<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 2000
Registration No. 333-93661
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
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. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(2) GLOBAL OFFERING PRICE AGGREGATE REGISTRATION FEE
PER ORDINARY SHARE(3) GLOBAL OFFERING PRICE(3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ORDINARY SHARES, PAR VALUE S$0.25 PER SHARE, 195,500,000 $2.00 $391,000,000 $ 103,224(4)
INCLUDING ORDINARY SHARES REPRESENTED BY
AMERICAN DEPOSITARY SHARES(1)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) American Depositary Shares evidenced by American Depositary Receipts
issuable upon deposit of the Ordinary Shares registered hereby are being
registered pursuant to a separate registration statement on Form F-6. Each
American Depositary Share will represent ten Ordinary Shares.
(2) Includes (a) 25,500,000 ordinary shares (including ordinary shares
represented by American Depositary Shares) that the underwriters have the
option to purchase to cover overallotments, if any, and (b) all ordinary
shares initially offered and sold outside of the United States that may be
resold from time to time in the United States, which ordinary shares are not
being registered for the purpose of sales outside the United States. See
"Underwriting."
(3) Estimated solely for the purpose of computing the amount of the registration
fee, in accordance with Rule 457(a) promulgated under the Securities Act of
1933, as amended.
(4) Of which $63,756 has previously been paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
We are making a global offering of our ordinary shares, which may be in the
form of American Depositary Shares. The global offering will consist of a U.S.
offering, an international offering and a Singapore offering. The attached
prospectus relates to the U.S. offering only. The international prospectus will
be the same as the prospectus for the U.S. offering except that it will have a
different front and back cover page. The prospectus for the Singapore offering
will be the same as the international prospectus except that it will have a
special wrap with information required by Singapore law.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 24, 2000
PROSPECTUS
153,000,000 ORDINARY SHARES
DIRECTLY OR IN THE FORM OF AMERICAN DEPOSITARY SHARES
STATS LOGO
ST ASSEMBLY TEST SERVICES LTD
S$ PER ORDINARY SHARE
US$ PER ADS
------------------
We are offering 153,000,000 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
153,000,000 ordinary shares that we are offering, 102,000,000 are being offered
in the United States and Canada and 51,000,000 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 17,000,000 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$18.00 and US$20.00 per ADS and S$3.00 and S$3.33
per ordinary share (the equivalent of US$1.80 and US$2.00 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 25,500,000 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 62.1% 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 73.5% 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 165 testers and 364 wire bonders as of January 10, 2000. 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,
(74.5% 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, (5.0% 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.
RECENT DEVELOPMENTS
The following is based on preliminary unaudited data and is subject to
change:
The Company's net revenues for the three months ended December 31, 1999 are
expected to be $65.1 million, an 87.6% increase over the $34.7 million net
revenues reported in the corresponding period of 1998 and a 21.2% increase over
the $53.7 million recorded in the September 30, 1999 quarter. Gross profit is
expected to be $25.8 million, or 39.6% of net revenues, in the fourth quarter
versus a gross profit of $8.5 million reported in the corresponding period of
1998 and a gross profit of $19.0 million in the September 30, 1999 quarter.
However, the Company expects an operating loss for the December 31, 1999 quarter
of $2.5 million, or (3.8)% of net revenues, versus operating income of $2.6
million in the corresponding period of 1998 and operating income of $2.7 million
in the September 30, 1999 quarter. This is due primarily to the charge for
stock-based compensation, which was $16.9 million for the three months ended
December 31, 1999, versus a charge of $0.2 million for the corresponding period
in 1998 and a charge of $6.7 million in the September 30, 1999 quarter. The
charge for the December 31, 1999 quarter was comprised mainly of a charge of
$15.7 million arising on the termination of the Employees' Share Ownership
Scheme, as discussed in Note 25 of the Company's audited financial statements
included elsewhere herein. Net loss for the three month period ended December
31, 1999 is expected to be $3.7 million, or (5.7)% of net revenues, versus net
income of $0.7 million reported in the corresponding period of 1998 and net
income of $1.4 million recorded in the September 30, 1999 quarter. Net income
for the 12 months ended December 31, 1999 is expected to be $4.8 million
compared to net income of $1.1 million for the year ended December 31, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1998 1999 1999
------------ ------------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............................ $34.7 $53.7 $65.1
Gross profit............................ 8.5 19.0 25.8
Stock-based compensation................ 0.2 6.7 16.9
Operating income (loss)................. 2.6 2.7 (2.5)
Net income (loss)....................... 0.7 1.4 (3.7)
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1999
-----------------
(IN MILLIONS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 16.6
Working capital (deficit)................................... (63.7)
Total assets................................................ 352.0
Short-term debt and current installments of long-term
debt...................................................... 67.4
Long-term debt.............................................. 46.4
Shareholders' equity........................................ 141.2
</TABLE>
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 170,000,000 ordinary shares, directly or in the
form of ADSs, will be offered (plus 25,500,000
ordinary shares subject to the underwriters'
overallotment option).
U.S. OFFERING.............. An offering in the United States and Canada of
102,000,000 ordinary shares, directly or in the
form of ADSs.
INTERNATIONAL OFFERING..... An offering outside the United States and Canada of
51,000,000 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 17,000,000
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$18.00 and US$20.00 per ADS
and S$3.00 and S$3.33 per ordinary share.
OVERALLOTMENT OPTION....... We have granted the underwriters a 30-day option to
purchase up to a total of 25,500,000 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...... 955,427,695 ordinary shares (including ordinary
shares represented by ADSs) will be outstanding
after the global offering. If the underwriters
exercise their overallotment option in full,
980,927,695 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 $271,754
Working capital (deficit)................................... (44,946) 260,092
Total assets................................................ 286,281 541,319
Short-term debt and current installments of long-term
debt...................................................... 57,518 7,518
Long-term debt.............................................. 45,107 45,107
Shareholders' equity........................................ 125,099 430,137
</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
170,000,000 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$3.17 per
ordinary share and $19.00 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."
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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.
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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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<PAGE> 13
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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<PAGE> 14
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 74.5% of our ordinary shares, or 72.6% 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 955,427,695 ordinary shares outstanding immediately following
the global offering without taking into account the underwriters' overallotment
option. The 170,000,000 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 25,500,000
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 $1.90 per
ordinary share, our current shareholders will have an aggregate unrealized gain
of $228.0 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
14
<PAGE> 20
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 $305.0 million, or $351.2 million if the underwriters exercise
their overallotment option in full, assuming an initial public offering price of
$19.00 per ADS and S$3.17 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 170,000,000 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
$19.00 per ADS and S$3.17 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 $271,754
======== ========
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); 966,145,600 shares issued and
outstanding, as adjusted(2)............................ 131,423 156,423
Additional paid in capital................................ 29,305 309,343
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............................. 125,099 430,137
-------- --------
Total capitalization................................. $227,724 $482,762
======== ========
</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 170,000,000 ordinary shares in the global
offering (including ordinary shares represented by ADSs), at an initial public
offering price of S$3.17 per ordinary share (or $19.00 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$0.76 per ordinary share (the equivalent of $4.45 per ADS). This represents an
immediate increase in net tangible book value of S$0.49 per ordinary share (the
equivalent of $2.88 per ADS) to our existing shareholders and an immediate
dilution in net tangible book value of S$2.41 per ordinary share (the equivalent
of $14.55 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$3.17 $19.00
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.............. 0.49 2.88
------ -----
Net tangible book value per ordinary share and per ADS after
the global offering....................................... 0.76 4.45
------ ------
Dilution in net tangible book value per ordinary share and
per ADS to new public investors........................... S$2.41 $14.55
====== ======
</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 82.4% $160.7 33.2% $0.20
New public investors........................... 170.0 17.6% 323.0 66.8% 1.90
----- ----- ------ ------ -----
Total..................................... 966.1 100.0% $483.7 100.0% $0.50
===== ===== ====== ====== =====
</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.
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<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 165 testers and 364 wire bonders as of January 10, 2000. 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,
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<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, 71.8% and 81.8%, 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% 73.5%
Digital.................................................. 39.6 30.6 25.4%
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.
QFP graphic
PLCC 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.
44
<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 January 10, 2000, we employed 66 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 Pte Ltd
Analog Devices, Inc. International, Inc. Sigmatel, Inc.
Broadcom Corporation Infineon Technologies Asia STMicroelectronics Pte Ltd
Centillium Technology Pacific Pte Ltd Standard Microsystems
Corporation Level One Communications, Inc. Corporation
Chip Express Corporation Marvell Technology Group Ltd Synaptics, Inc.
Cirrus Logic, Inc. Motorola Inc. TDK Corporation
Conexant Systems, Inc. National Semiconductor TeraLogic, Incorporated
Chartered Semiconductor Corporation Texas Instruments Incorporated
Manufacturing Ltd Nortel Networks Corporation Wolfson Microelectronics Ltd.
Dallas Semiconductor Oak Technology, Inc
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.......................................... 19.6% 38.6% 62.1%
Personal Computers...................................... 67.6 49.7 33.3
Other................................................... 12.8 11.7 4.6
----- ------ -----
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 165 testers, including 116 for mixed-signal
testing, 36 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 165 testers we
operate are on consignment and 17 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 364 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 January 10, 2000, we had 1,776 employees worldwide of whom 1,206 were
operations personnel, 275 were engineering personnel, 75 were sales and
marketing personnel and 220 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).................... 52 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 74.5% of our outstanding
ordinary shares upon completion of the global offering (assuming the
underwriters do not exercise their overallotment option), 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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<PAGE> 66
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 January 24, 2000 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 53.5%
Singapore Technologies Semiconductors Pte
Ltd(1)..................................... 200,695,652 25.5% 200,695,652 21.0%
EDB Investments Pte Ltd(2)................... 48,021,950 6.1% 48,021,950 5.0%
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 January 24, 2000, 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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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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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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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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- 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
955,427,695 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 170,000,000 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)
(9,554,277 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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<PAGE> 89
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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<PAGE> 90
UNDERWRITING
The global offering consists of:
- the U.S. offering of an aggregate of 102,000,000 ordinary shares directly
or in the form of ADSs in the United States and Canada;
- the International offering of an aggregate of 51,000,000 ordinary shares
directly or in the form of ADSs outside the United States and Canada; and
- the Singapore offering of an aggregate of 17,000,000 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..................................................... 102,000,000
===========
</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..................................................... 51,000,000
===========
</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 17,000,000 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 25,500,000 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
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<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
$0.04 per ordinary share or a total of approximately $727,000 assuming an
initial public offering price of $1.90 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.
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<PAGE> 93
We estimate that our total expenses of the global offering will be
$2,200,000. 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 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
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<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.
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<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 Standards
issued by the Institute of Certified Public Accountants of Singapore ("ICPAS"),
which statements set forth standards which are substantially similar to
generally accepted auditing standards in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
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........ -- -- 23,916 (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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
153,000,000 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......... $ 103,224
Nasdaq National Market Listing Fee.......................... $ 78,875
SGX-ST Listing Fee.......................................... $ 11,765
NASD Filing Fee............................................. $ 30,500
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............................................... $ 175,636
----------
Total..................................................... $2,200,000
==========
</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>
- ---------------
* Previously filed.
+ Confidential treatment has been requested. Confidential material has been
redacted and has been separately filed with the Securities and Exchange
Commission.
** Incorporated by reference to Exhibit 4 to the Form F-6 Registration
Statement filed on behalf of the Company with the Securities and Exchange
Commission on January 11, 2000.
(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
II-3
<PAGE> 132
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question 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. 2 to this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Republic of Singapore, on January 24, 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. 2
to this registration statement has been signed by the following persons in the
following capacities on January 24, 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 1.1
ST Assembly Test Services Ltd
102,000,000 Ordinary Shares */
(S$0.25 par value)
directly or in the form of American Depositary Shares
Each American Depositary Share representing
the right to receive ten Ordinary Shares
U.S. Underwriting Agreement
New York, New York
January [27], 2000
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
As U.S. Representatives of the several
U.S. Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
ST Assembly Test Services Ltd, a company organized under the
laws of Singapore (the "Company"), proposes to sell to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. Underwriters"), for whom you
(the "U.S. Representatives") are acting as representatives, 102,000,000 Ordinary
Shares, S$0.25 par value per share (the "Ordinary Shares"), of the Company
directly or in the form of American Depositary Shares (the "ADSs") (said
Ordinary Shares to be issued and sold by the Company being hereinafter called
the "U.S. Underwritten Shares"). The Company also proposes to grant to the U.S.
Underwriters an option to purchase up to 15,300,000 additional Ordinary Shares
to cover over-allotments (the "U.S. Option Shares" and together with the U.S.
Underwritten Shares, the "U.S. Shares").
It is understood that the Company is concurrently entering
into the International Underwriting Agreement dated as of the date hereof
providing for the sale by the Company of an aggregate of 51,000,000 Ordinary
Shares directly or in the form of ADSs (said Ordinary Shares to be issued and
sold by the Company pursuant to the International Underwriting Agreement being
hereinafter called the "International Underwritten Shares") and providing for
the grant to the International Underwriters of an option to purchase from the
Company up to 7,650,000 additional Ordinary Shares to cover over-allotments (the
"International Option Shares" and together with the International Underwritten
Shares, the "International Shares").
- --------
* Plus an option to purchase from the Company up to 25,500,000 additional
Ordinary Shares directly or in the form of ADSs to cover
over-allotments.
<PAGE> 2
2
It is also understood that the Company is concurrently
entering into the Singapore Management and Underwriting Agreement dated as of
the date hereof (hereinafter the "Singapore Underwriting Agreement" and together
with this U.S. Underwriting Agreement and the International Underwriting
Agreement, the "Underwriting Agreements") providing for the sale by the Company
of an aggregate of 17,000,000 Ordinary Shares (said Ordinary Shares to be issued
and sold by the Company pursuant to the Singapore Underwriting Agreement being
hereinafter called the "Singapore Underwritten Shares") and providing for the
grant to the Singapore Underwriters of an option to purchase from the Company up
to 2,550,000 additional Ordinary Shares to cover over-allotments (the "Singapore
Option Shares" and together with the "Singapore Underwritten Shares", the
"Singapore Shares"). The U.S. Shares, together with the International Shares and
the Singapore Shares are hereinafter called the "Shares".
You have also advised the Company that the Underwriters may
elect to cause the Company to deposit on their behalf all or any portion of the
Ordinary Shares to be purchased by them under the Underwriting Agreements
pursuant to the Deposit Agreement, dated as of February [8], 2000 (the "Deposit
Agreement"), to be entered into among the Company, Citibank N.A., as depositary
(the "Depositary") and all holders from time to time of the ADSs (as hereinafter
defined). Upon deposit of any Ordinary Shares, the Depositary will issue
American Depositary Shares representing the Shares so deposited. The ADSs will
be evidenced by American Depositary Receipts (the "ADRs"). Each ADS will
represent ten Ordinary Shares and each ADR may represent any number of ADSs.
Unless the context otherwise requires, the terms "Underwritten Securities",
"Option Securities", "U.S. Underwritten Securities", "U.S. Option Securities",
"U.S. Securities", "International Underwritten Securities", "International
Option Securities", "International Securities", "Singapore Underwritten
Securities", "Singapore Option Securities", "Singapore Securities" and
"Securities" shall be deemed to refer, respectively, to Underwritten Shares,
Option Shares, U.S. Underwritten Shares, U.S. Option Shares, U.S. Shares,
International Underwritten Shares, International Option Shares, International
Shares, Singapore Underwritten Shares, Singapore Option Shares, Singapore Shares
and Shares, as well as, in each case, to any ADSs representing such securities
and the ADRs evidencing such ADSs.
It is further understood and agreed that the U.S.
Underwriters, International Underwriters and Singapore Underwriters have entered
into an Agreement Among U.S. Underwriters, International Underwriters and
Singapore Underwriters dated the date hereof (the "Agreement Among U.S.
Underwriters, International Underwriters and Singapore Underwriters"), pursuant
to which, among other things, the International Underwriters and Singapore
Underwriters may purchase from the U.S. Underwriters a portion of the U.S.
Securities to be sold pursuant to this U.S. Underwriting Agreement, the U.S.
Underwriters and Singapore Underwriters may purchase from the International
Underwriters a portion of the International Securities to be sold pursuant to
the International Underwriting Agreement, and the U.S. Underwriters and
International Underwriters may purchase from the Singapore Underwriters a
portion of the Singapore Securities to be sold pursuant to the Singapore
Underwriting Agreement.
The offering of the U.S. Shares, directly or in the form of
ADSs, is referred to herein as the "U.S. Offering"; the offering of the
International Shares, directly or in the form of ADSs, is referred to herein as
the "International Offering"; and the offering of the Singapore Shares (which
will be only in the form of Ordinary Shares) is referred to herein as the
"Singapore Offering". The U.S. Offering, International Offering and Singapore
Offering are referred to collectively herein as the "Global Offering".
As part of the Global Offering contemplated by the
Underwriting Agreements, the U.S. Underwriters, the International Underwriters
and the Singapore
<PAGE> 3
3
Underwriters have agreed to reserve up to 7,500,000 Ordinary Shares out of the
Underwritten Shares set forth opposite their names on Schedule I to this U.S.
Underwriting Agreement, the International Underwriting Agreement and the
Singapore Underwriting Agreement, respectively, for sale (directly or in the
form of ADSs) to the Company's directors, officers, employees, employees of the
Company's business associates, officers and employees of the Company's
affiliates and certain charitable organizations in Singapore (collectively,
"Participants"), as set forth in the Prospectuses under the heading
"Underwriting" (the "Directed Securities Program"). The Securities to be sold by
the Underwriters pursuant to the Directed Securities Program (the "Directed
Securities") will be sold by them pursuant to the Underwriting Agreements at the
initial public offering price. Any Directed Securities not orally confirmed for
purchase by any Participants by the end of the Business Day in Singapore on
which the Underwriting Agreements are executed will be offered to the other
Participants first, and any of such Directed Securities which are not taken up
by such Participants shall then be offered to the public by the Underwriters as
set forth in the Prospectuses.
To the extent there are no additional U.S. Underwriters listed
on Schedule I other than you, the term U.S. Representatives as used in this U.S.
Underwriting Agreement shall mean you, as U.S. Underwriters, and the terms U.S.
Representatives and U.S. Underwriters shall mean either the singular or plural
as the context requires. The use of the neuter in this U.S. Underwriting
Agreement shall include the feminine and masculine wherever appropriate. Certain
terms used in this U.S.
Underwriting Agreement are defined in Section 20 hereof.
1. Representations and Warranties.
(i) The Company represents and warrants to, and agrees with,
each U.S. Underwriter as set forth below in this Section 1.
(a) The Company has prepared and filed with the Commission a
registration statement (file number 33-93661) on Form F-1, including
the related U.S. Preliminary Prospectus, for registration under the Act
of the offering and sale of the Shares. The Company may have filed one
or more amendments thereto, including the related U.S. Preliminary
Prospectus, each of which has previously been furnished to you. The
Company will next file with the Commission either (1) prior to the
Effective Date of such registration statement, a further amendment to
such registration statement (including the form of final U.S.
Prospectus) or (2) after the Effective Date of such registration
statement, final U.S. Prospectus in accordance with Rules 430A and
424(b). In the case of clause (2), the Company has included in such
registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the Act and
the rules thereunder to be included in such registration statement and
the U.S. Prospectus with respect to the Underlying Shares and the
offering thereof directly or in the form of ADSs. As filed, such
amendment and form of final prospectus, or such final prospectus, shall
contain all Rule 430A Information, together with all other such
required information with respect to the Underlying Shares and the
offering thereof directly or in the form of ADSs, and, except to the
extent the U.S. Representatives shall agree in writing to a
modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest U.S. Preliminary Prospectus) as the Company has advised you,
prior to the Execution Time, will be included or made therein.
<PAGE> 4
4
It is understood that three forms of prospectuses are to be
used in connection with the offering and sale of the Securities: one
form of prospectus relating to the U.S. Securities, which are to be
offered and sold to United States and Canadian Persons, one form of
prospectus relating to the International Securities, which are to be
offered and sold to persons other than United States and Canadian
Persons and one form of prospectus for circulation to potential
subscribers in Singapore relating to the Singapore Securities, which
are to be offered and sold in an initial public offering in Singapore.
The International Prospectus will be the same as the U.S. Prospectus
except that it will have a different front and back cover page. The
Singapore Prospectus will be the same as the International Prospectus
except that it will have a special wrap with information required by
Singapore law. The International Prospectus and the Singapore
Prospectus will not be filed as part of the Registration Statement.
(b) On the Effective Date, the Registration Statement did or
will, and when the U.S. Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date (as defined in this
U.S. Underwriting Agreement ) and on any date on which Option
Securities are purchased, if such date is not the Closing Date (a
"settlement date"), each U.S. Prospectus (and any supplements thereto)
will comply in all material respects with the applicable requirements
of the Act and the rules thereunder; on the Effective Date and at the
Execution Time, the Registration Statement did not or will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Effective Date, each
Prospectus, if not filed pursuant to Rule 424(b), will not, and on the
date of any filing pursuant to Rule 424(b) and on the Closing Date and
any settlement date, each Prospectus (together with any supplement
thereto) will not, include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or
omitted from the Registration Statement, or the Prospectuses (or any
supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through the Representatives specifically for inclusion in the
Registration Statement or the Prospectuses (or any supplement thereto)
as set forth in Section 8(c) hereof.
(c) The Company has filed with the Commission a registration
statement (file number 505544) on Form F-6 for the registration under
the Act of the offering and sale of the ADSs. The Company may have
filed one or more amendments thereto, each of which has previously been
furnished to you. Such ADR Registration Statement at the time of its
effectiveness did or will comply and on the Closing Date, will comply,
in all material respects with the applicable requirements of the Act
and the rules thereunder and at the time of its Effective Date and at
the Execution Time, did not and will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(d) Each of the Company and Singapore Technologies Assembly
and Test Services, Inc., a corporation organized under the laws of the
State of Delaware, (the "Subsidiary") has been duly incorporated and is
validly existing as a corporation under the laws of the jurisdiction in
which it is chartered or organized with full corporate power and
authority to own or lease, as the case may be, and to operate its
properties and conduct its business as described in the Prospectuses.
The Subsidiary is the only subsidiary of the Company.
<PAGE> 5
5
(e) All the outstanding shares of capital stock of the
Subsidiary have been duly and validly authorized and issued, are fully
paid and nonassessable, and are owned by the Company free and clear of
any perfected security interest or any other security interests,
claims, liens or encumbrances;
(f) The Company's authorized, issued and outstanding equity
capitalization is as set forth in the Prospectuses; the outstanding
Ordinary Shares have been duly and validly authorized and issued and
are fully paid and nonassessable; the Securities being sold under the
Underwriting Agreements by the Company have been duly and validly
authorized, and, when issued and delivered to and paid for by the U.S.
Underwriters pursuant to this U.S. Underwriting Agreement, by the
International Underwriters pursuant to the International Underwriting
Agreement, by the Singapore Underwriters pursuant to the Singapore
Underwriting Agreement will be validly issued, fully paid and
nonassessable; the certificates for the Securities are in valid and
sufficient form; the holders of outstanding shares of capital stock of
the Company are not entitled to any preemptive or other rights to
subscribe for the Securities; and, except as set forth in the
Prospectuses, the Company has not issued any options, warrants or other
rights to purchase, or entered into any agreements or other obligations
to issue, or granted any rights to convert any obligations into or
exchange any securities for, shares of capital stock of or ownership
interests in the Company.
(g) The Securities are freely transferable by the Company to
or for the account of the several Underwriters and their designees and
the initial purchasers thereof, and except as set forth in the
Prospectuses, there are no restrictions on subsequent transfers of the
Securities under the laws of Singapore and of the United States.
(h) The capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectuses. The
capital adjustment as a result of the termination and conversion of
certain of the options granted under the Employees' Share Ownership
Scheme was approved by the Company's shareholders at an extraordinary
general meeting on November 9, 1999 (the "EGM") and has become
effective and has been completed as described in the Prospectuses under
the heading "Management - Employee Benefits Plan".
(i) Each of the Underwriting Agreements and the Deposit
Agreement has been duly authorized, executed and delivered by the
Company.
(j) There is no franchise, contract or other document of a
character required to be described in the Registration Statement, ADR
Registration Statement or Prospectuses, or to be filed as an exhibit
thereto, which is not described or filed as required; and the
description of each such contract, franchise or document in the
Prospectuses is a fair description thereof in all material respects.
(k) Upon issuance by the Depositary of ADSs evidenced by ADRs
against deposit of Underlying Shares in accordance with the provisions
of the Deposit Agreement, such ADRs will be duly and validly issued and
persons in whose names the ADRs are registered will be entitled to the
rights specified in the ADRs and in the Deposit Agreement; and upon the
sale and delivery to the U.S. Underwriters of the U.S. Securities, and
payment therefor, pursuant to this U.S. Underwriting Agreement, the
U.S. Underwriters will acquire good, marketable and valid title to such
U.S. Securities subject to the terms of the Deposit Agreement, free and
clear of all pledges, liens, security interests, charges,
<PAGE> 6
6
claims or encumbrances of any kind. There are no limitations on the
rights of any holders of the ADSs to hold or vote the underlying
Ordinary Shares other than those arising in favor of persons purchasing
through the U.S. Underwriters.
(l) Except as described in the Prospectuses, no stamp or other
issuance or transfer taxes or duties are payable to the Republic of
Singapore or any political subdivision or taxing authority thereof or
therein by or on behalf of the Underwriters in connection with (A) the
execution and delivery of the Underwriting Agreements or Deposit
Agreement, (B) the issuance of the Securities in the manner
contemplated by the Underwriting Agreements, (C) the deposit with the
Depositary of the Underlying Shares against issuance of the ADRs
evidencing the ADSs, (D) the sale and delivery by the Company of the
Shares or the ADSs, as the case may be, as contemplated herein or (E)
the resale and delivery of such Shares and ADSs by the Underwriters in
the manner contemplated in the Prospectuses.
(m) Except as described in the Prospectuses, under current
Singapore law and regulations, all dividends and other distributions
declared and payable on the Ordinary Shares may be paid by the Company
to the Depositary and to the holders of Securities, as the case may be,
in Singapore dollars and may be converted into foreign currency and
freely transferred out of Singapore in accordance with the Deposit
Agreement, and all such dividends and other distributions made to
holders of the Underlying Shares or ADRs who are non-residents of
Singapore will not be subject to Singapore income, withholding or other
taxes under the laws and regulations of Singapore and, are otherwise
free and clear of any other tax, duty withholding or deduction in
Singapore and without the necessity of obtaining any government
authorization in Singapore.
(n) No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in connection
with the transactions contemplated herein or in the Deposit Agreement,
except such as have been obtained under the Companies Act, Chapter 50
of Singapore and such as have been obtained under the Act, and such as
may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters in the manner contemplated under the Underwriting
Agreements and in the Prospectuses.
(o) Neither the issue and sale of the Securities nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof or of the Deposit Agreement will
conflict with, result in a breach or violation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or the Subsidiary pursuant to, (i) the Memorandum and Articles of
Association of the Company or the Subsidiary, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement or other agreement, obligation, condition, covenant or
instrument to which the Company or the Subsidiary is a party or bound
or to which their respective property is subject, except such conflict,
breach, violation or imposition of any lien, charge or encumbrance
which would not, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and the Subsidiary,
taken as a whole, whether or not arising from transactions in the
ordinary course of business (a "Material Adverse Effect"), or (iii) any
statute, law, rule, regulation, judgment, order or decree applicable to
the Company or the Subsidiary of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority
having jurisdiction over the Company or the
<PAGE> 7
7
Subsidiary or any of their respective properties except, in the case of
the Subsidiary, any such conflict, breach, violation or imposition of
any lien, charge or encumbrance which would not, individually or in the
aggregate, have a Material Adverse Effect.
(p) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Prospectuses, will not be an "investment
company" as defined in the Investment Company Act of 1940, as amended.
(q) No holder of securities of the Company has rights to the
registration of such securities under the Registration Statement or the
ADR Registration Statement.
(r) The consolidated historical financial statements and
schedules of the Company included in the Prospectuses and the
Registration Statement present fairly in all material respects the
financial condition, results of operations and cash flows of the
Company as of the dates and for the periods indicated, comply as to
form with the applicable accounting requirements of the Act and have
been prepared in conformity with generally accepted accounting
principles of the United States applied on a consistent basis
throughout the periods involved (except as otherwise noted therein).
