,514 690 9,146
Income tax expense................... 18 -- (159) (390) (293) (660)
-------- -------- -------- -------- --------
Net income (loss).................... $ (7,555) $ (169) $ 1,124 $ 397 $ 8,486
======== ======== ======== ======== ========
Other comprehensive income (loss) --
foreign currency translation....... $ 754 $ (8,839) $ (1,636) $ (1,636) --
-------- -------- -------- -------- --------
Comprehensive income (loss).......... $ (6,801) $ (9,008) $ (512) $ (1,239) $ 8,486
======== ======== ======== ======== ========
Basic and diluted net income (loss)
per ordinary share................. $ (0.02) $ -- $ -- $ -- $ 0.01
======== ======== ======== ======== ========
Basic and diluted net income (loss)
per ADS............................ $ (0.21) $ -- $ 0.02 $ 0.01 $ 0.11
======== ======== ======== ======== ========
Ordinary shares (in thousands) used
in per ordinary share calculation:
-- basic........................... 352,032 368,000 669,671 634,869 769,144
-- effect of dilutive options...... -- -- 1,305 995 7,941
-------- -------- -------- -------- --------
-- diluted......................... 352,032 368,000 670,976 635,864 777,085
======== ======== ======== ======== ========
ADS (in thousands) used in per ADS
calculation:
-- basic........................... 35,203 36,800 66,967 63,487 76,914
-- effect of dilutive options...... -- -- 131 99 794
-------- -------- -------- -------- --------
-- diluted......................... 35,203 36,800 67,098 63,586 77,708
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 101
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998,
AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
ORDINARY SHARES PAID-IN UNEARNED SUBSCRIPTIONS COMPREHENSIVE RETAINED
NO. CAPITAL COMPENSATION RECEIVABLE INCOME (LOSS) DEFICIT
---------------------- ---------- ------------ ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1,
1996.................. 45,000,000 $ 31,802 $ -- $ -- $ -- $ (10) $(3,375)
Foreign currency
translation......... -- -- -- -- -- 754 --
Net loss.............. -- -- -- -- -- -- (7,555)
Share issuance........ 47,000,000.. 33,098 -- -- -- -- --
----------- -------- ------- -------- ------- ------- --------
Balances at December
31, 1996............ 92,000,000 64,900 -- -- -- 744 (10,930)
Foreign currency
translation......... -- -- -- -- -- (8,839) --
Net loss.............. -- -- -- -- -- -- (169)
----------- -------- ------- -------- ------- ------- --------
Balances at December
31, 1997............ 92,000,000 64,900 -- -- -- (8,095) (11,099)
Foreign currency
translation......... -- -- -- -- -- (1,636) --
Share issuance........ 100,000,000 62,305 -- -- -- -- --
Effect of stock
split............... 576,000,000 -- -- -- -- -- --
Share issuance........ 12,174,000 1,837 1,979 (730) (2,931) -- --
Amortization of stock
compensation........ -- -- -- 179 -- -- --
Net income............ -- -- -- -- -- -- 397
----------- -------- ------- -------- ------- ------- --------
Balances at September
30, 1998............ 780,174,000 129,042 1,979 (551) (2,931) (9,731) (10,702)
Other changes in
unearned
compensation........ -- -- 3,410 (3,410) -- -- --
Amortization of stock
compensation........ -- -- -- 205 -- -- --
Net income............ -- -- -- -- -- -- 727
----------- -------- ------- -------- ------- ------- --------
Balances at December
31, 1998............ 780,174,000 129,042 5,389 (3,756) (2,931) (9,731) (9,975)
Other changes in
unearned
compensation........ -- -- 23,196 (23,916) -- -- --
Share issuance........ 15,971,600.. 2,381 -- -- (2,262) -- --
Amortization of stock
compensation........ -- -- -- 8,456 -- -- --
Net income............ -- -- -- -- -- -- 8,486
----------- -------- ------- -------- ------- ------- --------
Balances at September
30, 1999............ 796,145,600.. $131,423 $29,305 $(19,216) $(5,193) $(9,731) $(1,489)
=========== ======== ======= ======== ======= ======= ========
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
-------------
<S> <C>
Balances at January 1,
1996.................. $ 28,417
Foreign currency
translation......... 754
Net loss.............. (7,555)
Share issuance........ 33,098
--------
Balances at December
31, 1996............ 54,714
Foreign currency
translation......... (8,839)
Net loss.............. (169)
--------
Balances at December
31, 1997............ 45,706
Foreign currency
translation......... (1,636)
Share issuance........ 62,305
Effect of stock
split............... --
Share issuance........ 155
Amortization of stock
compensation........ 179
Net income............ 397
--------
Balances at September
30, 1998............ 107,106
Other changes in
unearned
compensation........ --
Amortization of stock
compensation........ 205
Net income............ 727
--------
Balances at December
31, 1998............ 108,038
Other changes in
unearned
compensation........ --
Share issuance........ 119
Amortization of stock
compensation........ 8,456
Net income............ 8,486
--------
Balances at September
30, 1999............ $125,099
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 102
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
-------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................... $ (7,555) $ (169) $ 1,124 $ 397 $ 8,486
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 11,895 25,477 42,156 30,659 44,486
Loss (gain) on sale of property, plant and equipment...... (139) 17 (582) (582) 22
Loss on write-off of property, plant and equipment........ -- -- 248 248 --
Provision for doubtful accounts receivable................ 77 383 (241) (178) (185)
Provision for stock obsolescence.......................... 166 441 (1) 31 (123)
Exchange loss (gain) arising on loans..................... (158) 2,905 (423) (1,646) (2,337)
Changes in operating working capital:
Accounts receivable....................................... 1,174 (28,604) 8,485 15,993 (10,611)
Amounts due from ST affiliates............................ (4,218) 178 (1,970) 915 (237)
Inventories............................................... (1,668) (2,518) (2,536) 41 (887)
Other receivables and prepaid expenses.................... (548) (444) 554 748 (4,110)
Accounts payable.......................................... 515 4,354 1,961 (4,005) (1,416)
Amounts due to ST and ST affiliates....................... 2,357 497 826 2,389 986
Accrued operating expenses and other payables............. (1,885) 7,216 (1,671) (2,054) 13,758
-------- --------- --------- --------- --------
Net cash provided by operating activities................... 13 9,733 47,930 42,956 47,832
-------- --------- --------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment.................. (81,659) (120,595) (68,727) (63,900) (43,970)
Sale of property, plant and equipment....................... 1,017 91 1,254 1,207 43
-------- --------- --------- --------- --------
Net cash used by investing activities....................... (80,642) (120,504) (67,473) (62,693) (43,927)
-------- --------- --------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdrafts............................................. 3,727 (197) (3,012) (3,012) --
Proceeds from issuance of long-term debt.................... -- -- 54,299 54,299 --
Proceeds from issuance of short-term debt................... 37,172 109,855 25,000 25,000 --
Repayment of short-term debt................................ -- -- (107,550) (107,550) --
Proceeds from issuance of shares............................ 33,098 -- 62,460 62,460 119
-------- --------- --------- --------- --------
Net cash provided by financing activities................... 73,997 109,658 31,197 31,197 119
-------- --------- --------- --------- --------
Net increase (decrease) in cash and cash equivalents for the
year...................................................... (6,632) (1,113) 11,654 11,460 4,024
Effect of exchange rate changes on cash..................... 46 (258) (13) -- --
Cash and cash equivalents at beginning of the year.......... 9,008 2,422 1,051 1,051 12,692
-------- --------- --------- --------- --------
Cash and cash equivalents at end of the year................ $ 2,422 $ 1,051 $ 12,692 $ 12,511 $ 16,716
======== ========= ========= ========= ========
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (net of amount capitalized)................... $ 538 $ 3,467 $ 7,126 $ 6,906 $ 5,259
Taxes paid.................................................. $ -- $ 54 $ 162 $ 213 $ 158
Non-cash item
Share issue subscriptions receivable...................... $ -- $ -- $ 2,931 $ 2,931 $ 2,262
======== ========= ========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 103
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998 AND SEPTEMBER 30, 1998 AND 1999
IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA)
1. BUSINESS AND ORGANIZATION
BACKGROUND
ST Assembly Test Services Ltd (the "Company") is a leading independent
provider of a full range of semiconductor test and assembly services. The
Company has operations in Singapore and in the United States of America, its
principal market. As of September 30, 1999, the Company was 92.6%-owned by
Singapore Technologies Pte Ltd ("ST").
Significant Customers and Concentration Of Credit Risks
The Company has a number of major customers in North America and Asia.
During the years ended December 31, 1996, 1997 and 1998 and the nine months
ended September 30, 1998 and 1999, the Company's largest customer accounted for
25%, 34%, 21%, 22% and 25% of revenues respectively. The Company's five largest
customers collectively accounted for approximately 83%, 80%, 70%, 71% and 73% of
revenues for the year ended December 31, 1996, 1997 and 1998 and the nine month
ended September 30, 1998 and 1999 respectively (See Note 19). The Company
anticipates that significant customer concentration will continue for the
foreseeable future, although the companies which constitute the Company's
largest customers may change. 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 its affiliates. The Company participates in a pooled cash
management program and places short-term advances with other companies in the ST
group.
Risks and Uncertainties
The Company's future results of operations include a number of risks and
uncertainties. Factors that could affect the Company's future operating results
and cause actual results to vary materially from expectations include, but are
not limited to, dependence on the highly cyclical nature of both the
semiconductor and the communications and personal computer industries,
competitive pricing and declines in average selling prices, dependence on the
Company's relations with ST and the government of Singapore, reliance on a small
group of principal customers, timing and volume of orders relative to the
Company's production capacity, availability of manufacturing capacity and
fluctuations in manufacturing yields, availability of financing, competition,
dependence on raw material and equipment suppliers, exchange rate fluctuations,
dependence on key personnel, enforcement of intellectual property rights,
environmental regulations and fluctuations in quarterly operating results.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ACCOUNTING PRINCIPLES
The consolidated financial statements of the Company have been prepared in
conformity with generally accepted accounting principles in the United States
("US GAAP").
(B) BASIS OF ACCOUNTING
The consolidated financial statements have been prepared on the historical
cost basis. The consolidated financial statements included the financial
statements of ST Assembly Test Services Ltd and its subsidiary. All significant
intercompany balances and transactions have been eliminated in consolidation.
F-8
<PAGE> 104
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(C) USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
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.
(D) FUNCTIONAL CURRENCY
Through June 30, 1998, the Company's functional currency was the Singapore
dollar. Effective July 1, 1998, the Company changed its functional currency to
the US dollar.
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 that a more significant portion of its revenue is
derived from companies based outside of Singapore, principally the United
States. Interdependencies amongst the Company and its parent and other Singapore
government controlled entities continue to diminish. 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.
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 $9,731 cumulative translation
adjustment at July 1, 1998 in shareholders' equity prior to the change remains
as a separate component of accumulated other comprehensive income (loss).
(E) 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 debt obligations.
(F) 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 or anticipated transactions also are
deferred and are recognized in income or as adjustments of carrying amounts when
the hedged transaction occurs.
(G) CASH AND CASH EQUIVALENTS
Cash and cash equivalents are represented by highly liquid investments that
are readily convertible to known amounts of cash and have original maturities of
three months or less.
F-9
<PAGE> 105
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(H) INVENTORIES
Inventories are valued at the lower of cost and net realizable value. Cost
is determined principally on a standard cost basis which approximates the actual
cost on the weighted average basis.
(I) 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>
Building, mechanical and electrical installation............ 3 to 20 years
Plant and machinery......................................... 5 years
Toolings.................................................... 5 years
Office furniture and equipment.............................. 5 years
Computer equipment.......................................... 2 to 3 years
</TABLE>
No depreciation is provided on property, plant and equipment under
installation or construction. Repairs and replacements of a routine nature are
expensed, while those that extend the life of an asset are capitalized.
(J) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of". This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed 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 recognized 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.
(K) OPERATING LEASES
Rental payments under operating leases are expensed on a straight-line
basis over the periods of the respective leases.
(L) 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
concurrent with the related qualifying expenditures.
(M) REVENUE RECOGNITION
Net revenue represents the invoiced value of services rendered, excluding
goods and services tax, net of returns, trade discounts and allowances. Revenue
is recognized upon shipment of goods on which services have been rendered.
F-10
<PAGE> 106
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(N) RESEARCH AND DEVELOPMENT
Research and development expenses are expensed as incurred. Research and
development expenses amounted to $0, $2,157 and $3,482 during the years ended
December 31, 1996, 1997 and 1998 and $2,666 and $5,125 during the nine months
ended September 30, 1998 and 1999, respectively.
(O) 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 20 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 and is recorded over the requisite vesting
periods. Compensation cost for options granted to employees under the Company's
variable option plan is recorded over the requisite vesting periods based upon
the current market value of the Company's stock at the end of each period.
(P) 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.
(Q) NET INCOME (LOSS) PER SHARE
The computation of net income (loss) per share is calculated as the net
income or loss for the year divided by the weighted number of shares outstanding
during the year, as adjusted on a retroactive basis for stock splits. Diluted
net income (loss) per share includes the effect of all dilutive potential common
shares.
(R) 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).
(S) SEGMENT DISCLOSURES
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"), requires that a public company report descriptive
information about its reportable operating segments. Operating segments, as
defined, are components of an enterprise about which separate financial
F-11
<PAGE> 107
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 has one operating segment.
3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at December 31, 1997 and 1998 and September 30,
1998 and 1999 consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------- -----------------
1997 1998 1998 1999
------ ------- ------- -------
<S> <C> <C> <C> <C>
Cash at banks and in hand.................................. $ 44 $ 1,453 $ 342 $ 587
Cash equivalents -- ST pooled cash management.............. 1,007 11,239 12,169 16,129
------ ------- ------- -------
$1,051 $12,692 $12,511 $16,716
====== ======= ======= =======
</TABLE>
Certain of the Company's treasury management activities are undertaken by
ST or its affiliates. The Company participates in a pooled cash management
program which requires the Company to place surplus cash with ST as short-term
advances of less than three months.
4. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1997 and 1998 and September 30, 1998
and 1999 consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------- -----------------
1997 1998 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Accounts receivable -- third parties...................... $29,345 $20,864 $13,643 $31,475
Allowance for doubtful accounts
Balance brought forward................................. 77 448 448 211
Translation loss (gain) for the year.................... (12) 4 4 --
Provision made during the year.......................... 383 -- -- --
Amounts written back during the year.................... -- (241) (178) (185)
------- ------- ------- -------
448 211 274 26
------- ------- ------- -------
$28,897 $20,653 $13,369 $31,449
======= ======= ======= =======
</TABLE>
5. OTHER RECEIVABLES
Other receivables at December 31, 1997 and 1998 and September 30, 1998 and
1999 consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------- -------------
1997 1998 1998 1999
------ ------ ---- ------
<S> <C> <C> <C> <C>
Deposits and staff advances................................. $ 98 $ 182 $ 84 $ 165
Grant receivable (Note 12).................................. 167 1,797 38 3,829
Other receivables........................................... 773 333 223 2,200
------ ------ ---- ------
$1,038 $2,312 $345 $6,194
====== ====== ==== ======
</TABLE>
F-12
<PAGE> 108
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INVENTORIES
Inventories at December 31, 1997 and 1998 and September 30, 1998 and 1999
consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------- ---------------
1997 1998 1998 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Raw materials............................................... $3,022 $5,047 $2,954 $5,413
Factory supplies............................................ 547 1,079 863 1,087
Work-in-progress............................................ 869 1,003 574 1,453
Finished goods.............................................. 169 48 173 111
------ ------ ------ ------
4,607 7,177 4,564 8,064
Allowance for inventory obsolescence
Balance brought forward................................... 166 580 580 583
Translation loss (gain) for the period.................... (27) 4 4 --
Provision made during the period.......................... 666 207 206 717
Amounts utilized during the period........................ (225) (208) (175) (840)
------ ------ ------ ------
580 583 615 460
------ ------ ------ ------
$4,027 $6,594 $3,949 $7,604
====== ====== ====== ======
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1997 and 1998 and September
30, 1998 and 1999 consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------- -------------------
1997 1998 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cost:
Building, mechanical and electrical installation.... $ 46,192 $ 47,569 $ 47,569 $ 47,684
Plant and machinery................................. 136,753 187,874 185,982 213,082
Toolings............................................ 10,732 13,360 12,817 15,115
Office furniture and equipment...................... 1,442 1,570 1,405 2,807
Computer equipment.................................. 2,694 3,305 2,999 4,069
Assets under installation and construction in
progress......................................... 21,658 6,890 6,674 42,468
-------- -------- -------- --------
Total cost....................................... 219,471 260,568 257,446 325,225
-------- -------- -------- --------
Accumulated depreciation:
Building, mechanical and electrical installation.... 3,140 4,809 3,920 7,583
Plant and machinery................................. 26,520 59,293 51,178 90,550
Toolings............................................ 1,889 5,530 3,700 6,362
Office furniture and equipment...................... 607 708 627 1,055
Computer equipment.................................. 1,135 2,171 1,854 2,914
-------- -------- -------- --------
Total accumulated depreciation................... 33,291 72,511 61,279 108,464
-------- -------- -------- --------
Property, plant and equipment (net)................... $186,180 $188,057 $196,167 $216,761
======== ======== ======== ========
</TABLE>
Depreciation charged to results of operations amounted to $25,477 and
$41,772 for the years ended December 31, 1997 and 1998, and $30,480 and $36,030
for the nine months ended September 30, 1998 and 1999.
The building is built on land held on a 30-year operating lease, renewable
for a further 30-year-period subject to the fulfillment of certain conditions.
F-13
<PAGE> 109
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest of $947 was capitalized during the year ended December 31, 1997.
No interest was capitalized during the years ended December 31, 1996 or 1998 or
nine months ended September 30, 1999.
8. BANK OVERDRAFTS
Bank overdrafts at December 31, 1997 and 1998 and September 30, 1998 and
1999 consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------- ---------------
1997 1998 1998 1999
------ ---- ------ ------
<S> <C> <C> <C> <C>
Repayable in Singapore Dollars.............................. $2,975 $-- $-- $--
====== == == ==
</TABLE>
The weighted average rates of interest payable on the bank overdrafts was
7.5% as of December 31, 1997.
9. SHORT-TERM DEBT
Loans at December 31, 1997 and 1998 and September 30, 1998 and 1999 consist
of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------- ------------------
1997 1998 1998 1999
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Loans from ST
-- Singapore Dollar................................. $110,190 $ -- -- $ --
-- US Dollar........................................ 19,975 -- -- --
Loans from ST affiliate
-- US Dollar........................................ -- 25,000 25,000 25,000
Bank loan
-- US Dollar........................................ -- 25,000 25,000 25,000
-------- ------- -------- -------
$130,165 $50,000 $ 50,000 $50,000
======== ======= ======== =======
</TABLE>
Weighted average interest rate:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------ --------------
1997 1998 1998 1999
---- ---- ----- -----
<S> <C> <C> <C> <C>
Loans from ST
-- Singapore Dollar....................................... 6.6% --% 9.8% --%
-- US Dollar.............................................. 9.1 -- -- --
Loans from ST affiliate
-- US Dollar.............................................. -- 6.1 6.3 5.8
Bank loan
-- US Dollar.............................................. -- 5.8 6.2 6.0
</TABLE>
The Singapore Dollar loans from ST at December 31, 1997 bore interest at
rates quoted by specified banks to the lender ranging from 4.4% to 10.2% per
annum. The US Dollar loans from ST at December 31, 1997 bore interest at rates
quoted by specified banks to the lender ranging from 8.1% to 10.2% per annum.
These loans were unsecured.
The US Dollar loans payable to an ST affiliate at December 31, 1998,
September 30, 1998 and September 30, 1999 bore interest at rates quoted by
specified banks to the lender of 6.1% per annum, 6.3% per annum and 5.8% per
annum, respectively. The loans were unsecured.
The US Dollar bank loan payable at December 31, 1998, September 30, 1998
and September 30, 1999 bore interest at a rate of 0.5% above London Inter-Bank
Rate for US dollars. The loan was
F-14
<PAGE> 110
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
unsecured and repayable on August 26, 1999. The loan terms have been extended
and the loan is now repayable on August 26, 2000. The loan agreement requires ST
to maintain at least 51.0% equity in the Company and the Company to maintain a
debt to equity ratio of less than 1.5 to 1.
The Company has also entered into an agreement with a bank for an
uncommitted loan facility of $10.0 million. The agreement provides for
short-term loans of up to six months' duration. Interest on short-term loans
will be charged at the bank's prevailing rate on the date of drawdown.
10. ACCRUED OPERATING EXPENSES
Accrued operating expenses at December 31, 1997 and 1998 and September 30,
1998 and 1999 consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------- ----------------
1997 1998 1998 1999
------ ------ ------ -------
<S> <C> <C> <C> <C>
Staff costs................................................. $2,487 $1,812 $2,225 $ 9,179
Maintenance fees, license fees and royalties................ 760 669 696 1,012
Interest expense............................................ 1,797 1,061 398 354
Relocation costs............................................ 554 -- -- --
Others...................................................... 1,063 1,551 1,804 5,474
------ ------ ------ -------
$6,661 $5,093 $5,123 $16,019
====== ====== ====== =======
</TABLE>
11. OTHER PAYABLES
Other payables at December 31, 1997 and 1998 and September 30, 1998 and
1999 consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------- ----------------
1997 1998 1998 1999
------- ------ ------ -------
<S> <C> <C> <C> <C>
Liabilities for purchase of fixed assets.................... $29,765 $4,273 $5,833 $25,102
Provision for vacation liability............................ 376 447 410 825
Others...................................................... -- -- -- 1,094
------- ------ ------ -------
$30,141 $4,720 $6,243 $27,021
======= ====== ====== =======
</TABLE>
12. DEFERRED GRANT
In 1997, the Company obtained a 5-year grant of $13,878 for funding of
certain research and development projects from the National Science & Technology
Board ("NSTB"). The grant, which is a reimbursement of specified costs, has no
requirement for repayment.
13. LONG-TERM DEBT
Long-term debt at December 31, 1998 and September 30, 1998 and 1999
consists of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------- -----------------
1997 1998 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Singapore dollar loan..................................... $ -- $54,282 $52,653 $52,625
Less current installments................................. -- -- -- (7,518)
------- ------- ------- -------
$ -- $54,282 $52,653 $45,107
======= ======= ======= =======
</TABLE>
F-15
<PAGE> 111
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The term loan bears interest at 1% over the prevailing rate declared by the
Central Provident Fund ("CPF") Board, a statutory board of Singapore, for
contributions made to the CPF under the CPF Act. Interest is payable
semi-annually. Principal is denominated in Singapore dollars and is repayable in
7 equal semi-annual installments commencing September 1, 2000. The loan
agreement restricts the Company from paying dividends, from incurring further
indebtedness and from undertaking any form of reconstruction, including
amalgamation with another company, which would result in a change in the control
of the Company, in each case without prior lender consent. The loan is
unsecured, but is supported by a corporate guarantee given by ST. The term loan
at December 31, 1998, September 30, 1998 and September 30, 1999 bore interest at
5.3%, 5.3% and 3.5% per annum, respectively. (See Note 21)
]14. SHARE CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------- ---------------
1997 1998 1998 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Ordinary shares -- par value......................... S$1.00 S$0.25 S$0.25 S$0.25
====== ====== ====== ======
</TABLE>
The Company's authorized share capital at September 30, 1999 was comprised
of 1,200,000,000 ordinary shares of Singapore dollars S$0.25 par value each.
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 prohibits the issue of shares at a
discount to par value.
The Company was incorporated with an initial paid-in share capital of
Singapore dollars S$2 comprising 2 ordinary shares with a par value of Singapore
dollars S$1 each. In 1995, the paid-in capital was increased to Singapore
dollars S$45,000 (US$31,802) through the issue of 44,999,998 ordinary shares at
Singapore dollars S$1 per share. In 1996, the paid-in capital was further raised
by Singapore dollars S$47,000 (US$33,098) to Singapore dollars S$92,000 with the
issue of 47,000,000 ordinary shares at Singapore dollars S$1 per share. In March
1998, the paid-in capital was further increased by Singapore dollars S$100,000
(US$62,305) to Singapore dollars S$192,000 with the issue of 100,000,000
ordinary shares at Singapore dollars S$1 per share.
At an extraordinary general meeting held on April 30, 1998, the
shareholders of the Company approved the sub-division of the authorized share
capital of 300,000,000 ordinary shares of Singapore dollars S$1 each into
1,200,000,000 ordinary shares of Singapore dollars S$0.25 each. The 192,000,000
ordinary shares of Singapore dollars S$1 each in issue at that time were
sub-divided into 768,000,000 ordinary shares of Singapore dollars S$0.25 each.
In June 1998, the paid-in capital, net of subscriptions receivable, was
increased by Singapore dollars S$256 (US$155) to Singapore dollars S$192,256
with the issue of 12,174,000 ordinary shares of Singapore dollars S$0.25 each,
partly paid to Singapore dollars S$0.0125, at a subscription price of Singapore
dollars S$0.42 to employees of the Company, its subsidiary, ST and related
corporations of ST under the Ownership Scheme. (See Note 20)
In January 1999, the paid-in capital, net of subscriptions receivable, was
increased by Singapore dollars S$108 (US$65) to Singapore dollars S$192,363 with
the issue of 8,600,000 ordinary shares of Singapore dollars S$0.25 each at par,
partly paid to Singapore dollars S$0.0125 to employees of the Company, its
subsidiary, ST and related corporations of ST under the Ownership Scheme. (See
Note 20)
In July 1999, the paid-in capital, net of subscriptions receivable, was
increased by Singapore dollars S$92(US$54) to Singapore dollars S$192,455 with
the issue of 7,371,600 ordinary shares of Singapore
F-16
<PAGE> 112
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
dollars S$0.25 each at par, partly paid to Singapore dollars S$0.0125 to
employees of the Company, its subsidiary, ST and related corporations of ST
under the Ownership Scheme. (See Note 20)
The expiration dates of the installment payments for these partly-paid
ordinary shares ranged from May 2008 to May 2009.
15. ADDITIONAL PAID-IN CAPITAL
Additional paid-in capital includes 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 payment of dividends, if such dividends are satisfied by the issue of
shares to members of the Company, 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. As of
September 30, 1999, the Company's share premium account amounted to $1,249.
16. RETAINED DEFICIT
Singapore law allows dividends to be paid only out of retained earnings 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.
17. OTHER NON-OPERATING INCOME (EXPENSE)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------- --------------------
1996 1997 1998 1998 1999
------ ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Government grant income..................... $ -- $ 190 $1,151 $ 113 $1,175
Gain (loss) on disposal of property, plant
and equipment............................. 139 (17) 582 515 (23)
Provision for relocation costs.............. -- (554) -- -- --
Other income................................ 41 426 952 515 615
---- ----- ------ ------ ------
$180 $ 45 $2,685 $1,143 $1,767
==== ===== ====== ====== ======
</TABLE>
18. INCOME TAXES
The Company has been granted pioneer status under the Singapore Economic
Expansion Incentives (Relief from Income Tax) Act, Chapter 86 (the "Act"), for
subcontract assembly and testing of integrated circuits including wafer probing
services for a five-year period from January 1, 1996, renewable for a further
three years subject to compliance with certain conditions.
During the pioneer status period, Singapore-resident income from pioneer
trade is exempt from income tax, subject to compliance with the conditions
stated in the pioneer certificate and the Act. Income derived from non-pioneer
activities during the pioneer period, however, is subject to income tax at the
prevailing enacted rate of tax.
The tax-exempt profits arising from the pioneer trade can be distributed as
tax-exempt dividends that are not subject to Singapore income tax in the hands
of the shareholders. Losses and unutilized capital allowances arising in the
pioneer status period are available for carryforward to be offset against
profits arising in subsequent periods, including profits arising after the
pioneer status period. Profits arising during
F-17
<PAGE> 113
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. INCOME TAXES -- (CONTINUED)
the pioneer status period offset any accumulated pioneer loss and unutilized
capital allowance carryforward balances. Pioneer loss and unutilized capital
allowance carryforwards are available indefinitely, subject to more than 50% of
the shareholders staying the same from the incurrence of the tax loss to its
utilization. As of September 30, 1999, the Company had unutilized capital
allowance carryforwards of $32,506.
The income tax expense for the years ended December 31, 1997 and 1998 and
nine months ended September 30, 1998 and 1999 represents income tax payable on
non-pioneer trade income, principally rental and interest income.
A reconciliation of the expected tax expense (benefit) at the statutory
rate of tax to the tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
-------- ----- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Income tax expense (benefit) computed at
Singapore statutory rate of 26%............ $(1,964) $ (3) $ 394 $ 179 $ 2,378
Non-deductible expenses.................... 27 81 174 86 2,246
Pioneer status relief...................... -- -- (476) -- (4,112)
Pioneer unutilized capital allowance not
recognized as deferred benefit........... 1,937 -- -- -- --
All other items, net....................... -- 81 298 28 148
------- ---- ----- ----- -------
Income tax expense......................... $ -- $159 $ 390 $ 293 $ 660
======= ==== ===== ===== =======
Current taxation........................... $ -- $159 $ 390 $ 293 $ 360
Deferred taxation.......................... -- -- -- -- 300
------- ---- ----- ----- -------
$ -- $159 $ 390 $ 293 $ 660
======= ==== ===== ===== =======
</TABLE>
Income tax payable at December 31, 1997 and 1998 and the nine months ended
September 30, 1998 and 1999 was $93 and $321 and $261 and $523, respectively.
The pioneer status relief has the effect of increasing net income per share
by $0, $0 and $0 and net income per ADS by $0.01, $0 and $0.05 for the year
ended December 31, 1998, and the nine months ended September 30, 1998 and
September 30, 1999, respectively.
Due to the uncertainty surrounding the timing and extent of the realisation
of its deferred tax assets, substantially unutilized capital allowances, the
Company has provided a valuation allowance sufficient to reduce their carrying
amounts to zero. However, deferred tax expense of $300, which is expected to
reverse after the end of the pioneer status period, has been recognized for the
nine months period ended September 30, 1999. The underlying temporary
differences arise from basis differences relating to Company's property, plant
and equipment.
19. BUSINESS SEGMENT DATA AND MAJOR CUSTOMERS
The Company is a leading independent provider of a full range of
semiconductor test and assembly services.
F-18
<PAGE> 114
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. BUSINESS SEGMENT DATA AND MAJOR CUSTOMERS -- (CONTINUED)
Revenue by major service line and by geographical areas (identified by
location of customer) were:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
-------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
United States..................................
- - assembly..................................... $ 6,726 $28,831 $ 45,120 $28,697 $ 63,590
- - test......................................... 7,691 31,077 27,943 19,878 30,952
------- ------- -------- ------- --------
14,417 59,908 73,063 48,575 94,542
------- ------- -------- ------- --------
Singapore......................................
- - assembly..................................... 4,261 10,709 10,219 7,361 7,853
- - test......................................... 10,080 10,826 17,829 12,442 14,983
------- ------- -------- ------- --------
14,341 21,535 28,048 19,803 22,836
------- ------- -------- ------- --------
Rest of Asia...................................
- - assembly..................................... 318 1,454 1,778 1,616 420
- - test......................................... 3,109 5,474 10,980 9,236 14,077
------- ------- -------- ------- --------
3,427 6,928 12,758 10,852 14,497
------- ------- -------- ------- --------
Europe.........................................