The summary and selected financial data set forth under the caption
"Recent Development", "Summary Financial Data" and "Selected
Consolidated Financial Data", respectively, in the Prospectuses and
Registration Statement present fairly in all material respects, on the
basis stated in the Prospectuses and the Registration Statement, the
information included therein.
(s) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or the Subsidiary or their property is pending or, to the best
knowledge of the Company, threatened that (i) could reasonably be
expected to have a material adverse effect on the performance of this
U.S. Underwriting Agreement or the consummation of any of the
transactions contemplated hereby or (ii) could reasonably be expected
to have a Material Adverse Effect, except as set forth in the
Prospectus.
(t) Each of the Company and the Subsidiary owns or leases all
such properties as are necessary to the conduct of its operations as
presently conducted, except where such failure to own or lease would
not, individually or in the aggregate, have a Material Adverse Effect.
(u) Neither the Company nor the Subsidiary is in violation or
default of (i) any provision of its charter or by-laws, (ii) any
provision of the United States Foreign Corrupt Practice Act of 1997,
(iii) the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which it is a party or bound or to
which its property is subject, or (iv) any statute, law, rule,
regulation, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority
having jurisdiction over the Company or the Subsidiary or any of their
properties, as applicable except in the case of clauses (iii) or (iv),
where such violation or default (A) would not, individually or in the
aggregate, have a Material Adverse Effect or (B) would not,
individually or in the aggregate, have a material adverse effect in the
performance of this U.S. Underwriting Agreement or the consummation of
any of the transactions contemplated herein;
<PAGE> 8
8
(v) KPMG, who have certified certain financial statements of
the Company and delivered their report with respect to the audited
consolidated financial statements and schedules included in the
Prospectuses, are independent public accountants with respect to the
Company within the meaning of the Act and the applicable published
rules and regulations thereunder.
(w) The Company has not paid or agreed to pay to any person
(other than the Underwriters pursuant to the Underwriting Agreements)
any compensation for soliciting another to purchase any securities of
the Company.
(x) Each of the Company and the Subsidiary possesses all
licenses, certificates, permits and other authorizations issued by the
appropriate Singaporean, U.S. federal and state, and any other foreign
regulatory authorities necessary to conduct its business in the manner
described in and contemplated by, the Prospectuses except, in the case
of the Subsidiary, where the failure to possess any such license,
permit, certificate or other authorization would not, individually or
in the aggregate, have a Material Adverse Effect, and neither the
Company nor the Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect, except as set forth in the Prospectuses.
(y) No labor problem or dispute with the employees of the
Company or the Subsidiary exists or, to the best knowledge of the
Company, is threatened or imminent and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
principal suppliers, contractors or customers, that could have a
Material Adverse Effect, except as set forth in the Prospectuses.
(z) The Company and the Subsidiary are insured by independent
insurers against such losses and risks and in such amounts as are
prudent and customary in the businesses in which they are engaged; all
policies of insurance insuring the Company or the Subsidiary or their
respective businesses, assets, employees, officers and directors are in
full force and effect; the Company and the Subsidiary are in compliance
with the terms of such policies and instruments in all material
respects; and there are no claims by the Company or the Subsidiary
under any such policy or instrument as to which any insurance company
is denying liability or defending under a reservation of rights clause;
neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor
the Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not, individually or in
the aggregate, have a Material Adverse Effect, except as set forth in
the Prospectuses (exclusive of any supplement thereto).
(aa) To the Company's best knowledge, the Company and the
Subsidiary own, possess, license or have other rights to use all
patents, patent applications, trade and service marks, trade and
service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets, technology, know-how and other intellectual
property (collectively, the "Intellectual Property") necessary for the
conduct of the Company's business as now conducted or as proposed in
the Prospectuses to be conducted, except where the failure to so own,
possess, license or have other rights would not have a Material Adverse
Effect. Except as set forth in the Prospectuses under the captions
"Risk Factors--Our intellectual
<PAGE> 9
9
property is important to our ability to succeed in our business but may
be difficult to protect and--We may be subject to intellectual property
rights disputes" or "Business-Intellectual Property", to the Company's
best knowledge: (a) except with respect to certain licenses the Company
has granted to customers for assembly or testing development programs
thereof, there are no rights of third parties in connection with any
such Intellectual Property; (b) there is no material infringement by
third parties of any such Intellectual Property; (c) there is no
pending or threatened action, suit, proceeding or claim by any third
party challenging the Company's rights in or to any such Intellectual
Property, and the Company is unaware of any facts which would form a
reasonable basis for any such claim; (d) there is no pending or
threatened action, suit, proceeding or claim by any third party
challenging the validity or scope of any such Intellectual Property,
and the Company is unaware of any facts which would form a reasonable
basis for any such claim; (e) there is no pending or threatened action,
suit, proceeding or claim by others that the Company infringes or
otherwise violates any patent, trademark, copyright, trade secret or
other proprietary rights of any third party, and the Company is unaware
of any other fact which would form a reasonable basis for any such
claim in the case of any of (a) through (e) above, which would have a
Material Adverse Effect and (f) such Intellectual Property is valid.
(bb) The Company has implemented a comprehensive, detailed
program to analyze and address the risk that their computer hardware
and software may be unable to recognize and properly execute
date-sensitive functions involving certain dates prior to and any dates
after December 31, 1999 (the "Year 2000 Problem") and has determined
that its computer hardware and software are and will be able to process
all date information prior to and after December 31, 1999 without any
errors, aborts, delays or other interruptions in operations associated
with the Year 2000 Problem;
(cc) The Company and the Subsidiary have filed all Singapore,
U.S. federal, state, and local, and all other tax returns that are
required to be filed or has requested extensions thereof (except in any
case in which the failure so to file would not have a Material Adverse
Effect, except as set forth in or contemplated in the Prospectuses
(exclusive of any supplement thereto)) and have paid all taxes required
to be paid by them and any other assessment, fine or penalty levied
against them, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is
currently being contested in good faith or as would not have a Material
Adverse Effect, except as set forth in the Prospectuses (exclusive of
any supplement thereto).
(dd) No Underwriter will be deemed resident, domiciled,
carrying on business or subject to taxation in Singapore solely by
reason of the execution, delivery, consummation or enforcement of this
U.S. Underwriting Agreement or any other document to be furnished
hereunder and no holder of the Securities will be deemed to be resident
or domiciled in Singapore solely by reason of holding such Securities.
(ee) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
<PAGE> 10
10
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(ff) The Company represents and warrants that (i) the
Registration Statement, the ADR Registration Statement, the
Prospectuses and the Preliminary Prospectuses comply, and any further
amendments or supplements thereto will comply, with any applicable laws
or regulations of foreign jurisdictions in which the Prospectuses or
Preliminary Prospectuses, as amended or supplemented, if applicable,
are distributed in connection with the Directed Securities Program; and
that (ii) no authorization, approval, consent, license, order,
registration or qualification of or with any government, governmental
instrumentality or court is necessary to offer and sell Securities
pursuant to the Directed Securities Program, other than such as have
been obtained, under the laws and regulations of any jurisdiction in
which the Directed Securities are offered outside the United States.
(gg) The Company and the Subsidiary are (i) in compliance with
any and all applicable Singaporean, U.S. federal, state and local and
Singapore laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received and are in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) have not received notice
of any actual or potential liability for the investigation or
remediation of any disposal or release of hazardous or toxic substances
or wastes, pollutants or contaminants, except where such non-compliance
with Environmental Laws, failure to receive required permits, licenses
or other approvals, or liability would not, individually or in the
aggregate, have a Material Adverse Effect, except as set forth in the
Prospectuses (exclusive of any supplement thereto).
(hh) The Company and the Subsidiary are in compliance with all
applicable employee pension and employee benefit plans except where
such non-compliance would not, individually or in the aggregate, have a
Material Adverse Effect.
(ii) The Company does not believe that it is a Passive Foreign
Investment Company ("PFIC") within the meaning of Section 1296 of the
United States Internal Revenue Code of 1986, as amended, and does not
expect to become a PFIC in the future.
(jj) Neither the Company nor the Subsidiary nor any of its or
their properties or assets has any immunity from the jurisdiction of
any court or from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution or
otherwise) under the laws of Singapore.
Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters in connection
with the offering of the Securities shall be deemed a representation and
warranty by the Company, as to matters covered thereby, to each U.S.
Underwriter.
2. Purchase and Sale. (a) Subject to the terms and conditions
and in reliance upon the representations and warranties set forth in this U.S.
Underwriting Agreement, the Company agree to sell to each U.S. Underwriter, and
each U.S.
<PAGE> 11
11
Underwriter agrees, severally and not jointly, to purchase from the Company, at
a purchase price of U.S. $- per Ordinary Share in the case of U.S. Underwritten
Securities to be delivered in the form of ADS or in the form of Ordinary Shares,
the amount of the U.S. Underwritten Securities set forth opposite such U.S.
Underwriter's name in Schedule I to this U.S. Underwriting Agreement. The
respective numbers of U.S. Underwritten Securities to be delivered in the form
of ADS or Ordinary Shares shall be pursuant to the direction of the U.S.
Representatives.
(b) Subject to the terms and conditions and in reliance upon
the representations and warranties set forth in this U.S. Underwriting
Agreement, the Company hereby grants an option to the several U.S. Underwriters
to purchase, severally and not jointly, up to 15,300,000 U.S. Option Securities
at the same purchase price per Ordinary Share as the U.S. Underwriters shall pay
for the U.S. Underwritten Securities. Said option may be exercised only to cover
over-allotments in the sale of the U.S. Underwritten Securities by the U.S.
Underwriters. Said option may be exercised in whole or in part at any time (but
not more than once) on or before the 30th day after the date of the U.S.
Prospectus upon written notice by the U.S. Representatives to the Company
setting forth the number of shares of the U.S. Option Securities as to which the
several U.S. Underwriters are exercising the option and the settlement date. The
number of U.S. Option Securities to be purchased by each U.S. Underwriter shall
be the same percentage of the total number of shares of the U.S. Option
Securities to be purchased by the several U.S. Underwriters as such U.S.
Underwriter is purchasing of the U.S. Underwritten Securities, subject to such
adjustments as you in your absolute discretion shall make to eliminate any
fractional shares.
3. Delivery and Payment. Delivery of and payment for the U.S.
Underwritten Securities and the U.S. Option Securities (if the option provided
for in Section 2(b) hereof shall have been exercised on or before the third
Business Day prior to the Closing Date) shall be made at 9:00 AM, New York City
time, on February [8], 2000, (unless postponed in accordance with Section 9
hereof) or at such time on such later date not more than ten Business Days after
the foregoing date as the U.S. Representatives and the Company shall agree,
(such date and time of delivery and payment for the U.S. Securities being called
in this U.S. Underwriting Agreement the "Closing Date"). Delivery of the U.S.
Securities shall be made to the U.S. Representatives for the respective accounts
of the several U.S. Underwriters against payment by the several U.S.
Underwriters through the U.S. Representatives of the aggregate purchase price of
the U.S. Securities being sold by the Company to or upon the order of the
Company by wire transfer payable in same-day funds in United States dollars to
the account specified by the Company. Delivery of the U.S. Underwritten
Securities and the U.S. Option Securities shall be made through the facilities
of The Depositary Trust Company unless the U.S. Representatives shall instruct
otherwise.
If the option provided for in Section 2(b) hereof is exercised
after the third Business Day prior to the Closing Date, the Company will deliver
(at the expense of the Company) to the U.S. Representatives, c/o Salomon Smith
Barney Inc. at 388 Greenwich Street, New York, New York 10013, on the date
specified by the U.S. Representatives (which shall be within three Business Days
after exercise of said option), certificates for the U.S. Option Securities in
such names and denominations as the U.S. Representatives shall have requested
for the respective accounts of the several U.S. Underwriters, against payment by
the several U.S. Underwriters through the U.S. Representatives of the purchase
price thereof to or upon the order of the Company by wire transfer and payable
in same day funds to the accounts specified by the Company. If settlement for
the U.S. Option Securities occurs after the Closing Date, the Company will
deliver to the U.S. Representatives on the settlement date for the U.S. Option
Securities, and the obligation of the U.S. Underwriters to purchase the U.S.
Option Securities shall be conditioned upon
<PAGE> 12
12
receipt of, supplemental opinions, certificates and letters confirming as of
such date the opinions, certificates and letters delivered on the Closing Date
pursuant to Section 6 hereof to the office of Shearman & Sterling, 6 Battery
Road, #25-03, Singapore 049909.
The certificates evidencing the U.S. Underwritten Securities
and U.S. Option Securities shall be registered in such names and in such
denominations as Salomon Smith Barney Inc. may request not less than one full
business day prior to the applicable Closing Date.
It is understood and agreed that the Closing Date shall occur
simultaneously with the "Closing Date" under the International Underwriting
Agreement and the Singapore Underwriting Agreement, and that the settlement date
for any U.S. Option Securities occurring after the Closing Date, shall occur
simultaneously with the settlement date under the International Underwriting
Agreement and the Singapore Underwriting Agreement for any International Option
Securities and Singapore Option Securities occurring after the Closing Date.
4. Offering by Underwriters. It is understood that the several
U.S. Underwriters propose to offer the U.S. Securities for sale to the public as
set forth in the U.S. Prospectus.
5. Agreements.
(i) The Company agrees with the several U.S. Underwriters
that:
(a) The Company will use its best efforts to cause the
Registration Statement and the ADR Registration Statement, if not
effective at the Execution Time, and any amendment thereof, to become
effective. Prior to the termination of the offering of the Securities,
the Company will not file any amendment of the Registration Statement
or the ADR Registration Statement or supplement to the U.S. Prospectus
or any Rule 462(b) Registration Statement unless the Company has
furnished you a copy for your review prior to filing and will not file
any such proposed amendment or supplement to which you reasonably
object. Subject to the foregoing sentence, if the Registration
Statement or the ADR Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the U.S. Prospectus is
otherwise required under Rule 424(b), the Company will cause the U.S.
Prospectus, properly completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence
satisfactory to the U.S. Representatives of such timely filing. The
Company will promptly advise the U.S. Representatives (1) when the
Registration Statement and the ADR Registration Statement, if not
effective at the Execution Time, shall have become effective, (2) when
the U.S. Prospectus, and any supplement thereto, shall have been filed
(if required) with the Commission pursuant to Rule 424(b) or when any
Rule 462(b) Registration Statement or ADR Registration Statement shall
have been filed with the Commission, (3) when, prior to termination of
the offering of the Securities, any amendment to the Registration
Statement or the ADR Registration Statement shall have been filed or
become effective, (4) of any request by the Commission or its staff for
any amendment of the Registration Statement, or any Rule 462(b)
Registration Statement or the ADR Registration Statement, or for any
supplement to the U.S. Prospectus or for any additional information,
(5) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the ADR Registration
Statement or the institution or threatening of any proceeding for that
purpose and (6) of the receipt by the Company of any notification with
respect to the
<PAGE> 13
13
suspension of the qualification of the Securities for sale in any
jurisdiction or the institution or threatening of any proceeding for
such purpose. The Company will use its best efforts to prevent the
issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which the U.S. Prospectus as then supplemented would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, or if it
shall be necessary to amend the Registration Statement or the ADR
Registration Statement or supplement the U.S. Prospectus to comply with
the Act or the rules thereunder, the Company promptly will (1) notify
the U.S. Representatives of any such event; (2) prepare and file with
the Commission, subject to the second sentence of paragraph (i)(a) of
this Section 5, an amendment or supplement which will correct such
statement or omission or effect such compliance; and (3) supply any
supplemented U.S. Prospectus to you in such quantities as you may
reasonably request. If at any time the Company supplements or amends
the U.S. Prospectus, it will promptly make conforming changes to the
International and Singapore Prospectuses and supply copies thereof to
the U.S. Representatives unless otherwise agreed by the U.S.
Representatives.
(c) As soon as practicable, the Company will timely file such
reports pursuant to the Exchange Act as are necessary in order to make
generally available to its security holders and to the U.S.
Representatives an earnings statement or statements covering the 12
month period ending December 31, 2000 of the Company which will satisfy
the provisions of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the U.S. Representatives and
counsel for the U.S. Underwriters, without charge, signed copies of the
Registration Statement and the ADR Registration Statement (including
exhibits thereto) and to each other U.S. Underwriter a copy of the
Registration Statement and the ADR Registration Statement (without
exhibits thereto) and, so long as delivery of a prospectus by an U.S.
Underwriter or dealer may be required by the Act, as many copies of
each U.S. Preliminary Prospectus and the U.S. Prospectus and any
supplement thereto as the U.S. Representatives may reasonably request.
(e) The Company will arrange, if necessary, for the
qualification of the Securities for sale under the laws of such
jurisdictions in the United States as the U.S. Representatives may
reasonably designate and will maintain such qualifications in effect so
long as required for the distribution of the U.S. Securities; provided,
however, that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to
take any action that would subject it to service of process in suits,
other than those arising out of the offering or sale of the Securities,
in any jurisdiction where it is not now so subject.
(f) The Company will not, without the prior written consent of
Salomon Smith Barney Inc., offer, sell, contract to sell, pledge, or
otherwise dispose of, (or enter into any transaction is designed to, or
might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash
settlement or otherwise) by the Company, directly or
<PAGE> 14
14
indirectly, including the filing (or participation in the filing) of a
registration statement with the Commission in respect of, or establish
or increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Exchange
Act, any Ordinary Shares or ADSs or any securities convertible into, or
exercisable, or exchangeable for, Ordinary Shares or ADSs; or publicly
announce an intention to effect any such transaction, for a period of
180 days after the date of the Underwriting Agreements, provided,
however, that the Company may issue and sell Ordinary Shares pursuant
to any employee stock option plan or stock ownership plan of the
Company in effect at the Execution Time and may file a registration
statement on Form S-8 with respect thereto and the Company may issue
Ordinary Shares issuable upon the conversion of securities or the
exercise of warrants outstanding at the Execution Time.
(g) The Company will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Ordinary Shares or the
ADSs.
(h) The Company agrees to pay the costs and expenses relating
to the following matters: (i) the preparation, printing or reproduction
and filing with the Commission of the Registration Statement (including
financial statements and exhibits thereto), each Preliminary
Prospectus, each Prospectus, the ADR Registration Statement, and each
amendment or supplement to any of them; (ii) the preparation of the
Deposit Agreement, the deposit of the Underlying Shares under the
Deposit Agreement, the issuance thereunder of ADSs representing such
deposited Underlying Shares, the issuance of ADRs evidencing such ADSs
and the fees of the Depositary; (iii) the printing (or reproduction)
and delivery (including postage, air freight charges and charges for
counting and packaging) of such copies of the Registration Statement,
each Preliminary Prospectus, each Prospectus, the ADR Registration
Statement, and all amendments or supplements to any of them, as may, in
each case, be reasonably requested for use in connection with the
offering and sale of the Securities; (iv) the preparation, printing,
authentication, issuance and delivery of certificates for the
Securities, including any stamp or transfer taxes in connection with
the original issuance and sale of the Securities; (v) the printing (or
reproduction) and delivery of this U.S. Underwriting Agreement, the
International Underwriting Agreement and the Singapore Underwriting
Agreement, any blue sky memorandum and all other agreements or
documents printed (or reproduced) and delivered in connection with the
offering of the Securities; (vi) the registration of the Securities
under the Exchange Act and the listing of the Ordinary Shares on the
Stock Exchange of Singapore and the listing of the ADSs on the Nasdaq
National Market; (vii) any registration or qualification of the
Securities for offer and sale under the securities or blue sky laws of
the several states (including filing fees and the reasonable fees and
expenses of counsel for the Underwriters relating to such registration
and qualification); (viii) any filings required to be made with the
National Association of Securities Dealers, Inc. (including filing fees
and the reasonable fees and expenses of counsel for the Underwriters
relating to such filings); (ix) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Securities; (x) the fees
and expenses of the Company's accountants and the fees and expenses of
counsel (including Allen & Gledhill and Shearman & Sterling) for the
Company; (xi) except as may be agreed between the Company and the
Depositary, the cost and charges of any transfer agent or registrar;
(xii) any
<PAGE> 15
15
stamp, issue, registration or documentary taxes and duties arising as a
result of the issuance of the Securities, of the sales and delivery of
the Securities by the Company to or for the account of the
Underwriters, of the sale and delivery of the Securities by the
Underwriters to each other and, of the sale and delivery of the
Securities by the Underwriters to the initial purchasers thereof in the
manner contemplated under the Underwriting Agreements; and (xiii) all
other costs and expenses incident to the performance by the Company of
their obligations under the Underwriting Agreements.
(i) The Company covenants with Salomon Smith Barney Inc. that
the Company will comply with all applicable securities and other
applicable laws, rules and regulations in each foreign jurisdiction in
which the Directed Securities are offered in connection with the
Directed Securities Program.
(ii) Each U.S. Underwriter agrees that (a) it is not
purchasing any of the U.S. Securities for the account of anyone other than a
United States or Canadian Person, (b) it has not offered or sold, and will not
offer or sell, directly or indirectly, any of the U.S. Securities or distribute
any U.S. Prospectus to any person outside the United States or Canada, or to
anyone other than a United States or Canadian Person, and (c) any dealer to whom
it may sell any of the U.S. Securities will represent that it is not purchasing
for the account of anyone other than a United States or Canadian Person and
agree that it will not offer or resell, directly or indirectly, any of the U.S.
Securities outside the United States or Canada, or to anyone other than a United
States or Canadian Person or to any other dealer who does not so represent and
agree; provided, however, that the foregoing shall not restrict (A) purchases
and sales between the International Underwriters or the Singapore Underwriters
on the one hand and the U.S. Underwriters on the other hand pursuant to the
Agreement Among U.S. Underwriters, International Underwriters and Singapore
Underwriters, (B) stabilization transactions contemplated under the Agreement
Among U.S. Underwriters, International Underwriters, and Singapore Underwriters
conducted through Salomon Smith Barney Inc. (or through the U.S.
Representatives, International Representatives and Singapore Representatives) as
part of the distribution of the Securities, and (C) sales to or through (or
distributions of U.S. Prospectuses or U.S. Preliminary Prospectuses to) United
States or Canadian Persons who are investment advisors, or who otherwise
exercise investment discretion, and who are purchasing for the account of anyone
other than a United States or Canadian Person.
The agreements of the U.S. Underwriters set forth in this
paragraph (ii) of Section 5 shall terminate upon the earlier of the following
events:
(x) a mutual agreement of the U.S. Representatives,
International Representatives and Singapore Representatives to
terminate the selling restrictions set forth in paragraph (ii) of this
Section 5, Section 5(ii) of the International Underwriting Agreement
and Section 2(e) and (f) of the Agreement Among U.S. Underwriters,
International Underwriters and Singapore Underwriters; or
(y) the expiration of a period of 30 days after the Closing
Date, unless (A) the U.S. Representatives shall have given notice to
the Company, the International Representatives and the Singapore
Representatives that the distribution of the U.S. Securities by the
U.S. Underwriters has not yet been completed, or (B) the International
Representatives shall have given notice to the Company, the U.S.
Representatives and the Singapore Representatives that the distribution
of the International Securities by the International Underwriters has
not yet been completed, or (C) the Singapore Representatives shall have
given notice to the Company, the U.S. Representatives and the
International
<PAGE> 16
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Representatives that the distribution of the Singapore Securities by
the Singapore Underwriters has not yet been completed. If such notice
by the U.S. Representatives, the International Representatives or the
Singapore Representatives is given, the agreements set forth in such
paragraph (ii) shall survive until the earlier of (1) the event
referred to in clause (x) of this subsection or (2) the expiration of
an additional period of 30 days from the date of any such notice.
6. Conditions to the Obligations of the U.S. Underwriters. The
obligations of the U.S. Underwriters to purchase the U.S. Underwritten
Securities and the U.S. Option Securities, as the case may be, shall be subject
to the accuracy of the representations and warranties on the part of the Company
contained in this U.S. Underwriting Agreement as of the Execution Time, the
Closing Date and any settlement date pursuant to Section 3 hereof, to the
accuracy of the statements of the Company made in any certificates pursuant to
the provisions hereof, to the performance by the Company of its obligations
under this U.S. Underwriting Agreement and to the following additional
conditions:
(a) If the Registration Statement and the ADR Registration
Statement have not become effective prior to the Execution Time, unless the U.S.
Representatives, International Representatives and Singapore Representatives
agree in writing to a later time, the Registration Statement and the ADR
Registration Statement will become effective not later than (i) 6:00 PM New York
City time on the date of determination of the public offering price, if such
determination occurred at or prior to 3:00 PM New York City time on such date or
(ii) 9:30 AM on the Business Day following the day on which the public offering
price was determined, if such determination occurred after 3:00 PM New York City
time on such date; if filing of the U.S. Prospectus, or any supplement thereto,
is required pursuant to Rule 424(b), the U.S. Prospectus, and any such
supplement, will be filed in the manner and within the time period required by
Rule 424(b); and no stop order suspending the effectiveness of the Registration
Statement or the ADR Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) The Company shall have requested and caused Allen &
Gledhill, special Singapore counsel for the Company, to have furnished to the
Representatives their opinion, dated the Closing Date and addressed to the
Representatives, substantially in the form set forth in Appendix A hereto.
(c) The Company shall have requested and caused Shearman &
Sterling, counsel for the Company, to have furnished to the Representatives
their opinion, dated the Closing Date and addressed to the Representatives,
substantially in the form set forth in Appendix B hereto.
(d) The Depositary shall have requested and caused Skadden,
Arps, Slate, Meagher & Flom, LLP, counsel for the Depositary, to have furnished
to the Representatives their opinion dated the Closing Date and addressed to the
Representatives, substantially in the form set forth in Appendix C hereto.
(e) The Representatives shall have received from Cravath,
Swaine & Moore, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date and addressed to the Representatives, with respect to the
issuance and sale of the Securities, the Registration Statement, the ADR
Registration Statement, the Prospectuses (together with any supplement thereto)
and other related matters as the Representatives may reasonably require, and the
Company shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
<PAGE> 17
17
(f) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have examined
the Registration Statement, the ADR Registration Statement, the Prospectuses,
any supplements to the Prospectuses and the Underwriting Agreements and that:
(i) the representations and warranties of the Company in the
Underwriting Agreements are true and correct in all material respects
on and as of the Closing Date with the same effect as if made on the
Closing Date and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or the ADR Registration Statement has been
issued and no proceedings for that purpose have been instituted or, to
the Company's knowledge, threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectuses (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial
or otherwise), prospects, earnings, business or properties of the
Company and the Subsidiary, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectuses (exclusive of any
supplement thereto).
(g) The Company shall have requested and caused KPMG to have
furnished to the Representatives letters, dated respectively as of the
Execution Time and as of the Closing Date, in form and substance
satisfactory to the Representatives, confirming that they are
independent accountants within the meaning of the Act and the
applicable rules and regulations adopted by the Commission thereunder
and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included in the Registration
Statement and the Prospectuses and reported on by them comply as to
form in all material respects with United States generally accepted
accounting principles and the applicable accounting requirements of the
Act and the related rules and regulations adopted by the Commission;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by the Company and the
Subsidiary; a reading of the minutes of the meetings of the
shareholders, directors and budget, audit and executive resource and
compensation committees of the Company and the Subsidiary; and
inquiries of certain officials of the Company who have responsibility
for financial and accounting matters of the Company and the Subsidiary
as to transactions and events subsequent to September 30, 1999, nothing
came to their attention which caused them to believe that:
(1) with respect to the period subsequent to
September 30, 1999, there were any changes, at a specified
date not more than five days prior to the date of the letter,
in the short term debt or long-term debt of the Company and
the Subsidiary or the shareholders equity or share capital of
the Company or decrease in the working capital of the Company
and the Subsidiary, as compared with the amounts shown on
<PAGE> 18
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the September 30, 1999, consolidated balance sheet included in
the Registration Statement and the Prospectuses, or for the
period from October 1, 1999 to such specified date there were
any decreases, as compared with the corresponding period in
the preceding year; in net revenues, operating income, income
before income taxes or in total or per share amounts of net
income of the Company and the Subsidiary, except in all
instances for changes or decreases set forth in such letter,
in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof
unless said explanation is not deemed necessary by the
Representatives; and
(2) the information included in the
Registration Statement and Prospectuses in response to Form
20-F, Item 8 (Selected Financial Data) and Item 11
(Compensation of Directors and Officers) is not in conformity
with the applicable disclosure requirements of Form 20-F.