- - assembly..................................... -- 2 9 3 1,887
- - test......................................... -- -- 42 -- 2,219
------- ------- -------- ------- --------
-- 2 51 3 4,106
------- ------- -------- ------- --------
Total........................................ $32,185 $88,373 $113,920 $79,233 $135,981
======= ======= ======== ======= ========
</TABLE>
Revenue from major customers, as a percentage of net revenues were as
follows:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
FOR THE YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------- -------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Customer A................................................. 21.0% 5.8% 11.5% 9.6% 14.7%
Customer B................................................. -- -- 12.1 9.8 25.4
Customer C................................................. 2.0 33.9 19.4 22.3 7.1
Customer D*................................................ 25.0 13.7 20.9 21.9 16.2
Customer E................................................. 6.0 1.2 0.1 0.1 0.1
Customer F................................................. -- -- 6.3 7.0 0.1
Customer G................................................. 10.6 12.5 5.9 7.6 1.6
Customer H................................................. -- 9.6 5.2 5.4 2.8
Customer I*................................................ 20.0 10.6 3.6 3.1 0.5
Customer J................................................. -- 1.2 3.9 1.7 9.5
Others..................................................... 15.4 11.5 11.1 11.5 22.0
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
- ---------------
* ST affiliate
F-19
<PAGE> 115
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. SHARE OPTIONS AND INCENTIVE PLANS
(A) EMPLOYEES' SHARE OWNERSHIP SCHEME
Effective April 1998, the Company adopted the ST Assembly Test Services
Employees' Share Ownership Scheme (the "Ownership Scheme"). The Scheme 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 the par value. 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 and fifth years following the date the option was granted, however,
such cumulative second installment due could be deferred and payable at each
successive anniversary date but was not due until ten years after the date of
grant of the option.
Where employees fail to pay the second installment within ten years of the
date of grant of the option, the employees are 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 are entitled to retain those
shares which had been fully paid for, while shares not fully paid for are either
required to be sold to the ST affiliate or, in certain circumstances, are
allowed to be fully paid. Shares which are not fully paid for cannot be sold.
In May 1998, options to subscribe for 12,916,000 ordinary shares of
Singapore dollars S$0.25 each at a subscription price of Singapore dollars
S$0.42 were granted to employees of the Company, its subsidiary, ST and related
corporations of ST under the Ownership Scheme. The fair value of each option at
the date of grant was estimated to be $0.31. Options in respect of 12,174,000
ordinary shares were exercised. The shares were issued in June 1998.
In November 1998, options to subscribe for 8,961,000 ordinary shares of
Singapore dollars S$0.25 each at a subscription price of Singapore dollars
S$0.25 were granted to employees of the Company, its subsidiary, ST and related
corporations of ST under the Ownership Scheme. The fair value of each option at
the date of grant was estimated to be $0.41. Options in respect of 8,600,000
ordinary shares were exercised. The shares were issued in January 1999.
In May 1999, options to subscribe for 8,397,200 ordinary shares of
Singapore dollars S$0.25 each at a subscription price of Singapore dollars
S$0.25 each were granted to employees of the Company, its subsidiary, ST and
related corporations of ST under the Ownership Scheme. The fair value of each
option at the date of grant was estimated to be $0.51. Options in respect of
7,371,600 were exercised. The shares were issued in July 1999.
The Ownership Scheme is accounted for in accordance with variable plan
accounting under Accounting Principles Board Opinion ("APB") No. 25.
Compensation cost for shares granted under the Ownership Scheme is recorded as
compensation expense over the requisite vesting period, with the unvested shares
reflected as unearned compensation in a separate component of shareholders'
equity based on the current market price of the shares at the end of the
relevant period. The Company determines the fair market values of ordinary
shares underlying each option grant based on the income approach and the market
approach. The income approach indicates the fair market value of the common
stock of a business based on the value of the cash flows that the business can
be expected to generate in the future. The market approach indicates the fair
market value of the ordinary shares based on a comparison of the Company to
comparable publicly traded companies, comparable transactions in its industry,
and prior transactions.
F-20
<PAGE> 116
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. SHARE OPTIONS AND INCENTIVE PLANS -- (CONTINUED)
Total compensation expense recognized for stock-based compensation under
the Ownership Scheme for the year ended December 31, 1998 and for the nine
months ended September 30, 1998 and 1999 were $384, $179 and $8,395
respectively.
Information for the year ended December 31, 1998 and nine months ended
September 30, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
------------ --------------------
1998 1998 1999
------------ -------- --------
<S> <C> <C> <C>
Shares outstanding at beginning of period (in thousands).... -- -- 20,774
Shares granted during period (in thousands)................. 20,774 12,174 7,372
Shares outstanding at period end (in thousands)............. 20,774 12,174 28,146
Weighted average grant date fair value of options........... $0.30 $0.24 $0.47
</TABLE>
(B) SHARE OPTION PLAN
Effective May 1999, the Company adopted the ST Assembly Test Services Ltd
Share Option Plan 1999 (the "Option Plan") which provides for a maximum of 85
million shares (subject to adjustment under the plan) to be reserved for option
grants. Options granted under the plan may include non-statutory 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 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 non-statutory 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 may not exceed 10 years from the date of grant. Upon leaving
the employment of the Company, outstanding options remain exercisable for a
specified period.
In June 1999, the Company granted options to subscribe for 1,570,400 shares
at an exercise price of Singapore dollars S$0.25. The options vest over five
years and expire on dates ranging from June 12, 1999 to June 11, 2009. The fair
value of each option at the date of grant was estimated to be $0.49. 1,533,400
options were outstanding as of September 30, 1999.
The Option Plan is accounted for in accordance with fixed-plan accounting
under APB No. 25. Compensation cost for shares granted under the Option Plan is
recorded as compensation expense over the requisite vesting period, with the
unvested shares reflected as unearned compensation in a separate
F-21
<PAGE> 117
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. SHARE OPTIONS AND INCENTIVE PLANS -- (CONTINUED)
component of shareholders' equity based on the market price of the shares at the
date of grant. Total compensation expense recognized for the nine months ended
September 30, 1999 totalled $61.
(C) IMPACT OF APPLYING FAIR VALUE BASED METHOD
The fair value of option grants under the Ownership Scheme is estimated on
the date of the grant using the Black-Scholes option-pricing model with the
following assumptions used: dividend yield; 0.0% for all years; risk-free
interest rate of 5.71% for May 1998 option grant, 4.84% for November 1998 option
grant and 5.57% for May 1999 option grant; expected volatility of 61.1% for May
1998 option grant, 92.3% for November 1998 option grant and 78.6% for May 1999
option grant; and an expected life of ten years respectively.
The fair value of option grants under the Option Plan is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
assumptions: dividend yield of 0.0% for all years; risk-free interest rate of
5.9%; expected volatility of 77.3%; and an expected life of ten years
respectively.
Had the Company determined compensation for the Ownership Scheme and the
Option Plan under Statement of Financial Accounting Standards No. 123, the
Company's net income (loss) would have been reduced or increased to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
------------ --------------------
1998 1998 1999
------------ ------- ---------
<S> <C> <C> <C>
Net income (loss):
As reported.............................................. $1,124 $ 397 $ 8,486
Pro forma................................................ 999 507 16,601
Basic net income (loss) per share:
As reported.............................................. -- -- $ 0.01
Pro forma................................................ -- 0.01 $ 0.21
Diluted net income (loss) per share:
As reported.............................................. -- -- $ 0.01
Pro forma................................................ -- 0.01 $ 0.21
</TABLE>
21. RELATED PARTY TRANSACTIONS
ST is a multi-national conglomerate headquartered in Singapore which has
five principal business groups: engineering, technology, infrastructure,
property and financial services. ST is in turn 100%-owned by Temasek Holdings
(Private) Limited ("Temasek"). Temasek is a holding company through which the
corporate investments of the government of Singapore are held. The Company is in
the semiconductor division of the ST Group which specializes in design,
manufacture, assembly and testing of semiconductors. ST Companies, including
Chartered Semiconductor Manufacturing Ltd engage in transactions with the
Company in the normal course of their respective businesses.
The building of the Company is built on land held on a long-term operating
lease from a statutory board of the government of Singapore. The lease is for a
30-year period commencing March 1, 1996 and renewable for a further 30 years
subject to the fulfillment of certain conditions. The rent is subject to annual
revision, with the increase capped at 4% per annum.
In 1997, the Company subleased office premises to TriTech Microelectronics
Ltd ("TriTech"), an ST affiliate and a fabless designer of semiconductor
products, at a monthly receivable of $49 subject to annual
F-22
<PAGE> 118
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
21. RELATED PARTY TRANSACTIONS -- (CONTINUED)
revision. On July 2, 1999, TriTech was placed under judicial management. Rental
income for the years ended December 31, 1997 and 1998 and the nine months ended
September 30, 1998 and 1999 was $332, $810, $657 and $457, respectively.
TriTech 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.
The building contract of $38,000 was awarded to an ST affiliate. The
construction of the building was completed in August 1997.
ST also provides management and corporate services to the Company.
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.
ST provides short-term financing for the Company (generally on a 3 to 6
months renewable basis) using its cost competitive corporate banking advantage
in the banking community.
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 affiliates participating in the arrangement at
prevailing inter-bank rates.
Certain general and administrative expenses of Singapore Technologies
Assembly and Test Services, Inc., our subsidiary, are borne and recharged to the
Company by Chartered Semiconductor Manufacturing Inc., a United States
incorporated affiliate of ST. These expenses amounted $2,229 and $1,020 for 1997
and 1998 respectively, and $630 and $972 for the nine months ended September 30,
1998 and September 30, 1999, respectively.
The Company had the following significant transactions with ST and ST
affiliates:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------- -------------------
1996 1997 1998 1998 1999
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
ST --
Management fees expense........................ $ 493 $ 897 $ 1,066 $ 1,463 $ 1,898
Interest expense............................... 636 4,254 4,747 4,747 --
ST affiliates --
Net revenues................................... 14,341 21,535 28,048 19,802 22,890
Property, plant and equipment sold............. -- -- 190 190 --
Purchase of property, plant and equipment...... 9,319 38,438 1,207 781 160
Interest income................................ 94 5 -- -- 433
Interest expense............................... -- 5 1,867 1,205 1,047
Rental income.................................. -- 332 810 657 457
General and administrative expenses............ -- 2,229 1,020 630 972
======= ======= ======= ======= =======
</TABLE>
The interest payable to ST during the year ended December 31, 1997 includes
interest capitalized in property, plant and equipment during the year.
F-23
<PAGE> 119
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
21. RELATED PARTY TRANSACTIONS -- (CONTINUED)
As of December 31, 1997 and 1998 and September 30, 1998 and 1999, there
were the following amounts owing by (to) affiliates:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
DECEMBER 31, SEPTEMBER 30,
------------------ --------------------
1997 1998 1998 1999
-------- ------- --------- --------
<S> <C> <C> <C> <C>
Amounts due from ST affiliates
Accounts receivable, net of allowance for doubtful
accounts........................................... $ 3,367 $ 5,957 $ 2,341 $ 6,031
Others................................................ 692 336 551 499
-------- ------- -------- -------
$ 4,059 $ 6,293 $ 2,892 $ 6,530
======== ======= ======== =======
Amounts due to ST
Other payables........................................ $ 728 $ 2,625 $ 3,571 $ 3,620
Amounts due to ST affiliates
Accounts payable...................................... 143 33 48 65
Other payables........................................ 2,002 1,653 1,485 1,612
-------- ------- -------- -------
$ 2,873 $ 4,311 $ 5,104 $ 5,297
======== ======= ======== =======
Loans from ST
Short-term debt....................................... $130,165 $ -- $ -- $ --
Loans from ST affiliate
Short-term debt....................................... $ -- $25,000 $ 25,000 $25,000
======== ======= ======== =======
</TABLE>
22. COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company has leased land for a 30-year period commencing March 1, 1996
and renewable for a further 30 years subject to the fulfillment of certain
conditions. The annual rent is currently fixed at $594. The rent is subject to
annual revision with the increase capped at 4% per annum. Operating lease rental
expense for the years ended December 31, 1996, 1997 and 1998 and the nine months
ended September 30, 1998 and 1999 was $785, $962, $771, $599 and $446,
respectively.
In October 1998 and June 1999, the Company leased certain plant and
equipment under operating leases. These leases expire in 2001. Operating lease
rental expenses in respect of these leases for the year ended December 31, 1998
and the nine months ended September 30, 1999 were $270 and $1,057, respectively.
F-24
<PAGE> 120
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
22. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Future minimum lease payments under non-cancelable operating leases of
factory land and plant and equipment as of December 31, 1998 and September 30,
1999 were:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Payable in year ending December 31,
1999...................................................... $ 2,159 $ 533
2000...................................................... 2,159 2,138
2001...................................................... 1,614 1,593
2002...................................................... 610 592
2003...................................................... 610 592
2004...................................................... 610 592
Thereafter................................................ 12,962 12,579
------- -------
$20,724 18,619
======= =======
</TABLE>
(B) TECHNOLOGY ARRANGEMENTS
As is typical of the semiconductor industry, the Company may in the future
receive notices from third parties asserting patent rights, copyrights or other
rights covering the Company's designs or processes.
On October 18, 1996, the Company acquired patent rights from Motorola Inc.
("Motorola") to use technology in making ball grid array packages ("BGA"). Under
the agreement, the Company is required to pay Motorola a royalty based on the
number of pads used on each BGA package. The agreement expires on December 31,
2002 and the Company has the option to renew the agreement subject to possible
amendment of the provisions thereof. Total expense recorded under the agreement
for the year ended December 31, 1998, and the nine months ended September 30,
1999, was $134, and $567, respectively. No expense was recorded under the
agreement for the years ended December 31, 1996 and 1997 and the nine months
ended September 30, 1998.
The Company may obtain other suitable patent rights in the future relating
to current or future technologies. There can be no assurance that the Company
will always be able to obtain such future patents on favorable commercial terms.
(C) CAPITAL COMMITMENTS
As of December 31, 1997 and 1998 and September 30, 1998 and 1999, there
were the following capital commitments:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------- ---------------
1997 1998 1998 1999
------ ------- ------ ------
<S> <C> <C> <C> <C>
Building, mechanical and electrical installation............ $2,096 $ 1,293 -- 260
Purchase of plant and machinery............................. $ -- $12,964 33,107 51,144
====== ======= ====== ======
</TABLE>
F-25
<PAGE> 121
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
22. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
(D) FOREIGN CURRENCY CONTRACTS
The Company had the following notional amounts of forward foreign currency
contracts as of December 31, 1997 and 1998 and September 30, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------ ---------------
1997 1998 1998 1999
---- ---- ---- -------
<S> <C> <C> <C> <C>
Forward foreign currency contracts.......................... $-- $-- $-- $52,625
== == == =======
</TABLE>
The Company has only limited involvement with derivative financial
instruments and does not use them for trading. The Company has used a forward
foreign currency swap contract to hedge a Singapore dollar dominated long-term
debt to US dollars. The payment terms of the foreign currency swap contract
match the principal repayments of the long-term debt, as described in Note 13.
The Company incurs an annual financing charge of 1.7% of the principal amount of
the loan outstanding under this hedging transaction. The Company has not used
any other derivative financial instrument. The Company is exposed to credit loss
in the extent of non-performance by the forward foreign currency swap contract
counterparty. The Company anticipates, however, that the counterparty will be
able to fully satisfy its obligations under the contract. The Company has not
obtained collateral or other security to support the financial instrument but
monitors the credit standing of the counterparty.
23. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate methodologies;
however, considerable judgement is required in interpreting market data to
develop the estimates for fair value. Accordingly, these estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. Certain of these financial instruments are with major
financial institutions and expose the Company to market and credit risks and may
at times be concentrated with certain counterparties or groups of
counterparties. The creditworthiness of counterparties is continually reviewed,
and full performance is anticipated.
The methods and assumptions used to estimate the fair value of significant
classes of financial instruments is set forth below:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are due on demand or carry a maturity date of
less than three months when purchased. The carrying amount of these financial
instruments is a reasonable estimate of fair value.
BANK OVERDRAFTS
Bank overdrafts are due on demand and have interest rates that reflect
currently available terms and conditions for similar borrowings. The carrying
amount of this debt is a reasonable estimate of fair value.
SHORT-TERM DEBT
Short-term debt has variable rates that reflect currently available terms
and conditions for similar borrowings. The carrying amount of this debt is a
reasonable estimate of fair value.
F-26
<PAGE> 122
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
23. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
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.
FOREIGN CURRENCY CONTRACTS
The fair value is estimated by reference to market quotations for foreign
currency contracts with similar terms adjusted where necessary for maturity
differences.
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.
<TABLE>
<CAPTION>
AS OF AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1999
-------------------- -------------------- -------------------- --------------------
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and cash
equivalents........ $ 1,051 $ 1,051 $12,692 $12,692 $12,511 $ 12,511 $16,716 $16,716
FINANCIAL
LIABILITIES:
Bank overdrafts...... 2,975 2,975 -- -- -- -- -- --
Short-term debt...... 130,165 130,165 50,000 50,000 50,000 50,000 50,000 50,000
Long-term debt....... -- -- 54,282 54,282 52,653 52,653 52,625 53,095
DERIVATIVES:
Gain on foreign
currency
contracts.......... -- -- -- -- -- -- 680 1,150
</TABLE>
24. RECENT CHANGES IN US GAAP
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
established 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.
25. SUBSEQUENT EVENTS
Subsequent to September 30, 1999, the Company terminated the Ownership
Scheme. Under the terms of the termination, the Company received proceeds from
participants amounting to approximately $2,961 to fully pay up the remaining
second installment of 95% of the subscription price for 17,407,695 ordinary
shares issued under the Ownership Scheme. The remaining 9,605,505 partly paid
ordinary shares in issue under the Ownership Scheme were bought back from the
employees by the Company at a total cash consideration of approximately $104.
Also, as part of the consideration for the buy back, under the
F-27
<PAGE> 123
ST ASSEMBLY TEST SERVICES LTD AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
25. SUBSEQUENT EVENTS -- (CONTINUED)
terms of the termination, such employees were granted new options to subscribe
for 6,385,450 ordinary shares, at an exercise price of Singapore dollars S$0.42
each, and 3,220,055 ordinary shares, at an exercise price of Singapore dollars
S$0.25 each, under the Option Plan. These new options have the same exercise
price as the original partly paid shares. Of such options, 7,214,305 vested at
the grant date, with the remaining 2,391,200 options vesting over a period of
two years. Also at this time, the Company purchased 1,112,400 partly paid shares
held by a subsidiary of ST for a cash consideration of $12.
Total compensation expense recognized subsequent to September 30, 1999 up
to the effective date of termination for shares issued under the Ownership
Scheme amounted to $957. At the effective date of termination, the total
unearned compensation brought forward in relation to the Ownership Scheme
amounted to $17,474. The termination of the Ownership Scheme, together with the
issue of the new options results in the realization of a non-cash stock-based
compensation charge of approximately $15,743 and the remaining unearned
compensation of $1,731 will be recorded as compensation expense over the two
year option vesting period.
In November 1999 the company granted options to subscribe for 7,663,800
shares at an exercise price based on the higher of Singapore dollars S$2.00 or
the offer price per share under the prospective initial public offering. The
options vest over five years and expire on November 22, 2009.
F-28
<PAGE> 124
ANNEX A
THE REPUBLIC OF SINGAPORE
The information in this section has been extracted from published sources
and has not been independently verified by the Company.
THE COUNTRY
The Republic of Singapore is an island city-state in Southeast Asia, on the
southern tip of the Malay Peninsula with a total land area of approximately
647.8 sq. km. Singapore's population was 3,865,600 as at 1999, of which
approximately 77.0% were Chinese, 14.0% were Malays, 7.6% were Indian and 1.4%
were of other ethnicities. The official languages of Singapore are Malay,
Mandarin, Tamil and English. The national language remains Malay, but 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. It
maintains close ties with other Southeast Asian countries, through bilateral
relationships and through its membership in the economic and political
consortium known as the Association of Southeast Asian Nations ("ASEAN").
Singapore enjoys fundamentally sound relations with the United States, the
People's Republic of China, Japan and Western European nations. Through
bilateral visits and participation in the British Commonwealth and other
international forums, Singapore maintains ties with numerous developing nations.
Closer relations between Singapore and Russia and other Eastern European
countries are also being developed. Singapore is a member of the United Nations
and other international organizations, including the International Monetary
Fund, the International Bank for Reconstruction and Development, the Asian
Development Bank, the Asia-Pacific Economic Cooperation ("APEC") 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. Its economy is heavily dependent on exports, which were the
equivalent of approximately 130% of Gross Domestic Product ("GDP") at current
market prices in 1998. Singapore does not have any significant natural
resources, other than its deep water harbor. However, its strategic geographical
location, together with a well developed infrastructure and political stability,
have made it an international business and financial center. With a 1999 per
capita GDP of S$38,170 living standards in Singapore are among the highest in
Asia.
In 1990, Singapore adopted a tight monetary policy. This caused slower
growth and led to weaker external demand. As a result, GDP growth slowed and
bottomed out in 1992 at 6.2%. Due to the growth in external trade, the US
economic recovery and expansion in East Asia, Singapore's GDP grew at a rate of
10.4% in 1993 and 10.5% in 1994 (at 1990 market prices). Growth in the
manufacturing and financial and business service sectors spurred growth in 1993
and 1994. However, due to a decline in exports caused by a slowdown in the
global electronics industry and the effects of the economic crisis in Southeast
Asia beginning in the second half of 1997, Singapore's growth rate declined to
6.9% in 1996 and 7.8% in 1997 (at 1990 market prices).
A-1
<PAGE> 125
The currencies of several of Singapore's neighboring countries in East and
Southeast Asia experienced substantial depreciation and volatility in the second
half of 1997. Economic growth rates slowed or contracted for many countries in
the region. To date, the economic developments in the region have adversely
affected the Singapore economy, although to a lesser extent than most other East
and Southeast Asian countries. GDP growth continued to decline in 1998,
declining to 1.5% (at 1990 market prices). The Government proposed new measures
in its budget plan and announced that it will undertake reforms to accelerate
development of the financial sector in Singapore. GDP growth rate has
accelerated to 6.7% in the nine months ended September 30, 1999.
The following table sets forth certain key economic indicators of the
Singapore economy for the periods indicated.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998 1999(1)
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
GDP at 1990 market prices
(S$m)............................ 85,387 94,368 102,531 109,573 118,078 121,112 32,401
% change from prior year....... 10.4% 10.5% 8.7% 6.9% 7.8% 1.5% 6.7%
GDP at current price (S$m)....... 94,318 188,217 120,704 130,775 143,014 141,216 32,400
% change from prior year....... 16.5% 14.7% 11.5% 8.3% 9.4% -- 6.7%
Per capita GDP (S$).............. 28,937 32,174 34,810 36,206 38,273 36,532 38,170
Consumer Price Index (%
change)........................ 2.3% 3.1% 1.7% 1.4% 2.0% -0.3% 0.9%
Unemployment..................... 1.9% 2.0% 2.0% 2.0% 1.8% 4.6% 4.0%
Total demand (% change).......... 14.4% 15.4% 12.7% 8.3% 7.8% -4.7% 9.4%
Domestic demand (% change)....... 12.8% 3.2% 8.8% 10.5% 9.9% -4.2% 13.4%
External demand (% change)....... 15.0% 20.9% 14.3% 7.5% 7.0% -4.9% 7.9%
</TABLE>
- ---------------
(1) Through third quarter ended September 30, 1999.
Sources: Economic Survey of Singapore, 1993, 1994, 1995, 1996, 1997, 1998 and
Third Quarter 1999; Monetary Authority of Singapore, 1997 Annual
Report; Singapore Department of Statistics.
A-2
<PAGE> 126
ANNEX B
THE SECURITIES MARKET OF SINGAPORE
The information in this section has been extracted from published sources
and has not been independently verified by the Company.
SINGAPORE EXCHANGE SECURITIES TRADING LIMITED OR SGX-ST
The Stock Exchange of Singapore Limited or SES was incorporated on May 24,
1973. The Government of Singapore demutualized the SES and merged it with the
Singapore International Monetary Exchange effective December 1, 1999, following
which the SES was renamed the Singapore Exchange Securities Trading Limited or
SGX-ST. The SGX-ST is the only securities exchange in Singapore and is the
leading organized market for debt and equity securities of Singapore companies.
The main trading facility of the SGX-ST is known as the Main Board. The SGX-ST
also operates the Stock Exchange of Singapore Dealing and Automated Quotation
System ("SESDAQ"). Trading on the SGX-ST is effected on a computerized quotation
system known as the Central Limit Order Book ("CLOB") Trading System. Trades on
the SGX-ST are generally settled seven calendar days after the transaction date.
As of January 1, 1999, the then Stock Exchange of Singapore Limited had a
membership of 33 stockbroking firms, 26 of which are domestic member firms and
seven of which are international members. The SGX-ST currently 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 ("MAS"), to represent interests outside the stockbroking community.
The SGX-ST's rules have been instituted with the approval of the Minister of
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 then Stock Exchange of Singapore Limited.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total capitalization(1) (S$ million)............... 235,469 256,124 282,551 255,862 329,268 263,168
Annual trading value(2) (S$ million)............... 127,797 123,520 92,636 86,776 110,456 96,986
Annual trading volume(2) (million shares).......... 66,398 45,540 37,696 30,516 47,146 69,656
Number of listed companies (SES Main Board)........ 205 209 248 266 294 307
</TABLE>
- ---------------
(1) SES Mainboard.
(2) Includes CLOB International, excludes SESDAQ.
Source: SES Journal, January 1994 - January 1999.
MARKET INDICES
There are many published indices which track the performances of securities
listed on the Main Board. The most commonly used index is the Straits Times
Industrial Index ("STI"). The STI is a capitalization-weighted index of 55
companies comprising of 62 stocks of which 7 are foreign stocks traded on the
SGX-ST. Another index used to measure the performance of the SGX-ST Main Board
is the SGX-ST All Share Index. The SGX-ST 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.
B-1
<PAGE> 127
The following table set forth the high close, low close and year-end levels
of the STI and the then SES All Share Index for each of the periods indicated.
<TABLE>
<CAPTION>
STI SES ALL SHARE INDEX
----------------------------------------- -----------------------------------------
HIGH CLOSE LOW CLOSE PERIOD END CLOSE HIGH CLOSE LOW CLOSE PERIOD END CLOSE
---------- --------- ---------------- ---------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Year
1993..................... 2,086.73 1,231.24 2,086.73 628.66 394.24 628.66
1994..................... 2,137.99 1,659.76 1,853.98 641.61 506.84 533.57
1995..................... 1,917.93 1,584.51 1,917.17 558.94 472.90 555.39
1996..................... 2,163.11 1,790.94 1,991.68 610.37 503.78 536.12
1997..................... 2,129.81 1,382.07 1,507.65 573.03 380.78 425.94
1998..................... 1,553.75 805.04 1,392.73 437.98 253.20 382.51
</TABLE>
- ---------------
Source: Bloomberg.
B-2
<PAGE> 128
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
135,000,000 ORDINARY SHARES
DIRECTLY OR IN THE FORM OF AMERICAN DEPOSITARY SHARES
ST ASSEMBLY TEST SERVICES LTD
STATS LOGO
------------
PROSPECTUS
, 2000
------------
SALOMON SMITH BARNEY
CHASE H&Q
SG COWEN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 129
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses, other than the underwriting
discounts and commissions, expected to be incurred in connection with the
issuance and distribution of the securities registered under this registration
statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 63,756
Nasdaq National Market Listing Fee.......................... $ 50,000
SGX-S7 Listing Fee.......................................... $ 11,765
NASD Filing Fee............................................. $ 26,365
Blue Sky Fees and Expenses.................................. $ 25,000
Printing and Engraving Expenses............................. $ 250,000
Legal Fees and Expenses..................................... $ 950,000
Accounting Fees and Expenses................................ $ 550,000
Transfer Agent's Fees and Expenses.......................... $ 25,000
Miscellaneous............................................... $ 48,114
----------
Total..................................................... $2,000,000
==========
</TABLE>
All amounts are estimated except the Securities and Exchange Commission
registration fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Association provide that all of our directors, secretaries
and other officers shall be indemnified by our company against all costs,
charges, losses, expenses and liabilities incurred by them in the execution and
discharge of their duties or in relation thereto, including any liabilities
incurred by them in defending any proceedings, civil or criminal, which relate
to anything done or omitted or alleged to have been done or omitted by them as a
director, secretary or other officer of our company, as applicable, and in which
judgment is given in their favor (or the proceedings otherwise disposed of
without any finding or admission of any material breach of duty on their part)
or in which they are acquitted or in connection with any application under any
statute for relief from liability in respect of any such act or omission in
which relief is granted to them by the court. Our Articles of Association
further provide that none of our directors, secretaries or other officers shall
be liable:
- for the acts, receipts, neglects or defaults of any other director or
officer;
- for joining in any receipt or other act for conformity;
- for any loss or expense happening to our company through the
insufficiency or deficiency of title to any property acquired by order of
our directors for or on behalf of our company;
- for the insufficiency or deficiency of any security in or upon which any
of the moneys of our company shall be invested;
- for any loss or damage arising from the bankruptcy, insolvency or
tortious act of any person with whom any moneys, securities or effects
shall be deposited or left; or
- for any other loss, damage or misfortune whatever which shall happen in
the execution of the duties of their office or in relation thereto unless
the same shall happen through their own negligence, willful default,
breach of duty or breach of trust.
The indemnification provisions in our Articles of Association provide for
indemnification of our officers and directors to the maximum extent permitted
under the Companies Act (Chapter 50) of Singapore.
II-1
<PAGE> 130
The form of underwriting agreements to be filed as Exhibit 1.1 to this
registration statement will also provide for indemnification of our company and
our officers and directors.
We maintain an insurance policy providing indemnification for certain of
our directors and officers against certain liabilities incurred as a result of
actions taken in their official capacity. We intend to enter into an
indemnification agreement with each of our directors and certain of our officers
pursuant to which we will indemnify each of them for certain liabilities,
including any liability arising out of this registration statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, we have issued the following securities. With
respect to the benefit plan participants, the dates provided reflect the dates
the ordinary shares were issued, and not the dates the offer to subscribe for
such shares were made, and the consideration column lists the total
consideration due with respect to the partly-paid shares being issued:
<TABLE>
<CAPTION>
NUMBER OF
PURCHASER DATE OF ISSUANCE ORDINARY SHARES CONSIDERATION S$
--------- ---------------- --------------- ----------------
<S> <C> <C> <C>
Singapore Technologies Pte Ltd.............. January 31, 1996 75,000,000(3) 18,750,000(1)
Singapore Technologies Semiconductors
Pte Ltd................................... January 31, 1996 45,000,000(3) 11,250,000(1)
EDB Investments Pte Ltd..................... January 31, 1996 60,000,000(3) 15,000,000(1)
Seiko Epson Corporation..................... January 31, 1996 8,000,000(3) 2,000,000(1)
Singapore Technologies Pte Ltd.............. March 31, 1998 160,869,564(3) 40,217,391(1)
Singapore Technologies Semiconductors Pte
Ltd....................................... March 31, 1998 108,695,652(3) 27,173,913(1)
EDB Investments Pte Ltd..................... March 31, 1998 130,434,784(3) 32,608,696(1)
1997 Benefit Plan Participants.............. June 30, 1998 12,174,000 5,113,080(2)
1997 Benefit Plan Participants.............. January 15, 1999 8,600,000 2,150,000(2)
1997 Benefit Plan Participants.............. July 8, 1999 7,371,600 1,842,900(2)
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
ORDINARY
SHARES AGGREGATE
UNDERLYING EXERCISE PRICE
GRANTEE DATE OF GRANT GRANT (S$)
------- ----------------- ---------- --------------
<S> <C> <C> <C>
1999 Benefit Plan Participants.................. June 12, 1999 1,563,400(4) 390,850(2)
1999 Benefit Plan Participants.................. November 22, 1999 7,601,000(4) 15,202,000(5)
</TABLE>
- ---------------
(1) We believe that the subject issuance was exempt from registration under the
Securities Act in reliance on Regulation S under the Securities Act.
(2) We believe that the subject issuance was exempt from registration under the
Securities Act in reliance on Regulation S under the Securities Act or on
Rule 701 under the Securities Act regarding transactions not involving a
public offering.
(3) Number of ordinary shares adjusted to take effect of the subdivision of the
authorized share capital of 300,000,000 ordinary shares of Singapore dollars
S$1.00 each into 1,200,000,000 ordinary shares of Singapore dollars S$0.25
each on April 30, 1998.
(4) Represents issued but unexercised share options.
(5) The data assumes an exercise price of S$2.00 per share. However, the
exercise price is actually the higher of S$2.00 or the initial public
offering price. The aggregate exercise price is S$ if the exercise price
is the initial public offering price.
II-2
<PAGE> 131
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. Attached hereto are the following exhibits:
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<C> <S>
*1.1 Form of U.S. Underwriting Agreement.
*1.2 Form of International Underwriting Agreement.
*1.3 Form of Singapore Management and Underwriting Agreement.
3.1 Memorandum and Form of New Articles of Association of the
Company.
4.1 Form of specimen certificate representing the Company's
ordinary shares.
*4.2 Form of deposit agreement among the Company, Citibank, N.A.,
as Depositary, and the holders from time to time of ADRs
issued thereunder (including the Form of ADR).
5.1 Form of opinion of Allen & Gledhill as to the validity of
the Shares.
8.1 Opinion of Shearman & Sterling, as to certain United States
tax matters.
8.2 Form of opinion of Allen & Gledhill as to certain Singapore
tax matters (included as a part of Exhibit 5.1).
10.1 ST Group Management & Support Services Agreement dated
December 27, 1999 by and between Singapore Technologies Pte
Ltd and the Registrant.
10.2 Loan Agreement dated June 5, 1998 by and between the
Economic Development Board and the Registrant.
10.3 Confirmation of Loan Agreement dated May 12, 1999 by and
between ST Treasury Services Ltd and the Registrant.
10.4 Lease Agreement dated November 18, 1996 by and between the
Housing and Development Board and the Registrant.
+10.5 Immunity Agreement dated October 18, 1996 by and between
Motorola Inc. and the Registrant.
10.6 Loan Agreement dated November 16, 1999 by and between
Citibank, N.A., Singapore Branch and the Registrant.
21.1 Subsidiary of ST Assembly Test Services Ltd.
23.1 Consent of Shearman & Sterling (included as a part of
Exhibit 8.1).
23.2 Consent of Allen & Gledhill (included as part of Exhibit
5.1).
23.3 Consent of KPMG, independent accountants.
**24.1 Powers of attorney of the Company (included on page II-6
hereof).
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment has been requested. Confidential material has been
redacted and has been separately filed with the Securities and Exchange
Commission.
** Previously filed.
(b)Financial Statement Schedules.
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake that:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
in Item 14 of this registration statement or otherwise may be permitted,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel
II-3
<PAGE> 132
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(4) The undersigned registrant hereby undertakes to provide the
underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required
by the underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-1 and has duly caused Amendment No. 1 to this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Republic of Singapore, on January 3, 2000.
ST ASSEMBLY TEST SERVICES LTD
By: /s/ TAN BOCK SENG
------------------------------------
Name: Tan Bock Seng
Title: Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 1
to this registration statement has been signed by the following persons in the
following capacities on January 3, 2000.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C> <C>
/s/ TAN BOCK SENG Chairman and Chief Executive Officer
- ---------------------------------------------------
Name: Tan Bock Seng
* Deputy Chairman
- ---------------------------------------------------
Name: Lim Ming Seong
* Director and President
- ---------------------------------------------------
Name: Lee Joon Chung
* Director
- ---------------------------------------------------
Name: Sum Soon Lim
Director
- ---------------------------------------------------
Name: Steven Hugh Hamblin
* Director
- ---------------------------------------------------
Name: Koh Beng Seng
* Director
- ---------------------------------------------------
Name: Liow Voon Kheong
Director
- ---------------------------------------------------
Name: Premod Paul Thomas
* Director
- ---------------------------------------------------
Name: Charles Richard Wofford
</TABLE>
II-5
<PAGE> 134
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C> <C>
* Chief Financial Officer
- ---------------------------------------------------
Name: Wong Kok Kit
* Authorized Representative in the United States
- ---------------------------------------------------
Name: John McCarvel
*By: /s/ TAN BOCK SENG
- -----------------------------------------------
Name: Tan Bock Seng
Title: Attorney-in-fact
</TABLE>
II-6
<PAGE> 1
EXHIBIT 3.1
THE COMPANIES ACT, CAP. 50
----------------
PRIVATE COMPANY LIMITED BY SHARES
----------------
MEMORANDUM OF ASSOCIATION
OF
**ST ASSEMBLY TEST SERVICES [PTE] LTD
*(formerly known as
ANAM/AMKOR ST PTE LTD)
** ST Assembly Test Services Ltd
* ST Assembly Test Services Pte Ltd
1. The name of the Company is ["ANAM/AMKOR ST PTE LTD"].
2. The Registered Office of the Company will be situated in the Republic
of Singapore.
3. The objects for which the Company is established are:-
(1) To carry on the business of manufacturing, installing, buying,
selling, maintaining, assembling, importing, exporting,
distributing, handling, testing, servicing, repairing and
otherwise dealing in electrical and electronic components,
parts, fittings, accessories, equipment and materials of every
kind and description, including but not limited to semiconductor
components, parts, fittings, accessories, equipment and
materials.
(2) To carry out research and development work (including but not
limited to investigations and experimental work) of every
description in relation to, but not limited to, the electrical
and electronic industry and the application and use thereof and
to collect, collate, prepare and distribute (by way of sale,
licence, concession or otherwise) the technology thereof and
information and statistics relating thereto.
(3) To carry out modification, repairs, overhaul and testing of
electronics, components, parts, fittings and accessories
including but not limited to semiconductor components, parts,
fittings and accessories.
(4) To train personnel including but not limited to personnel for
the electrical and electronic industry and to advance the skills
of such persons.
(5) To carry on all or any of the businesses of electrical,
mechanical, motor and general engineers, manufacturers and
merchants of, agents for and dealers in engineering specialities
of every description.
(6) To manufacture, buy, sell, maintain, repair, provide technical
services, alter and otherwise deal in apparatus, plant,
machinery, fittings, furnishings, tools, materials, products and
things of all kinds capable of being used for the purposes of
the abovementioned businesses or any of them or likely to be
required in relation thereto.
(7) To carry on any other business which may seem to the Company
capable of being conveniently carried on in connection with its
business or calculated directly or indirectly to enhance the
value of or render profitable any of the Company's properties or
rights.
* The Name of the Company was changed to "ST Assembly Test Services
Pte Ltd" with effect from 20 January 1995.
** The Name of the Company was changed to "ST Assembly Test Services
Ltd" with effect from 30 April 1998.
["ANAM/AMKOR ST PTE LTD"] reference to deletion.
<PAGE> 2
(8) To acquire and undertake the whole or any part of the
business, property, and liabilities of any person or
company carrying on any business which the Company is
authorized to carry on, or possessed of property suitable
for the purposes of the Company.
(9) To apply for, purchase, or otherwise acquire any patents,
patent rights, copyrights, trademarks, formulae, licences,
concessions, and the like, conferring any exclusive or
non-exclusive or limited right to use, or any secret or
other information as to any invention which may seem
capable of being used for any of the purposes of the
company, or the acquisition of which may seem calculated
directly or indirectly to benefit the Company; and to use,
exercise, develop, or grant licences in respect of, or
otherwise turn to account, the property, rights, or
information so acquired.
(10) To amalgamate or enter into partnership or into any
arrangement for sharing of profits, union of interest,
co-operation, joint adventure, reciprocal concession, or
otherwise, with any person or company carrying on or
engaged in or about to carry on or engage in any business
or transaction which the Company is authorized to carry on
or engage in, or any business or transaction capable of
being conducted so as directly or indirectly to benefit the
Company.
(11) To take, or otherwise acquire, and hold shares, debentures,
or other securities of any other company.
(12) To enter into any arrangements with any government or
authority, supreme, municipal, local, or otherwise, that may
seem conducive to the Company's objects, or any of them;
and to obtain from any such government or authority any
rights, privileges, and concessions which the Company may
think it desirable to obtain; and to carry out, exercise,
and comply with any such arrangements, rights, privileges,
and concessions.
(13) To establish and support or aid in the establishment and
support of associations, institutions, funds, trusts, and
conveniences calculated to benefit employees or directors
or past employees or directors of the Company or its
predecessors in business, or the dependants or connections
of any such persons; and to grant pensions and allowances,
and to make payments towards insurance; and to subscribe or
guarantee money for charitable or benevolent objects, or
for any exhibition, or for any public, general, or useful
object.
(14) To promote any other company or companies for the purpose
of acquiring or taking over all or any of the property,
rights, or liabilities of the company or companies, or for
any other purpose which may seem directly or indirectly
calculated to benefit the Company.
(15) To purchase, take on lease or in exchange, hire, or
otherwise acquire any movable or immovable properties and
any rights or privileges which the Company may think
necessary or convenient for the purposes of its business,
and in particular any land, buildings, easements,
machinery, plant, and stock-in-trade.
- 2 -
<PAGE> 3
(16) To construct, improve, maintain, develop, work, manage,
carry out, or control any buildings, works, factories,
mills, roads, ways, tramways, railways, branches or
sidings, bridges, reservoirs, water-courses, wharves
warehouses, electric works, shops, stores, and other works,
and conveniences which may seem calculated directly or
indirectly to advance the Company's interests; and to
contribute to, subsidize, or otherwise assist or take part
in the construction, improvement, maintenance, development,
working, management, carrying out, or control thereof.
(17) To guarantee and give guarantees or indemnities for the
payment of money or the performance of contracts or
obligations by any person or company.
(18) To lend and advance money or give credit to any person or
company and on such terms as may be considered expedient,
and either with or without security; to secure or undertake
in any way the repayment of moneys lent or advanced to or
the liabilities incurred by any person or company, and
otherwise to assist any person or company.
(19) To borrow or raise or secure the payment of money in such
manner as the Company may think fit and to secure the same
or the repayment or performance of any debt, liability,
contract, guarantee or other engagement already incurred by
or to be entered into by the Company in any way and in
particular by the issue of debentures perpetual or
otherwise, charged upon all or any of the Company's
property (both present and future), including its uncalled
capital; and to purchase, redeem, or pay off any such
securities.
(20) To invest and deal with the money of the Company not
immediately required in such manner as may from time to
time be thought fit.
(21) To remunerate any person or company for services rendered,
or to be rendered, in placing or assisting to place or
guaranteeing the placing of any of the shares in the
Company's capital or any debentures, or other securities of
the Company, or in or about the organization, formation, or
promotion of the Company or the conduct of its business.
(22) To draw, make, accept, endorse, discount, execute, and
issue promissory notes, bills of exchange, bills of
lading, and other negotiable or transferable instruments.
(23) To sell or dispose of the undertaking of the Company or any
part thereof for such consideration as the Company may
think fit, and in particular for shares, debentures, or
securities of any other company having objects altogether
or in part similar to those of the Company.
(24) To adopt such means of making known and advertising the
business and products of the Company as may seem expedient.
- 3 -
<PAGE> 4
(25) To apply for, secure, acquire by grant, legislative enactment,
assignment, transfer, purchase, or otherwise, and to exercise, carry
out, and enjoy any charter, licence, power, authority, franchise,
concession, right, or privilege, which any Government or authority or
any corporation or other public body may be empowered to grant; and to
pay for, aid in, and contribute towards carrying the same into effect;
and to appropriate any of the Company's shares, debentures, or other
securities and assets to defray the necessary costs, charges, and
expenses thereof.
(26) To apply for, promote, and obtain any statute, order, regulation, or
other authorization or enactment which may seem calculated directly or
indirectly to benefit the Company; and to oppose any bills,
proceedings, or applications which may seem calculated directly or
indirectly to prejudice the Company's interests.
(27) To procure the Company to be registered or recognized in any country
or place outside the Republic of Singapore.
(28) To sell, improve, manage, develop, exchange, lease, dispose of, turn
to account, or otherwise deal with all or any part of the property and
rights of the Company.
(29) To issue and allot fully or partly paid shares in the capital of the
Company in payment or part payment of any movable or immovable
property purchased or otherwise acquired by the Company or any
services rendered to the Company.
(30) To distribute any of the property of the Company among the members in
kind or otherwise but so that no distribution amounting to a reduction
of capital shall be made without the sanction required by law.
(31) To take or hold mortgages, liens, and charges to secure payment of the
purchase price, or any unpaid balance of the purchase price, of any
part of the Company's property of whatsoever kind sold by the Company,
or any money due to the Company from purchasers and others.
(32) To undertake and transact all kinds of agency or secretarial business
and also to undertake and execute any trusts, the undertaking whereof
may seem desirable, and either gratuitously or otherwise.
(33) To transact any lawful business in aid of the Republic of Singapore in
the prosecution of any war or hostilities in which the Republic of
Singapore is engaged.
(34) To carry out all or any of the objects of the Company and do all or
any of the above things in any part of the world and either as
principal, agent, contractor, or trustee, or otherwise, and by or
through trustees or agents or otherwise, and either alone or in
conjunction with others.
(35) To do all such other things as are incidental or conducive to the
attainment of the objects and the exercise of the powers of the
Company.
AND IT IS HEREBY DECLARED that the word "company" in this Memorandum when
not referring to this Company shall be deemed to include any corporation
partnership association club or other body of persons whether incorporated or
not and wherever incorporated or domiciled and whether now
- 4 -
<PAGE> 5
existing or hereafter to be formed AND further that unless the context or
subject matter is inconsistent therewith words signifying the singular number
shall be deemed and taken to include the plural and vice versa AND further that
the objects specified in each of the paragraphs in this Memorandum shall be
regarded as independent objects, and accordingly, shall be in no wise limited
or restricted (except when otherwise expressed in such paragraph), by reference
to the objects indicated in any other paragraph or the name of the Company, but
may be carried out in as full and ample a manner and construed in as wide a
sense as if each of the said paragraphs defined the objects of a separate,
distinct and independent company.
4. The liability of the members is limited.
5. The original capital of the Company is $300,000,000 divided into
*300,000,000 shares of $1/- each, and the Company shall have power to increase
or reduce the capital to consolidate or subdivide the shares into shares of
larger or smaller amounts, and to issue all or any part of the original or any
additional capital as fully paid or partly paid shares and with any special or
preferential rights or privileges or subject to any special terms or
conditions, and either with or without any special designation, and also from
time to time to alter, modify, commute, abrogate or deal with any such rights,
privileges, terms, conditions or designations in accordance with the
regulations for the time being of the Company.
-----------------------------------
* Pursuant to an ordinary resolution passed at an Extraordinary General
Meeting held on 30 April 1998, 300,000,000 shares of $1/- each was sub-divided
into 1,200,000,000 shares of $0.25 each.
- 5 -
<PAGE> 6
WE, the several persons whose names, addresses and descriptions are
subscribed, are desirous of being formed into a Company in pursuance of this
Memorandum of Association and respectively agree to take the number of shares
in the capital of the Company set opposite our respective names:-
<TABLE>
<CAPTION>
=======================================================================
Number of Shares
taken by each
Names, Addresses and Descriptions of Subscribers Subscriber
- -----------------------------------------------------------------------
<S> <C>
/s/ ANTHONY LEE HWEE KHIAM
--------------------------
ANTHONY LEE HWEE KHIAM
27 Jalan Jambu Mawar One (1)
Singapore 2158
Advocate & Solicitor
/s/ LOH WAI MOOI MICHELLE
-------------------------
LOH WAI MOOI MICHELLE
15 Jalan Tempua One (1)
Singapore 1129
Advocate & Solicitor
- -----------------------------------------------------------------------
Total number of shares taken Two (2)
=======================================================================
</TABLE>
Dated this 29th day of October 1994.
Witness to the above signatures:-
/s/ JUNE LOW FUI SIAN
----------------------
JUNE LOW FUI SIAN
Advocate and Solicitor
c/o Bih Li & Lee
Advocates & Solicitors
79 Robinson Road
#24-01 CPF Building
Singapore 0106
- 6 -
<PAGE> 7
--------------------------------------------------
THE COMPANIES ACT
(CHAPTER 50)/ FORM
The Companies Regulations 1987 11
++Sections 17 (7), 26 (2), 30 (4), 31 (1) and (2),
33 (9), 34, 186 (1), 227B (1) and 290 (2)/
Regulations 24 and 66 --------
Folio No
NOTICE OF RESOLUTION
--------------------------------------------------
Name of Company: ST ASSEMBLY TEST SERVICES PTE LTD
Company No: 199407932-D
The Registrar of Companies & Businesses,
Singapore
At a (general) meeting of the *members[/creditors/directors] of the
abovenamed company duly convened and held at
---------------------------
5 Yishun Street 23, Singapore 768442 on 30 April 1998
- ------------------------------------------------- ----------- ---
the *special and ordinary[/Directors'] resolutions set out *[below/]in the
+annexure marked with the letter "A" and signed by me for purposes of
identification were *duly passed[/agreed on].
(Set out resolution here if a copy thereof is not annexed).
See Annexure "A" attached
Name(s) of person(s) who signed the minutes incorporating the resolutions
attached hereto was/were:
Mr Tan Bock Seng
The designation of the person signing the resolution(s) in the abovenamed
company is:
Chairman
Dated this 30th day of April 1998
--------------------- ----
Signature: /s/ CHUA SU LI
-----------------
Name of *[Director/]Secretary: Chua Su Li
-----------------
- ----------------
++ Delete whichever references to sections are inapplicable.
* Delete where inapplicable.
+ Where a copy of the resolution is annexed, the annexure is to be endorsed as
follows: "This is the annexure marked "A" referred to in the notice of
resolution signed by me on the day of 19 ."
--------- -------- ---
================================================================================
Lodged in the office of the Registrar of Companies & For Official Use
Businesses by ---------------------
Name: Date of Registration:
Address: Receipt No:
A/c No: Tel No: Checked By:
Fax No:
<PAGE> 8
Annexure "A"
Name of Company : ST Assembly Test Services Pte Ltd
Registration No : 199407932-D
III ORDINARY RESOLUTIONS NUMBERED 1, 2 AND 3
RESOLVED:-
1. THAT each of the existing 300,000,000 ordinary shares of $1.00 each in the
capital of the Company, of which 192,000,000 of the said ordinary shares of
$1.00 each have been issued and are fully paid, be subdivided into
1,200,000,000 ordinary shares of $0.25 each, of which 768,000,000 of the
said ordinary shares of $0.25 each have been issued and are fully paid.
2. THAT pursuant to Section 161 of the Companies Act, Chapter 50, the
Directors be and are hereby authorised to issue shares in the capital of
the Company to any person on such terms and conditions and with such
rights or restrictions as they may think fit to impose and that such
authority shall continue in force until the conclusion of the next annual
general meeting ("AGM") of the Company or the expiration of the period
within which the next AGM is required by law to be held, whichever is the
earlier.
3. THAT:-
(a) the employees' share ownership scheme to be known as "ST Assembly
Test Services Employees' Share Ownership Scheme (the "Scheme") under
which, pursuant to Rule 4 of the rules (the "Rules") of the Scheme
(submitted to this Meeting and for the purpose of identification
subscribed to by the Chairman thereof), options (the "Options") will
be granted to selected employees and directors of the Company, its
subsidiaries, Singapore Technologies Pte Ltd ("ST") and related
corporations of ST to subscribe for ordinary shares of $0.25 each
(the "Shares") in the capital of the Company, particulars of which
are set out in the Rules, be and is hereby approved; and
(b) the Board of Directors of the Company be and is hereby authorised:-
(i) to establish the Scheme;
(ii) to appoint a committee (the "Committee") to administer,
modify and/or amend the Scheme in accordance with the Rules;
(iii) to do all such acts and to enter into all such transactions,
arrangements and agreements as may be necessary or expedient
in order to give full effect to the Scheme including, without
limitation, to execute all agreements and documents in
connection with the purchase by Singapore Technologies
Semiconductors Pte Ltd ("STS") of partly-paid Shares in
accordance with the Rules and the grant by STS of options in
respect of such partly-paid Shares; and
(iv) to offer and grant options in accordance with the provisions
of the Scheme and to allot and issue from time to time such
number of Shares as may be required to be issued pursuant to
the exercise of the Options under the Scheme.
<PAGE> 9
IV SPECIAL RESOLUTIONS NUMBERED 4, 5 AND 6
RESOLVED:-
4. THAT the Company be converted into a public company.
5. THAT the name of the Company be changed from "ST Assembly Test Services Pte
Ltd" to "ST Assembly Test Services Ltd".
6. THAT the Articles of Association of the Company (the "Articles") be and
are hereby amended by deleting Article 4 in its entirety and substituting
the following therefor:-
"PUBLIC COMPANY
4. The Company is a public company limited Public
by Shares. Company."
This is the Annexure marked "A" referred to in the Notice of
Resolution signed by me on the 30th day of April 1998.
/s/ CHUA SU LI
- ------------------------------------------------------------
Chua Su Li (Mrs)
Company Secretary
- 2 -
<PAGE> 10
----------------------------------------------
NEW ARTICLES OF ASSOCIATION
OF
ST ASSEMBLY TEST SERVICES LTD
(ADOPTED BY SPECIAL RESOLUTION PASSED ON
[ ], 1999)
----------------------------------------------
ALLEN & GLEDHILL
36, ROBINSON ROAD, #18-01,
CITY HOUSE,
SINGAPORE 068877.
<PAGE> 11
CONTENTS
--------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLES OF ASSOCIATION:-
Preliminary 1
Share Capital 3
Issue of Shares 3
Variation of Rights 3
Alteration of Share Capital 4
Shares 5
Share Certificates 6
Calls on Shares 8
Forfeiture and Lien 9
Transfer of Shares 11
Transmission of Shares 13
Stock 13
General Meetings 14
Notice of General Meetings 14
Proceedings at General Meetings 16
Votes of Members 18
Corporations Acting by Representatives 20
Directors 20
Managing Director or Chief Executive Officer or President 22
Appointment and Retirement of Directors 23
Alternate Directors 24
</TABLE>
<PAGE> 12
CONTENTS
--------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Meetings and Proceedings of Directors 25
Borrowing Powers 27
General Powers of Directors 27
Secretary 28
The Seal 28
Authentication of Documents 29
Reserves 29
Dividends 30
Capitalisation of Profits and Reserves 31
Accounts 32
Auditors 33
Notices 33
Winding Up 34
Indemnity 35
Secrecy 35
</TABLE>
- ii -
<PAGE> 13
THE COMPANIES ACT, CHAPTER 50
---------------------------
PUBLIC COMPANY LIMITED BY SHARES
---------------------------
ARTICLES OF ASSOCIATION
of
ST ASSEMBLY TEST SERVICES LTD
(Adopted by Special Resolution passed on [ ], 1999)
------------------------------------------------------------
PRELIMINARY
1. The regulations in Table A in the Fourth Schedule Table "A" not to
to the Companies Act, Chapter 50 (as amended) shall not apply.
apply to the Company.
2. In these presents (if not inconsistent with the Interpretation.
subject or context) the words and expressions set out in
the first column below shall bear the meanings set opposite
to them respectively.
"The Act" The Companies Act, Chapter 50.
"The Company" ST Assembly Test Services Ltd.
"In writing" Written or produced by any
substitute for writing or partly
one and partly another.
"Month" Calendar month.
"Office" The registered office of the
Company for the time being.
"Ordinary Shares" The ordinary shares of $0.25 each
in the capital of the Company.
"Paid" Paid or credited as paid.
"Seal" The Common Seal of the Company.
"The Statutes" The Act and every other Act for
the time being in force concerning
companies and
<PAGE> 14
affecting the Company.
"These presents" These Articles of Association as from time to time
altered.
"Year" Calendar year.
The expressions "Depositor", "Depository", "Depository Agent" and
"Depository Register" shall have the meanings ascribed to them respectively in
the Act.
References in these presents to "holders" of shares or a class of shares
shall:-
(a) exclude the Depository except where otherwise expressly provided in
these presents or where the term "registered holders" or "registered holder" is
used in these presents; and
(b) where the context so requires, be deemed to include references to
Depositors whose names are entered in the Depository Register in respect of
those shares.
and "holding" and "held" shall be construed accordingly.
The expression "Director" shall have the meaning ascribed to it in the Act
and shall, where the context so requires, be deemed to include a reference to an
Alternate Director.
The expression "Secretary" shall include any person appointed by the
Directors to perform any of the duties of the Secretary and where two or more
persons are appointed to act as Joint Secretaries shall include any one of those
persons.
All such of the provisions of these presents as are applicable to paid-up
shares shall apply to stock, and the words "share" and "shareholder" shall be
construed accordingly.
Words denoting the singular shall include the plural and vice versa.
---- -----
Words denoting the masculine shall include the feminine. Words denoting
persons shall include corporations.
Subject as aforesaid any words or expression defined in the Act shall (if
not inconsistent with the subject or context) bear the same meanings in these
presents.
A Special Resolution shall be effective for any purpose for which an
Ordinary Resolution is expressed to be required under any provision of these
presents.
- 2 -
<PAGE> 15
SHARE CAPITAL
3. The authorised share capital of the Company Authorised share
is [ ] divided into [ ] ordinary shares of $[ ] capital.
each.
ISSUE OF SHARES
4. Subject to the Statutes and to these presents, Issue of Shares.
no shares may be issued by the Directors without the
prior approval of the Company in General Meeting but
subject thereto and to Article 8, and to any special
rights attached to any shares for the time being issued,
the Directors may allot or grant options over or
otherwise dispose of the same to such persons on such
terms and conditions and for such consideration and at
such time and subject or not to the payment of any part
of the amount thereof in cash as the Directors may think
fit, and any shares may be issued with such preferential,
deferred, qualified or special rights, privileges or
conditions as the Directors may think fit, and
preference shares may be issued which are or at the
option of the Company are liable to be redeemed, the
terms and manner of redemption being determined by the
Directors, Provided always that:-
(a) no shares shall be issued to transfer a
controlling interest in the Company
without the prior approval of the members
in a General Meeting; and
(b) no shares shall be issued at a discount
except in accordance with the Statutes.
5. (A) In the event of preference shares being issued Rights of
the total nominal value of issued preference shares preference
shall not at any time exceed the total nominal value of shareholders.
the issued ordinary shares and preference shareholders
shall have the same rights as ordinary shareholders as
regards receiving of notices, reports and balance sheets
and attending General Meetings of the Company, and
preference shareholders shall also have the right to
vote at any meeting convened for the purpose of reducing
the capital or winding-up or sanctioning a sale of the
undertaking or where the proposal to be submitted to the
meeting directly affects their rights and privileges or
when the dividend on the preference shares is more than
six months in arrears.
(B) The Company has power to issue further
preference capital ranking equally with, or in priority
to, preference shares already issued.
VARIATION OF RIGHTS
6. (A) Whenever the share capital of the Company is Variation of
divided into different classes of shares, the special rights.
rights attached to any class may, subject to the
provisions of the Statutes, be varied or abrogated
either with the consent in writing of the holders of
three-quarters in nominal value of the issued shares
of the class or with the sanction of a Special
Resolution passed at a separate General Meeting of
- 3 -
<PAGE> 16
the holders of the shares of the class (but not
otherwise) and may be so varied or abrogated either
whilst the Company is a going concern or during or in
contemplation of a winding-up. To every such separate
General Meeting all the provisions of these presents
relating to General Meetings of the Company and to the
proceedings thereat shall mutatis mutandis apply, except
that the necessary quorum shall be two persons at least
holding or representing by proxy at least one-third in
nominal value of the issued shares of the class and that
any holder of shares of the class present in person or by
proxy may demand a poll and that every such holder shall
on a poll have one vote for every share of the class held
by him. Provided always that where the necessary majority
for such a Special Resolution is not obtained at such
General Meeting, consent in writing if obtained from the
holders of three-quarters in nominal value of the issued
shares of the class concerned within two months of such
General Meeting shall be as valid and effectual as a
Special Resolution carried at such General Meeting. The
foregoing provisions of this Article shall apply to the
variation or abrogation of the special rights attached to
some only of the shares of any class as if each group of
shares of the class differently treated formed a separate
class the special rights whereof are to be varied.
(B) The special rights attached to any class of Creation or issue of
shares having preferential rights shall not unless further shares with
otherwise expressly provided by the terms of issue special rights.
thereof be deemed to be varied by the creation or issue
of further shares ranking as regards participation in
the profits or assets of the Company in some or all
respects pari passu therewith but in no respect in
priority thereto.
ALTERATION OF SHARE CAPITAL
7. The Company may from time to time by Ordinary Power to increase
Resolution increase its share capital by such sum to be share capital.
divided into shares of such amounts as the resolution
shall prescribe.
8. (A) The Company may by Ordinary Resolution in Authority to issue
General Meeting give to the Directors a general shares.
authority, either unconditionally or subject to such
conditions as may be specified in the Ordinary Resolution,
to issue shares (whether by way of rights, bonus or
otherwise) where, unless previously revoked or varied
by the Company in General Meeting, such authority to
issue shares does not continue beyond the conclusion of
the Annual General Meeting of the Company next following
the passing of the Ordinary Resolution or the date by
which such Annual General Meeting is required to be held,
or the expiration of such other period as may be
prescribed by the Statutes (whichever is the earliest).
(B) Except so far as otherwise provided by the
conditions of issue or by these presents, all new
shares shall be subject to the provisions of the Statutes
and of these presents with reference to allotment, payment
of calls, lien, transfer, transmission, forfeiture and
otherwise.
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<PAGE> 17
9. The Company may by Ordinary Resolution:- Power to
consolidate, cancel
(a) consolidate and divide all or any of its and sub-divide
share capital into shares of larger amount shares.
than its existing share;
(b) cancel any shares which, at the date of
the passing of the resolution, have not
been taken, or agreed to be taken by any
person and diminish the amount of its
capital by the amount of the shares so
cancelled;
(c) sub-divide its shares, or any of them,
into shares of smaller amount than is
fixed by the Memorandum of Association
(subject, nevertheless, to the provisions
of the Statutes), and so that the
resolution whereby any share is sub-
divided may determine that, as between the
holders of the shares resulting from such
sub-division, one or more of the shares
may, as compared with the others, have
any such preferred, deferred or other
special rights, or be subject to any such
restrictions, as the Company has power to
attach to unissued or new shares;
(d) subject to the provisions of the Statutes,
convert any class of shares into any other
class of shares.
10. (A) The Company may reduce its share capital or Power to reduce
any capital redemption reserve fund, share premium share capital.
account or other undistributable reserve in any manner
and with and subject to any incident authorised and
consent required by law. Without prejudice to the
generality of the foregoing, upon cancellation of any
share purchased or otherwise acquired by the Company
pursuant to these presents, the nominal amount of the
issued share capital of the Company shall be diminished
by the nominal amount of the share so cancelled.