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is derived from the
general accounting records of the Company and the Subsidiary) set forth
in the Registration Statement and the Prospectuses, including the
information set forth under the captions "Recent Development", "Summary
Financial Data", "Selected Consolidated Financial Data",
"Capitalization", "Dilution", "Management's Discussion and Analysis of
Financial Condition and Results of Operations", in the Prospectuses
"Business", "Management", "Certain Transactions", and "Principal
Shareholders", agrees with the accounting records of the Company and
the Subsidiary, excluding any questions of legal interpretation.
References to the Prospectuses in this paragraph (g) include
any supplement thereto at the date of the letter.
(h) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement (exclusive of any
amendment thereof), and the Prospectuses (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (g) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the condition
(financial or otherwise), earnings, prospects, business or properties of the
Company and the Subsidiary, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectuses (exclusive of any supplement thereto) the
effect of which, in any case referred to in clause (i) or (ii) above, is, in the
sole judgment of the U.S. Representatives, so material and adverse as to make it
impractical or inadvisable to proceed with the offering or delivery of the U.S.
Securities as contemplated by the Registration Statement (exclusive of any
amendment thereof), the ADR Registration Statement and the Prospectuses
(exclusive of any supplement thereto).
(i) At the Execution Time, the Company shall have furnished to
the Representatives a letter substantially in the form of Exhibit A hereto from
each executive officer, director of the Company named in the U.S. Prospectus and
selected employees of the Company and Singapore Technologies Pte Ltd., Singapore
Technologies Semiconductor Pte Ltd., and EDB Investments Pte Ltd. addressed to
the Representatives.
(j) The Company and the Depositary shall have executed and
delivered the Deposit Agreement in form and substance satisfactory to the
Representatives and the Deposit Agreement shall be in full force and effect;
<PAGE> 19
19
(k) The Depositary shall have furnished or caused to be
furnished to the Representatives certificates satisfactory to the
Representatives evidencing the deposit with the Depositary or its nominee of the
Underlying Shares in respect of which ADSs to be purchased by the Underwriters
on such Closing Date are to be issued, and the execution, issuance,
countersignature (if applicable) and delivery of the ADRs evidencing such ADSs
pursuant to the Deposit Agreement and such other matters related thereto as the
Representatives reasonably request;
(l) The closing of the purchase of the International
Underwritten Securities and Singapore Underwritten Securities to be issued and
sold by the Company pursuant to the International Underwriting Agreement and the
Singapore Underwriting Agreement, respectively, shall occur concurrently with
the closing of the purchase of the U.S. Underwritten Securities described
herein.
(m) The Ordinary Shares shall have been listed and admitted
and authorized for trading on the Stock Exchange of Singapore, and the ADSs
shall have been listed and admitted and authorized for trading on the Nasdaq
National Market and satisfactory evidence of all such actions shall have been
provided to the Representatives.
(n) Prior to the Closing Date, the Company shall have
furnished to the Representatives such further information, certificates and
documents as the Representatives may reasonably request.
(o) The Company shall have delivered a letter from the
President of Singapore Technologies Assembly and Test Services, Inc. confirming
and accepting his appointment as agent for service of process pursuant to
Section 15 hereof and Section [ ] of the Deposit Agreement.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this U.S.
Underwriting Agreement and the International Underwriting Agreement, or if any
of the opinions and certificates mentioned above or elsewhere in this U.S.
Underwriting Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters, this U.S. Underwriting Agreement and all obligations of the U.S.
Underwriters under this U.S. Underwriting Agreement may be canceled at, or at
any time prior to, the Closing Date by the Representatives. Notice of such
cancellation shall be given to the Company in writing or by telephone or
facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Shearman & Sterling, 6 Battery Road, #25-03,
Singapore 049909, on the Closing Date.
7. Reimbursement of U.S. Underwriters' Expenses. The Company
has agreed to reimburse the U.S. and International Underwriters severally
through Salomon Smith Barney Inc. on demand for out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the
Securities up to a maximum of $750,000, in addition to the costs and expenses to
be paid by the Company pursuant to Section 5(h) hereof. In addition, if the sale
of the U.S. Securities provided for in this U.S. Underwriting Agreement is not
consummated because any condition to the obligations of the U.S. Underwriters
set forth in Section 6 hereof is not satisfied, because of any termination
pursuant to Section 10 hereof or because of any refusal, inability or failure on
the part of the Company to perform any agreement in this U.S. Underwriting
Agreement or comply with any provision hereof other than by reason of a default
by any of the U.S.
<PAGE> 20
20
Underwriters, the Company will reimburse the U.S. Underwriters severally through
Salomon Smith Barney Inc. on demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities up to a
maximum of US$750,000, in addition to the costs and expenses to be paid by the
Company pursuant to Section 5(h) hereof.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each U.S. Underwriter, the directors, officers,
employees and agents of each U.S. Underwriter and each person who controls any
U.S. Underwriter within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for the
registration of the Securities as originally filed or in any amendment thereof,
or in the ADR Registration Statement as originally filed or in any amendment
thereof, or in any U.S., International or Singapore Preliminary Prospectus or in
any of the Prospectuses, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any U.S. Underwriter through the U.S. Representatives specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have; provided further, that with respect to any untrue
statement or omission of material fact made in any Preliminary Prospectus, the
indemnity agreement contained in this Section 8(a) shall not inure to the
benefit of any U.S. Underwriter from whom the person asserting any such loss,
claim, damage or liability purchased the securities concerned to the extent that
any such loss, claim, damage or liability of such U.S. Underwriter occurs under
the circumstance where it shall have been determined by a court of competent
jurisdiction by final and nonappealable judgment that (w) the Company had
previously furnished copies of the Prospectus to the Representatives, (x)
delivery of the Prospectus was required by the Act to be made to such person,
(y) the untrue statement or omission of a material fact contained in the
Preliminary Prospectus was corrected in the Prospectus and (z) there was not
sent or given to such person, at or prior to the written confirmation of the
sale of such securities to such person, a copy of the Prospectus.
(b) The Company agrees to indemnify and hold harmless each
U.S. Underwriter and each person, if any, who controls such U.S. Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) (i) caused by any untrue statement or alleged untrue statement
of a material fact contained in the prospectus wrapper material prepared by or
with the consent of the Company for distribution in foreign jurisdictions in
connection with the Directed Securities Program attached to the Prospectuses or
any Preliminary Prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement therein,
<PAGE> 21
21
when considered in conjunction with the Prospectuses or any applicable
Preliminary Prospectus, not misleading; or (ii) related to, arising out of, or
in connection with the Directed Securities Program; provided that, the Company
shall not be responsible under this subparagraph (ii) for any losses, claim,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted primarily from the bad faith or gross
negligence of any U.S. Underwriter.
(c) Each U.S. Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement, or the ADR Registration
Statement, the employees of the Company and each person who controls the Company
within the meaning of either the Act or the Exchange Act to the same extent as
the foregoing indemnity to each U.S. Underwriter, but only with reference to
written information relating to such U.S. Underwriter furnished to the Company
by or on behalf of such U.S. Underwriter through the U.S. Representatives
specifically for inclusion in the U.S. Preliminary Prospectus and the U.S.
Prospectus. This indemnity agreement will be in addition to any liability which
any U.S. Underwriter may otherwise have. The Company acknowledges that the
statements set forth in the last paragraph of the cover page regarding delivery
of the U.S. Securities and, under the heading "Underwriting", (i) the list of
Underwriters and their respective participation in the sale of the Securities,
(ii) the sentences related to concessions and reallowances and (iii) the
paragraph related to stabilization, syndicate covering transactions and penalty
bids in any U.S. Preliminary Prospectus and the U.S. Prospectus constitute the
only information furnished in writing by or on behalf of the several U.S.
Underwriters for inclusion in any U.S. Preliminary Prospectus or the U.S.
Prospectuses.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) or (c) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a), (b) or (c) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemnified party or parties except as
set forth below); provided, however, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the indemnified
party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. Notwithstanding anything
<PAGE> 22
22
contained herein to the contrary, if indemnity may be sought pursuant to
paragraph (b) above hereof in respect of such action or proceeding, then in
addition to such separate firm for the indemnified parties, the indemnifying
party shall be liable for the reasonable fees and expenses of not more than one
separate firm (in addition to any local counsel) for the U.S. Underwriters for
the defense of any losses, claims, damages and liabilities arising out of the
Directed Securities Program, and all persons, if any, who control such U.S.
Underwriters within the meaning of either Section 15 of the Act or Section 20 of
the Exchange Act. It is understood, however, that the Company shall, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Underwriters and controlling persons, which firm shall be designated in
writing by Salomon Smith Barney Inc. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought under this U.S. Underwriting Agreement (whether or
not the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent.
(e) In the event that the indemnity provided in paragraph (a),
(b) or (c) of this Section 8 is unavailable to or insufficient to hold harmless
an indemnified party for any reason, the Company and the U.S. Underwriters
severally agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company, and one or more of the U.S. Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and by the U.S. Underwriters on the other from the
offering of the U.S. Securities; provided, however, that in no case shall any
U.S. Underwriter (except as may be provided in any agreement among underwriters
relating to the offering of the U.S. Securities) be responsible for any amount
in excess of the underwriting discount or commission applicable to the
Securities purchased by such U.S. Underwriter under this U.S. Underwriting
Agreement. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the U.S. Underwriters severally
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
of the U.S. Underwriters on the other in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the offering (before deducting expenses) received by
it, and benefits received by the U.S. Underwriters shall be deemed to be equal
to the total underwriting discounts and commissions, in each case as set forth
on the cover page of the U.S. Prospectus. Relative fault shall be determined by
reference to, among other things, whether any untrue or any alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information provided by the Company on the one hand or
the U.S. Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the U.S. Underwriters agree that
it would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (e), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
<PAGE> 23
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For purposes of this Section 8, each person who controls an U.S. Underwriter
within the meaning of either the Act or the Exchange Act and each director,
officer, employee and agent of an U.S. Underwriter shall have the same rights to
contribution as such U.S. Underwriter, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, each officer of the
Company who shall have signed the Registration Statement or the ADR Registration
Statement, the employees of the Company and each director of the Company shall
have the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (e).
9. Default by a U.S. Underwriter. If any one or more U.S.
Underwriters shall fail to purchase and pay for any of the U.S. Securities
agreed to be purchased by such U.S. Underwriter or U.S. Underwriters under this
U.S. Underwriting Agreement and such failure to purchase shall constitute a
default in the performance of its or their obligations under this U.S.
Underwriting Agreement, the remaining U.S. Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the amount
of U.S. Securities set forth opposite their names in Schedule I hereto bears to
the aggregate amount of U.S. Securities set forth opposite the names of all the
remaining U.S. Underwriters) the U.S. Securities which the defaulting U.S.
Underwriter or U.S. Underwriters agreed but failed to purchase; provided,
however, that in the event that the aggregate amount of U.S. Securities which
the defaulting U.S. Underwriter or U.S. Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of U.S. Securities set forth
in Schedule I hereto, the remaining U.S. Underwriters shall have the right to
purchase all, but shall not be under any obligation to purchase any, of the U.S.
Securities, and if such nondefaulting U.S. Underwriters do not purchase all the
U.S. Securities, this U.S. Underwriting Agreement will terminate without
liability to any nondefaulting U.S. Underwriter or the Company. In the event of
a default by any U.S. Underwriter as set forth in this Section 9, the Closing
Date shall be postponed for such period, not exceeding five Business Days, as
the U.S. Representatives shall determine in order that the required changes in
the Registration Statement, the ADR Registration Statement and the Prospectuses
or in any other documents or arrangements may be effected. Nothing contained in
this U.S. Underwriting Agreement shall relieve any defaulting U.S. Underwriter
of its liability, if any, to the Company and any nondefaulting U.S. Underwriter
for damages occasioned by its default under this U.S.
Underwriting Agreement.
10. Termination. This U.S. Underwriting Agreement shall be
subject to termination in the absolute discretion of the U.S. Representatives,
by notice given to the Company prior to delivery of and payment for the U.S.
Securities, if at any time prior to such time (i) trading in the Company's
Ordinary Shares shall have been suspended by the Stock Exchange of Singapore or
trading in the ADSs shall have been suspended by the Commission or the Nasdaq
National Market or trading in securities generally on the New York Stock
Exchange or the Stock Exchange of Singapore or the Nasdaq National Market shall
have been suspended or limited or minimum prices shall have been established on
either of such Exchanges or the Nasdaq National Market, (ii) a banking
moratorium shall have been declared by U.S. Federal, New York State or Singapore
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities involving the United States or Singapore, declaration by the United
States or Singapore of a national emergency or war, or other calamity or crisis
the effect of which on financial markets is such as to make it, in the sole
judgment of the U.S. Representatives, impractical or inadvisable to proceed with
the offering or delivery of the Securities as contemplated by the U.S.
Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
<PAGE> 24
24
Company or its officers and of the U.S. Underwriters set forth in or made
pursuant to this U.S. Underwriting Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any U.S.
Underwriter or the Company or any of the officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the U.S. Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this U.S. Underwriting Agreement.
12. Notices. All communications under this U.S. Underwriting
Agreement will be in writing and effective only on receipt, and, if sent to the
U.S. Representatives, will be mailed, delivered or telefaxed to the Salomon
Smith Barney Inc. General Counsel (fax no.: (212) 816-7912) and confirmed to
such General Counsel at Salomon Smith Barney Inc., 388 Greenwich Street, New
York, New York, 10013, Attention: General Counsel; or, if sent to the Company,
will be mailed, delivered or telefaxed to Bernard Liew, (65) 755-3153 and
confirmed to it at ST Assembly Test Services Ltd., 5 Yishun St 23, Singapore
768442, attention of the Legal Department.
13. Successors. This U.S. Underwriting Agreement will inure to
the benefit of and be binding upon the parties hereto and their respective
successors and the officers and directors and controlling persons referred to in
Section 8 hereof, and no other person will have any right or obligation under
this U.S. Underwriting Agreement.
14. Applicable Law. This U.S. Underwriting Agreement will be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York.
15. Jurisdiction. The Company agrees that any suit, action or
proceeding against the Company brought by any U.S. Underwriter, by the
directors, officers, employees and agents of any U.S. Underwriter, or by any
person who controls any U.S. Underwriter, arising out of or based upon this U.S.
Underwriting Agreement or the transactions contemplated hereby may be instituted
in any New York Court, and waives any objection which it may now or hereafter
have to the laying of venue of any such proceeding, and irrevocably submits to
the non-exclusive jurisdiction of such courts in any suit, action or proceeding.
The Company has appointed the President of Singapore Technologies Assembly and
Test Services, Inc. as its authorized agent (the "Authorized Agent") upon whom
process may be served in any suit, action or proceeding arising out of or based
upon this U.S. Underwriting Agreement or the transactions contemplated herein
which may be instituted in any New York Court, by any U.S. Underwriter, the
directors, officers, employees and agents of any U.S. Underwriter, or by any
person who controls any U.S. Underwriter, and expressly accepts the
non-exclusive jurisdiction of any such court in respect of any such suit, action
or proceeding. The Company hereby represents and warrants that the Authorized
Agent has accepted such appointment and has agreed to act as said agent for
service of process, and the Company agrees to take any and all action, including
the filing of any and all documents that may be necessary to continue such
appointment in full force and effect as aforesaid. Service of process upon the
Authorized Agent shall be deemed, in every respect, effective service of process
upon the Company. Notwithstanding the foregoing, any action arising out of or
based upon this U.S. Underwriting Agreement may be instituted by any U.S.
Underwriter, the directors, officers, employees and agents of any U.S.
Underwriter, or by any person who controls any U.S. Underwriter, in any court of
competent jurisdiction in Singapore.
The provisions of this Section 15 shall survive any
termination of this U.S. Underwriting Agreement, in whole or in part.
<PAGE> 25
25
16. Currency. Each reference in this U.S. Underwriting
Agreement to U.S. Dollars (the "relevant currency") is of the essence. To the
fullest extent permitted by law, the obligations of the Company and the U.S.
Underwriters in respect of any amount due under this U.S. Underwriting Agreement
will, notwithstanding any payment in any other currency (whether pursuant to a
judgment or otherwise), be discharged only to the extent of the amount in the
relevant currency that the party entitled to receive such payment may, in
accordance with its normal procedures, purchase with the sum paid in such other
currency (after any premium and costs of exchange) on the Business Day
immediately following the day on which such party receives such payment. If the
amount in the relevant currency that may be so purchased for any reason falls
short of the amount originally due, the party required to pay such original
amount will pay such additional amounts, in the relevant currency, as may be
necessary to compensate for the shortfall. If, alternatively, the amount in the
relevant currency that may be so purchased for any reason exceeds the amount
originally due, the party entitled to receive such original amount will return
such excess amounts, in the relevant currency, to the Company. Any obligation of
the party required to pay such original amount not discharged by such payment
will, to the fullest extent permitted by applicable law, be due as a separate
and independent obligation and, until discharged as provided herein, will
continue in full force and effect.
17. Waiver of Immunity. To the extent that the Company has or
hereafter may acquire any immunity (sovereign or otherwise) from any legal
action, suit or proceeding, from jurisdiction of any court or from set-off or
any legal process (whether service or notice, attachment in aid or otherwise)
with respect to itself or any of its property, the Company hereby irrevocably
waives and agrees not to plead or claim such immunity in respect of its
obligations under this U.S. Underwriting Agreement.
18. Counterparts. This U.S. Underwriting Agreement may be
signed in one or more counterparts, each of which shall constitute an original
and all of which together shall constitute one and the same agreement.
19. Headings. The section headings used in this U.S.
Underwriting Agreement are for convenience only and shall not affect the
construction hereof.
20. Definitions. The terms which follow, when used in this
U.S. Underwriting Agreement, shall have the meanings indicated.
"Act" shall mean the United States Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"ADR Registration Statement" shall mean the registration
statement referred to in paragraph 1(i)(c) above, including all
exhibits thereto, each as amended at the time such part of the
registration statement became effective.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York
City or Singapore.
"Commission" shall mean the Securities and Exchange
Commission.
"Effective Date" shall mean each date and time that the
Registration Statement and the ADR Registration Statement, any
post-effective amendment or amendments thereto and any Rule 462(b)
Registration Statement became or become effective.
<PAGE> 26
26
"Exchange Act" shall mean the United States Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission promulgated thereunder.
"Execution Time" shall mean the date and time that this U.S.
Underwriting Agreement is executed and delivered by the parties hereto.
"International Preliminary Prospectus" shall mean any
preliminary prospectus with respect to the offering of the
International Securities.
"International Prospectus" shall mean such form of prospectus
relating to the offering of the International Securities as referred to
in paragraph 1(i)(a) above.
"International Representatives" shall mean the addressees of
the International Underwriting Agreement.
"International Securities" shall mean the International
Underwritten Securities and the International Option Securities.
"International Underwriters" shall mean the several
underwriters named in Schedule I to the International Underwriting
Agreement.
"International Underwriting Agreement" shall mean the
International Underwriting Agreement dated the date hereof related to
the sale of the International Securities by the Company to the
International Underwriters.
"New York Courts" shall mean the U.S. Federal or State courts
located in the State of New York, County of New York.
"Option Securities" shall mean the U.S. Option Securities, the
International Option Securities and the Singapore Option Securities
"Option Shares" shall mean the U.S. Option Shares, the
International Option Shares and the Singapore Option Shares.
"Preliminary Prospectus" shall mean the U.S. Preliminary
Prospectus, the International Preliminary Prospectus and the Singapore
Preliminary Prospectus.
"Prospectuses" and "each Prospectus" shall mean the U.S.
Prospectus, the International Prospectus and the Singapore Prospectus.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(i)(a) above, including exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto or
any Rule 462(b) Registration Statement becomes effective prior to the
Closing Date, shall also mean such registration statement as so amended
or such Rule 462(b) Registration Statement, as the case may be. Such
term shall include any Rule 430A Information deemed to be included
therein at the Effective Date as provided by Rule 430A.
"Representatives" shall mean the U.S. Representatives, the
International Representatives and the Singapore Representatives.
<PAGE> 27
27
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules
under the Act.
"Rule 430A Information" shall mean information with respect to
the Securities and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule
430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the registration statement referred
to in Section 1(a)(i) hereof.
"Securities" shall mean the U.S. Securities, the International
Securities and the Singapore Securities.
"Shares" shall mean the U.S. Shares, International Shares and
the Singapore Shares.
"Singapore Preliminary Prospectus" shall mean any preliminary
prospects with respect to the offering of the Singapore Securities.
"Singapore Prospectus" shall mean such form of prospectus
relating to the Singapore Securities consisting of a special wrap
around the International Prospectus.
"Singapore Representatives" shall mean the addressees of the
Singapore Underwriting Agreement.
"Singapore Securities" shall mean the Singapore Underwritten
Securities and the Singapore Option Securities.
"Singapore Underwriters" shall mean the several underwriters
named in Schedule I to the Singapore Underwriting Agreement.
"Singapore Underwriting Agreement" shall mean the Singapore
Management and Underwriting Agreement dated the date hereof related to
the sale of the Singapore Securities by the Company to the Singapore
Underwriters.
"Underlying Shares" shall mean the Shares that will be
represented by the ADSs.
"Underwriter" and "Underwriters" shall mean the U.S.
Underwriters, the International Underwriters and the Singapore
Underwriters.
"Underwritten Securities" shall mean the U.S. Underwritten
Securities, the International Underwritten Securities and the Singapore
Underwritten Securities.
"Underwritten Shares" shall mean the U.S. Underwritten Shares,
the International Underwritten Shares and the Singapore Underwritten
Shares.
"United States or Canadian Person" shall mean any person who
is a national or resident of the United States or Canada, any
corporation, partnership, or other entity created or organized in or
under the laws of the United States or Canada or of any political
subdivision thereof, or any estate or trust the income of which is
subject to United States or Canadian Federal income taxation,
<PAGE> 28
28
regardless of its source (other than any non-United States or
non-Canadian branch of any United States or Canadian Person), and shall
include any United States or Canadian branch of a person other than a
United States or Canadian Person. "U.S." or "United States" shall mean
the United States of America (including the states thereof and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
"U.S. Preliminary Prospectus" shall mean any preliminary
prospectus with respect to the offering of the U.S. Securities as
referred to in paragraph 1(i)(a) above and any preliminary prospectus
with respect to the offering of the U.S. Securities included in the
Registration Statement at the Effective Date that omits Rule 430A
Information.
"U.S. Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing pursuant to Rule 424(b) is required,
shall mean the form of final prospectus relating to the Securities
included in the Registration Statement at the Effective Date.
"U.S. Representatives" shall mean the addressees of the U.S.
Underwriting Agreement.
"U.S. Securities" shall mean the U.S. Underwritten Securities
and the U.S. Option Securities.
"U.S. Underwriting Agreement" shall mean this agreement
relating to the sale of the U.S. Securities by the Company to the U.S.
Underwriters.
"U.S. Underwriters" shall mean the several underwriters named
in Schedule I to this U.S. Underwriting Agreement.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several U.S. Underwriters.
Very truly yours,
ST Assembly Test Services Ltd
By:...........................
Name:
Title:
<PAGE> 29
29
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
By: Salomon Smith Barney Inc.
By:
............................
Name:
Title:
<PAGE> 30
SCHEDULE I
NUMBER OF UNDERWRITTEN
SECURITIES TO BE
U.S. UNDERWRITERS PURCHASED
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
------------
Total . . . . . . . . . ============
<PAGE> 31
EXHIBIT A
[Version One]
ST Assembly Test Services Ltd
Public Offering of Ordinary Shares
, 2000
Salomon Smith Barney Inc.
Salomon Brothers International Limited and
Citicorp Investment Bank (Singapore) Limited
As Representatives of the several U.S. Underwriters,
International Underwriters and Singapore Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed U.S. Underwriting Agreement, International Underwriting Agreement and
Singapore Underwriting Agreement (the "Underwriting Agreements"), between ST
Assembly Test Services Ltd., a company organized under the laws of Singapore
(the "Company"), and each of you as representatives of a group of U.S.
Underwriters, International Underwriters and Singapore Underwriters named
therein, relating to an underwritten public offering of 150,000,000 Ordinary
Shares, S$0.25 par value per share, of the Company, directly or in the form of
American Depositary Shares ("ADSs").
In order to induce you and the other U.S. Underwriters,
International Underwriters and Singapore Underwriters to enter into the
Underwriting Agreements, the undersigned will not, without the prior written
consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge or
otherwise dispose of (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise), 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 after the date of the Underwriting Agreements, other
than Directed Securities (as defined in the Underwriting Agreements), or
Ordinary Shares or ADSs disposed of as bona fide gifts approved by Salomon Smith
Barney Inc.
If for any reason the Underwriting Agreements shall be
terminated prior to the Closing Date (as defined in the Underwriting
Agreements), the agreement set forth above shall likewise be terminated.
Yours very truly,
[SIGNATURE OF SELECTED EMPLOYEE OR
MAJOR STOCKHOLDER]
[NAME AND ADDRESS OF SELECTED EMPLOYEE
OR MAJOR STOCKHOLDER]
<PAGE> 32
2
[Version Two]
ST Assembly Test Services Ltd
Public Offering of Ordinary Shares
, 2000
Salomon Smith Barney Inc.
Salomon Brothers International Limited and
Citicorp Investment Bank (Singapore) Limited
As Representatives of the several U.S. Underwriters,
International Underwriters and Singapore Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed U.S. Underwriting Agreement, International Underwriting Agreement and
Singapore Underwriting Agreement (the "Underwriting Agreements"), between ST
Assembly Test Services Ltd., a company organized under the laws of Singapore
(the "Company"), and each of you as representatives of a group of U.S.
Underwriters, International Underwriters and Singapore Underwriters named
therein, relating to an underwritten public offering of 150,000,000 Ordinary
Shares, S$0.25 par value per share, of the Company, directly or in the form of
American Depositary Shares ("ADSs").
In order to induce you and the other U.S. Underwriters,
International Underwriters and Singapore Underwriters to enter into the
Underwriting Agreements, the undersigned will not, without the prior written
consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge or
otherwise dispose of (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise), 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 after the date of the Underwriting Agreements, other
than Ordinary Shares or ADSs disposed of as bona fide gifts approved by Salomon
Smith Barney Inc.
If for any reason the Underwriting Agreements shall be
terminated prior to the Closing Date (as defined in the Underwriting
Agreements), the agreement set forth above shall likewise be terminated.
Yours very truly,
[SIGNATURE OF OFFICER, DIRECTOR OR SELECTED
EMPLOYEE]
[NAME AND ADDRESS OF OFFICER, DIRECTOR
OR SELECTED EMPLOYEE]
<PAGE> 33
APPENDIX A
[On the letterhead of Allen & Gledhill]
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
as U.S. Representatives of the several U.S. Underwriters
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
as International Representatives of the several
International Underwriters
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
United States of America
[8th] February, 2000
Dear Sirs,
1. We have acted as legal counsel to ST Assembly Test Services Ltd (the
"Company") in the Republic of Singapore in connection with a global offering
(the "Offering") of 150,000,000 ordinary shares ("Ordinary Shares") of par value
S$0.25 each in the capital of the Company (such offered Ordinary Shares, the
"Offered Shares"), directly or in the form of American Depositary Shares
("ADSs"), as described in the prospectus contained in the Company's Registration
Statement on Form F-1, as amended (the "Registration Statement"), filed with the
United States Securities and Exchange Commission. We are delivering this opinion
to you at the request of the Company pursuant to (i) Section [6(b)] of the U.S.
Underwriting Agreement (the "U.S. Underwriting Agreement") dated [27th] January,
2000 among the U.S. Underwriters named therein and the Company and (ii) Section
[6(b)] of the International Underwriting Agreement (the "International
Underwriting Agreement") dated [27th] January, 2000 among the International
Underwriters named therein and the Company.
2. For the purpose of rendering this opinion, we have examined:-
(i) an executed copy of the U.S. Underwriting Agreement;
(ii) an executed copy of the International Underwriting Agreement;
(iii) an executed copy of the Management and Underwriting Agreement
relating to the Singapore Retail Offering (the "Singapore
Underwriting Agreement") dated [28th] January, 2000 among the
Managers named therein and the Company;
(iv) an executed copy of the Deposit Agreement (as defined in the
U.S. Underwriting Agreement);
(v) the prospectus (the "U.S. Prospectus") dated [28th] January,
2000 relating to the U.S. Offering (as defined in the U.S.