(B) The Company may, subject to and in accordance Company may
with the Statutes, purchase or otherwise acquire shares acquire its own
in the issued share capital of the Company on such terms issued ordinary
and in such manner as the Company may from time to time shares.
think fit. If required by the Statutes, any share which
is so purchased or acquired by the Company shall be
deemed to be cancelled immediately on purchase or
acquisition by the Company. On the cancellation of any
share as aforesaid, the rights and privileges attached
to that share shall expire. In any other instance, the
Company may deal with any such share which is so
purchased or acquired by it in such manner as may be
permitted by, and in accordance with, the Statutes.
SHARES
11. Except as required by law, no person shall be Exclusion of
recognised by the Company as holding any share upon equities.
any trust, and the Company shall not be bound by or
compelled in any way to recognise any equitable,
contingent, future or partial interest in any share,
or any interest in any fractional part of a share, or
(except only as by these presents or by law otherwise
provided) any other right in
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<PAGE> 18
respect of any share, except an absolute right to the
entirety thereof in the person (other than the
Depository) entered in the Register of Members as the
registered holder thereof or (as the case may be)
person whose name is entered in the Depository Register
in respect of that share.
12. Without prejudice to any special rights Redeemable
previously conferred on the holders of any shares or preference shares.
class of shares for the time being issued, any share
in the Company may be issued with such preferred,
deferred or other special rights, or subject to such
restrictions, whether as regards dividend, return of
capital, voting or otherwise, as the Company may from
time to time by Ordinary Resolution determine (or, in
the absence of any such determination, as the
Directors may determine) and subject to the provisions
of the Statutes the Company may issue preference shares
which are, or at the option of the Company are, liable
to be redeemed.
13. Subject to the provisions of these presents Unissued shares.
and of the Statutes relating to authority and of any
resolution of the Company in General Meeting passed
pursuant thereto, all unissued shares shall be at the
disposal of the Directors and they may allot (with or
without conferring a right of renunciation), grant
options over or otherwise dispose of them to such
persons, at such times and on such terms as they think
proper.
14. The Company may exercise the powers of paying Power to pay
commissions conferred by the Statutes to the full commission and
extent thereby permitted provided that the rate brokerage.
or amount of the commissions paid or agreed to be
paid shall be disclosed in the manner required by
the Statutes. Such commissions may be satisfied by
the payment of cash or the allotment of fully or
partly paid shares or partly in one way and partly
in the other. The Company may also on any issue of
shares pay such brokerage as may be lawful.
15. Subject to the terms and conditions of any Renunciation of
application for shares, the Directors shall allot allotment.
shares applied for within thirty days of the closing
date of any such application. The Directors may, at
any time after the allotment of any share but before
any person has been entered in the Register of Members
as the holder or (as the case may be) before that share
is entered against the name of a Depositor in the
Depository Register, recognise a renunciation thereof
by the allottee in favour of some other person and may
accord to any allottee of a share a right to effect such
renunciation upon and subject to such terms and
conditions as the Directors may think fit to impose.
SHARE CERTIFICATES
16. Every share certificate shall be issued under Form of share
the Seal and shall specify the number and class of shares certificate.
to which it relates and the amount paid up thereon and
shall bear the autographic or facsimile signatures of
one Director and the Secretary or a second Director or
some other person appointed by the Directors. The
facsimile signatures may be reproduced by mechanical,
electronic or other method approved by the Directors.
No certificate shall be issued representing shares of
more than one class.
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<PAGE> 19
17. (A) The Company shall not be bound to register Rights and
more than three persons as the registered holder of a liabilities of
share except in the case of executors or administrators joint holders.
of the estate of a deceased member.
(B) In the case of a share registered jointly in
the names of several persons the Company shall not be
bound to issue more than one certificate therefor and
delivery of a certificate to any one of the registered
joint holders shall be sufficient delivery to all.
18. Subject to the payment of all or any part of Entitlement to
the stamp duty payable (if any) on each share certificate.
certificate prior to the delivery thereof which the
Directors in their absolute discretion may require,
every person whose name is entered as a member in the
Register of Members shall be entitled to receive within
thirty days of the closing date of any application for
shares or after the date of lodgement of a registrable
transfer one certificate for all his shares of any one
class or several certificates in reasonable denomina-
tions each for a part of the shares so allotted or
transferred. Where such a member transfers part only
of the shares comprised in a certificate or where such
a member requires the Company to cancel any certificate
or certificates and issue new certificates for the
purpose of subdividing his holding in a different
manner the old certificate or certificates shall be
cancelled and a new certificate or certificates for the
balance of such shares issued in lieu thereof and such
member shall pay all or any part of the stamp duty
payable (if any) on each share certificate prior to the
delivery thereof which the Directors in their absolute
discretion may require and a maximum fee of $2 for each
new certificate or such other fee as the Directors may
from time to time determine.
19. Where some only of the shares comprised in a Shares comprised
share certificate are transferred the old certificate in certificate.
shall be cancelled and a new certificate for the
balance of such shares issued in lieu without charge.
20. (A) Any two or more certificates representing Surrender for
shares of any one class held by any person whose name cancellation of
is entered in the Register of Members may at his request certificate.
be cancelled and a single new certificate for such
shares issued in lieu without charge.
(B) If any person whose name is entered in the
Register of Members shall surrender for cancellation a
share certificate representing shares held by him and
request the Company to issue in lieu two or more share
certificates representing such shares in such
proportions as he may specify, the Directors may, if
they think fit, comply with such request. Such person
shall (unless such fee is waived by the Directors) pay
a maximum fee of $2 for each share certificate issued
in lieu of a share certificate surrendered for
cancellation or such other fee as the Directors may
from time to time determine.
(C) Subject to the provisions of the Statutes, Replacement of
if any share certificate shall be defaced, worn out, certificate.
destroyed, lost or stolen, it may be renewed on such
evidence being produced and a letter of indemnity
(if required) being given by the shareholder,
transferee, person entitled, purchaser, member firm
or member company of any Stock Exchange upon which
the shares in the Company may be listed or on behalf
of its or their client or clients as the Directors of
the Company
- 7 -
<PAGE> 20
shall require, and (in case of defacement or wearing
out) on delivery up of the old certificate and in any
case on payment of such sum not exceeding $2 as the
Directors may from time to time require together with
the amount of the proper duty with which such share
certificate is chargeable under any law for the time
being in force relating to stamps. In the case of
destruction, loss or theft, a shareholder or person
entitled to whom such renewed certificate is given
shall also bear the loss and pay to the Company all
expenses incidental to the investigations by the
Company of the evidence of such destruction or loss.
(D) In the case of shares registered jointly
in the names of several persons any such request may
be made by any one of the registered joint holders.
CALLS ON SHARES
21. The Directors may from time to time make Calls on shares and
calls upon the members in respect of any moneys time when made.
unpaid on their shares (whether on account of the
nominal value of the shares or, when permitted, by
way of premium) but subject always to the terms of
issue of such shares. A call shall be deemed to have
been made at the time when the resolution of the
Directors authorising the call was passed and may be
made payable by instalments.
22. Each member shall (subject to receiving at Calls on shares and
least fourteen days' notice specifying the time or when payable.
times and place of payment) pay to the Company at the
time or times and place so specified the amount called
on his shares. The joint holders of a share shall be
jointly and severally liable to pay all calls in
respect thereof. A call may be revoked or postponed as
the Directors may determine.
23. If a sum called in respect of a share is not Interest on calls.
paid before or on the day appointed for payment thereof,
the person from whom the sum is due shall pay interest
on the sum from the day appointed for payment thereof to
the time of actual payment at such rate (not exceeding
ten per cent. per annum) as the Directors determine but
the Directors shall be at liberty in any case or cases
to waive payment of such interest wholly or in part.
24. Any sum (whether on account of the nominal Sum due on
value of the share or by way of premium) which by the allotment.
terms of issue of a share becomes payable upon allotment
or at any fixed date shall for all the purposes of these
presents be deemed to be a call duly made and payable on
the date on which by the terms of issue the same becomes
payable. In case of non-payment all the relevant provi-
sions of these presents as to payment of interest and
expenses, forfeiture or otherwise shall apply as if such
sum had become payable by virtue of a call duly made and
notified.
25. No member shall be entitled to receive any Rights of member
dividend or vote at any meeting or upon a poll, until suspended until calls
he shall have paid all calls for the time being due and are duly paid.
payable on every share held by him, whether alone or
jointly with any other person, together with interest
and expenses (if any).
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<PAGE> 21
26. The Directors may on the issue of shares Power to
differentiate between the holders as to the amount differentiate.
of calls to be paid and the times of payment.
27. The Directors may if they think fit receive Payment in advance
from any member willing to advance the same all or any of calls.
part of the moneys (whether on account of the nominal
value of the shares or by way of premium) uncalled and
unpaid upon the shares held by him and such payment in
advance of calls shall extinguish pro tanto the liability
upon the shares in respect of which it is made and upon
the money so received (until and to the extent that the
same would but for such advance become payable) the
Company may pay interest at such rate (not exceeding
eight per cent. per annum) as the member paying such sum
and the Directors may agree. Capital paid on shares in
advance of calls shall not while carrying interest
confer a right to participate in profits.
FORFEITURE AND LIEN
28. If a member fails to pay in full any call or Notice requiring
instalment of a call on the due date for payment payment of calls.
thereof, the Directors may at any time thereafter
serve a notice on him requiring payment of so much of
the call or instalment as is unpaid together with any
interest which may have accrued thereon and any expenses
incurred by the Company by reason of such non-payment.
29. The notice shall name a further day (not being Notice to state time
less than fourteen days from the date of service of the and place.
notice) on or before which and the place where the
payment required by the notice is to be made, and shall
state that in the event of non-payment in accordance
therewith the shares on which the call has been made
will be liable to be forfeited.
30. If the requirements of any such notice as Forfeiture on non-
aforesaid are not complied with, any share in respect compliance with
of which such notice has been given may at any time notice.
thereafter, before payment of all calls and interest
and expenses due in respect thereof has been made, be
forfeited by a resolution of the Directors to that
effect. Such forfeiture shall include all dividends
declared in respect of the forfeited share and not
actually paid before forfeiture. The Directors may
accept a surrender of any share liable to be forfeited
hereunder.
31. A share so forfeited or surrendered shall Sale or disposition of
become the property of the Company and may be sold, forfeited or
re-allotted or otherwise disposed of either to the surrendered shares.
person who was before such forfeiture or surrender the
holder thereof or entitled thereto or to any other
person upon such terms and in such manner as the
Directors shall think fit and at any time before a sale,
re-allotment or disposition the forfeiture or surrender
may be cancelled on such terms as the Directors think
fit. The Directors may, if necessary, authorise some
person to transfer or effect the transfer of a forfeited
or surrendered share to any such other person as
aforesaid.
32. A member whose shares have been forfeited or Rights and liabilities
surrendered shall cease to be a member in respect of members whose
of the shares but shall notwithstanding the shares have been
forfeiture or surrender remain liable to pay to the forfeited or
Company all moneys which at the date of forfeiture surrendered.
or surrender were presently payable by him to the
Company in
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<PAGE> 22
respect of the shares with interest thereon at eight per
cent. per annum (or such lower rate as the Directors may
determine) from the date of forfeiture or surrender
until payment and the Directors may at their absolute
discretion enforce payment without any allowance for the
value of the shares at that time of forfeiture or
surrender or waive payment in whole or in part.
33. The Company shall have a first and paramount Company's lien.
lien on every share (not being a fully paid share) for
all moneys (whether presently payable or not) called or
payable at a fixed time in respect of such share and for
all moneys as the Company may be called upon by law to
pay in respect of the shares of the member or deceased
member. The Directors may waive any lien which has
arisen and may resolve that any share shall for some
limited period be exempt wholly or partially from the
provisions of this Article.
34. The Company may sell in such manner as the Sale of shares
Directors think fit any share on which the Company has subject to lien.
a lien, but no sale shall be made unless some sum in
respect of which the lien exists is presently payable
nor until the expiration of fourteen days after a notice
in writing stating and demanding payment of the sum
presently payable and giving notice of intention to sell
in default shall have been given to the holder for the
time being of the share or the person entitled thereto
by reason of his death or bankruptcy.
35. The net proceeds of such sale after payment of Application of
the cost of such sale shall be applied in or towards proceeds of
payment or satisfaction of the debts or liabilities and such sale.
any residue shall be paid to the person entitled to the
shares at the time of the sale or to his executors,
administrators or assigns, as he may direct. For the
purpose of giving effect to any such sale the Directors
may authorise some person to transfer or effect the
transfer of the shares sold to the purchaser.
36. A statutory declaration in writing that the Title to shares
declarant is a Director or the Secretary of the Company forfeited and
and that a share has been duly forfeited or surrendered right of
or sold to satisfy a lien of the Company on a date purchaser of
stated in the declaration shall be conclusive evidence such share.
of the facts therein stated as against all persons
claiming to be entitled to the share. Such declaration
and the receipt of the Company for the consideration
(if any) given for the share on the sale, re-allotment
or disposal thereof together (where the same be
required) with the share certificate delivered to a
purchaser (or where the purchaser is a Depositor, to
the Depository) or allottee thereof shall (subject to
the execution of a transfer if the same be required)
constitute a good title to the share and the share
shall be registered in the name of the person to
whom the share is sold, re-allotted or disposed of or,
where such person is a Depositor, the Company shall
procure that his name be entered in the Depository
Register in respect of the share so sold, re-allotted
or disposed of. Such person shall not be bound to see
to the application of the purchase money (if any) nor
shall his title to the share be affected by any
irregularity or invalidity in the proceedings
relating to the forfeiture, surrender, sale,
re-allotment or disposal of the share.
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<PAGE> 23
TRANSFER OF SHARES
37. All transfers of the legal title in shares Form of transfer.
may be effected by the registered holders thereof by
transfer in writing in any form acceptable to the
Directors. The instrument of transfer of any share shall
be signed by or on behalf of both the transferor and the
transferee and be witnessed, provided that an instrument
of transfer in respect of which the transferee is the
Depository shall be effective although not signed or
witnessed by or on behalf of the Depository. The
transferor shall remain the holder of the shares
concerned until the name of the transferee is entered
in the Register of Members in respect thereof.
38. The Register of Members may be closed at Closing of Register
such times and for such period as the Directors may of Members.
from time to time determine, provided always that
such Register shall not be closed for more than thirty
days in any year.
39. There shall be no restriction on the transfer Directors' right to
of fully paid up shares (except where required by law) refuse to register a
but the Directors may, in their sole discretion, decline transfer.
to register any transfer of shares upon which the Company
has a lien and in the case of shares not fully paid up
may refuse to register a transfer to a transferee of
whom they do not approve. Provided always that in the
event of the Directors refusing to register a transfer
of shares, they shall within thirty days beginning with
the date on which the application for a transfer of
shares was made, serve a notice in writing to the
applicant stating the facts which are considered to
justify the refusal as required by the Statutes.
40. The Directors may in their sole discretion When Directors may
refuse to register any instrument of transfer of shares refuse to register a
unless:- transfer.
(a) all or any part of the stamp duty (if any)
payable on each share certificate and such
fee not exceeding $2 as the Directors may
from time to time require, is paid to the
Company in respect thereof;
(b) the instrument of transfer is deposited at
the Office or at such other place (if any)
as the Directors may appoint accompanied by
the certificates of the shares to which it
relates, and such other evidence as the
Directors may reasonably require to show the
right of the transferor to make the transfer
and, if the instrument of transfer is
executed by some other person on his behalf,
the authority of the person so to do;
(c) the instrument of transfer is in respect of
only one class of shares; and
(d) the amount of the proper duty with which each
share certificate to be issued in consequence
of the registration of such transfer is
chargeable under any law for the time being in
force relating to stamps is tendered.
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<PAGE> 24
41. If the Directors refuse to register a transfer Notice on refusal to
of any shares, they shall within thirty days after the register a transfer.
date on which the application for transfer was lodged
with the Company send to the transferor and the
transferee a notice in writing stating the reasons
justifying the refusal to transfer and a notice of
refusal as required by the Statutes.
42. All instruments of transfer which are Retention of
registered may be retained by the Company. transfers.
43. There shall be paid to the Company in respect Fee for registration
of the registration of any instrument of transfer of probate etc.
or probate or letters of administration or certificate
of marriage or death or stop notice or power of attorney
or other document relating to or affecting the title to
any shares or otherwise for making any entry in the
Register of Members affecting the title to any shares
such fee not exceeding $2 as the Directors may from time
to time require or prescribe.
44. The Company shall be entitled to destroy all Destruction of
instruments of transfer which have been registered at instrument of
any time after the expiration of six years from the date transfer.
of registration thereof and all dividend mandates and
notifications of change of address at any time after the
expiration of six years from the date of recording
thereof and all share certificates which have been
cancelled at any time after the expiration of six years
from the date of the cancellation thereof and it shall
conclusively be presumed in favour of the Company that
every entry in the Register of Members purporting to
have been made on the basis of an instrument of transfer
or other document so destroyed was duly and properly
made and every instrument of transfer so destroyed was
a valid and effective instrument duly and properly
registered and every share certificate so destroyed was
a valid and effective certificate duly and properly
cancelled and every other document hereinbefore
mentioned so destroyed was a valid and effective document
in accordance with the recorded particulars thereof in
the books or records of the Company; Provided always
that:-
(a) the provisions aforesaid shall apply only
to the destruction of a document in good
faith and without notice of any claim
(regardless of the parties thereto) to
which the document might be relevant;
(b) nothing herein contained shall be construed
as imposing upon the Company any liability
in respect of the destruction of any such
document earlier than as aforesaid or in
any other circumstances which would not
attach to the Company in the absence of
this Article; and
(c) references herein to the destruction of any
document include references to the disposal
thereof in any manner.
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<PAGE> 25
TRANSMISSION OF SHARES
45. (A) In the case of the death of a member whose Transmission.
name is entered in the Register of Members, the
survivors or survivor where the deceased was a joint
holder, and the executors or administrators of the
deceased where he was a sole or only surviving holder,
shall be the only person(s) recognised by the Company
as having any title to his interest in the shares.
(B) In the case of the death of a member who
is a Depositor, the survivors or survivor where the
deceased is a joint holder, and the executors or
administrators of the deceased where he was a sole
or only surviving holder and where such executors or
administrators are entered in the Depository Register
in respect of any shares of the deceased member, shall
be the only person(s) recognised by the Company as
having any title to his interest in the shares.
(C) Nothing in this Article shall release the
estate of a deceased holder (whether sole or joint)
from any liability in respect of any share held by him.
46. Any person becoming entitled to the legal Persons becoming
title in a share in consequence of the death or entitled to shares
bankruptcy of a person whose name is entered in the on death or
Register of Members may (subject as hereinafter bankruptcy of
provided) upon supplying to the Company such evidence member.
as the Directors may reasonably require to show his
legal title to the share either be registered himself
as holder of the share upon giving to the Company
notice in writing of such desire or transfer such
share to some other person. All the limitations,
restrictions and provisions of these presents relating
to the right to transfer and the registration of
transfers of shares shall be applicable to any such
notice or transfer as aforesaid as if the death or
bankruptcy of the person whose name is entered in the
Register of Members had not occurred and the notice
or transfer were a transfer executed by such person.
47. Save as otherwise provided by or in accordance Rights of
with these presents, a person becoming entitled to a persons entitled
share pursuant to Article 45(A) or (B) or Article 46 to shares on
(upon supplying to the Company such evidence as the transmission.
Directors may reasonably require to show his title to
the share) shall be entitled to the same dividends and
other advantages as those to which he would be entitled
if he were the member in respect of the share except
that he shall not be entitled in respect thereof
(except with the authority of the Directors) to exercise
any right conferred by membership in relation to
meetings of the Company until he shall have been
registered as a member in the Register of Members or
his name shall have been entered in the Depository
Register in respect of the share.
STOCK
48. The Company may from time to time by Ordinary Power to convert
Resolution convert any paid-up shares into stock and into stock.
may from time to time by like resolution reconvert any
stock into paid-up shares of any denomination.
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<PAGE> 26
49. The holders of stock may transfer the same or Transfer of stock.
any part thereof in the same manner and subject to the
same Articles as and subject to which the shares from
which the stock arose might previously to conversion
have been transferred (or as near thereto as
circumstances admit) but no stock shall be transferable
except in such units (not being greater than the nominal
amount of the shares from which the stock arose) as the
Directors may from time to time determine.
50. The holders of stock shall, according to the Rights of
amount of stock held by them, have the same rights, stockholders.
privileges and advantages as regards dividend, return
of capital, voting and other matters, as if they held
the shares from which the stock arose; but no such
privilege or advantage (except as regards participation
in the profits or assets of the Company) shall be
conferred by an amount of stock which would not, if
existing in shares, have conferred such privilege or
advantage; and no such conversion shall affect or
prejudice any preference or other special privileges
attached to the shares so converted.
GENERAL MEETINGS
51. An Annual General Meeting shall be held once Annual General
in every year, at such time (within a period of not Meeting.
more than fifteen months after the holding of the last
preceding Annual General Meeting) and place as may be
determined by the Directors. All other General Meetings
shall be called Extraordinary General Meetings.
52. The Directors may whenever they think fit, Extraordinary
and shall on requisition in accordance with the General Meeting.
Statutes, proceed with proper expedition to convene
an Extraordinary General Meeting.
NOTICE OF GENERAL MEETINGS
53. Any General Meeting at which it is proposed Notice of Meetings.
to pass a Special Resolution or (save as provided by the
Statutes) a resolution of which special notice has been
given to the Company, shall be called by twenty-one days'
notice in writing at the least and an Annual General
Meeting and any other Extraordinary General Meeting by
fourteen days' notice in writing at the least. The period
of notice shall in each case be exclusive of the day on
which it is served or deemed to be served and of the day
on which the meeting is to be held and shall be given in
the manner hereinafter mentioned to all members other
than such as are not under the provisions of these
presents entitled to receive such notices from the
Company; Provided that a General Meeting notwithstanding
that it has been called by a shorter notice than that
specified above shall be deemed to have been duly called
if it is so agreed:-
(a) in the case of an Annual General Meeting, by
all the members entitled to attend and vote
thereat; and
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<PAGE> 27
(b) in the case of an Extraordinary General
Meeting, by a majority in number of the
members having a right to attend and
vote thereat, being a majority together
holding not less than 95 per cent. in
nominal value of the shares giving that
right;
Provided also that the accidental omission to give
notice to or the non-receipt of notice by any person
entitled thereto shall not invalidate the proceedings
at any General Meeting. At least 14 days' notice of any
General Meeting shall be given by advertisement in the
daily press.
54. (A) Every notice calling a General Meeting shall Contents of notice.
specify the place and the day and hour of the meeting,
and there shall appear with reasonable prominence in
every such notice a statement that a member entitled to
attend and vote is entitled to appoint a proxy to attend
and vote instead of him and that a proxy need not be a
member of the Company.
(B) In the case of an Annual General Meeting, the
notice shall also specify the meeting as such.
(C) In the case of any General Meeting at which
business other than routine business is to be transacted,
the notice shall specify the general nature of such
business; and if any resolution is to be proposed as a
Special Resolution, the notice shall contain a statement
to that effect.
55. Routine business shall mean and include only Routine business.
business transacted at an Annual General Meeting of the
following classes, that is to say:-
(a) declaring dividends;
(b) receiving and adopting the accounts, the
reports of the Directors and Auditors and
other documents required to be attached
or annexed to the accounts;
(c) appointing or re-appointing Directors to
fill vacancies arising at the meeting on
retirement whether by rotation or
otherwise;
(d) re-appointing the retiring Auditors
(unless they were last appointed otherwise
than by the Company in General Meeting);
(e) fixing the remuneration of the Auditors or
determining the manner in which such
remuneration is to be fixed; and
(f) fixing the remuneration of the Directors
proposed to be paid under Article 81.
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<PAGE> 28
56. Any notice of a General Meeting to consider Notice to state
special business shall be accompanied by a statement effect of special
regarding the effect of any proposed resolution on the business.
Company in respect of such special business.
PROCEEDINGS AT GENERAL MEETINGS
57. The Chairman of the Board of Directors, Chairman.
failing whom the Deputy Chairman, shall preside as
chairman at a General Meeting. If there be no such
Chairman or Deputy Chairman, or if at any meeting n
either be present within 15 minutes after the time
appointed for holding the meeting and willing to act,
the Directors present shall choose one of their number
(or, if no Director be present or if all the Directors
present decline to take the chair, the members present
shall choose one of their number) to be chairman of the
meeting.
58. No business other than the appointment of a Quorum.
chairman shall be transacted at any General Meeting
unless a quorum is present at the time when the meeting
proceeds to business. Save as herein otherwise provided,
the quorum at any General Meeting shall be two or more
members holding or representing in aggregate not less
than 33 1/3 per cent. of the total issued and fully
paid up shares in the capital of the Company, present
in person or by proxy.
59. If within 30 minutes from the time appointed If quorum not
for a General Meeting (or such longer interval as the present,
chairman of the meeting may think fit to allow) a quorum adjournment or
is not present, the meeting, if convened on the dissolution of
requisition of members, shall be dissolved. In any other meeting.
case it shall stand adjourned to the same day in the
next week (or if that day is a public holiday then to
the next business day following that public holiday) at
the same time and place or such other day, time or place
as the Directors may by not less than ten days' notice
appoint. At the adjourned meeting any one or more
members present in person or by proxy shall be a quorum.
60. The chairman of any General Meeting at which a Adjournment.
quorum is present may with the consent of the meeting
(and shall if so directed by the meeting) adjourn the
meeting from time to time (or sine die) and from place
to place, but no business shall be transacted at any
adjourned meeting except business which might lawfully
have been transacted at the meeting from which the
adjournment took place. Where a meeting is adjourned
sine die, the time and place for the adjourned meeting
shall be fixed by the Directors. When a meeting is
adjourned for 30 days or more or sine die, not less than
seven days' notice of the adjourned meeting shall be
given in like manner as in the case of the original
meeting.
61. Save as hereinbefore expressly provided, it Notice of
shall not be necessary to give any notice of an adjournment.
adjournment or of the business to be transacted at an
adjourned meeting.
62. If an amendment shall be proposed to any Amendment to
resolution under consideration but shall in good faith resolution.
be ruled out of order by the chairman of the meeting,
the proceedings on the substantive resolution shall not
be invalidated by any error in such ruling. In the case
of a resolution duly proposed as a Special
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<PAGE> 29
Resolution, no amendment thereto (other than a mere
clerical amendment to correct a patent error) may in
any event be considered or voted upon.
63. At any General Meeting a resolution put to Method of voting.
the vote of the meeting shall be decided on a show of
hands unless a poll is (before or on the declaration of
the result of the show of hands) demanded by:-
(a) the chairman of the meeting; or
(b) any member present in person or by
proxy and entitled to vote; or
(c) a member present in person or by
proxy and representing not less
than one-tenth of the total voting
rights of all the members having
the right to vote at the meeting; or
(d) a member present in person or by
proxy and holding shares in the
Company conferring a right to vote
at the meeting being shares on which
an aggregate sum has been paid up
equal to not less than one-tenth of
the total sum paid on all the shares
conferring that right;
Provided always that no poll shall be demanded on the
choice of a chairman or on a question of adjournment.
64. A demand for a poll may be withdrawn only with Taking a poll.
the approval of the meeting. Unless a poll is required
a declaration by the chairman of the meeting that a
resolution has been carried, or carried unanimously, or
by a particular majority, or lost, and an entry to that
effect in the minute book, shall be conclusive evidence
of that fact without proof of the number or proportion
of the votes recorded for or against such resolution.
If a poll is required, it shall be taken in such manner
(including the use of ballot or voting papers or
tickets) as the chairman of the meeting may direct, and
the result of the poll shall be deemed to be the
resolution of the meeting at which the poll was
demanded. The chairman of the meeting may (and if so
directed by the meeting shall) appoint scrutineers and
may adjourn the meeting to some place and time fixed
by him for the purpose of declaring the result of the
poll.
65. In the case of an equality of votes, whether Casting vote
on a show of hands or on a poll, the chairman of the of Chairman.
meeting at which the show of hands takes place or at
which the poll is demanded shall be entitled to a
casting vote.
66. A poll demanded on any question shall be Polls and
taken either immediately or at such subsequent time continuance of
(not being more than 30 days from the date of the business after
meeting) and place as the chairman may direct. No demand for a poll.
notice need be given of a poll not taken immediately.
The demand for a poll shall not prevent the continuance
of the meeting for the transaction of any business
other than the question on which the poll has been
demanded.
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<PAGE> 30
VOTES OF MEMBERS
67. Subject and without prejudice to any special Voting rights of
privileges or restrictions as to voting for the time members.
being attached to any special class of shares for the
time being forming part of the capital of the Company
each member entitled to vote may vote in person or by
proxy. On a show of hands every member who is present
in person and each proxy shall have one vote and on a
poll, every member who is present in person or by proxy
shall have one vote for every share which he holds or
represents. For the purpose of determining the number
of votes which a member, being a Depositor, or his
proxy may cast at any General Meeting on a poll, the
reference to shares held or represented shall, in
relation to shares of that Depositor, be the number
of shares entered against his name in the Depository
Register as at 48 hours before the time of the
relevant General Meeting as certified by the Depository
to the Company.
68. In the case of joint holders of a share the Voting rights of joint
vote of the senior who tenders a vote, whether in holders.
person or by proxy, shall be accepted to the exclusion
of the votes of the other joint holders and for this
purpose seniority shall be determined by the order in
which the names stand in the Register of Members or
(as the case may be) the Depository Register in respect
of the share.
69. Where in Singapore or elsewhere a receiver or Voting rights of
other person (by whatever name called) has been receiver or court
appointed by any court claiming jurisdiction in that appointed persons.
behalf to exercise powers with respect to the property
or affairs of any member on the ground (however
formulated) of mental disorder, the Directors may in
their absolute discretion, upon or subject to production
of such evidence of the appointment as the Directors may
require, permit such receiver or other person on behalf
of such member to vote in person or by proxy at any
General Meeting or to exercise any other right conferred
by membership in relation to meetings of the Company.
70. No member shall, unless the Directors Rights to be present
otherwise determine, be entitled in respect of shares and to vote.
held by him to vote at a General Meeting either
personally or by proxy or to exercise any other right
conferred by membership in relation to meetings of the
Company if any call or other sum presently payable by
him to the Company in respect of such shares remains
unpaid.
71. No objection shall be raised as to the When objection to
admissibility of any vote except at the meeting or admissibility of votes
adjourned meeting at which the vote objected to is or may be made.
may be given or tendered and every vote not disallowed
at such meeting shall be valid for all purposes. Any
such objection shall be referred to the chairman of the
meeting whose decision shall be final and conclusive.
72. On a poll, votes may be given either Voting.
personally or by proxy and a person entitled to more
than one vote need not use all his votes or cast all
the votes he uses in the same way.
73. (A) A member may appoint not more than two Appointment of
proxies to attend and vote at the same General Meeting proxies.
provided that if the member is a Depositor, the
Company shall be entitled and bound:-
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<PAGE> 31
(a) to reject any instrument of proxy lodged
if the Depositor is not shown to have any
shares entered against his name in the
Depository Register as at 48 hours before
the time of the relevant General Meeting
as certified by the Depository to the
Company; and
(b) to accept as the maximum number of votes
which in aggregate the proxy or proxies
appointed by the Depositor is or are able
to cast on a poll a number which is the
number of shares entered against the name
of that Depositor in the Depository
Register as at 48 hours before the time
of the relevant General Meeting as
certified by the Depository to the Company,
whether that number is greater or smaller
than the number specified in any instrument
of proxy executed by or on behalf of that
Depositor.