Underwriting Agreement);
<PAGE> 34
2
(vi) the prospectus (the "International Prospectus") dated [28th]
January, 2000 relating to the International Offering (as
defined in the U.S. Underwriting Agreement);
(vii) the prospectus (the "Singapore Prospectus" and together with
the U.S. Prospectus and the International Prospectus, the
"Prospectus") dated [28th] January, 2000 incorporating the
International Prospectus and relating to the Singapore Retail
Offering;
(viii) the Registration Statement;
(ix) the Company's Registration Statement on Form F-6 (the "ADR
Registration Statement"1) filed with the United States
Securities and Exchange Commission;
(x) certified true copies of the Memorandum and Articles of
Association of the Company and its Certificate of
Incorporation;
(xi) resolutions, and certified extracts of resolutions, of the
Board of Directors of the Company ("Board Resolutions") and of
the shareholders of the Company ("Shareholders' Resolutions")
passed since the date of incorporation of the Company up to
[ ], 2000, relating to, inter alia, the authorisation for the
issue of, and the allotment and issue of, shares in the
capital of the Company and the Offering which were provided to
us for inspection by the Company;
(xii) a copy of the letter from the Stock Exchange of Singapore
Limited ("SES") dated 30th September, 1999 granting approval
in principle for the listing of and quotation for the entire
issued share capital of the Company on the Main Board of the
SES (the "AIP Letter"); and
(xiii) such other documents as we have considered necessary or
desirable to examine in order that we may render this opinion.
3. We have assumed:-
(i) that each of the U.S. Underwriting Agreement, the
International Underwriting Agreement and the Deposit Agreement
(together the "Transaction Agreements") is within the capacity
and powers of, and has been validly authorised by, each party
thereto (other than the Company) and has been validly executed
and delivered by and on behalf of each party thereto;
(ii) the genuineness of all signatures on all documents and the
completeness, and the conformity to original documents, of all
copies submitted to us;
(iii) 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;
(iv) that copies of the Board Resolutions and the Shareholders'
Resolutions submitted to us for examination are true, complete
and up-to-date copies;
(v) that the information disclosed by the search made on [8th]
February, 2000 at the Registry of Companies and Businesses in
the Republic of
<PAGE> 35
3
Singapore against the Company is true and complete and that
such information has not since then been materially altered
and that such search did not fail to disclose any material
information which has been delivered for filing but did not
appear on the public file at the time of the search;
(vi) that the information disclosed by the search made on [8th]
February, 2000 of the Cause Book kept at the Supreme Court of
the Republic of Singapore against the Company is true and
complete and that such information has not since then been
materially altered and that such search did not fail to
disclose any material information which has been delivered for
filing but was not disclosed at the time of the search;
(vii) that each of the Transaction Agreements constitutes legal,
valid, binding and enforceable obligations of the parties
thereto for all purposes under the laws of all relevant
jurisdictions other than the Republic of Singapore;
(viii) that there are no provisions of the laws of any jurisdiction
other than the Republic of Singapore which may be contravened
by the execution or delivery of any of the Transaction
Agreements and that, insofar as any obligation expressed to be
incurred or performed under any of the Transaction Agreements
falls to be performed in or is otherwise subject to the laws
of any jurisdiction other than the Republic of Singapore, its
performance will not be illegal by virtue of the laws of that
jurisdiction;
(ix) that the choice of New York law as the governing law of each
of the Transaction Agreements has been made in good faith and
will be regarded as a valid and binding selection which will
be upheld in the United States federal or state courts in the
State of New York as a matter of New York law and all other
relevant laws except the laws of the Republic of Singapore;
(x) that all consents, approvals, authorisations, licences,
exemptions or orders required from any governmental body or
agency outside the Republic of Singapore and all other
requirements outside the Republic of Singapore for the
legality, validity and enforceability of each of the
Transaction Agreements have been duly obtained or fulfilled
and are and will remain in full force and effect and that any
conditions to which they are subject have been satisfied;
(xi) that the Board Resolutions and the Shareholders' Resolutions
have not been rescinded or modified and they remain in full
force and effect and that no other resolution or other action
has been taken which may affect the validity of the Board
Resolutions or the Shareholders' Resolutions;
(xii) that the Offered Shares and the ADSs will be duly offered,
sold and delivered in accordance with the terms of the U.S.
Underwriting Agreement and the International Underwriting
Agreement; and
(xiii) that each of the Transaction Agreements and the Singapore
Underwriting Agreement has been executed and delivered, and
each Prospectus has been issued, in the form of the drafts we
have examined.
4. A search made on [8th] February, 2000 at the Registry of Companies and
Businesses in the Republic of Singapore and at the Supreme Court of the Republic
of
<PAGE> 36
4
Singapore revealed no order or resolution for the winding-up of the Company and
no notice of appointment of a receiver or judicial manager for the Company. It
should be noted that such a search is not capable of revealing whether or not a
winding-up petition has been presented. Notice of a winding-up order made or
resolution passed or a receiver or judicial manager appointed may not be filed
at the Registry of Companies and Businesses immediately.
5. We have received a Certificate (the "Certificate") dated [8th] February, 2000
from Mr [ ], a director of the Company, which certifies the matters referred to
in paragraphs [ ] below. In rendering our opinion in paragraphs [ ] below, we
have relied solely on the statements in the Certificate and we have not
ourselves reviewed or examined the corporate secretarial records and documents
of the Company for the purposes of giving such opinion. Nothing has come to our
attention which gives us any reason to believe that the statements in the
Certificate are, as at the date thereof, untrue, inaccurate or misleading in any
respect. We have made no independent investigation into any of the matters set
out in the Certificate and we have not ourselves checked the accuracy or
completeness of, or otherwise verified, the matters set out in the Certificate.
6. Based upon and subject to the foregoing, and subject to the qualifications
set forth below and any matters not disclosed to us, we are of the opinion
that:-
(i) the Company is a company incorporated and validly existing
under the laws of the Republic of Singapore and has the
corporate power and capacity to own or lease its property and
to conduct its business as described in the Prospectus;
(ii) (a) the Company has the corporate power and has taken all
necessary corporate action required under the laws of
the Republic of Singapore to authorise the entry
into, execution and delivery of, the U.S.
Underwriting Agreement, the International
Underwriting Agreement and the Singapore Underwriting
Agreement; and
(b) the Company has the corporate power and has taken all
necessary corporate action required under the laws of
the Republic of Singapore to authorise the entry
into, execution and delivery of the Deposit Agreement
and, assuming due authorisation, execution and
delivery thereof by the Depositary (as defined in the
U.S. Underwriting Agreement), the Deposit Agreement
constitutes a valid and legally binding agreement of
the Company, enforceable in accordance with its
terms;
(iii) the authorised share capital of the Company as at [ ], 2000
conforms as to legal matters to the description thereof set
out on page [ ] of the Prospectus;
(iv) (a) as of [ ], 2000, the [ ] Ordinary Shares
issued and outstanding prior to the issuance of the
Offered Shares in connection with the Offering have
been duly authorised and are validly issued, fully
paid and non-assessable and are not issued in
violation of any pre-emptive or similar rights under
(1) the laws of the Republic of Singapore or (2) the
Memorandum and Articles of Association of the Company
or any other constitutive document of the Company or
any amendment thereto. For the purposes of this
opinion we have assumed that the term "non-
<PAGE> 37
5
assessable" in relation to the Ordinary Shares means
under Singapore law that holders of such Ordinary
Shares, having fully paid up all amounts due on such
Ordinary 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
Ordinary Shares;
(b) no holder of any of the [ ] Ordinary Shares issued
and outstanding prior to the issuance of the Offered
Shares in connection with the Offering are entitled
to any pre-emptive or other rights to subscribe for
any of such Ordinary Shares; and
(c) except as described in the Prospectus under the
caption "Management - Employee Benefit Plans", and as
far as we are aware, there are no outstanding
securities issued by the Company convertible into or
exchangeable for, or warrants, rights or options to
purchase from the Company, or obligations of the
Company to issue, Ordinary Shares;
(v) the Offered Shares to be issued in connection with the
Offering have been duly authorised by the Company and, when
issued and delivered to and paid for by the U.S. Underwriters
in accordance with the terms of the U.S. Underwriting
Agreement, by the International Underwriters in accordance
with the terms of the International Underwriting Agreement and
by the Managers pursuant to the Singapore Underwriting
Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Offered Shares will
not be subject to any pre-emptive or similar rights under (a)
the laws of the Republic of Singapore or (b) the Memorandum
and Articles of Association of the Company or any other
constitutive document of the Company or any amendment thereto;
there are no restrictions on the transfer of the Offered
Shares under the laws of the Republic of Singapore except as
described under the captions "Description of Share Capital -
Transfer of Ordinary Shares" and "Description of American
Depository Shares - Withdrawal of Ordinary Shares Upon
Cancellation of ADSs" in the Prospectus;
(vi) the capital restructuring exercise undertaken by the Company
and as described under the captions "Capitalization" and
"Management - Employee Benefit Plans" in the Prospectus was
approved by the Company at the Extraordinary General Meeting
of the Company held on 9th November, 1999 and has become
effective and has been completed. The Articles of Association
of the Company referred to in the Prospectus under the caption
"Description of Ordinary Shares" were adopted by the Company
at the Extraordinary General Meeting of the Company held on
19th January, 2000 and are effective;
(vii) as at the date hereof:-
(a) we are not representing the Company in any legal or
governmental proceedings, pending or threatened, to
which the Company is a party or to which any of the
properties of the Company is subject which could
reasonably be expected to have a material adverse
effect on the performance of the Transaction
Agreements or the Singapore Underwriting Agreement or
the consummation of any transactions contemplated
therein or could
<PAGE> 38
6
reasonably be expected to have a material adverse
effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the
Company; and
(b) we are not aware of the existence of any legal or
governmental proceedings in the Republic of Singapore
to which the Company is a party or to which any of
the properties of the Company is subject;
(viii) no consent, approval, authorisation or order of or
qualification with any governmental body or agency or stock
exchange authority in the Republic of Singapore was or is
required for the consummation of the transactions contemplated
in the Transaction Agreements and the Singapore Underwriting
Agreement, except as may be required pursuant to the Companies
Act, Chapter 50 of the Republic of Singapore, the Listing
Manual of the SES or the AIP Letter and as have been obtained;
(ix) under the current laws and regulations of the Republic of
Singapore, all dividends declared and payable in respect of
the Ordinary Shares may be paid by the Company to the holder
thereof in Singapore dollars that may be converted into
foreign currency and, when so converted, freely transferred
out of the Republic of Singapore, without the necessity of
obtaining any consents, approvals, authorisations, orders or
clearances from or registering with any Singapore governmental
agency or body or any stock exchange authority; and except as
set forth in the Prospectus under the caption "Taxation -
Singapore Tax Considerations", all dividends paid to holders
of Ordinary Shares who are non-residents of the Republic of
Singapore will not be subject to Singapore income, withholding
or other taxes under the laws of the Republic of Singapore;
(x) the consummation of any of the transactions contemplated in
the Transaction Agreements and the Singapore Underwriting
Agreement (including the issuance and sale of the Offered
Shares in connection with the Offering) (a) have been, in the
case of transactions to which the Company is a party, duly
authorised by the Company and (b) do not contravene (1) any
provision of the laws of the Republic of Singapore, (2) the
Memorandum and Articles of Association of the Company or any
other constitutive document of the Company or any amendment
thereto, (3) any agreement or instrument binding on the
Company and governed by Singapore law and described in Exhibit
A hereto or (4) as far as we are aware, any judgment, order or
decree of any governmental body, agency or court of the
Republic of Singapore having jurisdiction over the Company or
any of its assets;
(xi) it is not necessary, in order to ensure the legality,
validity, enforceability or admissibility in evidence of the
Transaction Agreements and the Singapore Underwriting
Agreement, that they be filed or recorded with any
governmental or other regulatory authorities in the Republic
of Singapore or that any Singapore stamp duty be paid on them;
(xii) no taxes, imposts or duties of any nature (including, without
limitation, stamp or other issuance or transfer taxes or
duties and capital gains, income, withholding or other taxes
but excluding tax on the overall net income of the relevant
person) are payable by or on behalf of the U.S. Underwriters,
the International Underwriters, the Managers or the
<PAGE> 39
7
Company to the Republic of Singapore or any political
subdivision or taxing authority thereof or therein in
connection with (a) the execution and delivery of the U.S.
Underwriting Agreement, the International Underwriting
Agreement or the Singapore Underwriting Agreement; (b) the
issuance of the Offered Shares in connection with the
Offering; (c) the deposit of such Offered Shares with the
Depositary against issuance of ADRs evidencing the ADSs to be
sold to the U.S. Underwriters or the International
Underwriters; (d) the sale and delivery of the ADSs to the
U.S. Underwriters in the manner contemplated in the U.S.
Underwriting Agreement or to the International Underwriters in
the manner contemplated in the International Underwriting
Agreement or the sale and delivery of Offered Shares to the
Managers in the manner contemplated in the Singapore
Underwriting Agreement; or (e) except as disclosed in the
Prospectus under the caption "Taxation - Singapore Tax
Considerations", the resale and delivery of such ADSs by the
U.S. Underwriters or the International Underwriters, or the
resale and delivery of such Offered Shares by the Managers, in
the manner contemplated in the relevant Prospectus;
(xiii) the statements in the Prospectus indicated with asterisks in
Appendix A to this opinion under the captions "Exchange
Rates", "Dividend Policy", "Capitalization", "Business -
Enforcement of Civil Liabilities", "Description of Share
Capital" and "Taxation - Singapore Tax Considerations",
insofar as such statements constitute summaries of the
Singapore legal matters referred to therein, fairly present
the information called for with respect to such legal matters
and fairly summarise the matters referred to therein
(including the tax consequences described in connection with
investment in the Ordinary Shares);
(xiv) the choice of New York law as the governing law of the
Transaction Agreements is a valid choice of law and will be
recognised and given effect to by the Singapore courts;
(xv) the submission by the Company to the jurisdiction of the New
York courts contained in the Transaction Agreements and the
appointment by the Company of the President for the time being
of Singapore Technologies Assembly and Test Services, Inc.
presently located at 1450 McCandless Drive, Milpitas,
California 95035, United States of America as its agent for
service of process in connection therewith are, in each case,
valid and binding on the Company under the laws of the
Republic of Singapore and irrevocable and we are not aware of
any reason that the Singapore courts would not give effect to
such submission; and
(xvi) a final and conclusive judgement on the merits properly
obtained against the Company in any competent court of a state
in, or a Federal Court of, the United States of America for a
fixed sum of money in respect of any legal suit or proceedings
arising out of or relating to the Transaction Agreements and
which could be enforced by execution against the Company in
the jurisdiction of the relevant court and has not been stayed
or satisfied in whole may be sued on in the Republic of
Singapore as a debt due from the Company if:-
(a) the relevant court had jurisdiction over the Company
in that the Company was, at the time proceedings were
instituted, resident in
<PAGE> 40
8
the jurisdiction in which proceedings has been
commenced or had submitted to the jurisdiction of the
relevant court;
(b) that judgement was not obtained by fraud;
(c) the enforcement of that judgement would not be
contrary to the public policy of the Republic of
Singapore;
(d) that judgement had not been obtained in contravention
of the principles of natural justice; and
(e) the judgement of the relevant court did not include
the payment of taxes, a fine or penalty;
(xvii) the SES has granted in-principle approval for the listing of
the Ordinary Shares on the SES, subject to the conditions set
out in the AIP Letter;
(xviii) none of the U.S. Underwriters or International Underwriters is
or will be deemed to be resident, domiciled, carrying on
business or subject to taxation in the Republic of Singapore
by reason only of the entry into, performance or enforcement
of the U.S. Underwriting Agreement and International
Underwriting Agreement respectively; and
(xix) the Company is not entitled to claim immunity from suit,
execution, attachment or legal process in any proceedings
taken in the Republic of Singapore in relation to the
Transaction Agreements or the Singapore Underwriting
Agreement.
7. This opinion relates only to the laws of general application of the Republic
of Singapore as at the date hereof and as currently applied by the Singapore
courts, and is given on the basis that it will be governed by and construed in
accordance with the laws of the Republic of Singapore. We have made no
investigation of, and do not express or imply any views on, the laws of any
country other than the Republic of Singapore. In respect of the Transaction
Agreements, the Singapore Underwriting Agreement, the Prospectus, the
Registration Statement and the ADR Registration Statement, we have assumed due
compliance with all matters concerning United States Federal and New York laws
and the laws of all other relevant jurisdictions other than the Republic of
Singapore. With respect to all matters of United States Federal and New York
laws we have relied upon, and our opinion is subject to the qualifications,
assumptions and exceptions set forth in, the opinion of Shearman & Sterling,
United States counsel for the Company, delivered pursuant to (i) Section [6(c)]
of the U.S. Underwriting Agreement and (ii) Section [6(c)] of the International
Underwriting Agreement. As to matters of fact material to this opinion, we have
relied on the statements of responsible officers of the Company.
8. The qualifications to which this opinion is subject are as follows:-
(i) enforcement of the obligations of the Company under the
Transaction Agreements or the Singapore Underwriting Agreement
may be affected by prescription or lapse of time, bankruptcy,
insolvency, liquidation, reorganization, reconstruction or
similar laws generally affecting creditors' rights;
(ii) the power of the Singapore courts to grant equitable remedies
such as injunction and specific performance is discretionary
and accordingly a
<PAGE> 41
9
Singapore court may make an award of damages where an
equitable remedy is sought;
(iii) where under any of the Transaction Agreements or the Singapore
Underwriting Agreement, any person is vested with a discretion
or may determine a matter in its opinion, Singapore law may
require that such discretionicised reasonably or that such
opinion is based upon reasonable grounds;
(iv) by virtue of the Limitation Act, Chapter 163 of the Republic
of Singapore, failure to exercise a right of action for more
than six years will operate as a bar to the exercise of such
right and failure to exercise such a right for a lesser period
may result in such right being waived;
(v) a Singapore court may stay proceedings if concurrent
proceedings are brought elsewhere;
(vi) where obligations are to be performed in a jurisdiction
outside the Republic of Singapore, they may not be enforceable
in the Republic of Singapore to the extent that performance
would be illegal or contrary to public policy under the laws
of that jurisdiction;
(vii) provisions in each of the Transaction Agreements or the
Singapore Underwriting Agreement as to severability may not be
binding under the laws of the Republic of Singapore and the
question of whether or not provisions which are illegal,
invalid or unenforceable may be severed from other provisions
in order to save such other provisions depends on the nature
of the illegality, invalidity or unenforceability in question
and would be determined by a Singapore court at its
discretion;
(viii) a Singapore court may refuse to give effect to clauses in any
of the Transaction Agreements or the Singapore Underwriting
Agreement in respect of the costs of unsuccessful litigation
brought before a Singapore court or where the court has itself
made an order for costs;
(ix) we express no opinion as to events and conditions which might
violate covenants, restrictions or provisions with respect to
financial ratios or tests or any contractual provision
measured by the financial conditions or results of operation
of the Company or any of its subsidiaries;
(x) we express no opinion on the legality or enforceability of the
performance by the Company of its obligations of
indemnification or contribution set forth in Section [9] of
the U.S. Underwriting Agreement or Section [9] of the
International Underwriting Agreement;
(xi) any term of an agreement may be amended orally by all the
parties notwithstanding provisions to the contrary in the
Transaction Agreements or the Singapore Underwriting
Agreement;
(xii) this opinion is given on the basis that there will be no
amendment to or termination or replacement of the documents,
authorisations and approvals referred to in paragraph 2 of
this opinion and on the basis of the laws of the Republic of
Singapore in force as at the date of this opinion. This
opinion is also given on the basis that we undertake no
responsibility
<PAGE> 42
10
to notify any addressee of this opinion of any change in the
laws of the Republic of Singapore after the date of this
opinion; and
(xiii) under general principles of Singapore law, a person who is not
a contracting party to an agreement is not entitled to the
benefit of the agreement and may not enforce the agreement.
9. As the primary purpose of our professional engagement was not to establish or
confirm factual matters or financial, accounting or statistical matters and
because of the wholly or partially non-legal character of many of the statements
contained in the Prospectus, we express no opinion or belief on and do not
assume any responsibility for the accuracy, completeness or fairness of any of
the statements contained in the Prospectus (other than those specifically
referred to in paragraph 7 of this opinion) and we make no representation that
we have independently verified the accuracy, completeness or fairness of such
statements. Without limiting the foregoing, we express no belief and assume no
responsibility for, and have not independently verified the accuracy,
completeness or fairness of the financial statements and schedules and other
financial and statistical data included or incorporated in the Prospectus, and
we have not examined the accounting, financial or statistical records from which
such financial statements, schedules and data are derived.
10. This opinion is rendered by us solely for the benefit of the U.S.
Underwriters and the International Underwriters in their capacity as
underwriters in connection with the transactions referred to in the U.S.
Underwriting Agreement or, as the case may be, the International Underwriting
Agreement. This opinion is strictly limited to the matters stated herein and is
not to be read as extending by implication to any other matter in connection
with any of the Transaction Agreements or otherwise including, but without
limitation, any other document signed in connection with any of the Transaction
Agreements. Further, this opinion is not to be circulated to, or relied upon by,
any other person or quoted or referred to in any public document or filed with
any governmental body or agency without our prior written consent.
Yours faithfully,
<PAGE> 43
11
EXHIBIT A
[to come]
<PAGE> 44
12
APPENDIX A
[to come]
<PAGE> 45
APPENDIX B
(65) 230-3841
[ ], 2000
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
As U.S. Representatives of the several
U.S. Underwriters listed in Schedule "A"
to the U.S. Underwriting Agreement
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
As International Representatives of the several
International Underwriters listed in Schedule "A"
to the International Underwriting Agreement
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
ST Assembly Test Services Ltd
Ladies and Gentlemen:
We are acting as U.S. counsel for ST Assembly Test Services Ltd, a
company incorporated with limited liability under the laws of the Republic of
Singapore (the "Company"), in connection with a global offering of 170,000,000
Ordinary Shares, S$0.25 par value each, of the Company (the "Shares"), either
directly or in the form of Americal Depositary Shares ("ADSs"), each ADS
representing [ten] Shares, pursuant to (i) the U.S. Underwriting Agreement,
dated January [ ], 2000 (the "U.S. Underwriting Agreement"), among the Company
and Salomon Smith Barney Inc., Hambrecht & Quist LLC and SG Cowen Securities
Corporation, as U.S. Representatives of the several U.S. Underwriters listed in
Schedule "A" thereto (the "U.S. Underwriters"), (ii) the International
Underwriting Agreement, dated January [ ], 2000 (the "International Underwriting
Agreement") among the Company and [ ], as International Representatives of the
several International Underwriters listed in Schedule "A" thereto (the
"International Underwriters"), and (iii) the Singapore Underwriting Agreement,
dated January [ ], 2000 (together with the U.S. Underwriting Agreement and the
International Underwriting Agreement, the "Underwriting Agreements") among the
Company and [ ], as Singapore Representatives of the several Singapore
Underwriters listed in Schedule "A" thereto (together with the U.S. Underwriters
and the International Underwriters, the "Underwriters").
In this capacity, we have examined a signed copy of the registration
statement on Form F-1 (File No. 333-93661), filed by the Company under the
United States Securities Act of 1933, as amended (the "Securities Act"), with
the United States Securities and Exchange Commission (the "Commission") on [ ],
[ ], and of Amendment No. 1 thereto filed by the Company with the Commission
dated [ ], [ ], and of Amendment No. 2 thereto filed by the Company with the
Commission on [ ],
<PAGE> 46
2
[ ] and copies of the related U.S. prospectus and international prospectus (the
registration statement as amended at the time it became effective, including the
exhibits thereto, being hereinafter referred to as the "Share Registration
Statement", and the final U.S. Prospectus dated [ ], [ ] in the form delivered
to the U.S. Underwriters (the "U.S. Prospectus"), and the final International
Prospectus dated [ ], [ ] in the form delivered to the International
Underwriters (the "International Prospectus"), being hereinafter referred to
collectively as the "Prospectuses").
We have also examined a signed copy of the registration statement on
Form F-6 (File No. 333-505544), filed by Citibank, N.A. under the Securities Act
with the Commission on [ ], [ ], and of Amendment No. 1 thereto filed with the
Commission dated [ ], [ ], and of Amendment No. 2 thereto filed with the
Commission on [ ], [ ](such registration statement on Form F-6 at the time when
it became effective, including the exhibits thereto, being hereinafter referred
to as the "ADS Registration Statement" and, together with the Share Registration
Statement, being hereinafter referred to as the "Registration Statements").
We have also reviewed and participated in discussions concerning the
preparation of the Registration Statements and the Prospectuses with certain
directors, officers and employees of the Company, with Allen & Gledhill,
Singapore counsel to the Company, with KPMG, independent auditors of the
Company, and with representatives of the Underwriters. The limitations inherent
in the independent verification of factual matters and in the role of outside
counsel are such, however, that we cannot and do not assume any responsibility
for the accuracy, completeness and fairness of any of the statements made in the
Registration Statements or the Prospectuses, except as set forth in paragraph
(vii) of our opinion addressed to you, dated the date hereof.
Subject to the limitations set forth in the immediately preceding
paragraph, we advise you that, on the basis of the information we gained in the
course of performing the services referred to above, (A) in our opinion, each of
the Registration Statements, the U.S. Prospectus and the International
Prospectus (other than the financial statements and financial data included
therein or omitted therefrom, as to which we express no view) appear on their
face to be appropriately responsive in all material respects to the requirements
of the Securities Act or the Exchange Act, as the case may be, and the
applicable rules and regulations of the Commission thereunder, and there are no
contracts or other documents known to us after reasonable investigation that are
required to be filed as exhibits to any of the Registration Statements that have
not been so filed, and (B) no facts came to our attention which gave us reason
to believe that (a) any of the Registration Statements (other than the financial
statements and financial data included therein or omitted therefrom, as to which
we express our view), at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or (b) either of the U.S. Prospectus or International Prospectus
(other than the financial statements and financial data included therein or
omitted therefrom, as to which we express no view), as of its date or the date
hereof, contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Very truly yours,
<PAGE> 47
3
[ ], 2000
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
As U.S. Representatives of the several
U.S. Underwriters listed in Schedule "A"
to the U.S. Underwriting Agreement
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
As International Representatives of the several
International Underwriters listed in Schedule "A"
to the International Underwriting Agreement
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
ST Assembly Test Services Ltd
Ladies and Gentlemen:
We are acting as U.S. counsel for ST Assembly Test Services
Ltd, a company incorporated with limited liability under the laws of the
Republic of Singapore (the "Company"), in connection with a global offering of [
] Ordinary Shares, S$[ ] par value each, of the Company (the "Shares"), either
directly or in the form of Americal Depositary Shares ("ADSs"), each ADS
representing [ ] Shares, including the offering of [ ] Shares, either directly
or in the form of ADSs, pursuant to (i) the U.S. Underwriting Agreement, dated
January [ ], 2000 (the "U.S. Underwriting Agreement"), among the Company and
Salomon Smith Barney Inc., Hambrecht & Quist LLC and SG Cowen Securities
Corporation, as U.S. Representatives of the several U.S. Underwriters listed in
Schedule "A" thereto (the "U.S. UNDERWRITERS"), (ii) the International
Underwriting Agreement, dated January [ ], 2000 (the "International Underwriting
Agreement") among the Company and [ ], as International Representatives of the
several International Underwriters listed in Schedule "A" thereto (the
"International Underwriters"), and (iii) the Singapore Underwriting Agreement,
dated January [ ], 2000 (the "Singapore Underwriting Agreement", and, together
with the U.S. Underwriting Agreement and the International Underwriting
Agreement, the "Underwriting Agreements") among the Company and [ ], as
Singapore Representatives of the several Singapore Underwriters listed in
Schedule "A" thereto (the "Singapore Underwriters", and, together with the U.S.
Underwriters and the International Underwriters, the "Underwriters").
In this capacity, we have examined a signed copy of the registration
statement on Form F-1 (File No. 333-[ ]), filed by the Company under the United
States Securities Act of 1933, as amended (the "Securities Act"), with the
United States Securities and Exchange Commission (the "Commission") on [ ], [ ],
and of Amendment No.