(B) The Company shall be entitled and bound, in Notes and
determining rights to vote and other matters in respect instructions.
of a completed instrument of proxy submitted to it, to
have regard to the instructions (if any) given by and
the notes (if any) set out in the instrument or proxy.
(C) In any case where a form of proxy appoints Proportion in
more than one proxy, the proportion of the shareholding shareholding to be
concerned to be represented by each proxy shall be represented by
specified in the form of proxy. proxies.
(D) A proxy need not be a member of the Company. Proxy need not be a
member.
74. (A) An instrument appointing a proxy shall be in Instrument
writing in any usual or common form or in any other appointing proxies.
form which the Directors may approve and:-
(a) in the case of an individual, shall be
signed by the appointor or his attorney;
and
(b) in the case of a corporation, shall be
either given under its common seal or
signed on its behalf by an attorney or
a duly authorised officer of the
corporation.
(B) The signature on such instrument need not be
witnessed. Where an instrument appointing a proxy is
signed on behalf of the appointor by an attorney, the
letter or power of attorney or a duly certified copy
thereof must (failing previous registration with the
Company) be lodged with the instrument of proxy
pursuant to the next following Article, failing which
the instrument may be treated as invalid.
75. An instrument appointing a proxy must be left Deposit of
at such place or one of such places (if any) as may be instrument of proxy.
specified for that purpose in or by way of note to or
in any document accompanying the notice convening the
meeting (or, if no place is so specified, at the Office)
not less than 48 hours before the time appointed for the
holding of the meeting or adjourned meeting or (in the
case of a poll taken
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<PAGE> 32
otherwise than at or on the same day as the meeting
or adjourned meeting) for the taking of the poll at
which it is to be used, and in default shall not be
treated as valid. The instrument shall, unless the
contrary is stated thereon, be valid as well for any
adjournment of the meeting as for the meeting to which
it relates; Provided that an instrument of proxy
relating to more than one meeting (including any
adjournment thereof) having once been so delivered
for the purposes of any meeting shall not be required
again to be delivered for the purposes of any
subsequent meeting to which it relates.
76. An instrument appointing a proxy shall be Rights of
deemed to include the right to demand or join in proxies.
demanding a poll, to move any resolution or amendment
thereto and to speak at the meeting.
77. A vote cast by proxy shall not be invalidated Intervening death
by the previous death or insanity of the principal or or insanity of
by the revocation of the appointment of the proxy or principal not to
of the authority under which the appointment was made revoke proxy.
provided that no intimation in writing of such death,
insanity or revocation shall have been received by the
Company at the Office at least one hour before the
commencement of the meeting or adjourned meeting or
(in the case of a poll taken otherwise than at or on
the same day as the meeting or adjourned meeting) the
time appointed for the taking of the poll at which the
vote is cast.
CORPORATIONS ACTING BY REPRESENTATIVES
78. Any corporation which is a member of the Corporation acting
Company may be resolution of its directors or other by representatives.
governing body authorise such person as it thinks fit
to act as its representative at any meeting of the
Company or of any class of members of the Company. The
person so authorised shall be entitled to exercise the
same powers on behalf of such corporation as the
corporation could exercise if it were an individual
member of the Company and such corporation shall for
the purposes of these presents be deemed to be present
in person at any such meeting if a person so authorised
is present thereat.
DIRECTORS
79. The number of Directors shall not be less Number and
than two. All Directors of the Company shall be natural characteristics
persons. of Director.
80. A Director shall not be required to hold any No shares
shares of the Company by way of qualification. A qualification for
Director who is not a member of the Company shall Directors.
nevertheless be entitled to attend and speak at General
Meetings.
81. The ordinary remuneration of the Directors Remuneration of
shall from time to time be determined by an Ordinary Directors.
Resolution of the Company, shall not be increased
except pursuant to an Ordinary Resolution passed at a
General Meeting where notice of the proposed increase
shall have been given in the notice convening the
General Meeting and shall (unless such resolution
otherwise provides) be divisible
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<PAGE> 33
among the Directors as they may agree, or failing
agreement, equally, except that any Director who
shall hold office for part only of the period in
respect of which such remuneration is payable shall
be entitled only to rank in such division for a
proportion of remuneration related to the period
during which he has held office.
82. Any Director who holds any executive office, Extra remuneration.
or who serves on any committee of the Directors, or
who otherwise performs services which in the opinion
of the Directors are outside the scope of the ordinary
duties of a Director, may be paid such extra remunera-
tion by way of salary, commission or otherwise as the
Directors may determine.
83. The Directors may repay to any Director all Expenses.
such reasonable expenses as he may incur in attending
and returning from meetings of the Directors or of any
committee of the Directors or General Meetings or
otherwise in or about the business of the Company.
84. The Directors shall have power to pay and Pensions etc.
agree to pay pensions or other retirement, super-
annuation, death or disability benefits to (or to any
person in respect of) any Director for the time being
holding any executive office and for the purpose of
providing any such pensions or other benefits, to
contribute to any scheme or fund or to pay premiums.
85. A Director may be party to or in any way Holding of office of
interested in any contract or arrangement or transaction profit and
to which the Company is a party or in which the Company contracting with
is in any way interested and he may hold and be company.
remunerated in respect of any office or place of profit
(other than the office of Auditor of the Company or any
subsidiary thereof) under the Company or any other
company in which the Company is in any way interested
and he (or any firm of which he is a member) may act in
a professional capacity for the Company or any such
other company and be remunerated therefor and in any
such case as aforesaid (save as otherwise agreed) he
may retain for his own absolute use and benefit all
profits and advantages accruing to him thereunder or in
consequence thereof.
86. A Director who holds any office or possesses Declaration of
any property whereby whether directly or indirectly Director's conflict of
duties or interests might be created in conflict with interest.
his duties or interests as Director shall declare the
fact and the nature, character and extent of the conflict
at a meeting of the Directors of the Company in
accordance with the Statutes.
87. (A) The Directors may from time to time appoint Appointment to be
one or more of their body to be the holder of any holder of executive
executive office (including, where considered office.
appropriate, the office of Chairman or Deputy Chairman)
on such terms and for such period as they may (subject
to the provisions of the Statutes) determine and, without
prejudice to the terms of any contract entered into in
any particular case, may at any time revoke any such
appointment.
(B) The appointment of any Director to the office
of Chairman or Deputy Chairman or Managing or Joint
Managing or Deputy or Assistant Managing Director or
Chief Executive Officer or President shall automatically
determine if he ceases to be a Director but without
prejudice to any claim for damages for breach
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<PAGE> 34
of any contract of service between him and the Company.
(C) The appointment of any Director to any other
executive office shall not automatically determine if
he ceases from any cause to be a Director, unless the
contract or resolution under which he holds office
shall expressly state otherwise, in which event such
determination shall be without prejudice to any claim
for damages for breach of any contract of service
between him and the Company.
88. The Directors may entrust to and confer upon Powers of executive
any Directors holding any executive office any of the office holders.
powers exercisable by them as Directors upon such terms
and conditions and with such restrictions as they think
fit, and either collaterally with or to the exclusion of
their own powers, and may from time to time revoke,
withdraw, alter or vary all or any of such powers.
MANAGING DIRECTOR OR CHIEF EXECUTIVE OFFICER OR PRESIDENT
89. The Directors may from time to time appoint Appointment of
one or more of their body to be Managing Director or Managing Director or
Chief Executive Officer or President of the Company and Chief Executive
may from time to time (subject to the provisions of any Officer or President.
contract between him or them and the Company) remove or
dismiss him or them from office and appoint another or
others in his or their place or places.
90. A Managing Director or Chief Executive Officer Retirement removal
or President shall not while he continues to hold that and registration of
office be subject to retirement by rotation and he shall Managing Director or
not be taken into account in determining the rotation of Chief Executive
Directors but he shall, subject to the provisions of any Officer or President.
contract between him and the Company, be subject to the
same provisions as to resignation and removal as the
other Directors of the Company and if he ceases to hold
the office of Director from any cause he shall ipso
facto and immediately cease to be a Managing Director
or Chief Executive Officer or President.
91. The remuneration of a Managing Director or Remuneration of
Chief Executive Officer or President shall from time to Managing Director or
time be fixed by the Directors and may subject to these Chief Executive
presents be by way of salary or commission or Officer or President.
participation in profits or by any or all these modes.
92. A Managing Director or Chief Executive Officer Powers of Managing
or President shall at all times be subject to the Director or Chief
control of the Directors but subject thereto the Executive Officer or
Directors may from time to time entrust to and confer President.
upon a Managing Director or Chief Executive Officer or
President for the time being such of the powers
exercisable under these presents by the Directors as they
may think fit and may confer such powers for such time
and to be exercised on such terms and conditions and with
such restrictions as they think expedient and they may
confer such powers either collaterally with or to the
exclusion of and in substitution for all or any of the
powers of the Directors in that behalf and may from time
to time revoke, withdraw, alter or vary all or any of
such powers.
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<PAGE> 35
APPOINTMENT AND RETIREMENT OF DIRECTORS
93. The office of a Director shall be vacated in Vacation of office
any of the following events, namely:- of Director.
(a) if he shall become prohibited by law
from acting as a Director; or
(b) if (not being a Director holding any
executive office for a fixed term) he
shall resign by writing under his hand
left at the Office or if he shall in
writing offer to resign and the
Directors shall resolve to accept such
offer; or
(c) if he shall have a receiving order made
against him or shall compound with his
creditors generally; or
(d) if he becomes of unsound mind or if in
Singapore or elsewhere an order shall
be made by any court claiming
jurisdiction in that behalf on the
ground (however formulated) of mental
disorder for his detention or for the
appointment of a guardian or for the
appointment of a receiver or other
person (by whatever name called) to
exercise powers with respect to his
property or affairs; or
(e) if he is removed by the Company in
General Meeting pursuant to Article 98.
94. At each Annual General Meeting one-third of Retirement of
the Directors for the time being (or, if their number Directors by
is not a multiple of three, the number nearest to but rotation.
not less than one-third) shall retire from office by
rotation. Provided that no Director holding office as
Managing Director or Chief Executive Officer or
President shall be subject to retirement by rotation
or be taken into account in determining the number of
Directors to retire.
95. The Directors to retire in every year shall Selection of
be those subject to retirement by rotation who have been Directors to retire
longest in office since their last re-election or of rotation.
appointment and so that as between persons who became
or were last re-elected Directors on the same day those
to retire shall (unless they otherwise agree among
themselves) be determined by lot. A retiring Director
shall be eligible for re-election.
96. The Company at the meeting at which a Director Filling vacated
retires under any provision of these presents may by office.
Ordinary Resolution fill the office being vacated by
electing thereto the retiring Director or some other
person eligible for appointment. In default the retiring
Director shall be deemed to have been re-elected except
in any of the following cases:-
(a) where at such meeting it is expressly
resolved not to fill such office or a
resolution for the re-election of such
Director is put to the meeting and lost;
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<PAGE> 36
(b) where such Director has given notice in
writing to the Company that he is
unwilling to be re-elected;
(c) where the default is due to the moving
of a resolution in contravention of the
next following Article; or
(d) where such Director has attained any
retiring age applicable to him as
Director.
The retirement shall not have effect until the conclusion
of the meeting except where a resolution is passed to
elect some other person in the place of the retiring
Director or a resolution for his re-election is put to
the meeting and lost and accordingly a retiring Director
who is re-elected or deemed to have been re-elected
will continue in office without a break.
97. A resolution for the appointment of two or Appointment of
more persons as Directors by a single resolution shall Directors.
not be moved at any General Meeting unless a resolution
that it shall be so moved has first been agreed to by
the meeting without any vote being given against it; and
any resolution moved in contravention of this provision
shall be void.
98. The Company may in accordance with and subject Removal of Director.
to the provisions of the Statutes by Ordinary Resolution
of which special notice has been given remove any
Director from office (notwithstanding any provision of
these presents or of any agreement between the Company
and such Director, but without prejudice to any claim he
may have for damages for breach of any such agreement)
and appoint another person in place of a Director so
removed from office and any person so appointed shall
be treated for the purpose of determining the time at
which he or any other Director is to retire by rotation
as if he had become a Director on the day on which the
Director in whose place he is appointed was last elected
a Director. In default of such appointment the vacancy
arising upon the removal of a Director from office may
be filled as a casual vacancy.
99. The Company may by Ordinary Resolution appoint Directors' power to
any person to be a Director either to fill a casual fill casual vacancies
vacancy or as an additional Director. Without prejudice and appoint
thereto the Directors shall have power at any time so to additional Directors.
do, but any person so appointed by the Directors shall
hold office only until the next Annual General Meeting.
He shall then be eligible for re-election, but shall not
be taken into account in determining the number of
Directors who are to retire by rotation at such meeting.
ALTERNATE DIRECTORS
100. (A) Any Director may at any time by writing under Appointment of
his hand and deposited at the Office, or delivered at a Alternate Director.
meeting of the Directors, appoint any person (other than
another Director) to be his alternate Director and may
in like manner at any time terminate such appointment.
Such appointment, unless previously approved by the
Directors, shall have effect only upon and subject to
being so approved.
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<PAGE> 37
(B) The appointment of an alternate Director shall
determine on the happening of any event which if he were
a Director would cause him to vacate such office or if
the Director concerned (below called "his principal")
ceases to be a Director.
(C) An Alternate Director shall (except when absent
from Singapore) be entitled to receive notices of meetings
of the Directors and shall be entitled to attend and vote
as a Director at any such meeting at which is principal is
not personally present and generally at such meeting to
perform all functions of his principal as a Director and
for the purposes of the proceedings at such meeting the
provisions of these presents shall apply as if he
(instead of his principal) were a Director. If his
principal is for the time being absent from Singapore or
temporarily unable to act through ill health or
disability, his signature to any resolution in writing
of the Directors shall be as effective as the signature
of his principal. To such extent as the Directors may
from time to time determine in relation to any committee
of the Directors, the foregoing provisions of this
paragraph shall also apply mutatis mutandis to any
meeting of any such committee of which his principal is
a member. An Alternate Director shall not (save as
aforesaid) have power to act as a Director nor shall he
be deemed to be a Director for the purposes of these
presents.
(D) An Alternate Director shall be entitled to
contract and be interested in and benefit from contracts
or arrangements or transactions and to be repaid expenses
and to be indemnified to the same extent mutatis mutandis
as if he were a Director but he shall not be entitled to
receive from the Company in respect of his appointment as
Alternate Director any remuneration except only such part
(if any) of the remuneration otherwise payable to his
principal as such principal may by notice in writing to
the Company from time to time direct.
MEETINGS AND PROCEEDINGS OF DIRECTORS
101. (A) Subject to the provisions of these presents Meetings of
the Directors may meet together for the despatch of Directors.
business, adjourn and otherwise regulate their meetings
as they think fit. At any time any Director may, and the
Secretary on the requisition of a Director shall, summon
a meeting of the Directors. It shall not be necessary to
give notice of a meeting of Directors to any Director
for the time being absent from Singapore. Any Director
may waive notice of any meeting and any such waiver may
be retroactive.
(B) Directors may participate in a meeting of the
Directors by means of a conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other,
without a Director being in the physical presence of
another Director or Directors, and participation in a
meeting pursuant to this provision shall constitute
presence in person at such meeting.
102. The quorum necessary for the transaction of Quorum.
the business of the Directors may be fixed from time to
time by the Directors and unless so fixed at any other
number shall be two. A meeting of the Directors at which
a quorum is
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<PAGE> 38
present shall be competent to exercise all powers and
discretions for the time being exercisable by the
Directors.
103. Questions arising at any meeting of the Casting vote of
Directors shall be determined by a majority of votes. chairman.
In case of an equality of votes (except where only
two Directors are present and form the quorum or when
only two Directors are competent to vote on the question
in issue) the chairman of the meeting shall have a
second or casting vote.
104. A Director shall not vote in respect of any Prohibition against
contract or arrangement or any other proposal voting.
whatsoever in which he has any interest, directly or
indirectly. A Director shall not be counted in the
quorum at a meeting in relation to any resolution on
which he is debarred from voting.
105. The continuing Directors may act Proceeding in case
notwithstanding any vacancies, but if and so long as of vacancy.
the number of Directors is reduced below the minimum
number fixed by or in accordance with these presents the
continuing Directors or Director may act for the purpose
of filling up such vacancies or of summoning General
Meetings, but not for any other purpose. If there be no
Directors or Director able or willing to act, then any
two members may summon a General Meeting for the purpose
of appointing Directors.
106. (A) The Directors may elect from their number a Chairman of
Chairman and a Deputy Chairman (or two or more Deputy Directors.
Chairmen) and determine the period for which each is
to hold office. If no Chairman or Deputy Chairman shall
have been appointed or if at any meeting of the Directors
no Chairman or Deputy Chairman shall be present within
five minutes after the time appointed for holding the
meeting, the Directors present may choose one of their
number to be chairman of the meeting.
(B) If at any time there is more than one Deputy
Chairman the right in the absence of the Chairman to
preside at a meeting of the Directors or of the Company
shall be determined as between the Deputy Chairmen
present (if more than one) by seniority in length of
appointment or otherwise as resolved by the Directors.
107. A resolution in writing signed by a majority Resolution in writing.
in number of the Directors for the time being shall be
as effective as a resolution duly passed at a meeting
of the Directors and may consist of several documents
in the like form, each signed by one or more Directors.
The expressions "in writing" and "signed" include
approval by telefax, telex, cable or telegram by any
such Director.
108. The Directors may delegate any of their powers Committee of
or discretion to committees consisting of one or more Directors.
members of their body and (if thought fit) one or more
other persons co-opted as hereinafter provided. Any
committee so formed shall in the exercise of the powers
so delegated conform to any regulations which may from
time to time be imposed by the Directors. Any such
regulations may provide for or authorise the co-option
to the committee of persons other than Directors and for
such co-opted members to have voting rights as members of
the committee.
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<PAGE> 39
109. The meetings and proceedings of any such Meetings of
committee consisting of two or more members shall be committee.
governed mutatis mutandis by the provisions of these
presents regulating the meetings and proceedings of the
Directors, so far as the same are not superseded by any
regulations made by the Directors under the last
preceding Article.
110. All acts done by any meeting of Directors, or Validity of act of
of any such committee, or by any person acting as a Directors in spite
Director or as a member of any such committee, shall as of formal defect.
regards all persons dealing in good faith with the
Company, notwithstanding that there was defect in the
appointment of any of the persons acting as aforesaid,
or that any such persons were disqualified or had
vacated office, or were not entitled to vote, be as
valid as if every such person had been duly appointed
and was qualified and had continued to be a Director
or member of the committee and had been entitled to
vote.
BORROWING POWERS
111. Subject as hereinafter provided and to the Borrowing powers.
provisions of the Statutes, the Directors may exercise
all the powers of the Company to borrow money, to
mortgage or charge its undertaking, property and
uncalled capital and to issue debentures and other
securities, whether outright or as collateral security
for any debt, liability or obligation of the Company
or of any third party.
GENERAL POWERS OF DIRECTORS
112. The business and affairs of the Company shall General power of
be managed by the Directors, who may exercise all such Directors to manage
powers of the Company as are not by the Statutes or by Company's business.
these presents required to be exercised by the Company
in General Meeting, subject nevertheless to any
regulations of these presents, to the provisions of the
Statutes and to such regulations, being not inconsistent
with the aforesaid regulations or provisions, as may be
prescribed by Special Resolution of the Company, but no
regulation so made by the Company shall invalidate any
prior act of the Directors which would have been valid
if such regulation had not been made; Provided that the
Directors shall not carry into effect any proposals
for selling or disposing of the whole or substantially
the whole of the Company's undertaking unless such
proposals have been approved by the Company in General
Meeting. The general powers given by the Article shall
not be limited or restricted by any special authority
or power given to the Directors by any other Article.
113. The Directors may establish any local boards Power to establish
or agencies for managing any of the affairs of the local boards etc.
Company, either in Singapore or elsewhere, and may
appoint any persons to be members of such local boards,
or any managers or agents, and may fix their
remuneration, and may delegate to any local board,
manager or agent any of the powers, authorities and
discretions vested in the Directors, with power to
sub-delegate, and may authorise the members of any
local boards, or any of them, to fill any vacancies
therein, and to act notwithstanding vacancies, and
any such appointment or delegation may be made upon
such terms and subject to such conditions as the
Directors may think fit, and the Directors
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<PAGE> 40
may remove any person so appointed, and may annul or
vary any such delegation, but no person dealing in
good faith and without notice of any such annulment
or variation shall be affected thereby.
114. The Directors may from time to time and at Power to appoint
any time by power of attorney or otherwise appoint any attorney.
company, firm or person or any fluctuating body of
persons, whether nominated directly or indirectly by
the Directors, to be the attorney or attorneys of the
Company for such purposes and with such powers, autho-
rities and discretions (not exceeding those vested in
or exercisable by the Directors under these presents)
and for such period and subject to such conditions as
they may think fit, and any such power of attorney may
contain such provisions for the protection and
convenience of persons dealing with any such attorney
as the Directors may think fit, and may also authorise
any such attorney to sub-delegate all or any of the
powers, authorities and discretions vested in him.
115. The Company or the Directors on behalf of the Power to keep
Company may in exercise of the powers in that behalf Branch Register.
conferred by the Statutes cause to be kept a Branch
Register or Register of Members and the Directors may
(subject to the provisions of the Statutes) make and
vary such regulations as they may think fit in respect
of the keeping of any such Register.
116. All cheques, promissory notes, drafts, bills Execution of
of exchange, and other negotiable or transferable negotiable
instruments, and all receipts for moneys paid to the instruments and
Company, shall be signed, drawn, accepted, endorsed, or receipts for money
otherwise executed, as the case may be, in such manner paid.
as the Directors shall from time to time by resolution
determine.
SECRETARY
117. The Secretary shall be appointed by the Appointment and
Directors on such terms and for such period as they may removal of
think fit. Any Secretary so appointed may at any time Secretary.
be removed from office by the Directors, but without
prejudice to any claim for damages for breach of any
contract of service between him and the Company. If
thought fit two or more persons may be appointed as
Joint Secretaries. The Directors may also appoint from
time to time on such terms as they may think fit one
or more Assistant Secretaries. The appointment and
duties of the Secretary or Joint Secretaries shall not
conflict with the Statutes and in particular Section 171
of the Act.
THE SEAL
118. The Directors shall provide for the safe Usage of Seal.
custody of the Seal which shall not be used without the
authority of the Directors or of a committee authorised
by the Directors in that behalf.
119. Every instrument to which the Seal shall be Seal.
affixed shall be signed autographically by one Director
and the Secretary or by a second Director or some
another person appointed by the Directors save that as
regards any certificates for
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<PAGE> 41
shares or debentures or other securities of the Company
the Directors may by resolution determine that such
signatures or either of them shall be dispensed with
or affixed by some method or system of mechanical
signature or other method approved by the Directors.
120. (A) The Company may exercise the powers conferred Official Seal.
by the Statutes with regard to having an official seal
for use abroad and such powers shall be vested in the
Directors.
(B) The Company may exercise the powers conferred Share Seal.
by the Statutes with regard to having a duplicate Seal
as referred to in Section 124 of the Act which shall be
a facsimile of the Seal with the addition on its face of
the words "Share Seal".
AUTHENTICATION OF DOCUMENTS
121. Any Director or the Secretary or any person Power to
appointed by the Directors for the purpose shall have authenticate
power to authenticate any documents affecting the documents and
constitution of the Company and any resolutions passed certified copies of
by the Company or the Directors or any committee, and resolutions of the
any books, records, documents and accounts relating to Company or the
the business of the Company, and to certify copies Directors.
thereof or extracts therefrom as true copies or
extracts; and where any books, records, documents or
accounts are elsewhere than at the Office the local
manager or other officer of the Company having the
custody thereof shall be deemed to be a person
appointed by the Directors as aforesaid. A document
purporting to be a copy of a resolution, or an extract
from the minutes of a meeting, of the Company or of the
Directors or any committee which is certified as
aforesaid shall be conclusive evidence in favour of all
persons dealing with the Company upon the faith thereof
that such resolution has been duly passed, or as the
case may be, that any minute so extracted is a true
and accurate record of proceedings at a duly
constituted meeting.
RESERVES
122. The Directors may from time to time set aside Power to carry
out of the profits of the Company and carry to reserve profits to reserve.
such sums as they think proper which, at the discretion
of the Directors, shall be applicable for any purpose to
which the profits of the Company may properly be applied
and pending such application may either be employed in
the business of the Company or be invested. The Directors
may divide the reserve into such special funds as they
think fit and may consolidate into one fund any special
funds or any parts of any special funds into which the
reserve may have been divided. The Directors may also,
without placing the same to reserve, carry forward any
profits. In carrying sums to reserve and in applying the
same the Directors shall comply with the provisions of
the Statutes.
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<PAGE> 42
DIVIDENDS
123. The Company may by Ordinary Resolution Dividends.
declare dividends but no such dividend shall exceed
the amount recommended by the Directors.
124. If and so far as in the opinion of the Interim dividend.
Directors the profits of the Company justify such
payments, the Directors may declare and pay the fixed
dividends on any class of shares carrying a fixed
dividend expressed to be payable on fixed dates on
the half-yearly or other dates prescribed for the
payment thereof and may also from time to time
declare and pay interim dividends on shares of any
class of such amounts and on such dates and in
respect of such periods as they think fit.
125. Unless and to the extent that the rights Apportionment of
attached to any shares or the terms of issue thereof dividends.
otherwise provide, all dividends shall (as regards any
shares not fully paid throughout the period in respect
of which the dividend is paid) be apportioned and paid
pro rata according to the amounts paid on the shares
during any portion or portions of the period in respect
of which the dividend is paid. For the purposes of this
Article no amount paid on a share in advance of calls
shall be treated as paid on the share.
126. No dividend shall be paid otherwise than out Dividend payable
of profits available for distribution under the only out of profits.
provisions of the Statutes.
127. No dividend or other moneys payable on or in Dividend not to bear
respect of a share shall bear interest as against the interest.
Company.
128. (A) The Directors may retain any dividend or other Retention of
moneys payable on or in respect of a share on which the dividend.
Company has a lien and may apply the same in or towards
satisfaction of the debts, liabilities or engagements in
respect of which the lien exists.
(B) The Directors may retain the dividends payable
upon shares in respect of which any person is under the
provisions as to the transmission of shares hereinbefore
contained entitled to become a member, or which any
person is under those provisions entitled to transfer,
until such person shall become a member in respect of
such shares or shall transfer the same.
129. The waiver in whole or in part of any dividend Waiver of dividend.
on any share by any document (whether or not under seal)
shall be effective only if such document is signed by
the shareholder (or the person entitled to the share
in consequence of the death or bankruptcy of the holder)
and delivered to the Company and if or to the extent
that the same is accepted as such or acted upon by the
Company.
130. The Company may upon the recommendation of the Payment of dividend
Directors by Ordinary Resolution direct payment of a in specie.
dividend in whole or in part by the distribution of
specific assets (and in particular of paid-up shares or
debentures of any other company) and the Directors shall
give effect to such resolution. Where any difficulty
arises in regard to such distribution, the Directors may
settle the same as they think expedient and in particular
may issue fractional certificates.
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<PAGE> 43
may fix the value for distribution of such specific
assets or any part thereof, may determine that cash
payments shall be made to any members upon the
footing of the value so fixed in order to adjust the
rights of all parties and may vest any such specific
assets in trustees as may seem expedient to the
Directors.
131. Any dividend or other moneys payable in cash Dividends payable
on or in respect of a share may be paid by cheque or by cheque or
warrant sent through the post to the registered address warrant.
appearing in the Register of Members or (as the case
may be) the Depository Register of a member or person
entitled thereto (or, if two or more persons are
registered in the Register of Members or (as the case
may be) entered in the Depository Register as joint
holders of the share or are entitled thereto in
consequence of the death or bankruptcy of the holder,
to any one such persons) or to such person at such
address as such member or person or persons may be
writing direct. Every such cheque or warrant shall
be made payable to the order of the person to whom it
is sent or to such person as the holder or joint
holders or person or persons entitled to the share in
consequence of the death or bankruptcy of the holder
may direct and payment of the cheque or warrant by the
banker upon whom it is drawn shall be a good discharge
to the Company. Every such cheque or warrant shall be
sent at the risk of the person entitled to the money
represented thereby. Notwithstanding the foregoing
provisions of this Article and the provisions of
Article 133, the payment by the Company to the
Depository of any dividend payable to a Depositor
shall, to the extent of the payment made to the
Depository, discharge the Company from any liability
to the Depositor in respect of that payment.
132. If two or more persons are registered in the Payment of dividend
Register of Members or (as the case may be) the to joint holders.
Depository Register as joint holders of any share, or
are entitled jointly to a share in consequence of the
death or bankruptcy of the holder, any one of them may
give effectual receipts for any dividend or other
moneys payable or property distributable on or in
respect of the share.
133. Any resolution declaring a dividend on shares Resolution declaring
of any class, whether a resolution of the Company in dividends.
General Meeting or a resolution of the Directors, may
specify that the same shall be payable to the persons
registered as the holders of such shares in the Register
of Members or (as the case may be) the Depository
Register at the close of business on a particular date
and thereupon the dividend shall be payable to them in
accordance with their respective holdings so registered,
but without prejudice to the rights inter se in respect
of such dividend of transferors and transferees of any
such shares.
CAPITALISATION OF PROFITS AND RESERVES
134. The Directors may, with the sanction of an Power to capitalise
Ordinary Resolution of the Company, capitalise any sum profits and
standing to the credit of any of the Company's reserve implementation of
accounts (including Share Premium Account, Capital resolution to
Redemption Reserve Fund or other undistributable capitalise profits.
reserve) or any sum standing to the credit of profit
and loss account by appropriating such sum to the
persons registered as holders of shares in the Register
of Members or (as the case may be) in the Depository
Register at the close of business on the date of the
Resolution (or such other date
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<PAGE> 44
as may be specified therein or determined as therein
provided) or such other date as may be determined by the
Directors in proportion to their then holdings of shares
and applying such sum on their behalf in paying up in
full unissued shares (or, subject to any special rights
previously conferred on any shares or class of shares
for the time being issued, unissued shares of any other
class not being redeemable shares) for allotment and
distribution credited as fully paid up to and amongst
them as bonus shares in the proportion aforesaid. The
Directors may do all acts and things considered
necessary or expedient to give effect to any such
capitalisation, with full power to the Directors to
make such provisions as they think fit for any
fractional entitlements which would arise on the basis
aforesaid (including provisions whereby fractional
entitlements are disregarded or the benefit thereof
accrues to the Company rather than to the members
concerned). The Directors may authorise any person
to enter on behalf of all the members interested into
an agreement with the Company providing for any such
capitalisation and matters incidental thereto and any
agreement made under such authority shall be effective
and binding on all concerned.
135. In addition and without prejudice to the power Power to capitalise
to capitalise profits and other moneys provided for by profits for paying up
Article 134, the Directors shall have power to shares to be issued
capitalise any undivided profits or other moneys of the under share option
Company not required for the payment or provision of scheme.
the fixed dividend on any shares entitled to fixed
cumulative or non-cumulative preferential dividends
(including profits or moneys carried and standing to
any reserve or reserves) and to apply such profits
or moneys in paying up in full at par unissued shares
on terms that such shares shall, upon issue, be held
by or for the benefit of participants of any share
incentive or option scheme or plan implemented by the
Company and approved by shareholders in General Meeting
in such manner and on such terms as the Directors shall
think fit.
ACCOUNTS
136. Accounting records sufficient to show and Accounting records.
explain the Company's transactions and otherwise
complying with the Statutes shall be kept at the
Office, or at such other place as the Directors think
fit. No member of the Company or other person shall have
any right of inspecting any account or book or document
of the Company except as conferred by statute or ordered
by a court of competent jurisdiction or authorised by
the Directors.
137. In accordance with the Statutes, the Directors Presentation of
shall cause to be prepared and to be laid before the accounts.
Company in General Meeting such profit and loss accounts,
balance sheets, group accounts (if any) and reports as
may be necessary. The interval between the close of a
financial year of the Company and the issue of accounts
relating thereto shall not exceed six months.
138. A copy of every balance sheet and profit and Copies of accounts.
loss account which is to be laid before a General
Meeting of the Company (including every document
required by law to be comprised therein or attached or
annexed thereto) shall not less than 14 days before the
date of the meeting be sent to every member of, and
every holder of debentures of, the Company and to every
other person who is
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<PAGE> 45
entitled to receive notices of meetings from the Company
under the provisions of the Statutes or of these
presents; Provided that this Article shall not require a
copy of these documents to be sent to more than one or
any joint holders or to any person of whose address the
Company is not aware, but any member or holder of
debentures to whom a copy of these documents has not been
sent shall be entitled to receive a copy free of charge
on application at the Office.
AUDITORS
139. Subject to the provisions of the Statutes, Validity of acts of
all acts done by any person acting as an Auditor shall, Auditor despite
as regards all persons dealing in good faith with the formal defects.
Company, be valid, notwithstanding that there was some
defect in his appointment or that he was at the time of
his appointment not qualified for appointment or
subsequently became disqualified.
140. An Auditor shall be entitled to attend any Notices to Auditors.
General Meeting and to receive all notices of and other
communications relating to any General Meeting which
any member is entitled to receive and to be heard at
any General Meeting on any part of the business of the
meeting which concerns him as Auditor.
NOTICES
141. Any notice or document (including a share Service of notice or
certificate) may be served on or delivered to any document.
member by the Company either personally or by sending
it through the post in a prepaid cover addressed to such
member at his registered address appearing in the
Register of Members or (as the case may be) the
Depository Register, or (if he has no registered
address within Singapore) to the address, if any,
within Singapore supplied by him to the Company or (as
the case may be) supplied by him to the Depository as his
address for the service of notices, or by delivering it
to such address as aforesaid. Where a notice or other
document is served or sent by post, service or delivery
shall be deemed to be effected at the time when the
cover containing the same is posted and in proving such
service or delivery it shall be sufficient to prove that
such cover was properly addressed, stamped and posted.
142. Any notice given to that one of the joint Service of notice to
holders of a share whose name stands first in the joint holders.
Register of Members or (as the case may be) the
Depository Register in respect of the share shall be
sufficient notice to all the joint holders in their
capacity as such. For such purpose a joint holder having
no registered address in Singapore and not having
supplied an address within Singapore for the service of
notices shall be disregarded.
143. A person entitled to a share in consequence Service of notices
of the death or bankruptcy of a member upon supplying after death,
to the Company such evidence as the Directors may bankruptcy etc.
reasonably require to show his title to the share, and
upon supplying also to the Company or (as the case may
be) the Depository an address within Singapore for the
service of notices, shall be entitled to have served
upon or delivered to him at such address any notice or
document to which the member but
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<PAGE> 46
for his death or bankruptcy would have been entitled,
and such service or delivery shall for all purposes
be deemed a sufficient service or delivery of such
notice or document on all persons interested (whether
jointly with or as claiming through or under him) in
the share. Save as aforesaid any notice or document
delivered or sent by post to or left at the address
of any member in pursuance of these presents shall,
notwithstanding that such member be then dead or
bankrupt or in liquidation, and whether or not the
Company shall have notice of his death or bankruptcy
or liquidation, be deemed to have been duly served or
delivered in respect of any share registered in the
name of such member in the Register of Members or,
where such member is a Depositor, entered against
his name in the Depository Register as sole or
first-named joint holder.
144. A member who (having no registered address No notice to member
within Singapore) has not supplied to the Company or with no registered
(as the case may be) the Depository an address within address in
Singapore for the service of notices shall not be Singapore.
entitled to receive notices from the Company.
WINDING UP
145. The Directors shall have power in the name Voluntary winding
and on behalf of the Company to present a petition to up.
the court for the Company to be wound up.
146. If the Company shall be wound up (whether Distribution of
the liquidation is voluntary, under supervision, or by assets in specie.
the court) the Liquidator may, with the authority of a
Special Resolution, divide among the members in specie
or kind the whole or any part of the assets of the
Company and whether or not the assets shall consist of
property of one kind or shall consist of properties of
different kinds, and may for such purpose set such value
as he deems fair upon any one or more class or classes of
property and may determine how such division shall be
carried out as between the members of different classes
of members. The Liquidator may, with the like authority,
vest any part of the assets in trustees upon such trusts
for the benefit of members as the Liquidator with the
like authority shall think fit, and the liquidation of
the Company may be closed and the Company dissolved, but
so that no contributory shall be compelled to accept any
shares or other property in respect of which there is a
liability.
147. On a voluntary winding up of the Company, no Liquidators'
commission or fee shall be paid to a Liquidator without commission.
the prior approval of the members in General Meeting.
The amount of such commission or fee shall be notified
to all members not less than seven days prior to the
General Meeting at which it is to be considered.
148. In the event of a winding up of the Company Service of notice
every member of the Company who is not for the time after winding up.
being in the Republic of Singapore shall be bound,
within fourteen days after the passing of an effective
resolution to wind up the Company voluntarily, or
within the like period after the making of an order for
the winding up of the Company, to serve notice in
writing on the Company appointing some householder in
the Republic of Singapore upon whom all summonses,
notices, processes, orders and judgments in relation
to or under the
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<PAGE> 47
winding up of the Company may be served, and in default
of such nomination the liquidator of the Company shall be
at liberty on behalf of such member to appoint some such
person, and service upon any such appointee shall be
deemed to be a good personal service on such member for
all purposes, and where the liquidator makes any such
appointment he shall, with all convenient speed, give
notice thereof to such member by advertisement in any
leading daily newspaper in the English language in
circulation in Singapore or by a registered letter sent
through the post and addressed to such member at his
address as appearing in the Register of Members or (as
the case may be) the Depository Register, and such
notice shall be deemed to be served on the day
following that on which the advertisement appears or
the letter is posted.
INDEMNITY
149. Subject to the provisions of and so far as Indemnity of
may be permitted by the Statutes, every Director, Directors and
Auditor, Secretary or other officer of the Company officers.
shall be entitled to be indemnified by the Company
against all costs, charges, losses, expenses and
liabilities incurred by him in the execution and
discharge of his duties or in relation thereto including
any liability incurred by him in defending any
proceedings, civil or criminal, which relate to anything
done or omitted or alleged to have been done or omitted
by him as an officer or employee of the Company. Without
prejudice to the generality of the foregoing, no
Director, Manager, Secretary or other officer of the
Company shall be liable for the acts, receipts, neglects
or defaults of any other Director or officer or for
joining in any receipt or other act for conformity or
for any loss or expense happening to the Company
through the insufficiency or deficiency of title to any
property acquired by order of the Directors for or on
behalf of the Company or for the insufficiency or
deficiency of any security in or upon which any of the
moneys of the Company shall be invested or for any loss
or damage arising from the bankruptcy, insolvency or
tortious act of any person with whom any moneys,
securities or effects shall be deposited or left or
for any other loss, damage or misfortune whatever which
shall happen in the execution of the duties of his
office or in relation thereto unless the same shall
happen through his own negligence, wilful default,
breach of duty or breach of trust.
SECRECY
150. No member shall be entitled to require Secrecy.
discovery of or any information respecting any detail
of the Company's trade or any matter which may be in
the nature of a trade secret, mystery of trade or
secret process which may relate to the conduct of the
business of the Company and which in the opinion of
the Directors it will be inexpedient in the interest
of the members of the Company to communicate to the
public save as may be authorised by law.
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<PAGE> 1
EXHIBIT 4.1
[STATS LOGO]
ST ASSEMBLY TEST SERVICES LTD
(Incorporated in the Republic of Singapore under the Companies Act, Chapter 50)
Registered Office : No 5 Yishun Street 23 Singapore 768442
No. of Shares
Certificate No.
Account No.
THIS IS TO CERTIFY that
is/are the Registered Shareholder(s) of
Ordinary Shares of S$ each, fully paid, in ST ASSEMBLY TEST SERVICES LTD
subject to the provisions of the Memorandum and Articles of Association of the
Company.
GIVEN under the Share Seal of the Company on
SPECIMEN
NOTE : No transfer of any portion of shares comprised in this Certificate will
be registered unless this Certificate is delivered to the Registrar,
M & C Services Private Limited, 16 Raffles Quay #23-01, Hong Leong
Building, Singapore 048581.
<PAGE> 1
EXHIBIT 5.1
[ON THE LETTERHEAD OF ALLEN & GLEDHILL]
ST Assembly Test Services Ltd,
5, Yishun Street 23,
Singapore 768442.
[ ] January, 2000
Dear Sirs,
1. We have acted as Singapore legal advisers to ST Assembly Test Services
Ltd (the "Company"), a company organised under the laws of Singapore, in
connection with a registration statement on Form F-1 (Registration
No. 333-93661) filed by the Company with the Securities and Exchange Commission
("SEC") in the United States (the "Registration Statement"), for the
registration under the United States Securities Act of 1933, as amended, of
ordinary shares of the Company (the "Shares") directly or in the form of
American Depository Shares representing Shares.
2. We have examined the Memorandum of Association and Articles of Association
of the Company, such records of the corporate proceedings of the Company as we
have deemed relevant, the Registration Statement, the proposed form of the
U.S. Underwriting Agreement (the "U.S. Underwriting Agreement") to be entered
into between (1) the Company and (2) Salomon Smith Barney Inc. (for itself and
the other several U.S. Representatives and U.S. Underwriters), the proposed form
of the International Underwriting Agreement (the "International Underwriting
Agreement") to be entered into between (1) the Company and (2) Salomon Brothers
International Limited (for itself and the other International Representatives
and International Underwriters) and such other certificates, records and
documents as we deemed necessary for the purposes of this opinion.
3. We have assumed:-
(i) the genuineness of all signatures on all documents and the
completeness, and the conformity to original documents, of all copies
submitted to us; and
(ii) that copies of the Memorandum and Articles of Association and the
Certificate of Incorporation of the Company submitted to us for
examination are true, complete and up-to-date copies.
4. Based upon and subject to the foregoing, and subject to any matters not
disclosed to us, we are of the opinion that the Shares will be duly authorised
and, upon the issue of share certificates representing the Shares in accordance
with the Articles of Association of the Company against payment for the Shares,
the Shares will be validly issued, fully paid and non-assessable. For the
purposes of this opinion we have assumed that the term "non-assessable" in
relation to the Shares to be offered means under Singapore law that holders of
such Shares,
<PAGE> 2
having fully paid up all amounts due on such Shares as to nominal amount and
premium thereon, are under no further personal liability to contribute to the
assets or liabilities of the Company in their capacities purely as holders of
such Shares.
5. The statements in the Registration Statement under the caption "Taxation -
Singapore Taxation" insofar as such statements relate to Singapore tax matters
currently applicable to holders of Shares who are non-residents of Singapore
fairly summarises the material Singapore tax matters and consequences of owning
the Shares of such holders.
6. We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the use of our name under the captions "Risk
Factors - It may be difficult for you to enforce any judgment obtained in the
United States against us or our affiliates", "Taxation - Singapore Taxation" and
"Legal Matters" in the Registration Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the United States Securities Act of 1933, as amended or the
rules and regulations of the SEC thereunder.
Yours faithfully,
Allen & Gledhill
------------------
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD OF SHEARMAN & STERLING]
January 3, 2000
To the Board of Directors of
ST Assembly Test Services Ltd
Ladies & Gentlemen:
We are acting as special U.S. counsel for ST Assembly Test Services Ltd
(the "Company") in connection with the preparation and filing with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), of the Registration Statement on Form F-1,
Registration No. 333-93661, relating to the issue of up to 172,500,000 ordinary
shares, par value S$0.25 per share (including ordinary shares represented by
American Depositary Shares) of the Company, that will be registered under the
Act, as set forth in the prospectus forming a part of the Registration Statement
(the "Prospectus"). Capitalized terms used herein that are not separately
defined shall have the meanings ascribed to such terms in the Prospectus.
In such capacity, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary as a basis for the opinions
hereinafter expressed, including, without limitation, the Registration
Statement. In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity with the originals of all documents submitted to us as copies.
Our opinions expressed below are limited to the laws of the State of New
York and the federal laws of the United States, and we do not express any
opinion herein concerning any other law.
Based on the foregoing, we are of the opinion that the discussion in the
Prospectus forming a part of the Registration Statement under the caption
"Taxation- United States Federal Income Taxation" sets forth, subject to the
limitations described therein, the material U.S. federal income tax
considerations for U.S. Holders (as defined therein) relating to the
acquisition, ownership and disposition of ordinary shares or American Depositary
Shares pursuant to the Registration Statement. This opinion is based upon the
Internal Revenue Code of 1986, as amended, existing and proposed Treasury
Regulations thereunder, and administrative and judicial interpretations thereof
(all as currently in effect and all of which are subject to change, possibly
with retroactive effect).
We hereby consent to the reproduction of this opinion as an exhibit to the
Registration Statement, and the use of our firm name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving this consent, we do not thereby concede that we are within the category
of persons whose consent is required by the Act or the General Rules and
Regulations promulgated thereunder.
Very truly yours,
/s/ SHEARMAN & STERLING
------------------------
Shearman & Sterling
<PAGE> 1
EXHIBIT 10.1
ST GROUP MANAGEMENT & SUPPORT SERVICES AGREEMENT
THIS AGREEMENT is made the 27th day of December 1999
BETWEEN:
(1) SINGAPORE TECHNOLOGIES PTE LTD, a company incorporated in Singapore and
having its registered office at 51 Cuppage Road, #09-01 StarHub Centre,
Singapore 229 469 ("STPL"); and
(2) ST ASSEMBLY TEST SERVICES LTD, a company incorporated in Singapore and
having its registered office at 5 Yishun Street 23 Singapore 768442 ("the
Company").
WHEREAS:
(A) STPL is a majority shareholder of the Company, and the corporate
headquarters for the Singapore Technologies group of companies and provides
administrative and support services to its related companies within and
outside Singapore.
(B) STPL has invaluable experience in the fields of finance, treasury,
investment risk review, governmental relations, business development,
management information systems, human resources management and
development, legal and corporate secretarial matters and internal audit.
STPL is also able to offer the Company the benefits of a global network.
Further, the "Singapore Technologies" name, affiliation to STPL and STPL's
wide spectrum of industries provide the Company with operational and
financial leverages (such as improved credit rating, easier access to
funding and lower cost of borrowing) in its dealings with external parties
("STPL Franchise").
(C) STPL and the Company acknowledge that the centralisation of support staff
in STPL enables them to share the cost of business services, enhance
communication and eliminate duplication of efforts.
- 1 -
<PAGE> 2
NOW IT IS HEREBY AGREED as follows:
1. CORPORATE SERVICES & SUPPORT
1.1 STPL shall maintain throughout the duration of this Agreement a staff of
personnel with acknowledged proficiency in their respective fields who
shall render the Services, as defined in Clause 1.2 below and according to
the headcounts allocated, to the Company. STPL shall also continue to work
on strengthening and improving its global network and reputation for the
benefit of the ST group of companies.
1.2 "Services" shall refer to services in the areas specified in the Appendix
attached.
1.3 In addition to the Services mentioned in Clause 1.1 above, the Company may
request STPL to render additional specific services relating to specific
projects, or require personnel from STPL to be seconded or assigned to the
Company or its subsidiaries for an agreed period of time. In such events,
the said additional services shall be invoiced on a case by case basis at
terms and conditions to be mutually agreed between the parties.
2. CONSIDERATION
2.1 In consideration of the Services provided by STPL hereunder, the Company
agrees to pay ST such amount (the "Consideration") to be determined at the
beginning of each year in accordance with the Appendix. The method and
basis of determination of the Consideration shall be reviewed by the
parties every 3 years. STPL and the Company may upon mutual agreement,
delete any of the Services specified in the Appendix or add new Services
to the Appendix, in which event that Consideration shall be adjusted
accordingly by mutual agreement. Any variation shall be subject to the
written agreement of both parties.
2.2 The Company shall pay to STPL the Consideration in four equal advance
instalments upon presentation by STPL of its invoices at the beginning of
each financial quarter.
2.3 All payments by the Company to STPL shall be made in full in Singapore
Dollars within thirty (30) days of the date of invoice, without set-off or
deduction of taxes, duties, assessments or other charges of any kind or
description. The Company shall bear all goods and services tax payable on
the supply of the Services.
3. TERM AND TERMINATION
3.1 This Agreement shall take effect from the date hereof and shall remain
valid until terminated pursuant to Clauses 3.2 and 3.3 below.
- 2 -
<PAGE> 3
3.2 If the Company fails to effect payment of the Consideration in
accordance with Clause 2, and such default shall not be remedied
within fourteen (14) days after written notice of such default is
given by STPL to the Company, then at any time after the expiration
of such period of fourteen (14) days, STPL may give written notice to
the Company of its desire to terminate this Agreement, whereupon this
Agreement shall terminate on the date specified in such notice.
3.3 The parties agree that this Agreement shall terminate forthwith in
the event the Company ceases to be a subsidiary of STPL.
3.4 The termination of this Agreement howsoever caused shall be without
prejudice to any obligations, rights or remedy which have accrued prior to
such termination and shall not affect any provision of this Agreement
which is expressly or by implication provided to come into effect on or
continue in effect after such termination.
4. CONFIDENTIALITY
Except as authorised in writing by the respective party, each party shall
keep secret and shall not at any time, whether during or after this
Agreement, use for its own or any other person's advantage or reveal to
any person any of the trade secrets, secret or confidential operations,
processes or dealings, or any secret or confidential information
concerning the organisation, business or undertaking of the other party or
any of its subsidiaries or associated companies.
5. SEVERABILITY
If any provision of this Agreement at any time shall be deemed invalid,
illegal or unenforceable in any respect under Singapore law, such
invalidity, illegality or unenforceability shall not in any way affect or
impair any other provision of this Agreement and this Agreement shall be
construed as if such invalid or illegal or unenforceable provision had
been severed from the Agreement.
6. GENERAL
6.1 This Agreement contains the entire agreement between the parties in
respect to the subject matter hereof and supersedes and cancels any and
all previous negotiations, offers, agreements (whether written or oral) in
respect thereto.
6.2 This Agreement or any rights and liabilities hereunder may not be assigned
or transferred by either party hereto without the prior written consent of
the other party hereto.
- 3 -
<PAGE> 4
6.3 No failure or delay on the part of either party hereto in exercising any
power or right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of such right or power preclude any other or
further exercise of any right or power hereunder.
7. GOVERNING LAW
7.1 This Agreement shall be governed by and construed in all respects in
accordance with the laws of Singapore.
7.2 Any dispute arising out of or in connection with this Agreement,
including any question regarding its existence, validity or termination,
shall be referred to and finally resolved by arbitration in Singapore in
accordance with the Arbitration Rules of the Singapore International
Arbitration Centre ("SIAC Rules") for the time being in force, which Rules
are deemed to be incorporated by reference into this Clause.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF the parties have caused their duly authorised
representatives to set their hands.
Signed by }
for and on behalf of }
SINGAPORE TECHNOLOGIES PTE LTD }
in the presence of:- } /s/ GAN CHEE YEN
} ---------------------------------------
} Name: Gan Chee Yen
} Designation: Group Financial Controller
}
/s/ ISOO TAN
- ----------------------
Name:
Signed by }
for and on behalf of }
ST ASSEMBLY TEST SERVICES LTD }
in the presence of:- } /s/ WONG KOK KIT
} --------------------------------------
} Name: Wong Kok Kit
} Designation: Chief Financial Officer
}
/s/ BERNARD LIEW
- ---------------------
Name: Bernard Liew
- 5 -
<PAGE> 6
APPENDIX
COMPUTATION OF CONSIDERATION
The Consideration payable to STPL shall be calculated on the following basis:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
DESCRIPTION OF SERVICES FEE BASIS AMOUNT (S$'000)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Corporate Secretarial Work
Comprising corporate secretarial Co Secretary + 1 150
support for STATS. equivalent headcount
cost
- ----------------------------------------------------------------------------------------
2 Executive Resource Support
Comprising support provided to STATS 1 equivalent 150
Executive Resource and Compensation headcount cost
Committee ("ERCC") in the design and
implementation (including
benchmarking) of compensation
structure for executives; and together
with STATS, support to STATS ERCC
in the implementation of decisions and
support for administration of
compensation of executives under
STATS ERCC
- ----------------------------------------------------------------------------------------
3 Internal Audit
Comprising continuing audit plans, 1 1/2 equivalent 150
monitoring statutory compliance and headcount cost
compliance with relevant procedures
and policies.
- ----------------------------------------------------------------------------------------
4 Finance
Comprising treasury related activities, 1 equivalent 200
risk management, and accounting headcount cost
systems, policies, guidelines and
procedures
- ----------------------------------------------------------------------------------------
</TABLE>
- 6 -
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
5 Information Technology Based on
reimbursement of its 200
share of group wide
licences and IT
infrastructure (eg
Lotus Notes,
Hyperion).
- ----------------------------------------------------------------------------------------
6 STPL Franchise
Comprising benefits derived from the Based on 0.25% of 3,650
STPL global network and affiliation to Group Sales or
STPL, and S$5mil, whichever is
lower.
Financial leverage such as bank Based on 0.5% of ST
guarantee support, provision of standby Financial Support or
credit facilities, improved credit rating, S$5mil, whichever is
easier access to funding and lower cost lower.
of borrowing.
GRAND TOTAL 4,500
- ----------------------------------------------------------------------------------------
</TABLE>
- 7 -
<PAGE> 8
Where:
STATS means the Company.
Group Sales means the Company and its subsidiaries' worldwide actual sales. As
the Consideration is payable in advance, the Consideration for this Service
shall be determined based on the Company and its subsidiaries' worldwide
planned sales at the beginning of the year, and at the end of the year, the
final Consideration payable for such Service shall be determined based on the
actual sales. STPL shall refund to the Company any excess payment and the
Company shall make payment to STPL of any shortfall in payment within fourteen
(14) days after the determination of the final Consideration payable for such
Service.
ST Financial Support means the projected annual average outstanding amount of
(a) standby credit facilities provided by STPL to the Company and (b) guarantee
facilities provided by the STPL to third parties to secure loans granted by
such third parties to the Company.
For the avoidance of doubt, the headcount cost allocated in the Appendix above
shall be applicable for the first year from the date hereof and shall be
adjusted every year thereafter based on mutual agreement.
- 8 -
<PAGE> 1
EXHIBIT 10.2
THIS AGREEMENT is made the 5th day of June One Thousand Nine Hundred and Ninety
Eight (1998) Between:
ST ASSEMBLY TEST SERVICES LTD a company incorporated in Singapore and having its
registered office at 5 Yishun Street 23 Singapore 468442 hereinafter called "the
Company") of the one part; And
ECONOMIC DEVELOPMENT BOARD, a Corporate Body established in the Republic of
Singapore by The Economic Development Board Act (Cap. 85) of 250, North Bridge
Road, #24-00 Raffles City Tower Singapore 179101 (hereinafter called "the
Board") of the other part.
WHEREAS:
(1) The Company has applied to the Board for a term loan up to a maximum
aggregate principal amount of Singapore Dollars Ninety Million (S$90,000,000.00)
under the Capital Assistance Scheme of the Board.
(2) The Board is willing to grant the term loan to the Company, upon the terms
and subject to the conditions hereinafter set forth.
NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:-
1. DEFINITIONS
1.1 In this Agreement, unless the context otherwise requires, the following
words or expressions shall have the following meanings respectively:-
(a) "Business Day" means a day on which banks in Singapore are open for
business excluding Sunday.
(b) "Day" means a calendar day.
(c) "Dollars" and the sign"$" respectively mean the lawful currency of the
Republic of Singapore.
(d) "Drawing" means any, each or all (as the context may require) of the
drawings made by the Company under the Term Loan and includes the
First Drawing as defined hereof.
(e) "Event of Default" and "Events of Default" mean any, each or all (as
the context may require) of the Events of Default described in Clause
15 hereof.
(f) "First Drawing" means the first of the drawings made by the Company
under the Term Loan.
<PAGE> 2
(g) "Fixed Productive Assets" means the buildings, facilities and
equipment, for the semiconductor assembly and test project.
(h) "Guarantee" means the Corporate Guarantee to be issued by Singapore
Technologies Pte Ltd duly executed and signed by the Corporate's
authorised signatories, in favour of the Board and in the form and
containing terms acceptable to the Board.
(i) "Interest Rate" means the rates of interest determined in accordance
with Clause 7.2 hereof.
(j) "Interest Payment Dates" means the day falling on the first Business
Day of March or the first Business Day of September as the case may
be and the first Interest Payment Date shall be the Interest Payment
Date immediately following the date of the First Drawing of the Term
Loan.
(k) "Interest Period" means the period or periods determined as follows:-
(i) the Interest Period in relation to the First Drawing shall
begin on the date on which that Drawing is made hereunder and
shall end on the first Interest Payment Date;
(ii) the Interest Period in respect of any subsequent Drawing shall
begin on the date on which the relevant subsequent Drawing is
made and shall end on the Interest Payment Date falling
immediately thereafter;
(iii) each successive Interest Period shall begin on the last
Interest Payment Date and shall end on the Interest Payment
Date falling six (6) months immediately following;
(iv) if any Interest Period would otherwise end on a day which is
not a Business Day that Interest Period shall be extended to
the next succeeding day which is a Business Day;
(v) if any Interest Period is extended by the application of (iv)
above, the following Interest Period shall (without prejudice
to the application of (iv) above) end on the day on which it
would have ended if the preceding Interest Period had not been
so extended; and
(vi) any amount to be repaid under clause 8 shall have a final
Interest Period expiring on the relevant Repayment Date.
(l) "Month" means a calendar month.
(m) "person" shall include a company, body of persons, association or
body corporate or unincorporated.
<PAGE> 3
(n) "Repayment Dates" means the first Day of March and the first Day of
September of each year.
(o) "Term Loan" means the loan facility in the aggregate amount of
Singapore Dollars Ninety million (S$90,000,000.00) to be made
available to the Company by the Board in accordance with the terms
and conditions set out in this Agreement and shall also be deemed to
include the whole or any part thereof.
(p) "Year" means a calendar year.
1.2 Unless the context otherwise requires, words importing the singular number
include the plural number and vice versa.
1.3 The words "hereof", "herein", "hereon" and "hereunder" and words of
similar import, when used in this Agreement, refer to this Agreement as a whole
and not to any particular provision of this Agreement.
1.4 The headings to the Clauses hereof shall not be deemed to be a part
thereof or be taken in consideration in the interpretation or construction
thereof or of this Agreement.
1.5 Reference herein to Clauses are references to Clauses of this Agreement.
2. TERM LOAN
Subject to the provisions of this Agreement and in particular those of
Clause 3 hereof, the Board will make available to the Company the Term Loan
at the times and in the manner as hereinafter provided. The Term Loan shall be
for a period of 5 years, inclusive of a 2 year grace period for repayment of
the Term Loan as provided in Clause 8 herein.
3. CONDITIONS PRECEDENT AND AVAILABILITY
The right of the Company to make any Drawing or Drawings under the Term
Loan, and the obligations of the Board to make available the same shall be
subject to the following conditions precedent, that is to say:-
(a) There shall not exist at or prior to any Drawing, any Event of
Default or any condition, event or act which, with the giving of
notice or lapse of time, or both, would constitute such an Event of
Default.
<PAGE> 4
(b) All representations, warranties and statements contained herein, or
otherwise made in writing in connection herewith or in any
certificate or statement furnished pursuant to any provision of
this Agreement or in any document referred to herein made by the
Company shall be true and correct with the same effect as though
made on the date on which the Drawing is to be made.
(c) The Board shall have received, in form and substance satisfactory
to the Board, the following:-
(i) A copy of the Memorandum and Articles of Association
of the Company duly certified by a Director and the Secretary
of the Company to be a true copy thereof;
(ii) A copy, certified by a Director and Secretary of the
Company, of the resolution of the Board of Directors of the
Company, which is in full force and effect, approving the terms
and conditions contained in this Agreement and authorising a
person or persons to sign this Agreement and any other document
to be given to the Board from time to time by the Company;
(iii) Specimen signatures of the persons authorised to sign
this Agreement on behalf of the Company, and to sign the
notices of Drawing and any other document to be given from time
to time by the Company, such specimens to be certified by a
Director or the Secretary of the Company to be the true
signatures of such persons respectively; and
(iv) The Guarantee relating to the Term Loan to be made
and duly executed.
(d) All acts, conditions and things required to be done and performed and
to have happened precedent to the execution and delivery of this
Agreement and the Guarantee and to constitute this Agreement and the
Guarantee legal, valid and binding obligations enforceable in
accordance with their respective terms, shall have been done and
performed and have happened in compliance with all applicable laws.
(e) There is no breach by the Company of any of the terms, conditions and
undertakings herein contained.
4. PURPOSE OF THE TERM LOAN
4.1 Subject to the terms and conditions herein contained and in particular to
those of Clause 3, the Term Loan will be made available by the Board to the
Company for financing the Fixed Productive Assets of the semiconductor assembly
and test project.
<PAGE> 5
4.2 Upon advance of a Drawing under Clause 5, the Company shall apply all the
proceeds thereof for the purposes described in Clause 4.1 above and save with
the prior written consent of the Board for no other purpose whatsoever.
5. DRAWINGS OF TERM LOAN
5.1 Subject to the terms and conditions of this Agreement and in particular to
all the conditions of Clause 3 being complied with the Board will make available
drawings under the Term Loan in accordance with a disbursement schedule
submitted by the Company and approved by the Board at least 45 Days before the
First Drawing of the Term Loan.
5.2 The Company shall give notice of Drawing to the Board not later than thirty
(30) Business Days prior to the intended date of Drawing and each notice of
Drawing shall be substantially in the form set out in the Appendix I hereto and
shall:-
(i) state the date (which must be a Business Day) and the
amount of the proposed Drawing;
(ii) be irrevocable;
(iii) commit the Company to borrow the amount and on the date stated; and
(iv) constitute a representation and warranty that at the date
thereof the warranties and representations set out in Clause 12 are
true and no Event of Default and no event or act which with the
giving of notice or lapse of time or both would constitute such an
Event of Default has occurred.
5.3 The First Drawing shall be made not later than 25 May 1998 or such other
later date as may be approved by the Chairman of the Board or his lawful
representative.
5.4 All Drawings shall be made on the first Day of March or the first Day of
September of the respective years or such other date as may be approved by the
Chairman of the Board or his lawful representative.
6. AVAILABILITY OF TERM LOAN
The Term Loan shall be available for Drawing for a period of 5 years from
the date of the First Drawing after which date any part of the Term Loan not
drawn shall be cancelled.