<PAGE> 48
4
1 thereto filed by the Company with the Commission dated [ ], [ ], and of
Amendment No. 2 thereto filed by the Company with the Commission on [ ], [ ] and
copies of the related U.S. prospectus and international prospectus (the
registration statement as amended at the time it became effective, including the
exhibits thereto, being hereinafter referred to as the "Share Registration
Statement", and the final U.S. Prospectus dated [ ], [ ] in the form delivered
to the U.S. Underwriters (the "U.S. Prospectus"), and the final International
Prospectus dated [ ], [ ] in the form delivered to the International
Underwriters (the "International Prospectus"), being hereinafter referred to
collectively as the "Prospectuses").
We have also examined a signed copy of the registration statement on
Form F-6 (File No. 333-[ ]), filed by Citibank, N.A. under the Securities Act
with the Commission on [ ], [ ], and of Amendment No. 1 thereto filed with the
Commission dated [ ], [ ], and of Amendment No. 2 thereto filed with the
Commission on [ ], [ ](such registration statement on Form F-6 at the time when
it became effective, including the exhibits thereto, being hereinafter referred
to as the "ADS Registration Statement"). We have also examined a signed copy of
the registration statement on Form 8-A, filed by the Company under the United
States Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
the Commission on [ ], [ ](such registration statement on Form 8-A at the time
when it became effective, including the exhibits thereto, being hereinafter
referred to as the "Form 8-A Registration Statement", and, together with the
Share Registration Statement and the ADS Registration Statement, the
"Registration Statements").
A member of the Staff of the Commission advised us orally that the
Share Registration Statement and the ADS Registration Statement became effective
under the Securities Act at [ ] PM, New York City time, on [ ], [ ]. On [ ],
[ ], a member of the Staff of the Commission advised us orally that there was no
stop order suspending the effectiveness of any of the Registration Statements.
To our knowledge since that date no stop order suspending the effectiveness of
any of the Registration Statements has been issued under the Securities Act or
the Exchange Act, as the case may be, or proceedings therefor initiated or
threatened by the Commission.
We have also examined the Deposit Agreement, dated as of [ ], [ ] (the
"Deposit Agreement"), among the Company, Citibank, N.A., as depositary (the
"Depositary"), and the owners and beneficial owners from time to time of
American Depositary Receipts ("ADRs") thereunder, as well as originals, or
copies identified to our satisfaction, of such corporate records of the Company,
certificates of officers of the Company and other persons, and such other
documents, agreements and instruments as we have deemed necessary as a basis for
the opinions hereinafter expressed. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity of originals of all documents submitted to us as
copies.
Our opinions set forth below are limited to the laws of the State of
New York and the Federal securities Laws of the United States, and we do not
express any opinions herein concerning any other laws. In addition, we have not
been requested to express, and do not express, any opinion with respect to
whether the Deposit Agreement constitutes a valid and legally binding agreement
by owners and beneficial owners from time to time of ADRs.
Based upon and subject to the foregoing, and having regard for such
legal considerations as we deem relevant, we are of the opinion that:
<PAGE> 49
5
(i) assuming due authorization, execution and delivery thereof by
the Company under the laws of Singapore, each of the
Underwriting Agreements have been duly executed and delivered
by the Company under the laws of New York;
(ii) the Company is not, and after giving effect to the
transactions contemplated by the Underwriting Agreements and
the Deposit Agreement will not become, an "investment
company" within the meaning of the Investment Company Act of
1940;
(iii) assuming due authorization, execution and delivery thereof by
the Company under the laws of Singapore, the Deposit Agreement
has been duly executed and delivered by the Company under the
laws of New York and assuming further the due authorization,
execution and delivery of the Deposit Agreement by the
Depositary, the Deposit Agreement constitutes a valid and
legally binding agreement of the Company (other than Section
[5.8] thereof as to which we do not express any opinion),
enforceable in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors' rights generally and
to general principles of equity (regardless of whether in a
proceeding in equity or at law).
(iv) assuming due authorization, execution and delivery of the
Deposit Agreement by the Depositary and the Company, upon due
issuance by the Depositary of the ADRs evidencing the ADSs
being delivered by the Company at the Closing Date against the
deposit of the Underlying Shares by the Company in respect
thereof in accordance with the provisions of the Deposit
Agreement, such ADRs have been duly and validly issued and the
persons in whose names such ADRs are registered are entitled
to the rights specified therein and in the Deposit Agreement;
the ADSs and ADRs in respect thereof conform in all material
respects to the descriptions thereof in the Prospectuses,
insofar as such statements purport to summarize certain
provisions of the Deposit Agreement;
(v) no consent, approval, authorization or order of any court or
governmental agency or body of the United States or of the
State of New York is required for the consummation by the
Company of the transaction contemplated in the Underwriting
Agreements or the Deposit Agreement, except (A) the
registration under the Securities Act of the Shares and the
ADSs and the registration under the Exchange Act of the ADSs,
and (B) any other consents, approvals, authorizations or
orders as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution
of the Shares and the ADSs to be purchased under the
Underwriting Agreements;
(vi) the deposit of the Shares being deposited with the Depositary
or its nominee against the issuance of the ADRs evidencing the
ADSs to be delivered at the Closing Date, the sale and
delivery by the Company of the Shares to be delivered at the
Closing Date, the consummation of the transactions
contemplated by the Underwriting Agreements or the Deposit
Agreement and the fulfilment of the terms thereof will not
conflict with, result in a breach or violation of, or
constitute a default under, (A) any law of the United States
or the State of New York and (B)
<PAGE> 50
6
any judgment or decree know to us to be applicable to the
Company of any court, regulatory body, administrative agency,
governmental body or arbitrator of the United States or the
State of New York having jurisdiction over the Company;
(vii) the information contained in the Prospectuses under the
headings "Taxation" and "Shares Eligible for Future Sale",
insofar as it purports to summarize the provisions of federal
laws of the United States or the laws of the State of New
York, is true and accurate in all material respects and fairly
summarizes the material federal income tax considerations to
an investment on the Ordinary Shares directly or in the form
of ADSs and the other matters therein;
(viii) the choice of law provision set forth in Section 15 hereof and
in the Deposit Agreement will be recognized by the New York
Courts provided, however, that we express no opinion as to
whether any United States federal court will accept venue of
an action which it may affirmatively determine not to accept
as inconvenient or otherwise inappropriate;
This opinion is being furnished to you solely for your benefit in
connection with the transactions contemplated by the Underwriting Agreements and
the Deposit Agreement, and is not to be used, circulated, quoted or otherwise
referred to for any other purpose without our express written consent, and no
party other than you is entitled to rely on it. Notwithstanding the foregoing
sentence, the Depositary may rely on our opinion in paragraph (iii) as if such
opinion were addressed to it.
Very truly yours
<PAGE> 51
7
Appendix C
FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM L.L.P.
[date]
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
As U.S. Representatives of the several U.S. Underwriters
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
As International Representatives of the several International Underwriters
c/o
Salomon Brothers International Limited
Victoria Plaza
111 Buckingham Palace Road
London SWIW OSB
England
Re: American Depositary Shares
Each Representing Ten (10) Ordinary Shares of
ST Assembly Test Services Ltd
Ladies and Gentlemen:
We have acted as special United States counsel for Citibank, N.A. in
connection with the Deposit Agreement, dated as of February [8], 2000 (the
"Deposit Agreement"), by and among ST Assembly Test Services Ltd, a company
incorporated under the laws of the Republic of Singapore (the "Company"),
Citibank, N.A., as depositary (the "Depositary"), and Holders and Beneficial
Owners of American Depositary Shares (the "ADSs") evidenced by American
Depositary Receipts (the "ADRs"), --each ADS representing ten (10) ordinary
shares, par value S$0.25 per share, of the Company (the "Shares").
This opinion is being furnished to you pursuant to Section 6(d) of the
U.S. Underwriting Agreement, dated January [27], 2000 among the Company and the
U.S. Underwriters named therein (the "Underwriting Agreement"). Capitalized
terms used and not otherwise defined herein shall have the respective meanings
set forth in the Underwriting Agreement.
We have examined originals or copies of (i) the final Prospectuses,
each dated -, 2000, relating to the ADSs (the "Prospectuses"), (ii) the
registration statement with respect to the ADSs on Form F-6 under the Securities
Act of 1933, as amended (the "Act"), filed on January 11, 2000 (the "ADS
Registration Statement"), (iii) an executed copy of the Deposit Agreement, (iv)
specimen certificates of the ADRs evidencing the ADSs, (v) the Depositary's
Certificate,
<PAGE> 52
2
dated -, 2000 and (vi) a certified copy of the Charter and By-Laws of the
Depositary as in effect on the date hereof. We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such other
documents, certificates and records as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Depositary, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof. As to
any facts material to the opinions expressed herein which were not
independently established or verified, we have relied upon oral or written
statements and representations of officers and other representatives of the
Depositary and others.
Members of our firm are admitted to the bar in the State of New York,
and we do not express any opinion as to the laws of any other jurisdiction (or
as to the effect of the laws of any such jurisdiction on the opinions herein
stated) other than the federal laws of the United States of America to the
extent referred to specifically herein. We have assumed the accuracy,
correctness and validity of all matters relating to or dependent upon the laws
of the Republic of Singapore, including, but not limited to, (i) the due
authorization, execution and delivery of the Deposit Agreement by the Company
under the laws of the Republic of Singapore, (ii) the due execution and delivery
under the laws of the Republic of Singapore by the Depositary of the Deposit
Agreement and the validity and legality thereof under the laws of the Republic
of Singapore, (iii) that, under the laws of the Republic of Singapore, the
Shares have been duly authorized, executed and delivered by the Company and are
validly issued, fully paid and non-assessable, and the holders of the Shares
will be entitled to all the rights of a shareholder conferred by the Memorandum
and Articles of Association of the Company and the Companies Act of the Republic
of Singapore, and (iv) that, under the laws of the Republic of Singapore, upon
due issuance and delivery by the Depositary of the ADRs evidencing the ADSs
against the deposit of the Shares in accordance with the terms of the Deposit
Agreement, such ADRs will be validly issued and will entitle the persons in
whose name each ADR is registered to the rights specified therein and in the
Deposit Agreement.
Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:
(i) the Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and constitutes a legal, valid and binding
instrument enforceable against the Depositary in accordance with its terms,
except to the extent that enforcement thereof may be limited by (a) bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (b) general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity);
(ii) the statements in the Prospectuses under the heading "Description
of American Depositary Receipts", insofar as such statements purport to
summarize certain provisions of the Deposit Agreement, the ADSs and the ADRs,
are fair and accurate;
(iii) the Depositary has full power and authority and legal right to
execute and deliver the Deposit Agreement and to perform its obligations
thereunder;
(iv) upon due issuance and delivery by the Depositary of the ADRs
evidencing the ADSs against the deposit of the Shares in accordance with the
terms of the Deposit Agreement, such ADRs will be validly issued and will
entitle the person in whose name each ADR is registered to the rights specified
therein and in the Deposit Agreement; and
<PAGE> 53
3
(v) the ADS Registration Statement and each amendment comply as to form
in all material respects with the applicable requirements of the Act and the
rules thereunder.
We have been advised by the U.S. Securities and Exchange Commission
that the ADS Registration Statement has become effective under the Act. To our
knowledge, no stop order suspending the effectiveness of the ADS Registration
Statement has been issued and no proceedings for that purpose have been
instituted or threatened.
This opinion is furnished to you for your benefit in connection with
the execution and delivery of the Deposit Agreement and is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our
express written permission.
Very truly yours,
<PAGE> 1
Exhibit 1.2
ST Assembly Test Services Ltd
51,000,000 Ordinary Shares */
(S$0.25 par value)
directly or in the form of American Depositary Shares
Each American Depositary Share representing
the right to receive ten Ordinary Shares
International Underwriting Agreement
New York, New York
January [27], 2000
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
As International Representatives of the several
International Underwriters,
c/o Salomon Brothers International Limited
Victoria Plaza 111 Buckingham Palace Road
London SW1W OSB
England
Ladies and Gentlemen:
ST Assembly Test Services Ltd, a company organized under the laws
of Singapore (the "Company"), proposes to sell to the several International
Underwriters named in Schedule I hereto (the "International Underwriters"), for
whom you (the "International Representatives") are acting as representatives,
51,000,000 Ordinary Shares, S$0.25 par value per share (the "Ordinary Shares"),
of the Company directly or in the form of American Depositary Shares (the
"ADSs") (said Ordinary Shares to be issued and sold by the Company being
hereinafter called the "International Underwritten Shares"). The Company also
proposes to grant to the International Underwriters an option to purchase up to
7,650,000 additional Ordinary Shares to cover over-allotments (the
"International Option Shares" and together with the International Underwritten
Shares, the "International Shares").
It is understood that the Company is concurrently entering into
the U.S. Underwriting Agreement as of the date hereof providing for the sale by
the Company of an aggregate of 102,000,000 Ordinary Shares directly or in the
form of ADSs (said Ordinary Shares to be issued and sold by the Company pursuant
to the U.S. Underwriting Agreement being hereinafter called the "U.S.
Underwritten Shares" and providing for the grant to the U.S. Underwriters of an
option to purchase from the Company up to
- --------
* Plus an option to purchase from the Company up to 25,500,000 additional
Ordinary Shares directly or in the form of ADSs to cover over-allotments.
<PAGE> 2
2
15,300,000 additional Ordinary Shares to cover over-allotments (the "U.S. Option
Shares" and together with the U.S. Underwritten Shares, the "U.S. Shares").
It is also understood that the Company is concurrently entering
into the Singapore Management and Underwriting Agreement dated as of the date
hereof (hereinafter the "Singapore Underwriting Agreement" and together with the
U.S. Underwriting Agreement and this International Underwriting Agreement, the
"Underwriting Agreements") providing for the sale by the Company of an aggregate
of 17,000,000 Ordinary Shares (said Ordinary Shares to be issued and sold by the
Company pursuant to the Singapore Underwriting Agreement being hereinafter
called the "Singapore Underwritten Shares") and providing for the grant to the
Singapore Underwriters of an option to purchase from the Company up to 2,550,000
additional Ordinary Shares to cover over-allotments (the "Singapore Option
Shares" and together with the "Singapore Underwritten Shares", the "Singapore
Shares"). The U.S. Shares, together with the International Shares and the
Singapore Shares are hereinafter called the "Shares".
You have also advised the Company that the Underwriters may elect
to cause the Company to deposit on their behalf all or any portion of the
Ordinary Shares to be purchased by them under the Underwriting Agreements
pursuant to the Deposit Agreement, dated as of February [8], 2000 (the "Deposit
Agreement"), to be entered into among the Company, Citibank N.A., as depositary
(the "Depositary") and all holders from time to time of the ADSs (as hereinafter
defined). Upon deposit of any Ordinary Shares, the Depositary will issue
American Depositary Shares representing the Shares so deposited. The ADSs will
be evidenced by American Depositary Receipts (the "ADRs"). Each ADS will
represent ten Ordinary Shares and each ADR may represent any number of ADSs.
Unless the context otherwise requires, the terms "Underwritten Securities",
"Option Securities", "U.S. Underwritten Securities", "U.S. Option Securities",
"U.S. Securities", "International Underwritten Securities", "International
Option Securities", "International Securities", "Singapore Underwritten
Securities", "Singapore Option Securities", "Singapore Securities" and
"Securities" shall be deemed to refer, respectively, to Underwritten Shares,
Option Shares, U.S. Underwritten Shares, U.S. Option Shares, U.S. Shares,
International Underwritten Shares, International Option Shares, International
Shares, Singapore Underwritten Shares, Singapore Option Shares, Singapore Shares
and Shares, as well as, in each case, to any ADSs representing such securities
and the ADRs evidencing such ADSs.
It is further understood and agreed that the U.S. Underwriters,
International Underwriters and Singapore Underwriters have entered into an
Agreement Among U.S. Underwriters, International Underwriters and Singapore
Underwriters dated the date hereof (the "Agreement Among U.S. Underwriters,
International Underwriters and Singapore Underwriters"), pursuant to which,
among other things, the International Underwriters and Singapore Underwriters
may purchase from the U.S. Underwriters a portion of the U.S. Securities to be
sold pursuant to the U.S. Underwriting Agreement, the U.S. Underwriters and
Singapore Underwriters may purchase from the International Underwriters a
portion of the International Securities to be sold pursuant to this
International Underwriting Agreement, and the U.S. Underwriters and
International Underwriters may purchase from the Singapore Underwriters a
portion of the Singapore Securities to be sold pursuant to the Singapore
Underwriting Agreement.
The offering of the U.S. Shares, directly or in the form of ADSs,
is referred to herein as the "U.S. Offering"; the offering of the International
Shares, directly or in the form of ADSs, is referred to herein as the
"International Offering"; and the offering of the Singapore Shares (which will
be only in the form of Ordinary Shares) is
<PAGE> 3
3
referred to herein as the "Singapore Offering". The U.S. Offering, International
Offering and Singapore Offering are referred to collectively herein as the
"Global Offering".
As part of the Global Offering contemplated by the Underwriting
Agreements, the U.S. Underwriters, the International Underwriters and the
Singapore Underwriters have agreed to reserve up to 7,500,000 Ordinary Shares
out of the Underwritten Shares set forth opposite their names on Schedule I to
this International Underwriting Agreement, the U.S. Underwriting Agreement and
the Singapore Underwriting Agreement, respectively, for sale (directly or in the
form of ADSs) to the Company's directors, officers, employees, employees of the
Company's business associates, officers and employees of the Company's
affiliates and to certain charitible organizations in Singapore (collectively,
"Participants"), as set forth in the Prospectuses under the heading
"Underwriting" (the "Directed Securities Program"). The Securities to be sold by
the Underwriters pursuant to the Directed Securities Program (the "Directed
Securities") will be sold by them pursuant to the Underwriting Agreements at the
initial public offering price. Any Directed Securities not orally confirmed for
purchase by any Participants by the end of the Business Day in Singapore on
which the Underwriting Agreements are executed will be offered to the other
Participants first, and any of such Directed Securities which are not taken up
by such Participants shall then be offered to the public by the Underwriters as
set forth in the Prospectuses.
To the extent there are no additional International Underwriters
listed on Schedule I other than you, the term International Representatives as
used in this International Underwriting Agreement shall mean you, as
International Underwriters, and the terms International Representatives and
International Underwriters shall mean either the singular or plural as the
context requires. The use of the neuter in this International Underwriting
Agreement shall include the feminine and masculine wherever appropriate. Certain
terms used in this International Underwriting Agreement are defined in Section
20 hereof.
1. Representations and Warranties.
(i) The Company represents and warrants to, and agrees with, each
International Underwriter as set forth below in this Section 1.
(a) The Company has prepared and filed with the Commission a
registration statement (file number 33-93661) on Form F-1, including the
related U.S. Preliminary Prospectus, for registration under the Act of
the offering and sale of the Shares. The Company may have filed one or
more amendments thereto, including the related U.S. Preliminary
Prospectus, each of which has previously been furnished to you. The
Company will next file with the Commission either (1) prior to the
Effective Date of such registration statement, a further amendment to
such registration statement (including the form of the final U.S.
Prospectus) or (2) after the Effective Date of such registration
statement, the final U.S. Prospectus in accordance with Rules 430A and
424(b). In the case of clause (2), the Company has included in such
registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the Act and
the rules thereunder to be included in such registration statement and
the International Prospectus with respect to the Underlying Shares and
the offering thereof directly or in the form of ADSs. As filed, such
amendment and form of final prospectus, or such final prospectus, shall
contain all Rule 430A Information, together with all other such required
information with respect to the Underlying Shares and the offering
thereof directly or in the form of ADSs, and, except to the extent the
International
<PAGE> 4
4
Representatives shall agree in writing to a modification, shall be in
all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other
changes (beyond that contained in the latest U.S. Preliminary
Prospectus) as the Company has advised you, prior to the Execution Time,
will be included or made therein.
It is understood that three forms of prospectuses are to be used
in connection with the offering and sale of the Securities: one form of
prospectus relating to the U.S. Securities, which are to be offered and
sold to United States and Canadian Persons, one form of prospectus
relating to the International Securities, which are to be offered and
sold to persons other than United States and Canadian Persons and one
form of prospectus for circulation to potential subscribers in Singapore
relating to the Singapore Securities, which are to be offered and sold
in an initial public offering in Singapore. The International Prospectus
will be the same as the U.S. Prospectus except that it will have a
different front and back cover page. The Singapore Prospectus will be
the same as the International Prospectus except that it will have a
special wrap with information required by Singapore law. The
International Prospectus and the Singapore Prospectus will not be filed
as part of the Registration Statement.
(b) On the Effective Date, the Registration Statement did or
will, and when the U.S. Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date (as defined in this
International Underwriting Agreement ) and on any date on which Option
Securities are purchased, if such date is not the Closing Date (a
"settlement date"), each U.S. Prospectus (and any supplements thereto)
will comply in all material respects with the applicable requirements of
the Act and the rules thereunder; on the Effective Date and at the
Execution Time, the Registration Statement did not or will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Effective Date, each
Prospectus, if not filed pursuant to Rule 424(b), will not, and on the
date of any filing pursuant to Rule 424(b) and on the Closing Date and
any settlement date, each Prospectus (together with any supplement
thereto) will not, include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or
omitted from the Registration Statement, or the Prospectuses (or any
supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through the Representatives specifically for inclusion in the
Registration Statement or the Prospectuses (or any supplement thereto)
as set forth in Section 8(c) hereof.
(c) The Company has filed with the Commission a registration
statement (file number 505544) on Form F-6 for the registration under
the Act of the offering and sale of the ADSs. The Company may have filed
one or more amendments thereto, each of which has previously been
furnished to you. Such ADR Registration Statement at the time of its
effectiveness did or will comply and on the Closing Date, will comply,
in all material respects with the applicable requirements of the Act and
the rules thereunder and at the time of its Effective Date and at the
Execution Time, did not and will not contain any untrue statement
<PAGE> 5
5
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(d) Each of the Company and Singapore Technologies Assembly and
Test Services, Inc., a corporation organized under the laws of the State
of Delaware, (the "Subsidiary") has been duly incorporated and is
validly existing as a corporation under the laws of the jurisdiction in
which it is chartered or organized with full corporate power and
authority to own or lease, as the case may be, and to operate its
properties and conduct its business as described in the Prospectuses.
The Subsidiary is the only subsidiary of the Company.
(e) All the outstanding shares of capital stock of the Subsidiary
have been duly and validly authorized and issued, are fully paid and
nonassessable, and are owned by the Company free and clear of any
perfected security interest or any other security interests, claims,
liens or encumbrances;
(f) The Company's authorized, issued and outstanding equity
capitalization is as set forth in the Prospectuses; the outstanding
Ordinary Shares have been duly and validly authorized and issued and are
fully paid and nonassessable; the Securities being sold under the
Underwriting Agreements by the Company have been duly and validly
authorized, and, when issued and delivered to and paid for by the U.S.
Underwriters pursuant to the U.S. Underwriting Agreement, by the
International Underwriters pursuant to this International Underwriting
Agreement, by the Singapore Underwriters pursuant to the Singapore
Underwriting Agreement will be validly issued, fully paid and
nonassessable; the certificates for the Securities are in valid and
sufficient form; the holders of outstanding shares of capital stock of
the Company are not entitled to any preemptive or other rights to
subscribe for the Securities; and, except as set forth in the
Prospectuses, the Company has not issued any options, warrants or other
rights to purchase, or entered into any agreements or other obligations
to issue, or granted any rights to convert any obligations into or
exchange any securities for, shares of capital stock of or ownership
interests in the Company.
(g) The Securities are freely transferable by the Company to or
for the account of the several Underwriters and their designees and the
initial purchasers thereof, and except as set forth in the Prospectuses,
there are no restrictions on subsequent transfers of the Securities
under the laws of Singapore and of the United States.
(h) The capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectuses. The
capital adjustment as a result of termination and conversion of certain
of the options granted under the Employees' Share Ownership Scheme was
approved by the Company's shareholders at an extraordinary general
meeting on November 9, 1999 (the "EGM") and has become effective and has
been completed as described in the Prospectuses under the heading
"Management - Employee Benefits Plan".
(i) Each of the Underwriting Agreements and the Deposit Agreement
has been duly authorized, executed and delivered by the Company.
(j) There is no franchise, contract or other document of a
character required to be described in the Registration Statement, ADR
Registration Statement or Prospectuses, or to be filed as an exhibit
thereto, which is not described or filed as required; and the
description of each such contract, franchise
<PAGE> 6
6
or document in the Prospectuses is a fair description thereof in all
material respects.
(k) Upon issuance by the Depositary of ADSs evidenced by ADRs
against deposit of Underlying Shares in accordance with the provisions
of the Deposit Agreement, such ADRs will be duly and validly issued and
persons in whose names the ADRs are registered will be entitled to the
rights specified in the ADRs and in the Deposit Agreement; and upon the
sale and delivery to the International Underwriters of the International
Securities, and payment therefor, pursuant to this International
Underwriting Agreement, the International Underwriters will acquire
good, marketable and valid title to such International Securities
subject to the terms of the Deposit Agreement, free and clear of all
pledges, liens, security interests, charges, claims or encumbrances of
any kind. There are no limitations on the rights of any holders of the
ADSs to hold or vote the underlying Ordinary Shares other than those
arising in favor of persons purchasing through the International
Underwriters.
(l) Except as described in the Prospectuses, no stamp or other
issuance or transfer taxes or duties are payable to the Republic of
Singapore or any political subdivision or taxing authority thereof or
therein by or on behalf of the Underwriters in connection with (A) the
execution and delivery of the Underwriting Agreements or Deposit
Agreement, (B) the issuance of the Securities in the manner contemplated
by the Underwriting Agreements, (C) the deposit with the Depositary of
the Underlying Shares against issuance of the ADRs evidencing the ADSs,
(D) the sale and delivery by the Company of the Shares or the ADSs, as
the case may be, as contemplated herein or (E) the resale and delivery
of such Ordinary Shares and ADSs by the Underwriters in the manner
contemplated in the Prospectuses.
(m) Except as described in the Prospectuses, under current
Singapore law and regulations, all dividends and other distributions
declared and payable on the Ordinary Shares may be paid by the Company
to the Depositary and to the holders of Securities, as the case may be,
in Singapore dollars and may be converted into foreign currency and
freely transferred out of Singapore in accordance with the Deposit
Agreement, and all such dividends and other distributions made to
holders of the Underlying Shares or ADRs who are non-residents of
Singapore will not be subject to Singapore income, withholding or other
taxes under the laws and regulations of Singapore and, are otherwise
free and clear of any other tax, duty withholding or deduction in
Singapore and without the necessity of obtaining any government
authorization in Singapore.
(n) No consent, approval, authorization, filing with or order of
any court or governmental agency or body is required in connection with
the transactions contemplated herein or in the Deposit Agreement, except
such as have been obtained under the Companies Act, Chapter 50 of
Singapore and such as have been obtained under the Act, and such as may
be required under the blue sky laws of any jurisdiction in connection
with the purchase and distribution of the Securities by the Underwriters
in the manner contemplated under the Underwriting Agreements and in the
Prospectuses.
(o) Neither the issue and sale of the Securities nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof or of the Deposit Agreement will
conflict with, result in a breach or violation or imposition of any
lien, charge or encumbrance upon any property or
<PAGE> 7
7
assets of the Company or the Subsidiary pursuant to, (i) the Memorandum
and Articles of Association of the Company or the Subsidiary, (ii) the
terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which the Company or the Subsidiary is a party
or bound or to which their respective property is subject, except such
conflict, breach, violation or imposition of any lien, charge or
encumbrance which would not, individually or in the aggregate, have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the
Subsidiary, taken as a whole, whether or not arising from transactions
in the ordinary course of business (a "Material Adverse Effect"), or
(iii) any statute, law, rule, regulation, judgment, order or decree
applicable to the Company or the Subsidiary of any court, regulatory
body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or the Subsidiary or any
of their respective properties except, in the case of the Subsidiary,
any such conflict, breach, violation or imposition of any lien, charge
or encumbrance which would not, individually or in the aggregate, have a
Material Adverse Effect.
(p) The Company is not and, after giving effect to the offering
and sale of the Securities and the application of the proceeds thereof
as described in the Prospectuses, will not be an "investment company" as
defined in the Investment Company Act of 1940, as amended.
(q) No holder of securities of the Company has rights to the
registration of such securities under the Registration Statement or the
ADR Registration Statement.