<PAGE> 6
7. INTEREST
7.1 The Company shall pay to the Board on each Interest Payment Date interest
in arrears on the amounts drawn and outstanding under the Term Loan
from time to time in respect of each Interest Period relating thereto
determined in accordance with clause 1.1(k) and at the Interest Rate determined
in accordance with sub-clause 7.2 hereof.
7.2 Interest will be charged by the Board at the prevailing rate per annum
declared by the Central Provident Fund Board (henceforth referred to as "CPF
Board") for contributions made to the CPF under the CPF Act plus one per cent
(1%) (the "Interest Rate") and shall be payable in arrears at six-monthly
intervals, the first payment to be made on the Interest Payment Date as defined
in Clause 1.1(j) hereof.
7.3 The amount of interest payable on the drawings under the Term Loan from
time to time owing and outstanding shall be calculated at the Interest Rate on
the basis of a year of three hundred and sixty five (365) Days for the actual
number of Days elapsed.
7.4 The certificate of the Board in writing as to the determination of the
amount of interest payable on each Interest Payment Date shall be conclusive
and binding upon the parties hereto, save for manifest error.
7.5 The Company recognises and accepts that it is commercial practice for
interest on amounts in default to be charged and that the rate of interest to
be applied by the Board on the amounts in default shall be three per cent (3%)
per annum above the average prevailing prime interest rate as reported by the
Monetary Authority of Singapore compounded on a monthly basis, which will
represent a genuine estimate of the damage the Board would suffer in the event
of a failure by the Company in the payment on the due date of any principal
and/or interest on the amounts due and payable to the Board.
8. REPAYMENT OF THE TERM LOAN
The Company shall repay the principal of the amounts drawn under the Term
Loan in seven (7) equal consecutive six-monthly instalments on the Repayment
Dates. The first of such instalments shall be paid on the first Repayment Date
following two (2) Years from the date of the First Drawing of the Term Loan or
such other later date as the Board may determine in its absolute discretion.
9. PAYMENT PROVISIONS
9.1 All payments to be made by the Company under this Agreement shall be made
not later than 11 a.m. (Singapore time) on the relevant day to the Board at
its address described above or at such other address as the Board may from time
to time designate by notice in writing to the Company not less than ten (10)
Business Days prior to the date of any such payment hereunder.
<PAGE> 7
9.2 If any sum becomes due for payment under this Agreement on a day which is
not a Business Day, such payment shall be made on the next succeeding Business
Day and all calculation of interest shall be adjusted accordingly.
10. PREPAYMENT
10.1 The Company may prepay in the inverse order of maturity any part of the
Term Loan or the entire Term Loan before maturity on paying a fee amounting to
a quarter of one percent (1/4 of 1%) of the amount prepaid for every period of
six (6) months or any lesser period before maturity or one percent (1 %) of the
amount prepaid, whichever is the lesser amount.
10.2 The Company shall give the Board seven (7) Days' prior written notice of
the intention to prepay any amount described in Clause 10.1.
10.3 In the event the Company is required to prepay the principal sum owing
under the Term Loan pursuant to Clause 15.2 (a) hereof the Company shall pay to
the Board the fee at the rate described in Clause 10.1 above on the principal
sum owing.
11. SECURITY
Prior to the first Drawing of the Term Loan, the Company shall procure the
requisite Guarantee to be given in favour of the Board.
12. WARRANTIES AND REPRESENTATIONS
12.1 The Company hereby warrants and represents to the Board as follows:-
(a) that it is lawfully incorporated, validly existing and in
good standing under the laws of the Republic of Singapore;
(b) that it has the corporate power and authority to carry
on the business as now being conducted;
(c) that it has the corporate power to execute and perform
this Agreement and to borrow hereunder;
(d) that the execution, delivery and performance of this
Agreement and the borrowings hereunder have been duly
authorised by all requisite corporate action and will not
violate any provision of any agreement or other
instrument to which the Company is a party;
<PAGE> 8
(e) that its latest audited accounts submitted to the Board are correct
and complete and accurately represent the financial condition of the
Company on the date thereof and the results of its operation for the
period then ended and such audited accounts shows all known present
and future liabilities, direct or contingent, of the Company as of
the date thereof and each such audited accounts referred to herein
was prepared in accordance with generally accepted accounting
principles;
(f) save as disclosed to the Board that there has been no material
adverse change in the business activities operations or financial
condition of the Company since the date of the latest audited
accounts referred to in sub-paragraph (e) above;
(g) save as otherwise disclosed to the Board, there are no actions, suits
or proceedings pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, at law or
in equity (whether or not purportedly on behalf of the Company, or
any of its subsidiaries) before any court or competent body
adjudicating such matters, which involve the possibility of any
judgement or liability which may result in any material adverse
change in the business, operations, properties or assets, or in the
condition, financial or otherwise of the Company or its parent or any
of its subsidiaries and adversely affect the Company's ability to
make repayment of the Term Loan;
(h) that to the best of the knowledge of the Company no steps have been
taken or are being taken to appoint a receiver and/or manager or
judicial manager or liquidator or any other person over it or any of
its assets or in any winding up action.
12.2 Each of the warranties and representations contained in the preceding
sub-clause shall survive and continue to have full force and effect after the
execution of this Agreement and that they will be true and correct and fully
observed as though made on the date of Drawing or each Interest Payment Date
with reference to the facts and circumstances then subsisting.
13. AFFIRMATIVE UNDERTAKING
The Company hereby undertakes and agrees with the Board as follows:-
(a) that the Term Loan granted by the Board under the provisions of this
Agreement and every part thereof shall be used solely for the purpose
and in the manner hereinbefore stipulated and not for any other
purpose or manner save with the prior written consent of the Board.
<PAGE> 9
(b) that it will carry on and conduct its business and affairs with due
diligence and efficiency in accordance with sound technical financial
industrial and managerial standards and practices including the
maintenance of adequate financial records with qualified personnel
and in accordance with its Memorandum and Articles of Association.
(c) that it will furnish and provide the Board with and permit the Board
to obtain all such statements information explanation and data, except
information of a confidential nature, as the Board may reasonably
require, by prior written notice, regarding the affairs operations
administration financial or other whatsoever state or condition of
the Company or any of the matters in this Clause mentioned.
(d) that it will furnish to the Board particulars of any kind of
immovable property hereafter acquired by the Company.
(e) that the Board shall have the right as it may reasonably request, by
prior written notice, to inspect any land or premises where the
Company carries on its business and inspect the same and all
property and assets whatsoever therein or thereon and all accounts
records and statements wherever the same may be situate and to
make inventories and record thereof.
(f) that it will supply to the Board certified copies of all resolutions
passed which materially affect the financial state and condition
of the Company at general and/or special meetings of the Company
within seven (7) Days from the date of the passing of such
resolutions.
(g) that it will deliver to the Board every year immediately after the
issue of the audited accounts a copy of the Company's audited
balance sheet and profit and loss accounts audited by a firm of
auditors of international repute together with Auditors' and
Directors' Reports and will also deliver to the Board a copy of
the annual return which the Company is required by law to file
with the Registrar of Companies.
(h) that it shall punctually pay all rents rates assessments taxes and
all outgoings payable in respect of any land/or premises belonging
to the Company or at which it carries on business and obtain all
necessary licences and comply with all laws regulations rules
and orders relating to the carrying on of its business on such
premises.
(i) that it will keep all its plant machinery equipment buildings
construction fixtures fittings implements and other effects in
good and substantial repair and proper working condition to the
satisfaction of the Board.
<PAGE> 10
(j) that it shall not dismantle pull down or remove any part of the
buildings and fixtures, except in cases where such dismantling
pulling down or removal shall in the opinion of the Company be
rendered necessary by reason of the same being obsolete worn out
or damaged, in which case the Company shall give sufficient
written notice to the Board and will replace such property by
property of similar nature and value after giving intimation to
the Board.
(k) that it shall given to the Board such written authorities or other
directions and provide such facilities and access as the Board may
require for the aforesaid inspection and shall pay all costs fees
travelling and other out-of-pocket expenses whether legal or
otherwise in respect of such inspection.
(l) that insofar as may be necessary the Company shall amend its
Memorandum and Articles of Association so as to enable it to
observe and perform all the covenants undertakings terms
stipulations conditions and other provisions of this Agreement.
14. NEGATIVE UNDERTAKINGS
The Company hereby undertakes and agrees with the Board that it shall not
without the written consent of the Board, which consent shall not be
unreasonably withheld:-
(a) embark on any new project or substantial expansion or diversification
of its present business and operations, which are not related to
its present business activities;
(b) invest its funds by way of deposits (other than deposits with banks
licensed by the Monetary Authority of Singapore), loans, share
capital or otherwise in any other concern or issue or give
guarantees for the account or on behalf of any person or otherwise
become contingently liable for or in connection with any obligations
or indebtedness of any person;
(c) effect any form of reconstruction including amalgamation with another
company which will result in a change in the control of the Company;
(d) create or permit to arise or subsist, any mortgage, charge (whether
fixed or floating), pledge, lien or other encumbrances whatsoever
(except those which have been specifically disclosed to and
approved by the Board respectively) on any of its properties or
assets, both present and future whatsoever and wheresoever
situate;
<PAGE> 11
(e) declare or pay any dividend or make any income or capital
distribution, whether in cash or in specie, to its share-
holders or any of them; or
(f) raise, borrow, take, make, issue or give, as the case may
be, any loans, debentures, bonds or credits from or to any
persons.
15. EVENTS OF DEFAULT
15.1 If any one or more of the following Events of Default shall occur, that is
to say:
(a) if the Company shall fail to pay or otherwise discharge when due any
sums of money, whether principal, interest, fees or otherwise, payable
under this Agreement;
(b) if the Company shall default in the payment of any principal or
interest or any other obligation for borrowed money (whether or not
to the Board) beyond any period of grace provided in respect thereof;
(c) if any representation or warranty made in or in pursuance of this
Agreement or in any certificate, statement or other document
delivered in connection with the execution and delivery hereof or in
pursuance of this Agreement shall be or become incorrect in any
material respect;
(d) if the Company defaults in the due performance of any undertaking,
condition or obligation on its part to be performed and observed
hereunder (other than the payment of any sum due hereunder) and
such default (if capable of being rectified) shall not be rectified
for a period of thirty (30) Days after the date of receipt by the
Company of written notice of such default from the Board;
(e) if a petition is presented in any court of competent jurisdiction or
a resolution is passed for the winding-up of the Company or for the
filing or any application for placing the Company under judicial
management or any similar or analogous proceedings are taken against
the Company and are not withdrawn within thirty (30) Days after being
presented;
(f) if any encumbrancer or lessor shall take possession or a receiver
and/or manager, judicial manager, liquidator or other similar officer
is appointed of the whole of the undertaking, property or assets, or
any part thereof, of the Company;
(g) if a distress or execution is levied or enforced upon or sued out
against any part of the property or assets of the Company and is not
discharged within thirty (30) Days of being levied and the Board is of
the reasonable opinion that such an event will be materially
prejudicial to the interests of the Board;
<PAGE> 12
(h) if a judgement or order is made against the Company and is not
discharged within sixty (60) Days and the Board is in that
case of the reasonable opinion that the said judgement will
materially affect the Company's ability to perform and observe
its obligations under this Agreement;
(i) if the Company becomes insolvent or is unable or deemed unable
to pay its debts or admits in writing its inability to pay its
debts, as they mature, or enters into composition, compromise
or arrangement with its creditors or makes a general assignment
for the benefit of its creditors and the Board is of the opinion
that any such event will be materially prejudicial to the interests
of the Board;
(j) if a winding-up petition is presented by or against the guarantor
of the Guarantee or analogous proceedings shall be taken by or against
it and is not discharged within thirty (30) Days after being
presented;
(k) if the Company ceases or threatens to cease to carry on its
business and the Board is of the opinion that it will materially
affect the ability of the Company to perform and observe its
obligations under this Agreement;
(l) if any licence, consent or approval of any authority at any time
necessary to enable the Company to comply with and perform its
obligations under this Agreement to a material extent shall be
revoked, withheld or materially modified or shall otherwise not be
granted or fail to remain in full force and effect;
(m) if any of the consents, authorities, approvals, waivers or
resolutions referred to in Clause 3 shall be modified in a manner
unacceptable to the Board or shall be wholly or partly revoked,
withdrawn, suspended or terminated or shall expire and not be
renewed or shall otherwise fail to remain in full force and its
effect and such circumstances are considered by the Board to be
material;
(n) if without the prior written consent of the Board there is any
change in the shareholding of the Company which will result in a
change in the control of the Company;
(o) if a situation shall have arisen, which shall make it improbable
that the company will be able to perform its obligations under
this Agreement;
(p) if the Board determines in its absolute discretion that its
interests under the Guarantee is or are in jeopardy;
then and in any of such event, the Board may, by notice in writing to the
Company declare that an Event of Default has occurred and such declaration
shall be deemed to take effect from the date of such an Event of Default.
<PAGE> 13
15.2 Upon the declaration by the Board that an Event of Default has occurred:-
(a) the whole of the principal sum drawndown and owing under the Term
Loan, interest thereon and all other sums agreed to be paid under
this Agreement shall immediately become due and payable without any
demand or notice of any kind by the Board to the Company; and
(b) it shall be lawful for the Board to exercise all or any rights,
powers or remedies under this Agreement, the Guarantee given to the
Board or any one or more of them.
15.3 In the event of an occurrence of an Event of Default before the Term Loan
shall have been fully drawn or utilised hereunder, the Board's obligations
hereunder shall automatically and forthwith cease.
15.4 After the declaration by the Board that an Event of Default has occurred,
all moneys received or recovered by the Board (whether such moneys shall have
been received or recovered as a result of or arising from its exercise of all
or any rights, powers or remedies under this Agreement, the Guarantee or any
one or more of them or by way of a set-off or otherwise) shall be held by it
and shall be applied as follows:-
(a) Firstly, in or towards payment of all costs charges and expenses, if
any, incurred in enforcing this Agreement, the Guarantee or any one or
more of them.
(b) Secondly, in or towards payment to the Board of all moneys and
liabilities for the time being due, owing or outstanding under this
Agreement and where such moneys and liabilities are of a contingent
nature, in or towards making full and adequate provisions for payment
of such moneys and liabilities as and when they become due and
payable; and
(c) Thirdly, any surplus shall be paid to the Company.
16. NOTICES
16.1 Except as otherwise expressly provided herein, any notice, request, demand
or other communication to be given or served hereunder by one of the parties
hereto to or on the other or others may be delivered at or sent by prepaid
registered post or by facsimile to the address or addresses herein specified of
the other party or parties and shall be deemed to be duly served:
(a) if it is delivered, at the time of delivery,
(b) if it is sent by prepaid registered post, one (1) Day after posting
thereof, or
<PAGE> 14
(c) if it is sent by facsimile, immediately after transmission thereof, if
the date of transmission is a Business Day, and if such a date is not
a Business Day, then the notice by facsimile shall be deemed to be
served on the immediately next succeeding Business Day.
Except as otherwise expressly provided herein, all notices, requests, demands or
other communications which are required by this Agreement to be in writing may
be made by facsimile.
16.2 For the purpose of this Clause 16 each of the parties hereto shall from
time to time notify the other party in writing of an address in Singapore where
such notice, request, demand or other communication as aforesaid can be given
or served and such notification shall be effective only when it is actually
received. In the absence of such notification, the notice, request, demand or
other communication aforesaid may be given or served at the addresses of the
respective parties as stated above.
17. WAIVER NOT TO PREJUDICE RIGHT OF BOARD
The Board may from time to time and at any time waive either
unconditionally or on such terms and conditions as it may deem fit any breach
by the Company of any of the undertakings stipulations terms and conditions
herein contained and any modification thereof but without prejudice to its
powers rights and remedies for enforcement thereof, provided always that:-
(a) no neglect or forbearance of the Board to require and enforce
payment of any moneys hereunder or the performance and observance
of any undertaking stipulation term or condition herein contained,
nor any time which may be given to the Company shall in any way
prejudice or affect any of the rights powers or remedies of the
Board at any time afterwards to act strictly in accordance with the
provisions hereof;
(b) no such waiver of any such breach as aforesaid shall prejudice the
rights of the Board in respect of any other or subsequent breach of
any of the undertakings stipulations terms or conditions aforesaid.
18. INDULGENCE OF THE BOARD
The liability of the Company hereunder shall not be impaired or discharged
by reason of any time or other indulgence being granted by or with the consent
of the Board to any person who or which may be in any way liable to pay any of
the moneys secured hereby by any other security in favour of the Board or by
reason of any arrangement being entered into or composition accepted by the
Board which has the effect of modifying the operation of law or otherwise its
rights and remedies under the provisions of this Agreement.
<PAGE> 15
19. SEVERABILITY
In case any provision in this Agreement shall be, or at any time shall
become invalid, illegal or unenforceable in any respect under any law, such
invalidity, illegality or unenforceability shall not in any way affect or impair
the other provisions of this Agreement but this Agreement shall be construed as
if such invalid or illegal or unenforceable provision contained herein or
therein did not form a part of this Agreement.
20. GOVERNING LAW
This Agreement shall be governed by and construed in all respects in
accordance with the laws of the Republic of Singapore.
21. MISCELLANEOUS
21.1 All legal and other professional fees, out-of-pocket expenses, charges and
expenses of and in connection with this Agreement shall be paid by the Company.
21.2 The Company shall further pay all legal fees as between solicitor and
client and other costs and disbursements incurred in connection with or
demanding and enforcing payment of moneys due under this Agreement and
Guarantee and otherwise howsoever in enforcing the performance of any other
undertakings stipulations terms conditions or provisions of hereof and thereof.
21.3 A certificate signed by a duly authorised officer for the time being of
the Board as to the amount of moneys and liabilities for the time being due to
the Board or incurred by the Board under this Agreement and Guarantee shall be
conclusive and binding on the Company, save for any computation or clerical
error.
21.4 This Agreement shall be binding upon the successors of the Company and
shall enure to the benefit of the Board and its successors and assigns.
<PAGE> 16
IN WITNESS WHEREOF the parties hereto have hereunto affixed their respective
common seals.
The Common Seal of
ST ASSEMBLY TEST SERVICES LTD
was hereunto affixed in the
presence of:-
/s/ [ILLEGIBLE SIGNATURE]
-------------------------
Director
[SEAL]
/s/ [ILLEGIBLE SIGNATURE]
-------------------------
Director/Secretary
The Common Seal of the ECONOMIC
DEVELOPMENT BOARD was
hereunto affixed in the presence of:-
/s/ [ILLEGIBLE SIGNATURE]
-------------------------
Chairman
[SEAL]
/s/ [ILLEGIBLE SIGNATURE]
-------------------------
Secretary
<PAGE> 17
APPENDIX I
ECONOMIC DEVELOPMENT BOARD
250 North Bridge Road
#24-00 Raffles City Tower
Singapore 179101
Dear Sirs,
NOTICE OF DRAWING
TERM LOAN OF S$90,000,000.00
Pursuant to Clause 5 of the EDB Loan Agreement dated 1998 in respect of
the above Term Loan we hereby give you notice for a Drawing of Singapore
Dollars [ ] (S$ ) on 1998.
We confirm--
(i) that the conditions precedent under Clause 3 of the EDB
Loan Agreement have been complied with in every respect;
(ii) that each of the representations and warranties contained
in Clause 12 of the EDB Loan Agreement are true and accurate in all
respects as though made on the date of this Notice with reference to
facts and circumstances presently subsisting and will be true and
accurate in all respects on the date of the intended Drawing as
though made on the date of the intended Drawing with reference to
facts and circumstances then subsisting; and
(iii) that as at the date hereof no Event of Default has occurred
and no event has occurred which, with the giving of notice and/or
the lapse of time and/or upon you making any necessary determination
under Clause 15 of the EDB Loan Agreement, might constitute and
Event of Default, and we undertake that no Event of Default and none
of the events aforesaid will exist at the date of the intended
Drawing.
In addition to the above documents kindly let us know if you require copies of
any opinion approval or other documents.
Dated this day of 19
Yours faithfully
Director/Authorised Signatory
<PAGE> 1
EXHIBIT 10.3
[ST TREASURY SERVICES LTD LETTERHEAD]
51 Cuppage Road #09-01
Singapore 229469
Tel: 8361128 Fax: 8361198
Date : 12/05/1999
ST Assembly Test Services Ltd
5 Yishun Street 23
Singapore 768442
Dear Sirs,
We confirm the following Investment Rollover transaction:
Our ref: 27618 Your ref:
Your dealer: SWEE CHOO Roll over of: 27247
Borrower: ST Assembly Test Services Ltd
Lender: ST Treasury Services Ltd
Previous principal: USD 25,000,000.00
Amount: USD 25,000,000.00
Interest type: YIELD
Deal date: 12/05/1999
Settlement date: 12/05/1999
Maturity date: 14/06/1999
Term: 33 Days
Interest rate: 5.460000% FIXED
Interest days: 360 Days
Interest amount: USD 125,125.00
Interest due: ON MATURITY
Accumulated interest:
Capitalised interest:
Comments: R/O CT27247 PRINCIPAL ONLY
On maturity, please credit the proceeds to our account as follows:
Account No: 0/812284/029
Account Name: ST TREASURY SERVICES LTD - (USD A/C)
Bank Name: Citibank N.A. Singapore
Shenton Way Branch
Yours faithfully
ST Treasury Services Ltd
/s/ [ILLEGIBLE SIGNATURE]
/s/ [ILLEGIBLE SIGNATURE]
- ------------------------------
Authorised Signatories
Verified by: /s/ WENDY WONG
-----------------
WENDY WONG
Accountant
<PAGE> 1
EXHIBIT 10.4
AN AGREEMENT made the 18th day of November 1996 BETWEEN HOUSING & DEVELOP-
MENT BOARD, a Body Corporate incorporated under the Housing & Development Act
and having its office at Bukit Merah Centre, 3451 Jalan Bukit Merah, Singapore
159459, (hereinafter called "the Licensor" which expression shall where the
context so admits include its successors and assigns) of the one part AND
M/S ST ASSEMBLY TEST SERVICES PTE LTD
33 MARSILING INDUSTRIAL ESTATE ROAD 3
#03-01/03
SINGAPORE 739256
(hereinafter called the "the Licensee" which expression shall where the context
so admits include its successors and assigns) of the other part.
WHEREBY IT IS AGREED as follows:-
1 For the period of twenty-four months from 1ST MAR of 1996 (hereinafter
referred to as "the date hereof") or for such further period as may be
extended by the Licensor the Licensee shall have the Licence and authority
to enter upon ALL THAT piece of land more particularly described in the First
Schedule hereto (hereinafter referred to as "the said land") for the
construction of factory buildings and other structures therein and for the
installation of equipment fixtures and fittings thereat for the purpose of
SEMICONDUCTOR MANUFACTURING AND TESTING
in accordance with the stipulation hereinafter contained and for no other
purpose whatsoever.
<PAGE> 2
2 The Licensee hereby agrees to perform and observe the following
stipulations:-
(i) To hold the said land until the same shall be comprised in a lease
to be granted as hereinafter provided as licensee upon the same
terms relating to the lease referred to in Clause 2(ii) herein at a
licence fee and subject to the same covenants and stipulations so
far as applicable as if a lease thereto has been actually granted
and so that the Licensor shall have all remedies by whatsoever
means for rent in arrears that are incidental to the relationship of
landlord and tenant but so that nothing herein contained shall be
construed as creating a legal demise or any greater interest in
the licence than a tenancy at will;
(ii) To pay in advance as from the date hereof a licence fee calculated
at the same rate and on the dates specified as for the rent reserved
in the lease of the said land set out in the Second Schedule
hereto as if such lease has actually been granted;
(iii) The Licensee shall pay to the Licensor an amount equivalent to the
sum, if any, payable by the Licensor as property tax in respect
of the said land during the term prior to the issue of the
Lease by the Licensor;
(iv) To pay interest at the rate of 8.5% per annum or such higher rate as
may be determined from time to time by the Licensor in respect of
any outstanding amount payable by the Licensee under this Agreement
from the date such amount becomes due until payment in full is
received by the Licensor;
- 2 -
<PAGE> 3
(v) The Licensee shall also within one calender month from the 1ST
of MAR 1996 submit to the Licensor for its approval layout plans
of the said buildings proposed to be erected on the said land in
accordance in every way with the requirements of the Licensor and
the Competent Authority appointed under Section 3 of the Planning
Act and the Building Control Act (1985 Rev Ed Chapter 29), which
approval the Licensor may either give or refuse at its absolute
discretion;
(vi) The Licensee shall also within four calendar months from the
1ST of MAR 1996 submit to the Deputy Director (Building Control
Division), Public Works Department, or his successor full and
complete plans elevations and specifications of the said
buildings proposed to be erected on the said land in accordance
in every way with the layout approved by the Licensor and the
Competent Planning Authority and with the Building Control Act
(1985 Rec Ed Chapter 29) and the Building Authority under the
Building Control Act;
(vii) The Licensee shall also within eight calendar months from the
1ST of MAR 1996 or within one month from the date of approval by
the Deputy Director (Building Control Division), Public Works
Department whichever shall be the later, commence work on the
erection of the said buildings after but not before the said
plans elevations and specifications have been approved by the
Deputy Director (Building Control Division), Public Works
Department, or his successor;
- 3 -
<PAGE> 4
(viii) The Licensee shall also at its own expense within twenty-four
(24) calendar months from the 1ST of MAR 1996 build on the said
land and finish the said buildings so as to be completely fit
for occupation. The said buildings shall be erected in every way
in accordance with the said plans elevations and specifications
as submitted to and approved by the Licensor and by the Competent
Authority and the Deputy Director (Building Control Division),
Public Works Department or their respective successors under
sub-clauses (v) and (vi) hereof;
(ix) In the planning, erection, construction and completion of the said
buildings, to develop the said land to a gross plot ratio of not
less than 1.0. In the event the gross plot ratio of the buildings
and structures on the said land is less than 1.0, the Licensor
shall be entitled to impose, and the Licensee shall pay the
Licensor additional licence fee amounting to 10% of the licence
fee payable by the licensee under the terms of this Agreement;
(x) If at any time in the option of the Licensor inferior work or
material is found to have been used, then upon fourteen (14) days'
notice in writing requiring the remedy or removal of such defects
and on default of the Licensee to remedy such defects within the
said fourteen (14) days the Licensor may enter upon the premises
and make good all such defects at the expense of the Licensee;
(xi) In the event of the Licensee continuing to make use of
sub-standard materials and workmanship the Licensor may direct
that this Agreement shall be terminated and the interest of the
Licensee therein shall be forfeited;
- 4 -
<PAGE> 5
(xii) No extension of time for completion of the said buildings beyond
the period of twenty-four (24) calendar months prescribed shall be
granted provided the Licensor may at his absolute discretion extend
the time for completion of the said buildings and the Licensee may
be required to pay liquidated damages calculated at the rate of
$50/- per day until the date of completion of the development;
(xiii) Not to demise, transfer, assign, mortgage, let, sublet, underlet,
license or part with possession of the said land or any part
thereof in whatsoever manner and not to effect any form of
reconstruction howsoever brought about including any form of
amalgamation or merger with or take-over by another company, firm
or body or party, without first obtaining the consent of the
Licensor in writing. Section 17 of the Conveyancing Law of Property
Act (Chapter 61) shall not apply. Any consent, if granted by the
Licensor shall be given on such terms and conditions as the
Licensor may in its entire and unfettered discretion deem fit to
impose and shall include:-
(a) full revision of the rental to the prevailing market rate from
the date of assignment;
(b) payment of such administrative fee as determined by the
Licensor;
(xiv) On or before the execution of the Building Agreement, the Licensee
shall supply to the Licensor in writing a list of names of its
existing shareholders and particulars of the classes of shares held
by each and every shareholder and the value thereof and such list
shall be duly certified to be correct by a director of the company.
- 5 -
<PAGE> 6
(xv) Notwithstanding any mortgage or charge or any permitted assignment
the original Licensee shall continue to be liable to the Licensor
for the observance and performance of all the stipulations and
agreements herein contained and on the part of the Licensee to be
observed and performed until the grant of the Lease hereinafter
mentioned;
(xvi) Not to do or omit or suffer to be done or omitted any act matter
or thing in or on or respecting the said land which shall
contravene the provisions of any Ordinance Act of Parliament
Enactment order rule or regulation now or hereafter affecting the
same and the Licensee will at all times hereafter indemnify and
keep indemnified the Licensor against all actions proceedings
costs expenses claims liabilities losses and demand in respect of
any such act matter or thing done or omitted to be done in
contravention of the said provisions;
(xvii) Not to do or permit or suffer to be done in or upon the said land
or any part thereof anything which in the opinion of the Licensor
may be or become a nuisance or annoyance or cause damage to the
Licensor or the Licensees or occupiers of neighbouring premises;
(xviii) Not without the consent in writing of the Licensor to affix or
exhibit or erect or paint or permit or suffer to be affixed or
exhibited or erected or painted on or upon any part of the
exterior of the said land or of the external walls or rails or
fences thereof any nameplate signboard placard poster or other
advertisement or hoarding;
- 6 -
<PAGE> 7
(xix) Not to permit or suffer any person to occupy reside or make use of
any building erected on the said land before a Temporary Occupation
Licence or the Certificate of Fitness for Occupation or other
equivalent permission has been issued by the Building Authority;
(xx) To make reasonable provision against and be responsible for all loss
injury or damage to any person or property including that of the
Licensor for which the Licensee may be held liable arising out of or
in connection with the occupation and use of the said land and the
structures erected thereon and to indemnify the Licensor against all
proceedings claims costs and expenses which he may incur or for
which he may be held liable as a result of any neglect or default of
the Licensee its servants contractors or agents or their respective
servants;
(xxi) To make good and sufficient provision for the safe and efficient
disposal of all waste including but not limited to pollutants
generated at the said land to the requirements and satisfaction of
the Licensor and other relevant Government authorities PROVIDED THAT
in the event of any default by the Licensee under this covenant the
Licensor may carry out such remedial measures as it thinks necessary
and all costs and expenses incurred thereby shall be recoverable
forthwith from the Licensee as a debt;
- 7 -
<PAGE> 8
(xxii) Not to effect a change of name except with the consent in writing
of the Licensor PROVIDED THAT on every change of name the Licensee
shall pay to the Licensor a fee to be specified by the Licensor
in relation to such consent;
(xxiii) Within one month of the completion of the construction of the said
buildings and related civil works to reinstate any damage caused
to the roads roadside kerbs drains turfing and the said permanent
culvert by the Licensee its servants contractors or agents or
their respective agents to the satisfaction of the Licensor and
the relevant Government or Statutory authorities;
(xxiv) To place with the Licensor a deposit (the amount as and when
determined by the Licensor) which shall be forfeited in the
event of any breach of the provision in sub-clause (xxiii)
herein without prejudice to the rights and remedies of the
Licensor contained in this Agreement and the Lease.
3 The Licensee shall so soon as the said buildings shall have reached a
height of one and a half (1 & 1/2) metres above the ground level insure the
same to the full value thereof in the joint names of the Licensee and the
Licensor against loss or damage by fire with some insurance company approved by
the Licensor and shall increase such insurance to the satisfaction of the
Licensor as the said buildings approach completion and shall keep the same so
insured from time to time and make all payments necessary for the above purpose
within fourteen (14) days after the same shall respectively become payable and
shall whenever required produce to the Licensor the policy or policies of such
insurance and the receipt or receipts for each payment and shall cause
- 8 -
<PAGE> 9
all moneys received by virtue of any such insurance to be forthwith paid out in
re-building and reinstating the said buildings and make up any deficiency with
its own moneys. Provided Always that if the Licensee shall at any time fail to
keep the said buildings insured as aforesaid the Licensor may do all things
necessary to effect or maintain such insurance and any moneys expended by the
firm for that purpose shall be repayable by the Licensee on demand and be
recoverable forthwith from the Licensee.