(r) The consolidated historical financial statements and
schedules of the Company included in the Prospectuses and the
Registration Statement present fairly in all material respects the
financial condition, results of operations and cash flows of the Company
as of the dates and for the periods indicated, comply as to form with
the applicable accounting requirements of the Act and have been prepared
in conformity with generally accepted accounting principles of the
United States applied on a consistent basis throughout the periods
involved (except as otherwise noted therein). The summary and selected
financial data set forth under the caption "Recent Development",
"Summary Financial Data" and "Selected Consolidated Financial Data",
respectively, in the Prospectuses and Registration Statement present
fairly in all material respects, on the basis stated in the Prospectuses
and the Registration Statement, the information included therein.
(s) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or the Subsidiary or their property is pending or, to the best
knowledge of the Company, threatened that (i) could reasonably be
expected to have a material adverse effect on the performance of this
International Underwriting Agreement or the consummation of any of the
transactions contemplated hereby or (ii) could reasonably be expected to
have a Material Adverse Effect, except as set forth in the Prospectus.
(t) Each of the Company and the Subsidiary owns or leases all
such properties as are necessary to the conduct of its operations as
presently
<PAGE> 8
8
conducted, except where such failure to own or lease would not,
individually or in the aggregate, have a Material Adverse Effect.
(u) Neither the Company nor the Subsidiary is in violation or
default of (i) any provision of its charter or by-laws, (ii) any
provision of the United States Foreign Corrupt Practice Act of 1997,
(iii) the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which it is a party or bound or to
which its property is subject, or (iv) any statute, law, rule,
regulation, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority
having jurisdiction over the Company or the Subsidiary or any of their
properties, as applicable except in the case of clauses (iii) or (iv),
where such violation or default (A) would not, individually or in the
aggregate, have a Material Adverse Effect or (B) would not, individually
or in the aggregate, have a material adverse effect in the performance
of this International Underwriting Agreement or the consummation of any
of the transactions contemplated herein;
(v) KPMG, who have certified certain financial statements of the
Company and delivered their report with respect to the audited
consolidated financial statements and schedules included in the
Prospectuses, are independent public accountants with respect to the
Company within the meaning of the Act and the applicable published rules
and regulations thereunder.
(w) The Company has not paid or agreed to pay to any person
(other than the Underwriters pursuant to the Underwriting Agreements)
any compensation for soliciting another to purchase any securities of
the Company.
(x) Each of the Company and the Subsidiary possesses all
licenses, certificates, permits and other authorizations issued by the
appropriate Singaporean, U.S. federal and state, and any other foreign
regulatory authorities necessary to conduct its business in the manner
described in and contemplated by, the Prospectuses except, in the case
of the Subsidiary, where the failure to possess any such license,
permit, certificate or other authorization would not, individually or in
the aggregate, have a Material Adverse Effect, and neither the Company
nor the Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse
Effect, except as set forth in the Prospectuses.
(y) No labor problem or dispute with the employees of the Company
or the Subsidiary exists or, to the best knowledge of the Company, is
threatened or imminent and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its principal
suppliers, contractors or customers, that could have a Material Adverse
Effect, except as set forth in the Prospectuses.
(z) The Company and the Subsidiary are insured by independent
insurers against such losses and risks and in such amounts as are
prudent and customary in the businesses in which they are engaged; all
policies of insurance insuring the Company or the Subsidiary or their
respective businesses, assets, employees, officers and directors are in
full force and effect; the Company and the Subsidiary are in compliance
with the terms of such policies and instruments in all material
respects; and there are no claims by the Company or the Subsidiary under
any
<PAGE> 9
9
such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; neither the
Company nor any such subsidiary has been refused any insurance coverage
sought or applied for; and neither the Company nor the Subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not, individually or in the aggregate,
have a Material Adverse Effect, except as set forth in the Prospectuses
(exclusive of any supplement thereto).
(aa) To the Company's best knowledge, the Company and the
Subsidiary own, possess, license or have other rights to use all
patents, patent applications, trade and service marks, trade and service
mark registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property
(collectively, the "Intellectual Property") necessary for the conduct of
the Company's business as now conducted or as proposed in the
Prospectuses to be conducted, except where the failure to so own,
possess, license or have other rights would not have a Material Adverse
Effect . Except as set forth in the Prospectuses under the captions
"Risk Factors--Our intellectual property is important to our ability to
succeed in our business but may be difficult to protect and--We may be
subject to intellectual property rights disputes" or
"Business-Intellectual Property", to the Company's best knowledge: (a)
except with respect to certain licenses the Company has granted to
customers for assembly or testing development programs, there are no
rights of third parties in connection with any such Intellectual
Property; (b) there is no material infringement by third parties of any
such Intellectual Property; (c) there is no pending or threatened
action, suit, proceeding or claim by any third party challenging the
Company's rights in or to any such Intellectual Property, and the
Company is unaware of any facts which would form a reasonable basis for
any such claim; (d) there is no pending or threatened action, suit,
proceeding or claim by any third party challenging the validity or scope
of any such Intellectual Property, and the Company is unaware of any
facts which would form a reasonable basis for any such claim; (e) there
is no pending or threatened action, suit, proceeding or claim by others
that the Company infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of any third party,
and the Company is unaware of any other fact which would form a
reasonable basis for any such claim; in the case of any of (a) through
(e) above, which would have a Material Adverse Effect and (f) such
Intellectual Property is valid.
(bb) The Company has implemented a comprehensive, detailed
program to analyze and address the risk that their computer hardware and
software may be unable to recognize and properly execute date-sensitive
functions involving certain dates prior to and any dates after December
31, 1999 (the "Year 2000 Problem") and has determined that its computer
hardware and software are and will be able to process all date
information prior to and after December 31, 1999 without any errors,
aborts, delays or other interruptions in operations associated with the
Year 2000 Problem;
(cc) The Company and the Subsidiary have filed all Singapore,
U.S. federal, state, and local, and all other tax returns that are
required to be filed or has requested extensions thereof (except in any
case in which the failure so to file would not have a Material Adverse
Effect, except as set forth in or contemplated in the Prospectuses
(exclusive of any supplement thereto)) and have paid all taxes
<PAGE> 10
10
required to be paid by them and any other assessment, fine or penalty
levied against them, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is
currently being contested in good faith or as would not have a Material
Adverse Effect, except as set forth in the Prospectuses (exclusive of
any supplement thereto).
(dd) No Underwriter will be deemed resident, domiciled, carrying
on business or subject to taxation in Singapore solely by reason of the
execution, delivery, consummation or enforcement of this International
Underwriting Agreement or any other document to be furnished hereunder
and no holder of the Securities will be deemed to be resident or
domiciled in Singapore solely by reason of holding such Securities.
(ee) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(ff) The Company represents and warrants that (i) the
Registration Statement, the ADR Registration Statement, the Prospectuses
and the Preliminary Prospectuses comply, and any further amendments or
supplements thereto will comply, with any applicable laws or regulations
of foreign jurisdictions in which the Prospectuses or Preliminary
Prospectuses, as amended or supplemented, if applicable, are distributed
in connection with the Directed Securities Program; and that (ii) no
authorization, approval, consent, license, order, registration or
qualification of or with any government, governmental instrumentality or
court is necessary to offer and sell Securities pursuant to the Directed
Securities Program, other than such as have been obtained, under the
laws and regulations of any jurisdiction in which the Directed
Securities are offered outside the United States.
(gg) The Company and the Subsidiary are (i) in compliance with
any and all applicable Singaporean, U.S. federal, state and local and
Singapore laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received and are in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) have not received notice
of any actual or potential liability for the investigation or
remediation of any disposal or release of hazardous or toxic substances
or wastes, pollutants or contaminants, except where such non-compliance
with Environmental Laws, failure to receive required permits, licenses
or other approvals, or liability would not, individually or in the
aggregate, have a Material Adverse Effect, except as set forth in the
Prospectuses (exclusive of any supplement thereto).
(hh) The Company and the Subsidiary are in compliance with all
applicable employee pension and employee benefit plans except where such
non-
<PAGE> 11
11
compliance would not, individually or in the aggregate, have a Material
Adverse Effect.
(ii) The Company does not believe that it is a Passive Foreign
Investment Company ("PFIC") within the meaning of Section 1296 of the
United States Internal Revenue Code of 1986, as amended, and does not
expect to become a PFIC in the future.
(jj) Neither the Company nor the Subsidiary nor any of its or
their properties or assets has any immunity from the jurisdiction of any
court or from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution or
otherwise) under the laws of Singapore.
Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters in connection
with the offering of the Securities shall be deemed a representation and
warranty by the Company, as to matters covered thereby, to each U.S.
Underwriter.
2. Purchase and Sale. (a) Subject to the terms and conditions and
in reliance upon the representations and warranties set forth in this
International Underwriting Agreement, the Company agree to sell to each
International Underwriter, and each International Underwriter agrees, severally
and not jointly, to purchase from the Company, at a purchase price of U.S. $ -
per Ordinary Share in the case of International Underwritten Securities to be
delivered in the form of ADS or in the form of Ordinary Shares , the amount of
the International Underwritten Securities set forth opposite such International
Underwriter's name in Schedule I to this International Underwriting Agreement.
The respective numbers of International Underwritten Securities to be delivered
in the form of ADS or Ordinary Shares shall be pursuant to the direction of the
International Representatives.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties set forth in this International Underwriting
Agreement, the Company hereby grants an option to the several International
Underwriters to purchase, severally and not jointly, up to 7,650,000
International Option Securities at the same purchase price per Ordinary Share as
the International Underwriters shall pay for the International Underwritten
Securities. Said option may be exercised only to cover over-allotments in the
sale of the International Underwritten Securities by the International
Underwriters. Said option may be exercised in whole or in part at any time (but
not more than once) on or before the 30th day after the date of the Prospectuses
upon written notice by the International Representatives to the Company setting
forth the number of shares of the International Option Securities as to which
the several International Underwriters are exercising the option and the
settlement date. The number of International Option Securities to be purchased
by each International Underwriter shall be the same percentage of the total
number of shares of the International Option Securities to be purchased by the
several International Underwriters as such International Underwriter is
purchasing of the International Underwritten Securities, subject to such
adjustments as you in your absolute discretion shall make to eliminate any
fractional shares.
3. Delivery and Payment. Delivery of and payment for the
International Underwritten Securities and the International Option Securities
(if the option provided for in Section 2(b) hereof shall have been exercised on
or before the third Business Day prior to the Closing Date) shall be made at
9:00 AM, New York City time, on February [8], 2000, (unless postponed in
accordance with Section 9 hereof) or at such time on such
<PAGE> 12
12
later date not more than ten Business Days after the foregoing date as the
International Representatives and the Company shall agree, (such date and time
of delivery and payment for the International Securities being called in this
International Underwriting Agreement the "Closing Date"). Delivery of the
International Securities shall be made to the International Representatives for
the respective accounts of the several International Underwriters against
payment by the several International Underwriters through the International
Representatives of the aggregate purchase price of the International Securities
being sold by the Company to or upon the order of the Company by wire transfer
payable in same-day funds in United States dollars to the account specified by
the Company. Delivery of the International Underwritten Securities and the
International Option Securities shall be made through the facilities of The
Depositary Trust Company unless the International Representatives shall instruct
otherwise.
If the option provided for in Section 2(b) hereof is exercised
after the third Business Day prior to the Closing Date, the Company will deliver
(at the expense of the Company) to the International Representatives, c/o
Salomon Smith Barney Inc. at 388 Greenwich Street, New York, New York 10013, on
the date specified by the International Representatives (which shall be within
three Business Days after exercise of said option), certificates for the
International Option Securities in such names and denominations as the
International Representatives shall have requested for the respective accounts
of the several International Underwriters, against payment by the several
International Underwriters through the International Representatives of the
purchase price thereof to or upon the order of the Company by wire transfer and
payable in same day funds to the accounts specified by the Company. If
settlement for the International Option Securities occurs after the Closing
Date, the Company will deliver to the International Representatives on the
settlement date for the International Option Securities, and the obligation of
the International Underwriters to purchase the International Option Securities
shall be conditioned upon receipt of, supplemental opinions, certificates and
letters confirming as of such date the opinions, certificates and letters
delivered on the Closing Date pursuant to Section 6 hereof to the offices of
Shearman & Sterling, 6 Battery Road, #25-03, Singapore 049909.
The certificates evidencing the International Underwritten
Securities and International Option Securities shall be registered in such names
and in such denominations as Salomon Smith Barney Inc. may request not less than
one full business day prior to the applicable Closing Date.
It is understood and agreed that the Closing Date shall occur
simultaneously with the "Closing Date" under the U.S. Underwriting Agreement and
the Singapore Underwriting Agreement, and that the settlement date for any
International Option Securities occurring after the Closing Date, shall occur
simultaneously with the settlement date under the U.S. Underwriting Agreement
and the Singapore Underwriting Agreement for any U.S. Option Securities and
Singapore Option Securities occurring after the Closing Date.
4. Offering by Underwriters. It is understood that the several
International Underwriters propose to offer the International Securities for
sale to the public as set forth in the International Prospectus.
<PAGE> 13
13
5. Agreements.
(i) The Company agrees with the several International Underwriters that:
<PAGE> 14
14
(a) The Company will use its best efforts to cause the
Registration Statement and the ADR Registration Statement, if not
effective at the Execution Time, and any amendment thereof, to become
effective. Prior to the termination of the offering of the Securities,
the Company will not file any amendment of the Registration Statement or
the ADR Registration Statement or supplement to the U.S. Prospectus or
any Rule 462(b) Registration Statement unless the Company has furnished
you a copy for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably object. Subject
to the foregoing sentence, if the Registration Statement or the ADR
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the U.S. Prospectus is otherwise required under Rule
424(b), the Company will cause the U.S. Prospectus, properly completed,
and any supplement thereto to be filed with the Commission pursuant to
the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the International
Representatives of such timely filing. The Company will promptly advise
the International Representatives (1) when the Registration Statement
and the ADR Registration Statement, if not effective at the Execution
Time, shall have become effective, (2) when the U.S. Prospectus, and any
supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration
Statement or ADR Registration Statement shall have been filed with the
Commission, (3) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement or the ADR
Registration Statement shall have been filed or become effective, (4) of
any request by the Commission or its staff for any amendment of the
Registration Statement, or any Rule 462(b) Registration Statement or the
ADR Registration Statement, or for any supplement to the U.S. Prospectus
or for any additional information, (5) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or the ADR Registration Statement or the institution or
threatening of any proceeding for that purpose and (6) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the
institution or threatening of any proceeding for such purpose. The
Company will use its best efforts to prevent the issuance of any such
stop order or the suspension of any such qualification and, if issued,
to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities
is required to be delivered under the Act, any event occurs as a result
of which the U.S. Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Registration Statement or the ADR Registration
Statement or supplement the U.S. Prospectus to comply with the Act or
the rules thereunder, the Company promptly will (1) notify the
International Representatives of any such event; (2) prepare and file
with the Commission, subject to the second sentence of paragraph (i)(a)
of this Section 5, an amendment or supplement which will correct such
statement or omission or effect such compliance; and (3) supply any
supplemented Prospectus to you in such quantities as you may reasonably
request. If at any time the Company supplements or amends the U.S.
Prospectus, it will promptly make conforming changes to the
International and Singapore Prospectuses and supply copies thereof to
the International Representatives unless otherwise agreed by the
International Representatives.
<PAGE> 15
15
(c) As soon as practicable, the Company will timely file such
reports pursuant to the Exchange Act as are necessary in order to make
generally available to its security holders and to the International
Representatives an earnings statement or statements covering the 12
month period ending December 31, 2000 of the Company which will satisfy
the provisions of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the International Representatives
and counsel for the International Underwriters, without charge, signed
copies of the Registration Statement and the ADR Registration Statement
(including exhibits thereto) and to each other International Underwriter
a copy of the Registration Statement and the ADR Registration Statement
(without exhibits thereto) and, so long as delivery of a prospectus by
an International Underwriter or dealer may be required by the Act, as
many copies of each International and Singapore Preliminary Prospectus
and the International and Singapore Prospectus and any supplement
thereto as the International Representatives may reasonably request.
(e) The Company will arrange, if necessary, for the qualification
of the Securities for sale under the laws of such jurisdictions as the
International Representatives may reasonably designate and will maintain
such qualifications in effect so long as required for the distribution
of the International Securities; provided, however, that in no event
shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action that
would subject it to service of process in suits, other than those
arising out of the offering or sale of the Securities, in any
jurisdiction where it is not now so subject.
(f) The Company will not, without the prior written consent of
Salomon Smith Barney Inc., offer, sell, contract to sell, pledge, or
otherwise dispose of, (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to
cash settlement or otherwise) by the Company, directly or indirectly,
including the filing (or participation in the filing) of a registration
statement with the Commission in respect of, or establish or increase a
put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Exchange Act, any
Ordinary Shares or ADSs or any securities convertible into, or
exercisable, or exchangeable for, Ordinary Shares or ADSs; or publicly
announce an intention to effect any such transaction, for a period of
180 days after the date of the Underwriting Agreements, provided,
however, that the Company may issue and sell Ordinary Shares pursuant to
any employee stock option plan or stock ownership plan of the Company in
effect at the Execution Time and may file a registration statement on
Form S-8 with respect thereto and the Company may issue Ordinary Shares
issuable upon the conversion of securities or the exercise of warrants
outstanding at the Execution Time.
(g) The Company will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Ordinary Shares or the
ADSs.
(h) The Company agrees to pay the costs and expenses relating to
the following matters: (i) the preparation, printing or reproduction and
filing with the
<PAGE> 16
16
Commission of the Registration Statement (including financial statements
and exhibits thereto), each Preliminary Prospectus, each Prospectus, the
ADR Registration Statement, and each amendment or supplement to any of
them; (ii) the preparation of the Deposit Agreement, the deposit of the
Underlying Shares under the Deposit Agreement, the issuance thereunder
of ADSs representing such deposited Underlying Shares, the issuance of
ADRs evidencing such ADSs and the fees of the Depositary; (iii) the
printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
Registration Statement, each Preliminary Prospectus, each Prospectus,
the ADR Registration Statement, and all amendments or supplements to any
of them, as may, in each case, be reasonably requested for use in
connection with the offering and sale of the Securities; (iv) the
preparation, printing, authentication, issuance and delivery of
certificates for the Securities, including any stamp or transfer taxes
in connection with the original issuance and sale of the Securities; (v)
the printing (or reproduction) and delivery of this International
Underwriting Agreement, the U.S. Underwriting Agreement and the
Singapore Underwriting Agreement, any blue sky memorandum and all other
agreements or documents printed (or reproduced) and delivered in
connection with the offering of the Securities; (vi) the registration of
the Securities under the Exchange Act and the listing of the Ordinary
Shares on the Stock Exchange of Singapore and the listing of the ADSs on
the Nasdaq National Market; (vii) any registration or qualification of
the Securities for offer and sale under the securities or blue sky laws
of the several states (including filing fees and the reasonable fees and
expenses of counsel for the Underwriters relating to such registration
and qualification); (viii) any filings required to be made with the
National Association of Securities Dealers, Inc. (including filing fees
and the reasonable fees and expenses of counsel for the Underwriters
relating to such filings); (ix) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Securities; (x) the fees
and expenses of the Company's accountants and the fees and expenses of
counsel (including Allen & Gledhill and Shearman & Sterling) for the
Company; (xi) except as may be agreed between the Company and the
Depositary, the cost and charges of any transfer agent or registrar;
(xii) any stamp, issue, registration or documentary taxes and duties
arising as a result of the issuance of the Securities, of the sales and
delivery of the Securities by the Company to or for the account of the
Underwriters, of the sale and delivery of the Securities by the
Underwriters to each other and, of the sale and delivery of the
Securities by the Underwriters to the initial purchasers thereof in the
manner contemplated under the Underwriting Agreements; and (xiii) all
other costs and expenses incident to the performance by the Company of
their obligations under the Underwriting Agreements.
(j) the Company covenants with Salomon Smith Barney Inc. that the
Company will comply with all applicable securities and other applicable
laws, rules and regulations in each foreign jurisdiction in which the
Directed Securities are offered in connection with the Directed
Securities Program.
(ii) Each International Underwriter agrees that (a) it is not
purchasing any of the International Securities for the account of any United
States or Canadian Person, (b) it has not offered or sold, and will not offer or
sell, directly or indirectly, any of the International Securities or distribute
any International Prospectus to any person in the United States or Canada, or to
any United States or Canadian Person, and (c) any dealer to whom it may sell any
of the International Securities will represent that it is not purchasing for the
account of any United States or Canadian Person and agree that it will
<PAGE> 17
17
not offer or resell, directly or indirectly, any of the International Securities
in the United States or Canada, or to any United States or Canadian Person or to
any other dealer who does not so represent and agree; provided, however, that
the foregoing shall not restrict (A) purchases and sales between the U.S.
Underwriters or the Singapore Underwriters on the one hand and the International
Underwriters on the other hand pursuant to the Agreement Among U.S.
Underwriters, International Underwriters and Singapore Underwriters, (B)
stabilization transactions contemplated under the Agreement Among U.S.
Underwriters, International Underwriters, and Singapore Underwriters conducted
through Salomon Smith Barney Inc. (or through the U.S. Representatives,
International Representatives and Singapore Representatives) as part of the
distribution of the Securities, and (C) sales to or through (or distributions of
International or Singapore Prospectuses or International or Singapore
Preliminary Prospectuses to) persons not United States or Canadian Persons who
are investment advisors, or who otherwise exercise investment discretion, and
who are purchasing for the account of any United States or Canadian Person.
The agreements of the International Underwriters set forth in
this paragraph (ii) of Section 5 shall terminate upon the earlier of the
following events:
(x) a mutual agreement of the U.S. Representatives, International
Representatives and Singapore Representatives to terminate the selling
restrictions set forth in paragraph (ii) of this Section 5, Section
5(ii) of the U.S. Underwriting Agreement and Section 2(e) and (f) of the
Agreement Among U.S. Underwriters, International Underwriters and
Singapore Underwriters; or
(y) the expiration of a period of 30 days after the Closing Date,
unless (A) the International Representatives shall have given notice to
the Company, the U.S. Representatives and the Singapore Representatives
that the distribution of the International Securities by the
International Underwriters has not yet been completed, or (B) the U.S.
Representatives shall have given notice to the Company, the
International Representatives and the Singapore Representatives that the
distribution of the U.S. Securities by the U.S. Underwriters has not yet
been completed, or (C) the Singapore Representatives shall have given
notice to the Company, the U.S. Representatives and the International
Representatives that the distribution of the Singapore Securities by the
Singapore Underwriters has not yet been completed. If such notice by the
U.S. Representatives, the International Representatives or the Singapore
Representatives is given, the agreements set forth in such paragraph
(ii) shall survive until the earlier of (1) the event referred to in
clause (x) of this subsection or (2) the expiration of an additional
period of 30 days from the date of any such notice.
(iii) Each International Underwriter severally represents and
agrees that:
(a) it has not offered or sold and, prior to the expiry of six
months from the Closing Date, will not offer or sell any International
Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments, (whether as principal or agent) for the
purpose of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities
Regulations 1995;
(b) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything
done by it in relation to the International Securities, in, from or
otherwise involving the United Kingdom; and
<PAGE> 18
18
(c) it has only issued or passed on, and will only issue or pass
on, in the United Kingdom any document received by it in connection with
the issue of the International Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996, (as amended), or a
person to whom the document may otherwise lawfully be issued or passed
on;
(d) 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 International Securities, except (A) under an
exemption from the registration requirements of the Securities and
Exchange Law of Japan and (B) in compliance with any other applicable
requirements of Japanese law;
(e) it will send to any dealer who purchases from it any
International Securities a notice stating in substance that, by
purchasing such International Securities, 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 an 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
International Securities a notice containing substantially the same
statement as is contained in this sentence;
(f) it has not offered or sold and will not offer or sell any
International Securities 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;
(g) it has not issued and will not issue any invitation or
advertisement relating to the International Securities in Hong Kong,
except if permitted to do so by the securities law of 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; and
(h) it has not and will not offer or sell any International
Securities or distribute any document or other material relating to the
International Securities, either directly or indirectly, to the public
or any member of the public in Singapore other than (A) to an
institutional investor or other person specified in Section 106C of the
Companies Act, Chapter 50 of Singapore, or (B) to a sophisticated
investor as specified in Section 106D of the Companies Act Chapter 50 of
Singapore (any of the foregoing a "Singapore Institutional Investor").
(i) it has complied and will comply with all applicable laws and
regulations and has made or obtained or will make or obtain all
necessary filings, consents or approvals in each jurisdiction in which
it purchases, offers, sells or delivers International Securities
(including, without limitation, any applicable requirements relating to
the delivery of the Preliminary Prospectuses or Prospectuses), in each
case at its own expense; and
6. Conditions to the Obligations of the International
Underwriters. The obligations of the International Underwriters to purchase the
International Underwritten Securities and the International Option Securities,
as the case may be, shall be subject to
<PAGE> 19
19
the accuracy of the representations and warranties on the part of the Company
contained in this International Underwriting Agreement as of the Execution Time,
the Closing Date and any settlement date pursuant to Section 3 hereof, to the
accuracy of the statements of the Company made in any certificates pursuant to
the provisions hereof, to the performance by the Company of its obligations
under this International Underwriting Agreement and to the following additional
conditions:
(a) If the Registration Statement and the ADR Registration
Statement have not become effective prior to the Execution Time, unless the U.S.
Representatives, International Representatives and Singapore Representatives
agree in writing to a later time, the Registration Statement and the ADR
Registration Statement will become effective not later than (i) 6:00 PM New York
City time on the date of determination of the public offering price, if such
determination occurred at or prior to 3:00 PM New York City time on such date or
(ii) 9:30 AM on the Business Day following the day on which the public offering
price was determined, if such determination occurred after 3:00 PM New York City
time on such date; if filing of the U.S. Prospectus, or any supplement thereto,
is required pursuant to Rule 424(b), the U.S. Prospectus, and any such
supplement, will be filed in the manner and within the time period required by
Rule 424(b); and no stop order suspending the effectiveness of the Registration
Statement or the ADR Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) The Company shall have requested and caused Allen & Gledhill,
special Singapore counsel for the Company, to have furnished to the
Representatives their opinion, dated the Closing Date and addressed to the
Representatives, substantially in the form set forth in Appendix A hereto.
(c) The Company shall have requested and caused Shearman &
Sterling, counsel for the Company, to have furnished to the Representatives
their opinion, dated the Closing Date and addressed to the Representatives,
substantially in the form set forth in Appendix B hereto.
(d) The Depositary shall have requested and caused Skadden, Arps,
Slate, Meagher & Flom, LLP, counsel for the Depositary, to have furnished to the
Representatives their opinion dated the Closing Date and addressed to the
Representatives substantially in the form set forth in Appendix C hereto.
(e) The Representatives shall have received from Cravath, Swaine
& Moore, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date and addressed to the Representatives, with respect to the issuance
and sale of the Securities, the Registration Statement, the ADR Registration
Statement, the Prospectuses (together with any supplement thereto) and other
related matters as the Representatives may reasonably require, and the Company
shall have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(f) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have examined
the Registration Statement, the ADR Registration Statement, the Prospectuses,
any supplements to the Prospectuses and the Underwriting Agreements and that:
(i) the representations and warranties of the Company in the
Underwriting Agreements are true and correct in all material respects on
and as
<PAGE> 20
20
of the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or the ADR Registration Statement has been issued
and no proceedings for that purpose have been instituted or, to the
Company's knowledge, threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectuses (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and the Subsidiary, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectuses (exclusive of any supplement
thereto).
(g) The Company shall have requested and caused KPMG to have
furnished to the Representatives letters, dated respectively as of the Execution
Time and as of the Closing Date, in form and substance satisfactory to the
Representatives, to the effect set forth in Section 6(g) of the U.S.
Underwriting Agreement.
(h) Subsequent to the Execution Time or, if earlier, the dates as
of which information is given in the Registration Statement (exclusive of any
amendment thereof), and the Prospectuses (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (g) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the condition
(financial or otherwise), earnings, prospects, business or properties of the
Company and the Subsidiary, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectuses (exclusive of any supplement thereto) the
effect of which, in any case referred to in clause (i) or (ii) above, is, in the
sole judgment of the International Representatives, so material and adverse as
to make it impractical or inadvisable to proceed with the offering or delivery
of the International Securities as contemplated by the Registration Statement
(exclusive of any amendment thereof), the ADR Registration Statement and the
Prospectuses (exclusive of any supplement thereto).
(i) At the Execution Time, the Company shall have furnished to
the Representatives a letter substantially in the form of Exhibit A hereto from
each executive officer and director of the Company named in the U.S. Prospectus,
selected employees of the Company and Singapore Technologies Pte Ltd., Singapore
Technologies Semiconductor Pte Ltd., and EDB Investments Pte Ltd. addressed to
the Representatives.
(j) The Company and the Depositary shall have executed and
delivered the Deposit Agreement in form and substance satisfactory to the
Representatives and the Deposit Agreement shall be in full force and effect;
(k) The Depositary shall have furnished or caused to be furnished
to the Representatives certificates satisfactory to the Representatives
evidencing the deposit with the Depositary or its nominee of the Underlying
Shares in respect of which ADSs to be purchased by the Underwriters on such
Closing Date are to be issued, and the execution, issuance, countersignature (if
applicable) and delivery of the ADRs evidencing
<PAGE> 21
21
such ADSs pursuant to the Deposit Agreement and such other matters related
thereto as the Representatives reasonably request;
(l) The closing of the purchase of the U.S. Underwritten
Securities and Singapore Underwritten Securities to be issued and sold by the
Company pursuant to the U.S. Underwriting Agreement and the Singapore
Underwriting Agreement, respectively, shall occur concurrently with the closing
of the purchase of the International Underwritten Securities described herein.
(m) The Ordinary Shares shall have been listed and admitted and
authorized for trading on the Stock Exchange of Singapore, and the ADSs shall
have been listed and admitted and authorized for trading on the Nasdaq National
Market and satisfactory evidence of all such actions shall have been provided to
the Representatives.
(n) Prior to the Closing Date, the Company shall have furnished
to the Representatives such further information, certificates and documents as
the Representatives may reasonably request.
(o) The Company shall have delivered a letter from the President
of Singapore Technologies Assembly and Test Services, Inc. confirming and
accepting his appointment as agent for service of process pursuant to Section 15
hereof and Section [ ] of the Deposit Agreement.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
International Underwriting Agreement and the U.S. Underwriting Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
International Underwriting Agreement shall not be in all material respects
reasonably satisfactory in form and substance to the Representatives and counsel
for the Underwriters, this International Underwriting Agreement and all
obligations of the International Underwriters under this International
Underwriting Agreement may be canceled at, or at any time prior to, the Closing
Date by the Representatives. Notice of such cancellation shall be given to the
Company in writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Shearman & Sterling, 6 Battery Road, #25-03,
Singapore 049909, on the Closing Date.
7. Reimbursement of U.S. Underwriters' Expenses. The Company has
agreed to reimburse the International and U.S. Underwriters severally through
Salomon Smith Barney Inc. on demand for out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities up to a
maximum of $750,000, in addition to the costs and expenses to be paid by the
Company pursuant to Section 5(h) hereof. In addition, if the sale of the
International Securities provided for in this International Underwriting
Agreement is not consummated because any condition to the obligations of the
International Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement in this International. Underwriting Agreement or comply with any
provision hereof other than by reason of a default by any of the International
Underwriters, the Company will reimburse the International. Underwriters
severally through Salomon Smith Barney Inc. on demand for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
<PAGE> 22
22
the Securities up to a maximum of US$750,000, in addition to the costs and
expenses to be paid by the Company pursuant to Section 5(h) hereof.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each International Underwriter, the directors,
officers, employees and agents of each International Underwriter and each person
who controls any International Underwriter within the meaning of either the Act
or the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Securities as originally
filed or in any amendment thereof, or in the ADR Registration Statement as
originally filed or in any amendment thereof, or in any U.S., International or
Singapore Preliminary Prospectus or in any of the Prospectuses, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any International Underwriter through the
International Representatives specifically for inclusion therein. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have provided further, that with respect to any untrue statement or omission of
material fact made in any Preliminary Prospectus, the indemnity agreement
contained in this Section 8(a) shall not inure to the benefit of any
International Underwriter from whom the person asserting any such loss, claim,
damage or liability purchased the securities concerned to the extent that any
such loss, claim, damage or liability of such International Underwriter occurs
under the circumstance where it shall have been determined by a court of
competent jurisdiction by final and nonappealable judgment that (w) the Company
had previously furnished copies of the Prospectus to the Representatives, (x)
delivery of the Prospectus was required by the Act to be made to such person,
(y) the untrue statement or omission of a material fact contained in the
Preliminary Prospectus was corrected in the Prospectus and (z) there was not
sent or given to such person, at or prior to the written confirmation of the
sale of such securities to such person, a copy of the Prospectus.
(b) The Company agrees to indemnify and hold harmless each
International Underwriter and each person, if any, who controls such
International Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement or
alleged untrue statement of a material fact contained in the prospectus wrapper
material prepared by or with the consent of the Company for distribution in
foreign jurisdictions in connection with the Directed Securities Program
attached to the Prospectuses or any Preliminary Prospectus, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein, when considered in
conjunction with the Prospectuses or any applicable Preliminary Prospectus, not
misleading; or (ii) related to, arising out of, or in
<PAGE> 23
23
connection with the Directed Securities Program; provided that, the Company
shall not be responsible under this subparagraph (ii) for any losses, claim,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted primarily from the bad faith or gross
negligence of any International Underwriter.
(c) Each International Underwriter severally and not jointly
agrees to indemnify and hold harmless the Company, each of its directors, each
of its officers who signs the Registration Statement or the ADR Registration
Statement, the employees of the Company and each person who controls the Company
within the meaning of either the Act or the Exchange Act to the same extent as
the foregoing indemnity to each International Underwriter, but only with
reference to written information relating to such International Underwriter
furnished to the Company by or on behalf of such International Underwriter
through the International Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any International Underwriter may
otherwise have. The Company acknowledges that the statements set forth in the
last paragraph of the cover page regarding delivery of the International
Securities and, under the heading "Underwriting", (i) the list of Underwriters
and their respective participation in the sale of the Securities, (ii) the
sentences related to concessions and reallowances and (iii) the paragraph
related to stabilization, syndicate covering transactions and penalty bids in
any International Preliminary Prospectus and the International Prospectus
constitute the only information furnished in writing by or on behalf of the
several International Underwriters for inclusion in any International
Preliminary Prospectus or the International Prospectuses.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) or (c) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a), (b) or (c) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemnified party or parties except as
set forth below); provided, however, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the indemnified
party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. Notwithstanding anything
<PAGE> 24
24
contained herein to the contrary, if indemnity may be sought pursuant to
paragraph (b) above hereof in respect of such action or proceeding, then in
addition to such separate firm for the indemnified parties, the indemnifying
party shall be liable for the reasonable fees and expenses of not more than one
separate firm (in addition to any local counsel) for the International
Underwriters for the defense of any losses, claims, damages and liabilities
arising out of the Directed Securities Program, and all persons, if any, who
control such International Underwriters within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act. It is understood, however, that
the Company shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for all such International Underwriters and controlling
persons, which firm shall be designated in writing by Salomon Smith Barney Inc.
An indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
under this International Underwriting Agreement (whether or not the indemnified
parties are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent.
(e) In the event that the indemnity provided in paragraph (a),
(b) or (c) of this Section 8 is unavailable to or insufficient to hold harmless
an indemnified party for any reason, the Company and the International
Underwriters severally agree to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) (collectively "Losses") to
which the Company, and one or more of the International Underwriters may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and by the International Underwriters on
the other from the offering of the International Securities; provided, however,
that in no case shall any International Underwriter (except as may be provided
in any agreement among underwriters relating to the offering of the
International Securities) be responsible for any amount in excess of the
underwriting discount or commission applicable to the Securities purchased by
such International Underwriter under this International Underwriting Agreement.
If the allocation provided by the immediately preceding sentence is unavailable
for any reason, the Company and the International Underwriters severally shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
of the International Underwriters on the other in connection with the statements
or omissions which resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Company shall be deemed to be
equal to the total net proceeds from the offering (before deducting expenses)
received by it, and benefits received by the International Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the International Prospectus. Relative
fault shall be determined by reference to, among other things, whether any
untrue or any alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information provided by the
Company on the one hand or the International Underwriters on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company
and the International Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable
<PAGE> 25
25
considerations referred to above. Notwithstanding the provisions of this
paragraph (e), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an International Underwriter within the
meaning of either the Act or the Exchange Act and each director, officer,
employee and agent of an International Underwriter shall have the same rights to
contribution as such International Underwriter, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, each officer
of the Company who shall have signed the Registration Statement or the ADR
Registration Statement, the employees of the Company, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this paragraph (e).
9. Default by an International Underwriter. If any one or more
International Underwriters shall fail to purchase and pay for any of the
International Securities agreed to be purchased by such International
Underwriter or International Underwriters under this International Underwriting
Agreement and such failure to purchase shall constitute a default in the
performance of its or their obligations under this International Underwriting
Agreement, the remaining International Underwriters shall be obligated severally
to take up and pay for (in the respective proportions which the amount of
International Securities set forth opposite their names in Schedule I hereto
bears to the aggregate amount of International Securities set forth opposite the
names of all the remaining International Underwriters) the International
Securities which the defaulting International Underwriter or International
Underwriters agreed but failed to purchase; provided, however, that in the event
that the aggregate amount of International Securities which the defaulting
International Underwriter or International Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of International Securities
set forth in Schedule I hereto, the remaining International Underwriters shall
have the right to purchase all, but shall not be under any obligation to
purchase any, of the International Securities, and if such nondefaulting
International Underwriters do not purchase all the International Securities,
this International Underwriting Agreement will terminate without liability to
any nondefaulting International Underwriter or the Company. In the event of a
default by any International Underwriter as set forth in this Section 9, the
Closing Date shall be postponed for such period, not exceeding five Business
Days, as the International Representatives shall determine in order that the
required changes in the Registration Statement, the ADR Registration Statement
and the Prospectuses or in any other documents or arrangements may be effected.
Nothing contained in this International Underwriting Agreement shall relieve any
defaulting International Underwriter of its liability, if any, to the Company
and any nondefaulting International Underwriter for damages occasioned by its
default under this International Underwriting Agreement.
10. Termination. This International Underwriting Agreement shall
be subject to termination in the absolute discretion of the International
Representatives, by notice given to the Company prior to delivery of and payment
for the International Securities, if at any time prior to such time (i) trading
in the Company's Ordinary Shares shall have been suspended by the Stock Exchange
of Singapore or trading in the ADSs shall have been suspended by the Commission
or the Nasdaq National Market or trading in securities generally on the New York
Stock Exchange or the Stock Exchange of Singapore or the Nasdaq National Market
shall have been suspended or limited or minimum prices shall have been
established on either of such Exchanges or the Nasdaq National Market, (ii) a
banking moratorium shall have been declared by U.S. Federal, New York State or
Singapore authorities or (iii) there shall have occurred any outbreak or
escalation of hostilities involving the United States or Singapore, declaration
by the
<PAGE> 26
26
United States or Singapore of a national emergency or war, or other calamity or
crisis the effect of which on financial markets is such as to make it, in the
sole judgment of the International Representatives, impractical or inadvisable
to proceed with the offering or delivery of the Securities as contemplated by
the International Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the International Underwriters set forth in or
made pursuant to this International Underwriting Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
International Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the International Securities. The provisions of Sections 7
and 8 hereof shall survive the termination or cancellation of this International
Underwriting Agreement.
12. Notices. All communications under this International
Underwriting Agreement will be in writing and effective only on receipt, and, if
sent to the International Representatives, will be mailed, delivered or
telefaxed to the Salomon Smith Barney Inc. General Counsel (fax no.: (212)
816-7912) and confirmed to such General Counsel at Salomon Brothers
International Limited (fax no.: (44) 171-721-2870), Victoria Plaza, 111
Puckingham Palace Road, London SW1W OSB England, Attention: General Counsel; or,
if sent to the Company, will be mailed, delivered or telefaxed to Bernard Liew,
(65) 755-3153 and confirmed to it at ST Assembly Test Services Ltd., 5 Yishun St
23, Singapore 768442, attention of the Legal Department.
13. Successors. This International Underwriting Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and controlling persons
referred to in Section 8 hereof, and no other person will have any right or
obligation under this International Underwriting Agreement.
14. Applicable Law. This International Underwriting Agreement
will be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed within the State of
New York.
15. Jurisdiction. The Company agrees that any suit, action or
proceeding against the Company brought by any International Underwriter, by the
directors, officers, employees and agents of any International Underwriter, or
by any person who controls any International Underwriter, arising out of or
based upon this International Underwriting Agreement or the transactions
contemplated hereby may be instituted in any New York Court, and waives any
objection which it may now or hereafter have to the laying of venue of any such
proceeding, and irrevocably submits to the non-exclusive jurisdiction of such
courts in any suit, action or proceeding. The Company has appointed the
President of ST Assembly and Test Services, Inc. as its authorized agent (the
"Authorized Agent") upon whom process may be served in any suit, action or
proceeding arising out of or based upon this International Underwriting
Agreement or the transactions contemplated herein which may be instituted in any
New York Court, by any International Underwriter, the directors, officers,
employees and agents of any International Underwriter, or by any person who
controls any International Underwriter, and expressly accepts the non-exclusive
jurisdiction of any such court in respect of any such suit, action or
proceeding. The Company hereby represents and warrants that the Authorized Agent
has accepted such appointment and has agreed to act as said agent for service of
process, and the Company agrees to take any
<PAGE> 27
27
and all action, including the filing of any and all documents that may be
necessary to continue such appointment in full force and effect as aforesaid.
Service of process upon the Authorized Agent shall be deemed, in every respect,
effective service of process upon the Company. Notwithstanding the foregoing,
any action arising out of or based upon this International Underwriting
Agreement may be instituted by any International Underwriter, the directors,
officers, employees and agents of any International Underwriter, or by any
person who controls any International Underwriter, in any court of competent
jurisdiction in Singapore.
The provisions of this Section 15 shall survive any termination
of this International Underwriting Agreement, in whole or in part.
16. Currency. Each reference in this International Underwriting
Agreement to U.S. Dollars (the "relevant currency") is of the essence. To the
fullest extent permitted by law, the obligations of the Company and the
International Underwriters in respect of any amount due under this International
Underwriting Agreement will, notwithstanding any payment in any other currency
(whether pursuant to a judgment or otherwise), be discharged only to the extent
of the amount in the relevant currency that the party entitled to receive such
payment may, in accordance with its normal procedures, purchase with the sum
paid in such other currency (after any premium and costs of exchange) on the
Business Day immediately following the day on which such party receives such
payment. If the amount in the relevant currency that may be so purchased for any
reason falls short of the amount originally due, the party required to pay such
original amount will pay such additional amounts, in the relevant currency, as
may be necessary to compensate for the shortfall. If, alternatively, the amount
in the relevant currency that may be so purchased for any reason exceeds the
amount originally due, the party entitled to receive such original amount will
return such excess amounts, in the relevant currency, to the Company. Any
obligation of the party required to pay such original amount not discharged by
such payment will, to the fullest extent permitted by applicable law, be due as
a separate and independent obligation and, until discharged as provided herein,
will continue in full force and effect.
17. Waiver of Immunity. To the extent that the Company has or
hereafter may acquire any immunity (sovereign or otherwise) from any legal
action, suit or proceeding, from jurisdiction of any court or from set-off or
any legal process (whether service or notice, attachment in aid or otherwise)
with respect to itself or any of its property, the Company hereby irrevocably
waives and agrees not to plead or claim such immunity in respect of its
obligations under this International Underwriting Agreement.
18. Counterparts. This International Underwriting Agreement may
be signed in one or more counterparts, each of which shall constitute an
original and all of which together shall constitute one and the same agreement.
19. Headings. The section headings used in this International
Underwriting Agreement are for convenience only and shall not affect the
construction hereof.
20. Definitions. The terms which follow, when used in this
International Underwriting Agreement, shall have the meanings indicated.
"Act" shall mean the United States Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
<PAGE> 28
28
"ADR Registration Statement" shall mean the registration
statement referred to in paragraph 1(i)(c) above, including all exhibits
thereto, each as amended at the time such part of the registration
statement became effective.
"Business Day" shall mean any day other than a Saturday, a Sunday
or a legal holiday or a day on which banking institutions or trust
companies are authorized or obligated by law to close in New York City
or Singapore.
"Commission" shall mean the Securities and Exchange Commission.
"Effective Date" shall mean each date and time that the
Registration Statement and the ADR Registration Statement, any
post-effective amendment or amendments thereto and any Rule 462(b)
Registration Statement became or become effective.
"Exchange Act" shall mean the United States Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission
promulgated thereunder.
"Execution Time" shall mean the date and time that this
International Underwriting Agreement is executed and delivered by the
parties hereto.
"International Preliminary Prospectus" shall mean any preliminary
prospectus with respect to the offering of the International Securities.
"International Prospectus" shall mean such form of prospectus
relating to the offering of the International Securities as referred to
in paragraph 1(i)(a) above.
"International Representatives" shall mean the addressees of the
International Underwriting Agreement.
"International Securities" shall mean the International
Underwritten Securities and the International Option Securities.
"International Underwriters" shall mean the several underwriters
named in Schedule I to this International Underwriting Agreement.
"International Underwriting Agreement" shall mean this agreement
relating to the sale of the International Securities by the Company to
the International Underwriters.
"New York Courts" shall mean the U.S. Federal or State courts
located in the State of New York, County of New York.
"Option Securities" shall mean the U.S. Option Securities, the
International Option Securities and the Singapore Option Securities
"Option Shares" shall mean the U.S. Option Shares, the
International Option Shares and the Singapore Option Shares.
"Preliminary Prospectus" shall mean the U.S. Preliminary
Prospectus, the International Preliminary Prospectus and the Singapore
Preliminary Prospectus.
<PAGE> 29
29
"Prospectuses" and "each Prospectus" shall mean the U.S.
Prospectus, the International Prospectus and the Singapore Prospectus.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(i)(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at
the Execution Time, in the form in which it shall become effective) and,
in the event any post-effective amendment thereto or any Rule 462(b)
Registration Statement becomes effective prior to the Closing Date,
shall also mean such registration statement as so amended or such Rule
462(b) Registration Statement, as the case may be. Such term shall
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A.
"Representatives" shall mean the U.S. Representatives, the
International Representatives and the Singapore Representatives.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under
the Act.
"Rule 430A Information" shall mean information with respect to
the Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the registration statement referred
to in Section 1(a)(i) hereof.
"Securities" shall mean the U.S. Securities, the International
Securities and the Singapore Securities.
"Shares" shall mean the U.S. Shares, International Shares and the
Singapore Shares.
"Singapore Preliminary Prospectus" shall mean any preliminary
prospects with respect to the offering of the Singapore Securities.
"Singapore Prospectus" shall mean such form of prospectus
relating to the Singapore Securities consisting of a special wrap around
the International Prospectus.
"Singapore Representatives" shall mean the addressees of the
Singapore Underwriting Agreement.
"Singapore Securities" shall mean the Singapore Underwritten
Securities and the Singapore Option Securities.
"Singapore Underwriters" shall mean the several underwriters
named in Schedule I to the Singapore Underwriting Agreement.
"Singapore Underwriting Agreement" shall mean the Singapore
Management and Underwriting Agreement dated the date hereof related to
the sale of the Singapore Securities by the Company to the Singapore
Underwriters.
<PAGE> 30
30
"Underlying Shares" shall mean the Shares that will be
represented by the ADSs.
"Underwriter" and "Underwriters" shall mean the U.S.
Underwriters, the International Underwriters and the Singapore
Underwriters.
"Underwritten Securities" shall mean the U.S. Underwritten
Securities, the International Underwritten Securities and the Singapore
Underwritten Securities.
"Underwritten Shares" shall mean the U.S. Underwritten Shares,
the International Underwritten Shares and the Singapore Underwritten
Shares.
"United States or Canadian Person" shall mean any person who is a
national or resident of the United States or Canada, any corporation,
partnership, or other entity created or organized in or under the laws
of the United States or Canada or of any political subdivision thereof,
or any estate or trust the income of which is subject to United States
or Canadian Federal income taxation, regardless of its source (other
than any non-United States or non-Canadian branch of any United States
or Canadian Person), and shall include any United States or Canadian
branch of a person other than a United States or Canadian Person. "U.S."
or "United States" shall mean the United States of America (including
the states thereof and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction.
"U.S. Preliminary Prospectus" shall mean any preliminary
prospectus with respect to the offering of the U.S. Securities as
referred to in paragraph 1(i)(a) above and any preliminary prospectus
with respect to the offering of the U.S. Securities included in the
Registration Statement at the Effective Date that omits Rule 430A
Information.
"U.S. Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing pursuant to Rule 424(b) is required,
shall mean the form of final prospectus relating to the Securities
included in the Registration Statement at the Effective Date.
"U.S. Representatives" shall mean the addressees of the U.S.
Underwriting Agreement.
"U.S. Securities" shall mean the U.S. Underwritten Securities and
the U.S. Option Securities.
"U.S. Underwriting Agreement" shall mean the agreement dated the
date hereof relating to the sale of the U.S. Securities by the Company
to the U.S. Underwriters.
"U.S. Underwriters" shall mean the several underwriters named in
Schedule I to the U.S. Underwriting Agreement.
<PAGE> 31
31
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several International Underwriters.
Very truly yours,
ST Assembly Test Services Ltd
By:
--------------------------------
Name:
Title:
<PAGE> 32
32
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
By: Salomon Brothers International Limited.
By:
-----------------------------------
Name:
Title:
<PAGE> 33
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF INTERNATIONAL
UNDERWRITTEN SECURITIES
INTERNATIONAL UNDERWRITERS TO BE PURCHASED
- -------------------------- ------------------------
<S> <C>
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
------------
Total . . . . . . . . . ============
</TABLE>
<PAGE> 34
EXHIBIT A
[Version One]
ST Assembly Test Services Ltd
Public Offering of Ordinary Shares
, 2000
Salomon Smith Barney Inc.
Salomon Brothers International Limited and
Citicorp Investment Bank (Singapore) Limited
As Representatives of the several U.S. Underwriters,
International Underwriters and Singapore Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed U.S. Underwriting Agreement, International Underwriting Agreement and
Singapore Underwriting Agreement (the "Underwriting Agreements"), between ST
Assembly Test Services Ltd., a company organized under the laws of Singapore
(the "Company"), and each of you as representatives of a group of U.S.
Underwriters, International Underwriters and Singapore Underwriters named
therein, relating to an underwritten public offering of 150,000,000 Ordinary
Shares, S$0.25 par value per share, of the Company, directly or in the form of
American Depositary Shares ("ADSs").
In order to induce you and the other U.S. Underwriters,
International Underwriters and Singapore Underwriters to enter into the
Underwriting Agreements, the undersigned will not, without the prior written
consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge or
otherwise dispose of (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise), 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 after the date of the Underwriting Agreements, other
than Directed Securities (as defined in the Underwriting Agreements), or
Ordinary Shares or ADSs disposed of as bona fide gifts approved by Salomon Smith
Barney Inc.
If for any reason the Underwriting Agreements shall be terminated
prior to the Closing Date (as defined in the Underwriting Agreements), the
agreement set forth above shall likewise be terminated.
Yours very truly,
[SIGNATURE OF SELECTED EMPLOYEE OR
MAJOR STOCKHOLDER]
[NAME AND ADDRESS OF SELECTED EMPLOYEE
OR MAJOR STOCKHOLDER]
<PAGE> 35
2
[Version Two]
ST Assembly Test Services Ltd
Public Offering of Ordinary Shares
, 2000
Salomon Smith Barney Inc.
Salomon Brothers International Limited and
Citicorp Investment Bank (Singapore) Limited
As Representatives of the several U.S. Underwriters,
International Underwriters and Singapore Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed U.S. Underwriting Agreement, International Underwriting Agreement and
Singapore Underwriting Agreement (the "Underwriting Agreements"), between ST
Assembly Test Services Ltd., a company organized under the laws of Singapore
(the "Company"), and each of you as representatives of a group of U.S.
Underwriters, International Underwriters and Singapore Underwriters named
therein, relating to an underwritten public offering of 150,000,000 Ordinary
Shares, S$0.25 par value per share, of the Company, directly or in the form of
American Depositary Shares ("ADSs").
In order to induce you and the other U.S. Underwriters,
International Underwriters and Singapore Underwriters to enter into the
Underwriting Agreements, the undersigned will not, without the prior written
consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge or
otherwise dispose of (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise), 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 after the date of the Underwriting Agreements, other
than Ordinary Shares or ADSs disposed of as bona fide gifts approved by Salomon
Smith Barney Inc.
If for any reason the Underwriting Agreements shall be terminated
prior to the Closing Date (as defined in the Underwriting Agreements), the
agreement set forth above shall likewise be terminated.
Yours very truly,
[SIGNATURE OF OFFICER, DIRECTOR OR SELECTED
EMPLOYEE]
[NAME AND ADDRESS OF OFFICER, DIRECTOR
OR SELECTED EMPLOYEE]
<PAGE> 36
APPENDIX A
[On the letterhead of Allen & Gledhill]
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
as U.S. Representatives of the several U.S. Underwriters
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
as International Representatives of the several
International Underwriters
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
United States of America
[8th] February, 2000
Dear Sirs,
1. We have acted as legal counsel to ST Assembly Test Services Ltd (the
"Company") in the Republic of Singapore in connection with a global offering
(the "Offering") of 150,000,000 ordinary shares ("Ordinary Shares") of par value
S$0.25 each in the capital of the Company (such offered Ordinary Shares, the
"Offered Shares"), directly or in the form of American Depositary Shares
("ADSs"), as described in the prospectus contained in the Company's Registration
Statement on Form F-1, as amended (the "Registration Statement"), filed with the
United States Securities and Exchange Commission. We are delivering this opinion
to you at the request of the Company pursuant to (i) Section [6(b)] of the U.S.
Underwriting Agreement (the "U.S. Underwriting Agreement") dated [27th] January,
2000 among the U.S. Underwriters named therein and the Company and (ii) Section
[6(b)] of the International Underwriting Agreement (the "International
Underwriting Agreement") dated [27th] January, 2000 among the International
Underwriters named therein and the Company.
2. For the purpose of rendering this opinion, we have examined:-
(i) an executed copy of the U.S. Underwriting Agreement;
(ii) an executed copy of the International Underwriting Agreement;
(iii) an executed copy of the Management and Underwriting Agreement
relating to the Singapore Retail Offering (the "Singapore
Underwriting Agreement") dated [28th] January, 2000 among the
Managers named therein and the Company;
(iv) an executed copy of the Deposit Agreement (as defined in the
U.S. Underwriting Agreement);
(v) the prospectus (the "U.S. Prospectus") dated [28th] January,
2000 relating to the U.S. Offering (as defined in the U.S.
Underwriting Agreement);
<PAGE> 37
2
(vi) the prospectus (the "International Prospectus") dated [28th]
January, 2000 relating to the International Offering (as
defined in the U.S. Underwriting Agreement);
(vii) the prospectus (the "Singapore Prospectus" and together with
the U.S. Prospectus and the International Prospectus, the
"Prospectus") dated [28th] January, 2000 incorporating the
International Prospectus and relating to the Singapore Retail
Offering;
(viii) the Registration Statement;
(ix) the Company's Registration Statement on Form F-6 (the "ADR
Registration Statement"1) filed with the United States
Securities and Exchange Commission;
(x) certified true copies of the Memorandum and Articles of
Association of the Company and its Certificate of
Incorporation;
(xi) resolutions, and certified extracts of resolutions, of the
Board of Directors of the Company ("Board Resolutions") and of
the shareholders of the Company ("Shareholders' Resolutions")
passed since the date of incorporation of the Company up to [
], 2000, relating to, inter alia, the authorisation for the
issue of, and the allotment and issue of, shares in the
capital of the Company and the Offering which were provided to
us for inspection by the Company;
(xii) a copy of the letter from the Stock Exchange of Singapore
Limited ("SES") dated 30th September, 1999 granting approval
in principle for the listing of and quotation for the entire
issued share capital of the Company on the Main Board of the
SES (the "AIP Letter"); and
(xiii) such other documents as we have considered necessary or
desirable to examine in order that we may render this opinion.