4 Until the completion of the said buildings in accordance with the
stipulations hereinbefore contained the Licensor shall have the following
rights powers and authorities that is to say:-
(i) The right of the Licensor or its officers or agents with or
without workmen and others at all reasonable times to enter upon the
said land and the said buildings to view the state and progress of
the said buildings and to inspect and test the materials and
workmanship and for any other reasonable purpose including the
construction, repair or cleansing by or on behalf of the Licensor of
any sewer or drain on or leading from any adjoining or neighbouring
land of the Licensor;
(ii) In case the Licensee shall fail to complete the said buildings
within the time aforesaid (time in this respect being the essence of
the contract) and otherwise in every way in accordance with the
stipulations hereinbefore contained or if the Licensee shall not
proceed with the said works with due diligence or if the rent shall
be in arrears for the space of fourteen (14) days next after being
payable or if he shall fail to observe or perform any of the
- 9 -
<PAGE> 10
stipulations on its part hereinbefore contained then unless the
Licensor shall full right power and authority to impose such
penalties as he deems fit as well at to re-enter upon and resume
possession of the said land and every building or erection thereon
or any part thereof and thereupon this Agreement shall forthwith
cease and determine and all buildings erections upon the said land
shall belong to the Licensor absolutely and without making to the
Licensee any compensation or allowance for the same and without
prejudice to any right of action or other remedy of the Licensor for
the recovery of any rent or moneys due to him from the Licensee or in
respect of any antecedent breach of this Agreement. PROVIDED ALWAYS
that if the said land has been assigned by way of mortgage the
provisions of this clause shall not take effect until the Licensor
has served upon the mortgagee a notice in writing specifying the
breach and the mortgagee has failed to remedy such breach.
5 If the said buildings shall be completed by the Licensee in accordance with
the covenants agreements and stipulations hereinbefore contained the Licensor
will grant and the Licensee (without any investigations of title or any abstract
or evident thereof) will accept and execute a lease in accordance with the draft
form of Lease set out in the Second Schedule to this Agreement with such modifi-
cations as the parties may agree upon or the circumstances may render necessary.
6 The area of the said land ("the said area") as specified in the First
schedule hereto shall be subject to Government survey or re-survey.
- 10 -
<PAGE> 11
(i) If upon final survey, the said area is found to differ from the final
surveyed area within +/- 1% of the said area, the final surveyed area
will be adopted for the lease of the said land but the licence fee
shall not be adjusted. Any licence fee revision subsequent to the
final survey shall be calculated based on the final surveyed area.
(ii) If the difference between the said area and the final surveyed area
exceeds the +/- 1% margin, the final surveyed area will be adopted for
the lease of the said land and :-
(a) if the final surveyed area is greater than the said area; the
Licensee shall at the request and absolute discretion of the
Licensor pay to the Licensor additional licence fee for the
additional area;
(b) if the final surveyed area is less than the said area, the
Licensor shall credit the excess licence fee paid by the
Licensee to the account of the Licensee towards payment of the
licence fee.
The additional licence fee payable or to be credited in either instance
will be computed at the same rate as the licence fee payable under the
terms of this Agreement.
7 The Licensee shall pay all costs disbursements fees and charges legal or
otherwise including stamp and/or registration fees in connection with the
preparation stamping and issue of this Agreement and the lease herein agreed to
be granted and any prior accompanying or future documents or deeds
supplementary collateral or in any way relating to this Agreement and the lease.
- 11 -
<PAGE> 12
8 The Licensee shall pay all cost and fees legal or otherwise including the
Licensor's costs as between solicitor and client in connection with the
enforcement of the covenants and conditions of this Agreement and the lease.
9 If at any time during the said period of twenty-four (24) months and any
extensions thereof granted under Clause 2(xii) the Licensee terminates this
Agreement or subject to the consent in writing of the Licensor surrenders part
of the said land he shall in addition to the licence fee (which at the
discretion of the Licensor may by apportioned for the period commencing from
the date hereof up to the date of delivery of vacant possession of the said land
or part thereof to the Licensor) survey fee property tax and other charges
specified herein pay to the Licensor as liquidated damages a sum made up of
firstly an amount equivalent to three (3) months' licence fee, secondly an
amount equivalent to one (1) additional year's property tax and thirdly an
amount of $500/- being administrative costs PROVIDED THAT before the delivery
of vacant possession as aforesaid if the Licensor shall so desire the Licensee
shall render the said land or part thereof as the case may be to its original
state and condition.
10 All sums payable under this Agreement are exclusive of Goods and Services
Tax. The Licensee shall pay and indemnify the Licensor against Goods and
Services Tax chargeable in respect of any payment made by the Licensee under
the terms of or in connection with this Agreement or in respect of any payment
made by the Licensor where the Licensee hereby agrees in this Agreement to
reimburse the Licensor for such payment.
- 12 -
<PAGE> 13
AS WITNESS the hands of the parties hereto the day and year first above
written.
THE COMMON SEAL of HOUSING } /s/ MICHAEL LOW
} -------------------------------
AND DEVELOPMENT BOARD was hereunto } Name: Michael Low
} Designation: Member
affixed in the presence of:- }
}
} /s/ LIM WEE MIEN
} -------------------------------
} Name: Lim Wee Mien
} Designation: Officer
}
THE COMMON SEAL of } /s/ KWEK BUCK CHYE
} -------------------------------
M/s ST Assembly Test Services Pte Ltd } Name: Kwek Buck Chye
} -------------------------
} Designation: Director
} ------------------
}
}
}
} /s/ CHUA SU LI
} -------------------------------
was hereunto affixed in the } Name: Chua Su Li (Mrs)
presence of:- } -------------------------
} Designation: Company Secretary
} ------------------
}
[SEAL]
- 13 -
<PAGE> 14
THE FIRST SCHEDULE ABOVE REFERRED TO:
All that piece of land known as LOT 1970PT, 1972 PT & 1974 PT Mukim 19 and
situated in the District of NORTH SELETAR in the Republic of Singapore estimated
to contain an area of 29,863.8 square metres or thereabouts being the land edged
RED on the plan attached subject to Government Resurvey.
- 14 -
<PAGE> 15
THE SECOND SCHEDULE ABOVE REFERRED TO:
-----------------------
L 1 Ver 1
-----------------------
THE LAND TITLES ACT
-----------------------
-----------------------
(For Official Use only)
LEASE
(A) DESCRIPTION OF LAND
------------------------------------------------------------
*CT/SSCT/SCT MK TS Lot No Property Address
Whole or part lot (if
------------- part lot, to state
Vol Fol appd new lot/strata
lot)
------------------------------------------------------------
-- -- 19 -- 1970pt, Part of Lots 1970,
1972pt & 1972 & 1974,
1974pt Mukim 19
------------------------------------------------------------
(B) LESSOR
------------------------------------------------------------
If more than ONE ID/Co regn no:
lessee, please ------------------------------------------------------------
refer to
explanatory notes Name: Housing & Development Board
------------------------------------------------------------
Address: HDB Centre, 3451 Jalan Bukit Merah,
(within Singapore for Singapore 159459
service of notice)
------------------------------------------------------------
(the registered proprietor) HEREBY LEASES the registered
estate or interest in the land to:-
(C) LESSEE
------------------------------------------------------------
ID/Co regn no:
------------------------------------------------------------
If more than ONE Name: M/s ST Assembly Test Services Pte Ltd
lessee, please
refer to
explanatory notes ------------------------------------------------------------
Citizenship/Place of Singapore
incorporation
------------------------------------------------------------
Non-Citizens *Permanent Resident/Non-Permanent
Resident
------------------------------------------------------------
Address: 33 Marsiling Industrial Estate Road 3
(within Singapore for #03-01/03
service of notice) Singapore 739256
------------------------------------------------------------
* Please delete whichever is not applicable
<PAGE> 16
* to hold as
-----------------------------------------------------------------------------
Manner of Holding
-----------------------------------------------------------------------------
* To complete where there are co-owners. To delete if not applicable.
FOR TERM OF LEASE :
Term of Lease : 30 Years
Term of Option to renew : 30 Years
(Upon exercise of the option to renew)
Commencement date : 1 MAR 1996
Annual Rent : $ 1,328,940.00 per annum
(Yearly Rent) @ $ 44.50 per square metre per annum
- -------------------------------------------------------------------------------
(D) SUBJECT TO :
PRIOR ENCUMBRANCES (TO STATE 'NIL' IF THERE ARE NONE) :
-----------------------------------
NIL
-----------------------------------
- -------------------------------------------------------------------------------
(E) AND THE FOLLOWING :-
COVENANTS AND CONDITIONS
(a) the covenants, conditions and powers implied by law in instruments of
lease (or to such of them as are not hereinafter expressly negatived
or modified);
(b) the covenants and conditions set forth in the Memorandum of Lease
filed in the Registry of Titles as ML 24.
- 2 -
<PAGE> 17
SPECIAL COVENANTS AND CONDITIONS
1 AND THE LESSEE for itself and its successors and assigns hereby covenants
with the lessor as follows:-
(i) (a) To pay the Yearly Rent of Dollars ONE MILLION THREE HUNDRED
& TWENTY-EIGHT THOUSAND NINE HUNDRED & FORTY ONLY
($1,328,940.00) calculated at the rate of $44.50 per square
metre per annum from the 1st day of MAR 1996 (hereinafter
referred to as "the Initial Rent") which rate shall be
subject to revision on the 1st day of MAR 1997, and
thereafter annually on the 1st day of MAR of each succeeding
year. The revision on the 1st day of MAR of 1997 and each
subsequent annual revision shall be subject to a rate based
on the market rent on the date of such revision and
determined in the manner following but any increase in the
rent pursuant to the revision on the 1st day of MAR 1997 and
each subsequent annual revision shall not exceed 7.6 per
cent of the yearly rent of each immediate preceding year.
The market rent in this context shall mean the rent per
square metre per annum of the said land excluding the
buildings and other structures erected thereon and shall be
determined by the Lessor on or about the abovementioned rent
revision dates and the decision of the Lessor shall be
final;
- 3 -
<PAGE> 18
(b) The Yearly Rent aforesaid shall be paid quarterly in advance
without deduction and without demand w.e.f. the 1st day
of MAR 1996 at the office of the Lessor or such other office
as the Lessor may designate.
(ii) To pay the Yearly Rent hereby reserved at the time and in the
manner aforesaid PROVIDED THAT in the event the gross plot
ratio of the buildings and structures on the said land is
less than 1.0, the Lessor shall be entitled to impose, and the
Lessee shall pay the Lessor additional Yearly Rent amounting
to 10% of the Yearly Rent hereby reserved as aforesaid.
(iii) To pay all rates taxes charges assessments outgoings and
impositions whatsoever which now are or which at any time
hereafter during the said term shall or may be charged
assessed or imposed upon the said land or on any part thereon;
(iv) To pay all Public Utilities Board charges for the supply of
water gas sanitation or electric light or power at any time
hereafter during the said term charged or imposed by the
Public Utilities Board in respect of the said land and the
building thereon;
(v) To pay interest at the rate of 8.5% per annum or such higher
rate as may be determined from time to time by the Lessor in
respect of any arrears of rent or other outstanding sums due
and payable under the Lease from the due dates thereof until
payment in full is received by the Lessor;
- 4 -
<PAGE> 19
(vi) To maintain and keep the said land together with the buildings and
appurtenances standing upon the said land during the said term in
good and tenantable condition and repair and in clean and sanitary
order and condition and to fully comply with all statutory
requirements and the requirements of any Competent Authority for
the maintenance of the said land or for the improvement of the said
land by landscape gardening and any expenses so incurred shall be
borne by the Lessee;
(vii) At the termination of the said term or at the earlier determination
thereof to yield up to the Lessor the said land hereby demised
together with all buildings, structures and fixtures therein in
good and tenantable repair;
(viii) Not at any time during the said term without the previous consent
in writing of the Lessor to make any alteration addition to any
building now standing upon the said land and not without the same
consent to erect or put up any building or erection whatsoever in
addition to the building now standing upon the said land or change
the use of the building or any part thereof as prescribed in
Sub-clause (xi) herein and the Lessor reserves the right to levy a
charge for such consent, if given;
(ix) Not to demise, transfer, assign, mortgage, let, sublet, underlet,
license or part with the possession of the said land or any part
thereof in whatsoever manner and not to effect any form of
reconstruction howsoever brought about including any form of
amalgamation or merger with or take-over by another company, firm
or body or party, without first obtaining the consent of the
Lessor in writing. Section 17 of the Conveyancing Law of Property
Act (Chapter 61) shall not apply. Any
- 5 -
<PAGE> 20
consent, if granted by the Lessor shall be given on such terms and
conditions as the Lessor may in its entire and unfettered discretion
deem fit to impose and shall include:-
(a) full revision of the rental to the prevailing market
rate from the date of assignment;
(b) payment of such administrative fees as determined by
the Lessor;
(x) On or before the execution of the Lease, the Lessee shall supply
to the Lessor in writing a list of the names of its existing
shareholders and particulars of the classes of shares held by
each and every shareholder and the value thereof and such list
shall be duly certified to be correct by a director of the
company;
(xi) Not to use or to permit or suffer the said land or the building
thereon or any part of the said land and building thereof to be
used otherwise than as SEMICONDUCTOR MANUFACTURING AND TESTING
subject to the approval of the Competent Authority appointed
under Section 3 of the Planning Act;
(xii) Not to use the said land or any part thereof for any illegal or
immoral purpose and not to carry on or permit or suffer to be
carried on in or upon the said land or any part of the building
thereon any noxious noisy dangerous or offensive trade or
business or manufacture whatsoever which may be or become a
nuisance annoyance or inconvenience to the owners tenants or
occupiers of premises neighbouring adjoining or adjacent
thereto or to the Lessor;
- 6 -
<PAGE> 21
(xiii) Not to erect permit or suffer to be carried out any
construction of chimneys or ducts of any kind whatsoever in or at
any part of the building for the purpose of discharging smoke gas
fume or any other substance connected directly or indirectly with
the manufacturing processes;
(xiv) Not to allow utilise or permit to be utilised any of the
covered or open spaces outside the building for storage purposes of
any kind and all raw materials and finished products shall be
stored within the building erected on the said land;
(xv) To maintain and take whatever steps necessary to keep all
machinery and equipment installed in and upon the building or on
any part thereof during the said terms in such condition that they
be free from generating noises or vibration that will cause
nuisance annoyance or inconvenience to the Lessor or the owners,
tenants or occupiers of neighbouring premises;
(xvi) To permit the Lessor or any officer authorised by him in
writing with or without workmen and others at all reasonable times
during the said term but not more often than once in any calender
month to enter into and upon the said land and upon any building
thereon to view the state and condition thereof and the Lessor may
thereupon serve upon the Lessee notice in writing specifying any
breaches of covenant and require the Lessee forthwith to remedy
such breaches and if the Lessee shall not within ten (10) days
after the receipt of such notice proceed diligently to remedy such
breaches then to permit the Lessor to enter upon the said
- 7 -
<PAGE> 22
land and take steps as may be necessary to remedy such breaches
and the cost thereof shall be a debt due from the Lessee to the
Lessor and be forthwith recoverable by action;
(xvii) To insure and keep insured against loss or damage by fire the
building upon the said land to the full value thereof with some
Insurance Company approved by the Lessor and to pay all premiums
necessary for that purpose within seven (7) days after the same
shall become due and to produce and show to the Lessor whenever
required the policy of such insurance and the receipt for every
such premium and to cause all moneys received by virtue of any of
such insurances to be forthwith paid out in rebuilding or
reinstating the said land and the building now standing thereon
and to make up any deficiency with the Lessee's own moneys;
(xviii) Not do or omit or suffer to be done or omitted any act matter or
thing in or on or respecting the said land which contravene the
provisions of any Ordinance Act of Parliament Enactment order rule
or regulation now or hereafter affecting the same and the Lessee
will at all times hereafter indemnify and keep indemnified the
Lessor against all actions proceedings costs expenses claims
liabilities losses and demand in respect of any such act matter or
thing done or omitted to be done in contravention of the said
provisions;
- 8 -
<PAGE> 23
(xix) Not without the consent in writing of the Lessor to affix
or exhibit to erect or paint or permit or suffer to be affixed or
exhibited or erected or painted on or upon any part of the exterior
of the demised premises or of the external walls or rails or fences
thereof any nameplate signboard placard poster or other
advertisement or hoarding;
(xx) To make reasonable provision against and be responsible
for all loss injury or damage to any person or property including
that of the Lessor for which the Lessee may be held liable arising
out of or in connection with the occupation and use of the demised
premises and to indemnify the Lessor against all proceedings claims
costs and expenses which he may incur or for which he may be held
liable as a result of any act neglect or default of the Lessee its
servants contractors or agents;
(xxi) Not to effect a change of name without the prior consent
in writing of the Lessor PROVIDED THAT on every change of name the
Lessee shall pay to the Lessor a fee to be specified by the Lessor
in relation to such consent;
(xxii) Not in install and/or use any electrical installations,
machines or apparatus that may cause or causes heavy power surge,
high frequency voltage and current, air borne noise, vibration or
any electrical or mechanical interference or disturbance whatsoever
which may prevent or prevents in any way the service or use of any
communication system or affects the operation of other equipment,
installations, machinery, apparatus or plants of other Lessees and
in connection therewith, to allow the Lessor or any authorised
persons to inspect at all reasonable
- 9 -
<PAGE> 24
times, such installations, machines or apparatus in the demised
premises to determine the source of he interference or
disturbance and thereupon, to take suitable measures, at the
Lessee's own expense, to eliminate or reduce such interference or
disturbance to the Lessor's satisfaction, if it is found by the
Lessor or such authorised person that the Lessee's electrical
installations, machines or apparatus is causing or contributing
to the said interference or disturbance;
(xxiii) To indemnify the Lessor against any claims, proceedings, action,
losses, penalties, damages, expenses, costs, demands which may
arise in connection with Clause (xxii) above;
(xxiv) To make good and sufficient provision for the safe and efficient
disposal of all waste including but not limited to pollutants
generated at the said land to the requirements and satisfaction
of the Lessor and other relevant Government authorities PROVIDED
THAT in the event of any default by the Lessee under this
covenant the Lessor may carry out such remedial measures as it
thinks necessary and all costs and expenses incurred thereby
shall be recoverable forthwith from the Lessee as a debt.
2 The area of the said land ("the said area") shall be subject to Government
survey or re-survey.
(i) If upon final survey, the said area is found to differ from the
final surveyed area within +/- 1% of the said area, the final
surveyed area will be adopted for the lease of the said land, but
the rent shall not be adjusted. Any rental revision subsequent to
the final survey shall be calculated based on the final surveyed
area.
- 10 -
<PAGE> 25
(ii) If the difference between the said area and the final surveyed area
exceeds the +/- 1% margin, the final surveyed area will be adopted
for the lease of the said land and:-
(a) if the final surveyed area is greater than the said area; the
Lessee shall at the request and absolute discretion of the
Lessor pay to the Lessor additional rent for the additional
area;
(b) if the final surveyed area is less than the said area, the
Lessor shall credit the excess rent paid by the Lessee to
the account of the Lessee towards payment of the rent. The
additional rent payable or to be credited in either instance
will be computed at the same rate as the rent payable under the
terms of this Lease.
3 The Lessor further covenants with the Lessee that the Lessor shall at the
written request of the Lessee made not less than twelve (12) months before the
expiry of the said term but not earlier than the twenty-eighth (28th) year of
the said term grant to the Lessee a Lease of the said land for a further term
of 30 years (hereinafter referred to as "the further term") which shall
commence from the date immediately following the expiration of the said term
on the same terms and conditions and containing like covenants as are
herein contained with the exception of the present covenant for renewal and
such variations or modifications as shall be imposed by the Lessor PROVIDED
that:-
(i) There be no existing breach(es) or non-observance(s) of any of the
covenants and conditions herein contained on the part of the Lessee
to be observed or performed;
- 11 -
<PAGE> 26
(ii) The rental payable for the further term shall be as set out
hereunder:-
(a) The Yearly Rent for the further term commencing on the 1st day
of MAR 2026 shall be at the rate based on the market rent at
the commencement of the further term (hereinafter referred to
as "the Second Initial Rent") which rate shall however be
subject to a revision on the 1st day of MAR 2027 to a rate based
on the market rent on the date of such revision determined in
the manner following but so that the increase shall not exceed
7.6 percent of the Second Initial Rent;
(b) The Yearly Rent so revised shall be subject to revision every
year from the 1st day of MAR 2027 and shall be at the rate based
on the market rent on the respective dates determined in the
manner following but so that the increase shall not exceed 7.6
percent of the Yearly Rent for each immediately preceding year;
(c) The market rent in this context shall mean the rent per square
metre per annum of the said land excluding the buildings and
other structures erected thereon and shall be determined by the
Lessor on or about the dates mentioned and the decision of the
Lessor shall be final.
(d) The Yearly Rent shall be paid quarterly in advance without
deduction and without demand w.e.f. the 1st day of MAR 2026 at
the office of the Lessor or such other office as the Lessor may
designate;
- 12 -
<PAGE> 27
(e) Any demise, transfer, assignment or parting of possession of
the said land or any part thereof by the Lessee in whatsoever
manner within 5 years of the commencement of the further term
will be approved by the Lessor only upon payment by the Lessee
of a fee (hereinafter called "the additional fee") which shall
be equivalent to the value of the buildings and there shall
also be a full revision of the rental to the prevailing market
rate from the date of assignment and payment of such
administrative fee as determined by the Lessor as provided
under Clause 1(ix) herein contained. The value of the building
shall be determined by the Lessor alone and the Lessor's
assessment shall be final and conclusive and not be subject or
open to review by the Lessee. PROVIDED THAT the Lessee shall
not be required to pay the additional fee for any demise,
transfer, assignment or parting with possession of the said
land or any part thereof by the Lessee in whatsoever manner
after the aforesaid 5 years period;
(f) All costs expenses charges legal or otherwise including stamp
duty and the Lessor's legal costs of or connected with the
preparation completion and registration of the Lease for the
further term of 30 years shall be borne by the Lessee.
(iii) The interest chargeable shall be at the rate of 8.5% per
annum or such higher rate as may be determined from time to time by
the Lessor in respect of any arrears of rent or other outstanding
sums due and payable under the Lease from the due dates thereof
until payment in full is
- 13 -
<PAGE> 28
4 AND the Lessor hereby covenants with the Lessee that the Lessee duly paying
the rent hereinbefore reserved and performing and observing the covenants
conditions and agreements on the part of the Lessee hereinbefore contained shall
and may peaceably and quietly hold and enjoy the said land for the term hereby
granted without any interruption from the Lessor or from any person lawfully
claiming through under or in trust for him.
5 PROVIDED ALWAYS that if the said rent hereby reserved or any part thereof
shall be in arrears for the space of fourteen (14) days next after being payable
(whether the same shall have been formally demanded or not) or if any covenant
on the part of the Lessee hereinbefore contained shall not be performed or
observed or if the Lessee or other person or persons in whom for the time being
the term hereby created shall be vested shall become bankrupt or make an
assignment for the benefit of its or their creditors or enter into an agreement
or make any arrangement with its or their creditors for liquidation of its or
their debts by composition or otherwise then and in any such case it shall be
lawful for the Lessor to impose such penalties as it deems fit as well as to
enter upon and take possession of the said land or any part thereof in the name
of the whole and thereupon the term hereby created shall absolutely cease and
determine without prejudice to any right of action or remedy of the Lessor in
respect of any antecedent breach of any of the Lessee's covenants hereinbefore
contained. Provided Always that if the said land and the buildings thereon have
been assigned by way of mortgage and there should be any breach of the Lessee's
covenants as aforesaid, the Lessor or the officer authorised as aforesaid shall
not enter upon and take possession of the said land and buildings nor shall the
term hereby created cease and determine
- 14 -
<PAGE> 29
until the Lessor has served upon the Mortgage a notice in writing that such
breach has occurred and the Mortgage has failed to remedy such breach within
one (1) calendar month from the date of service of such notice.
6 All sums payable under this Lease are exclusive of Goods and Services Tax.
The Lessee shall pay and indemnify the Lessor against Goods and Services Tax
chargeable in respect of any payment made by the Lessee under the terms of or
in connection with this Lease or in respect of any payment made by the Lessor
where the Lessee hereby agrees in this Lease to reimburse the Lessor for such
payment.
- -------------------------------------------------------------------------------
(F) DATE OF LEASE :
------------------------
- -------------------------------------------------------------------------------
(G) EXECUTION BY LESSOR
-------------------------
SIGNATURE
Witness :
-------------------------
- -------------------------------------------------------------------------------
(H) EXECUTION BY LESSEE
-------------------------
SIGNATURE
Witness :
-------------------------
- -------------------------------------------------------------------------------
(I) CERTIFICATES PURSUANT TO THE RESIDENTIAL PROPERTY ACT AND THE LAND TITLES
RULES AND PRACTICE CIRCULARS:
- 15 -
<PAGE> 30
(J) SIMILAR INTEREST CONFIRMATION (if any)
I, the solicitors for the Lessee hereby confirms that
---------------------
the interest of the Lessee is similar to that in Caveat CV/ .
----------
--------------------------------------------
NAME & SIGNATURE OF SOLICITOR FOR THE LESSEE
(K) CERTIFICATE OF CORRECTNESS:
I, the solicitor for the Lessor hereby certify that
---------------------
this instrument is correct for the purposes of the Land Titles Act.
--------------------------------------------
NAME & SIGNATURE OF SOLICITOR FOR THE LESSOR
I, the solicitor for the Lessee hereby certify that
---------------------
this instrument is correct for the purposes of the Land Titles Act.
---------------------------------------------
NAME & SIGNATURE OF SOLICITOR FOR THE LESSEE
- -------------------------------------------------------------------------------
FOR OFFICIAL USE ONLY
- -------------------------------------------------------------------------------
EXAMINED REGISTERED
Date: Initials of Signing Officer: Registrar of Titles
- -------------------------------------------------------------------------------
Note: This portion shall be printed or typed on the reverse side of the
last page of the application.
Signature
- 16 -
<PAGE> 31
[MAP -- SITE PLAN OF ST ASSEMBLY TEST SERVICES PTE LTD]
<PAGE> 1
EXHIBIT 10.6
[CITIBANK LETTERHEAD]
CITIBANK, N.A., SINGAPORE BRANCH
Global Corporate Banking
Public Sector Unit
5 Shenton Way
#37-03/04 UIC Building
Singapore 068808
Tel (65) 320-5418
Fax (65) 225-1584
21 October 1999
Mr. Wong Kok Kit
Director of Finance
ST Assembly Test & Services Pte Ltd
5 Yishun Street 23
Singapore 768442
Dear Mr. Wong
CREDIT FACILITY
We are pleased to advise that Citibank, N.A., Singapore Branch ("Lender"), is
willing to make available the following facility ("Facility") to ST Assembly
Test & Services Pte Ltd ("Borrower") on the terms and conditions stated below.
1. LENDER
Citibank, N.A., Singapore Branch
2. BORROWER
ST Assembly Test & Services Pte Ltd
3. FACILITY TYPE
Uncommitted multi-currency credit facilities comprising the following:-
(a) short-term facilities (US$19MM)
(i) short-term loans
(ii) guarantees
(iii) issuance of letters of credit
(b) overdraft facility (US$1MM)
<PAGE> 2
4. FACILITY LIMIT
The purpose of the US$20 million facility is to meet general working
capital requirements. The Borrower may choose to vary the various
facilities limits as long as it is within the total facility limit
of US$20 million.
5. FACILITY PURPOSE
The purpose of the facility is to meet general working capital
requirements.
6. INTEREST AND COMMISSIONS
Interest is chargeable at
(a) short-term facilities
- short-term loans based on best effort basis
(b) overdraft facility, Citibank prime per annum, payable in arrears
monthly
Commissions at the following rates and payable at the time of issuance
(a) letters of credit at 1/16% per month, minimum S$100
(b) guarantees at
- 1/2% p.a. for tenor less than 1 year
- 5/8% p.a. for tenor between 1 and 2 years
- 3/4 p.a. for tenor above 2 years
(minimum S$100 for each guarantee, irregardless of tenor)
7. REVIEW AND REPAYMENT ON DEMAND
In accordance with the Lender's policy, this Facility, if extended is
subject to the Lender's periodic review and may, without prior notice, be
modified or cancelled, in whole or in part, at the Lender's sole discre-
tion, whereupon all outstanding amounts owing under this Facility shall
become immediately due and payable on demand.
8. SET-OFF
The Borrower agrees that in addition to any general lien or similar right
which the Lender as bankers may be entitled at law, the Lender may at any
time, without prior notice to the Borrower, apply any credit balance
(whether or not then due) to which the Borrower is at any time, legally or
beneficially entitled on any account(s) any sum(s) held to the Borrower's
order with the Lender, Citibank, N.A. or any of Citibank, N.A.'s branches
or affiliates in any jurisdiction, in or towards satisfaction of any of
the Borrower's liabilities to the Lender.
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9. INDEMNITY FOR COSTS AND EXPENSES
The Borrower shall indemnify the Lender against all legal and out-of-pocket
costs and expenses relating to the establishment of this Facility and the
enforcement by the Lender of any of its rights, whether as a result of
any default by the Borrower of its obligations, under this Facility or
otherwise and will be paid by the Borrower on demand by the Lender.
10. GOVERNING LAW
This letter shall be governed by and construed in accordance with
Singapore law. The Borrower agrees irrevocably to submit to the non-
exclusive jurisdiction of the Singapore courts.
11. INTERNATIONALISATION OF THE SINGAPORE DOLLAR
As you are aware, if any of the Borrower is not a Singapore resident,
Singapore Dollar credit facilities are required to be used by the
Borrower for financial investments in Singapore and/or economic
activities in Singapore. Approval of and/or consultation with the
Monetary Authority of Singapore are required for use otherwise.
This offer should be accepted by the Borrower by signing on the duplicate copy
of this letter and returning it to the Lender on or before 21 NOVEMBER 1999
together with a certified true copy of the Borrower's Board of Directors
authorizing any of its offices to execute and deliver acceptance by the
Borrower of the duplicate copy of this letter. This offer will lapse after 21
NOVEMBER 1999 unless extended by the Lender.
Yours sincerely
/s/ BILL CHUA /s/ LIM SHIEN KWOK
- ------------------ ------------------
Bill Chua Lim Shien Kwok
Director Deputy Director
Public Sector/GLCs Public Sector/GLCs
Accepted for and on behalf of the Borrower
/s/ [ILLEGIBLE SIGNATURE]
- ------------------------------------------
Authorized Signatory of the Borrower
16 November 1999
- ----------------
Date
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EXHIBIT 21.1
SUBSIDIARY OF ST ASSEMBLY TEST SERVICES LTD:
Singapore Technologies Assembly and Test Services, Inc.
Jurisdiction of Incorporation: Delaware, United States
<PAGE> 1
EXHIBIT 23.3
[KPMG LETTERHEAD]
THE BOARD OF DIRECTORS AND SHAREHOLDERS
ST ASSEMBLY TEST SERVICES LTD:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG
- -----------------
KPMG
SINGAPORE
December 27, 1999