3. We have assumed:-
(i) that each of the U.S. Underwriting Agreement, the
International Underwriting Agreement and the Deposit Agreement
(together the "Transaction Agreements") is within the capacity
and powers of, and has been validly authorised by, each party
thereto (other than the Company) and has been validly executed
and delivered by and on behalf of each party thereto;
(ii) the genuineness of all signatures on all documents and the
completeness, and the conformity to original documents, of all
copies submitted to us;
(iii) 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;
(iv) that copies of the Board Resolutions and the Shareholders'
Resolutions submitted to us for examination are true, complete
and up-to-date copies;
<PAGE> 38
3
(v) that the information disclosed by the search made on [8th]
February, 2000 at the Registry of Companies and Businesses in
the Republic of Singapore against the Company is true and
complete and that such information has not since then been
materially altered and that such search did not fail to
disclose any material information which has been delivered for
filing but did not appear on the public file at the time of
the search;
(vi) that the information disclosed by the search made on [8th]
February, 2000 of the Cause Book kept at the Supreme Court of
the Republic of Singapore against the Company is true and
complete and that such information has not since then been
materially altered and that such search did not fail to
disclose any material information which has been delivered for
filing but was not disclosed at the time of the search;
(vii) that each of the Transaction Agreements constitutes legal,
valid, binding and enforceable obligations of the parties
thereto for all purposes under the laws of all relevant
jurisdictions other than the Republic of Singapore;
(viii) that there are no provisions of the laws of any jurisdiction
other than the Republic of Singapore which may be contravened
by the execution or delivery of any of the Transaction
Agreements and that, insofar as any obligation expressed to be
incurred or performed under any of the Transaction Agreements
falls to be performed in or is otherwise subject to the laws
of any jurisdiction other than the Republic of Singapore, its
performance will not be illegal by virtue of the laws of that
jurisdiction;
(ix) that the choice of New York law as the governing law of each
of the Transaction Agreements has been made in good faith and
will be regarded as a valid and binding selection which will
be upheld in the United States federal or state courts in the
State of New York as a matter of New York law and all other
relevant laws except the laws of the Republic of Singapore;
(x) that all consents, approvals, authorisations, licences,
exemptions or orders required from any governmental body or
agency outside the Republic of Singapore and all other
requirements outside the Republic of Singapore for the
legality, validity and enforceability of each of the
Transaction Agreements have been duly obtained or fulfilled
and are and will remain in full force and effect and that any
conditions to which they are subject have been satisfied;
(xi) that the Board Resolutions and the Shareholders' Resolutions
have not been rescinded or modified and they remain in full
force and effect and that no other resolution or other action
has been taken which may affect the validity of the Board
Resolutions or the Shareholders' Resolutions;
(xii) that the Offered Shares and the ADSs will be duly offered,
sold and delivered in accordance with the terms of the U.S.
Underwriting Agreement and the International Underwriting
Agreement; and
(xiii) that each of the Transaction Agreements and the Singapore
Underwriting Agreement has been executed and delivered, and
each Prospectus has been issued, in the form of the drafts we
have examined.
<PAGE> 39
4
4. A search made on [8th] February, 2000 at the Registry of Companies and
Businesses in the Republic of Singapore and at the Supreme Court of the Republic
of Singapore revealed no order or resolution for the winding-up of the Company
and no notice of appointment of a receiver or judicial manager for the Company.
It should be noted that such a search is not capable of revealing whether or not
a winding-up petition has been presented. Notice of a winding-up order made or
resolution passed or a receiver or judicial manager appointed may not be filed
at the Registry of Companies and Businesses immediately.
5. We have received a Certificate (the "Certificate") dated [8th] February, 2000
from Mr [ ], a director of the Company, which certifies the matters referred
to in paragraphs [ ] below. In rendering our opinion in paragraphs [ ]
below, we have relied solely on the statements in the Certificate and we have
not ourselves reviewed or examined the corporate secretarial records and
documents of the Company for the purposes of giving such opinion. Nothing has
come to our attention which gives us any reason to believe that the statements
in the Certificate are, as at the date thereof, untrue, inaccurate or misleading
in any respect. We have made no independent investigation into any of the
matters set out in the Certificate and we have not ourselves checked the
accuracy or completeness of, or otherwise verified, the matters set out in the
Certificate.
6. Based upon and subject to the foregoing, and subject to the qualifications
set forth below and any matters not disclosed to us, we are of the opinion
that:-
(i) the Company is a company incorporated and validly existing
under the laws of the Republic of Singapore and has the
corporate power and capacity to own or lease its property and
to conduct its business as described in the Prospectus;
(ii) (a) the Company has the corporate power and has taken all
necessary corporate action required under the laws of
the Republic of Singapore to authorise the entry
into, execution and delivery of, the U.S.
Underwriting Agreement, the International
Underwriting Agreement and the Singapore Underwriting
Agreement; and
(b) the Company has the corporate power and has taken all
necessary corporate action required under the laws of
the Republic of Singapore to authorise the entry
into, execution and delivery of the Deposit Agreement
and, assuming due authorisation, execution and
delivery thereof by the Depositary (as defined in the
U.S. Underwriting Agreement), the Deposit Agreement
constitutes a valid and legally binding agreement of
the Company, enforceable in accordance with its
terms;
(iii) the authorised share capital of the Company as at [ ], 2000
conforms as to legal matters to the description thereof set
out on page [ ] of the Prospectus;
(iv) (a) as of [ ], 2000, the [ ] Ordinary Shares issued and
outstanding prior to the issuance of the Offered
Shares in connection with the Offering have been duly
authorised and are validly issued, fully paid and
non-assessable and are not issued in violation of any
pre-emptive or similar rights under (1) the laws of
the Republic of Singapore or (2) the Memorandum and
Articles
<PAGE> 40
5
of Association of the Company or any other
constitutive document of the Company or any amendment
thereto. For the purposes of this opinion we have
assumed that the term "non-assessable" in relation to
the Ordinary Shares means under Singapore law that
holders of such Ordinary Shares, having fully paid up
all amounts due on such Ordinary 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 Ordinary Shares;
(b) no holder of any of the [ ] Ordinary Shares issued
and outstanding prior to the issuance of the Offered
Shares in connection with the Offering are entitled
to any pre-emptive or other rights to subscribe for
any of such Ordinary Shares; and
(c) except as described in the Prospectus under the
caption "Management - Employee Benefit Plans", and as
far as we are aware, there are no outstanding
securities issued by the Company convertible into or
exchangeable for, or warrants, rights or options to
purchase from the Company, or obligations of the
Company to issue, Ordinary Shares;
(v) the Offered Shares to be issued in connection with the
Offering have been duly authorised by the Company and, when
issued and delivered to and paid for by the U.S. Underwriters
in accordance with the terms of the U.S. Underwriting
Agreement, by the International Underwriters in accordance
with the terms of the International Underwriting Agreement and
by the Managers pursuant to the Singapore Underwriting
Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Offered Shares will
not be subject to any pre-emptive or similar rights under (a)
the laws of the Republic of Singapore or (b) the Memorandum
and Articles of Association of the Company or any other
constitutive document of the Company or any amendment thereto;
there are no restrictions on the transfer of the Offered
Shares under the laws of the Republic of Singapore except as
described under the captions "Description of Share Capital -
Transfer of Ordinary Shares" and "Description of American
Depository Shares - Withdrawal of Ordinary Shares Upon
Cancellation of ADSs" in the Prospectus;
(vi) the capital restructuring exercise undertaken by the Company
and as described under the captions "Capitalization" and
"Management - Employee Benefit Plans" in the Prospectus was
approved by the Company at the Extraordinary General Meeting
of the Company held on 9th November, 1999 and has become
effective and has been completed. The Articles of Association
of the Company referred to in the Prospectus under the caption
"Description of Ordinary Shares" were adopted by the Company
at the Extraordinary General Meeting of the Company held on
19th January, 2000 and are effective;
(vii) as at the date hereof:-
(a) we are not representing the Company in any legal or
governmental proceedings, pending or threatened, to
which the Company is a party or to which any of the
properties of the
<PAGE> 41
6
Company is subject which could reasonably be expected
to have a material adverse effect on the performance
of the Transaction Agreements or the Singapore
Underwriting Agreement or the consummation of any
transactions contemplated therein or could reasonably
be expected to have a material adverse effect on the
condition (financial or otherwise), prospects,
earnings, business or properties of the Company; and
(b) we are not aware of the existence of any legal or
governmental proceedings in the Republic of Singapore
to which the Company is a party or to which any of
the properties of the Company is subject;
(viii) no consent, approval, authorisation or order of or
qualification with any governmental body or agency or stock
exchange authority in the Republic of Singapore was or is
required for the consummation of the transactions contemplated
in the Transaction Agreements and the Singapore Underwriting
Agreement, except as may be required pursuant to the Companies
Act, Chapter 50 of the Republic of Singapore, the Listing
Manual of the SES or the AIP Letter and as have been obtained;
(ix) under the current laws and regulations of the Republic of
Singapore, all dividends declared and payable in respect of
the Ordinary Shares may be paid by the Company to the holder
thereof in Singapore dollars that may be converted into
foreign currency and, when so converted, freely transferred
out of the Republic of Singapore, without the necessity of
obtaining any consents, approvals, authorisations, orders or
clearances from or registering with any Singapore governmental
agency or body or any stock exchange authority; and except as
set forth in the Prospectus under the caption "Taxation -
Singapore Tax Considerations", all dividends paid to holders
of Ordinary Shares who are non-residents of the Republic of
Singapore will not be subject to Singapore income, withholding
or other taxes under the laws of the Republic of Singapore;
(x) the consummation of any of the transactions contemplated in
the Transaction Agreements and the Singapore Underwriting
Agreement (including the issuance and sale of the Offered
Shares in connection with the Offering) (a) have been, in the
case of transactions to which the Company is a party, duly
authorised by the Company and (b) do not contravene (1) any
provision of the laws of the Republic of Singapore, (2) the
Memorandum and Articles of Association of the Company or any
other constitutive document of the Company or any amendment
thereto, (3) any agreement or instrument binding on the
Company and governed by Singapore law and described in Exhibit
A hereto or (4) as far as we are aware, any judgment, order or
decree of any governmental body, agency or court of the
Republic of Singapore having jurisdiction over the Company or
any of its assets;
(xi) it is not necessary, in order to ensure the legality,
validity, enforceability or admissibility in evidence of the
Transaction Agreements and the Singapore Underwriting
Agreement, that they be filed or recorded with any
governmental or other regulatory authorities in the Republic
of Singapore or that any Singapore stamp duty be paid on them;
<PAGE> 42
7
(xii) no taxes, imposts or duties of any nature (including, without
limitation, stamp or other issuance or transfer taxes or
duties and capital gains, income, withholding or other taxes
but excluding tax on the overall net income of the relevant
person) are payable by or on behalf of the U.S. Underwriters,
the International Underwriters, the Managers or the Company to
the Republic of Singapore or any political subdivision or
taxing authority thereof or therein in connection with (a) the
execution and delivery of the U.S. Underwriting Agreement, the
International Underwriting Agreement or the Singapore
Underwriting Agreement; (b) the issuance of the Offered Shares
in connection with the Offering; (c) the deposit of such
Offered Shares with the Depositary against issuance of ADRs
evidencing the ADSs to be sold to the U.S. Underwriters or the
International Underwriters; (d) the sale and delivery of the
ADSs to the U.S. Underwriters in the manner contemplated in
the U.S. Underwriting Agreement or to the International
Underwriters in the manner contemplated in the International
Underwriting Agreement or the sale and delivery of Offered
Shares to the Managers in the manner contemplated in the
Singapore Underwriting Agreement; or (e) except as disclosed
in the Prospectus under the caption "Taxation - Singapore Tax
Considerations", the resale and delivery of such ADSs by the
U.S. Underwriters or the International Underwriters, or the
resale and delivery of such Offered Shares by the Managers, in
the manner contemplated in the relevant Prospectus;
(xiii) the statements in the Prospectus indicated with asterisks in
Appendix A to this opinion under the captions "Exchange
Rates", "Dividend Policy", "Capitalization", "Business -
Enforcement of Civil Liabilities", "Description of Share
Capital" and "Taxation - Singapore Tax Considerations",
insofar as such statements constitute summaries of the
Singapore legal matters referred to therein, fairly present
the information called for with respect to such legal matters
and fairly summarise the matters referred to therein
(including the tax consequences described in connection with
investment in the Ordinary Shares);
(xiv) the choice of New York law as the governing law of the
Transaction Agreements is a valid choice of law and will be
recognised and given effect to by the Singapore courts;
(xv) the submission by the Company to the jurisdiction of the New
York courts contained in the Transaction Agreements and the
appointment by the Company of the President for the time being
of Singapore Technologies Assembly and Test Services, Inc.
presently located at 1450 McCandless Drive, Milpitas,
California 95035, United States of America as its agent for
service of process in connection therewith are, in each case,
valid and binding on the Company under the laws of the
Republic of Singapore and irrevocable and we are not aware of
any reason that the Singapore courts would not give effect to
such submission; and
(xvi) a final and conclusive judgement on the merits properly
obtained against the Company in any competent court of a state
in, or a Federal Court of, the United States of America for a
fixed sum of money in respect of any legal suit or proceedings
arising out of or relating to the Transaction Agreements and
which could be enforced by execution against the Company in
the jurisdiction of the relevant court and has not been stayed
<PAGE> 43
8
or satisfied in whole may be sued on in the Republic of
Singapore as a debt due from the Company if:-
(a) the relevant court had jurisdiction over the Company
in that the Company was, at the time proceedings were
instituted, resident in the jurisdiction in which
proceedings has been commenced or had submitted to
the jurisdiction of the relevant court;
(b) that judgement was not obtained by fraud;
(c) the enforcement of that judgement would not be
contrary to the public policy of the Republic of
Singapore;
(d) that judgement had not been obtained in contravention
of the principles of natural justice; and
(e) the judgement of the relevant court did not include
the payment of taxes, a fine or penalty;
(xvii) the SES has granted in-principle approval for the listing of
the Ordinary Shares on the SES, subject to the conditions set
out in the AIP Letter;
(xviii) none of the U.S. Underwriters or International Underwriters is
or will be deemed to be resident, domiciled, carrying on
business or subject to taxation in the Republic of Singapore
by reason only of the entry into, performance or enforcement
of the U.S. Underwriting Agreement and International
Underwriting Agreement respectively; and
(xix) the Company is not entitled to claim immunity from suit,
execution, attachment or legal process in any proceedings
taken in the Republic of Singapore in relation to the
Transaction Agreements or the Singapore Underwriting
Agreement.
7. This opinion relates only to the laws of general application of the Republic
of Singapore as at the date hereof and as currently applied by the Singapore
courts, and is given on the basis that it will be governed by and construed in
accordance with the laws of the Republic of Singapore. We have made no
investigation of, and do not express or imply any views on, the laws of any
country other than the Republic of Singapore. In respect of the Transaction
Agreements, the Singapore Underwriting Agreement, the Prospectus, the
Registration Statement and the ADR Registration Statement, we have assumed due
compliance with all matters concerning United States Federal and New York laws
and the laws of all other relevant jurisdictions other than the Republic of
Singapore. With respect to all matters of United States Federal and New York
laws we have relied upon, and our opinion is subject to the qualifications,
assumptions and exceptions set forth in, the opinion of Shearman & Sterling,
United States counsel for the Company, delivered pursuant to (i) Section [6(c)]
of the U.S. Underwriting Agreement and (ii) Section [6(c)] of the International
Underwriting Agreement. As to matters of fact material to this opinion, we have
relied on the statements of responsible officers of the Company.
8. The qualifications to which this opinion is subject are as follows:-
(i) enforcement of the obligations of the Company under the
Transaction Agreements or the Singapore Underwriting Agreement
may be affected
<PAGE> 44
9
by prescription or lapse of time, bankruptcy, insolvency,
liquidation, reorganization, reconstruction or similar laws
generally affecting creditors' rights;
(ii) the power of the Singapore courts to grant equitable remedies
such as injunction and specific performance is discretionary
and accordingly a Singapore court may make an award of damages
where an equitable remedy is sought;
(iii) where under any of the Transaction Agreements or the Singapore
Underwriting Agreement, any person is vested with a discretion
or may determine a matter in its opinion, Singapore law may
require that such discretion is exercised reasonably or that
such opinion is based upon reasonable grounds;
(iv) by virtue of the Limitation Act, Chapter 163 of the Republic
of Singapore, failure to exercise a right of action for more
than six years will operate as a bar to the exercise of such
right and failure to exercise such a right for a lesser period
may result in such right being waived;
(v) a Singapore court may stay proceedings if concurrent
proceedings are brought elsewhere;
(vi) where obligations are to be performed in a jurisdiction
outside the Republic of Singapore, they may not be enforceable
in the Republic of Singapore to the extent that performance
would be illegal or contrary to public policy under the laws
of that jurisdiction;
(vii) provisions in each of the Transaction Agreements or the
Singapore Underwriting Agreement as to severability may not be
binding under the laws of the Republic of Singapore and the
question of whether or not provisions which are illegal,
invalid or unenforceable may be severed from other provisions
in order to save such other provisions depends on the nature
of the illegality, invalidity or unenforceability in question
and would be determined by a Singapore court at its
discretion;
(viii) a Singapore court may refuse to give effect to clauses in any
of the Transaction Agreements or the Singapore Underwriting
Agreement in respect of the costs of unsuccessful litigation
brought before a Singapore court or where the court has itself
made an order for costs;
(ix) we express no opinion as to events and conditions which might
violate covenants, restrictions or provisions with respect to
financial ratios or tests or any contractual provision
measured by the financial conditions or results of operation
of the Company or any of its subsidiaries;
(x) we express no opinion on the legality or enforceability of the
performance by the Company of its obligations of
indemnification or contribution set forth in Section [9] of
the U.S. Underwriting Agreement or Section [9] of the
International Underwriting Agreement;
(xi) any term of an agreement may be amended orally by all the
parties notwithstanding provisions to the contrary in the
Transaction Agreements or the Singapore Underwriting
Agreement;
<PAGE> 45
10
(xii) this opinion is given on the basis that there will be no
amendment to or termination or replacement of the documents,
authorisations and approvals referred to in paragraph 2 of
this opinion and on the basis of the laws of the Republic of
Singapore in force as at the date of this opinion. This
opinion is also given on the basis that we undertake no
responsibility to notify any addressee of this opinion of any
change in the laws of the Republic of Singapore after the date
of this opinion; and
(xiii) under general principles of Singapore law, a person who is not
a contracting party to an agreement is not entitled to the
benefit of the agreement and may not enforce the agreement.
9. As the primary purpose of our professional engagement was not to establish or
confirm factual matters or financial, accounting or statistical matters and
because of the wholly or partially non-legal character of many of the statements
contained in the Prospectus, we express no opinion or belief on and do not
assume any responsibility for the accuracy, completeness or fairness of any of
the statements contained in the Prospectus (other than those specifically
referred to in paragraph 7 of this opinion) and we make no representation that
we have independently verified the accuracy, completeness or fairness of such
statements. Without limiting the foregoing, we express no belief and assume no
responsibility for, and have not independently verified the accuracy,
completeness or fairness of the financial statements and schedules and other
financial and statistical data included or incorporated in the Prospectus, and
we have not examined the accounting, financial or statistical records from which
such financial statements, schedules and data are derived.
10. This opinion is rendered by us solely for the benefit of the U.S.
Underwriters and the International Underwriters in their capacity as
underwriters in connection with the transactions referred to in the U.S.
Underwriting Agreement or, as the case may be, the International Underwriting
Agreement. This opinion is strictly limited to the matters stated herein and is
not to be read as extending by implication to any other matter in connection
with any of the Transaction Agreements or otherwise including, but without
limitation, any other document signed in connection with any of the Transaction
Agreements. Further, this opinion is not to be circulated to, or relied upon by,
any other person or quoted or referred to in any public document or filed with
any governmental body or agency without our prior written consent.
Yours faithfully,
<PAGE> 46
11
EXHIBIT A
[to come]
<PAGE> 47
12
APPENDIX A
[to come]
<PAGE> 48
13
APPENDIX B
(65) 230-3841
[ ], 2000
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
As U.S. Representatives of the several
U.S. Underwriters listed in Schedule "A"
to the U.S. Underwriting Agreement
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
As International Representatives of the several
International Underwriters listed in Schedule "A"
to the International Underwriting Agreement
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
ST Assembly Test Services Ltd
Ladies and Gentlemen :
We are acting as U.S. counsel for ST Assembly Test Services Ltd, a
company incorporated with limited liability under the laws of the Republic of
Singapore (the "Company"), in connection with a global offering of 170,000,000
Ordinary Shares, S$0.25 par value each, of the Company (the "Shares"), either
directly or in the form of American Depositary Shares ("ADSs"), each ADS
representing [ten] Shares, pursuant to (i) the U.S. Underwriting Agreement,
dated January [ ], 2000 (the "U.S. Underwriting Agreement"), among the Company
and Salomon Smith Barney Inc., Hambrecht & Quist LLC and SG Cowen Securities
Corporation, as U.S. Representatives of the several U.S. Underwriters listed in
Schedule "A" thereto (the "U.S. Underwriters"), (ii) the International
Underwriting Agreement, dated January [ ], 2000 (the "International Underwriting
Agreement") among the Company and [ ], as International Representatives of the
several International Underwriters listed in Schedule "A" thereto (the
"International Underwriters"), and (iii) the Singapore Underwriting Agreement,
dated January [ ], 2000 (together with the U.S. Underwriting Agreement and the
International Underwriting Agreement, the "Underwriting Agreements") among the
Company and [ ], as Singapore Representatives of the several Singapore
Underwriters listed in Schedule "A" thereto (together with the U.S. Underwriters
and the International Underwriters, the "Underwriters").
In this capacity, we have examined a signed copy of the registration
statement on Form F-1 (File No. 333-93661), filed by the Company under the
United States Securities Act of 1933, as amended (the "Securities Act"), with
the United States Securities and Exchange Commission (the "Commission") on [ ],
[ ], and of Amendment No. 1 thereto filed by the Company with the Commission
dated [ ], [ ], and of
<PAGE> 49
14
Amendment No. 2 thereto filed by the Company with the Commission on [ ], [ ]
and copies of the related U.S. prospectus and international prospectus (the
registration statement as amended at the time it became effective, including the
exhibits thereto, being hereinafter referred to as the "Share Registration
Statement", and the final U.S. Prospectus dated [ ], [ ] in the form
delivered to the U.S. Underwriters (the "U.S. Prospectus"), and the final
International Prospectus dated [ ], [ ] in the form delivered to the
International Underwriters (the "International Prospectus"), being hereinafter
referred to collectively as the "Prospectuses").
We have also examined a signed copy of the registration statement on Form
F-6 (File No. 333-505544), filed by Citibank, N.A. under the Securities Act with
the Commission on [ ], [ ], and of Amendment No. 1 thereto filed with the
Commission dated [ ], [ ], and of Amendment No. 2 thereto filed with the
Commission on [ ], [ ](such registration statement on Form F-6 at the time
when it became effective, including the exhibits thereto, being hereinafter
referred to as the "ADS Registration Statement" and, together with the Share
Registration Statement, being hereinafter referred to as the "Registration
Statements").
We have also reviewed and participated in discussions concerning the
preparation of the Registration Statements and the Prospectuses with certain
directors, officers and employees of the Company, with Allen & Gledhill,
Singapore counsel to the Company, with KPMG, independent auditors of the
Company, and with representatives of the Underwriters. The limitations inherent
in the independent verification of factual matters and in the role of outside
counsel are such, however, that we cannot and do not assume any responsibility
for the accuracy, completeness and fairness of any of the statements made in the
Registration Statements or the Prospectuses, except as set forth in paragraph
(vii) of our opinion addressed to you, dated the date hereof.
Subject to the limitations set forth in the immediately preceding
paragraph, we advise you that, on the basis of the information we gained in the
course of performing the services referred to above, (A) in our opinion, each of
the Registration Statements, the U.S. Prospectus and the International
Prospectus (other than the financial statements and financial data included
therein or omitted therefrom, as to which we express no view) appear on their
face to be appropriately responsive in all material respects to the requirements
of the Securities Act or the Exchange Act, as the case may be, and the
applicable rules and regulations of the Commission thereunder, and there are no
contracts or other documents known to us after reasonable investigation that are
required to be filed as exhibits to any of the Registration Statements that have
not been so filed, and (B) no facts came to our attention which gave us reason
to believe that (a) any of the Registration Statements (other than the financial
statements and financial data included therein or omitted therefrom, as to which
we express our view), at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or (b) either of the U.S. Prospectus or International Prospectus
(other than the financial statements and financial data included therein or
omitted therefrom, as to which we express no view), as of its date or the date
hereof, contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Very truly yours,
<PAGE> 50
16
[ ], 2000
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
As U.S. Representatives of the several
U.S. Underwriters listed in Schedule "A"
to the U.S. Underwriting Agreement
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
As International Representatives of the several
International Underwriters listed in Schedule "A"
to the International Underwriting Agreement
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
ST Assembly Test Services Ltd
Ladies and Gentlemen :
We are acting as U.S. counsel for ST Assembly Test Services Ltd, a
company incorporated with limited liability under the laws of the Republic of
Singapore (the "Company"), in connection with a global offering of [ ] Ordinary
Shares, S$[ ] par value each, of the Company (the "Shares"), either directly or
in the form of Americal Depositary Shares ("ADSs"), each ADS representing [ ]
Shares, including the offering of [ ] Shares, either directly or in the form of
ADSs, pursuant to (i) the U.S. Underwriting Agreement, dated January [ ], 2000
(the "U.S. Underwriting Agreement"), among the Company and Salomon Smith Barney
Inc., Hambrecht & Quist LLC and SG Cowen Securities Corporation, as U.S.
Representatives of the several U.S. Underwriters listed in Schedule "A" thereto
(the "U.S. UNDERWRITERS"), (ii) the International Underwriting Agreement, dated
January [ ], 2000 (the "International Underwriting Agreement") among the Company
and [ ], as International Representatives of the several International
Underwriters listed in Schedule "A" thereto (the "International Underwriters"),
and (iii) the Singapore Underwriting Agreement, dated January [ ], 2000 (the
"Singapore Underwriting Agreement", and, together with the U.S. Underwriting
Agreement and the International Underwriting Agreement, the "Underwriting
Agreements") among the Company and [ ], as Singapore Representatives of the
several Singapore Underwriters listed in Schedule "A" thereto (the "Singapore
Underwriters", and, together with the U.S. Underwriters and the International
Underwriters, the "Underwriters").
In this capacity, we have examined a signed copy of the registration
statement on Form F-1 (File No. 333-[ ]), filed by the Company under the United
States Securities Act of 1933, as amended (the "Securities Act"), with the
United States Securities and
<PAGE> 51
17
Exchange Commission (the "Commission") on [ ], [ ], and of
Amendment No. 1 thereto filed by the Company with the Commission dated [ ],
[ ], and of Amendment No. 2 thereto filed by the Company with the
Commission on [ ], [ ] and copies of the related U.S. prospectus
and international prospectus (the registration statement as amended at the time
it became effective, including the
exhibits thereto, being hereinafter referred to as the "Share Registration
Statement", and the final U.S. Prospectus dated [ ], [ ] in the form
delivered to the U.S. Underwriters (the "U.S. Prospectus"), and the final
International Prospectus dated [ ], [ ] in the form delivered to the
International Underwriters (the "International Prospectus"), being hereinafter
referred to collectively as the "Prospectuses").
We have also examined a signed copy of the registration statement on Form
F-6 (File No. 333-[ ]), filed by Citibank, N.A. under the Securities Act
with the Commission on [ ], [ ], and of Amendment No. 1 thereto filed
with the Commission dated [ ], [ ], and of Amendment No. 2 thereto
filed with the Commission on [ ], [ ](such registration statement on
Form F-6 at the time when it became effective, including the exhibits thereto,
being hereinafter referred to as the "ADS Registration Statement"). We have also
examined a signed copy of the registration statement on Form 8-A, filed by the
Company under the United States Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with the Commission on [ ], [ ](such registration
statement on Form 8-A at the time when it became effective, including the
exhibits thereto, being hereinafter referred to as the "Form 8-A Registration
Statement", and, together with the Share Registration Statement and the ADS
Registration Statement, the "Registration Statements").
A member of the Staff of the Commission advised us orally that the Share
Registration Statement and the ADS Registration Statement became effective under
the Securities Act at [ ] PM, New York City time, on [ ], [ ].
On [ ], [ ], a member of the Staff of the Commission advised us
orally that there was no stop order suspending the effectiveness of any of the
Registration Statements. To our knowledge since that date no stop order
suspending the effectiveness of any of the Registration Statements has been
issued under the Securities Act or the Exchange Act, as the case may be, or
proceedings therefor initiated or threatened by the Commission.
We have also examined the Deposit Agreement, dated as of [ ], [ ]
(the "Deposit Agreement"), among the Company, Citibank, N.A., as depositary (the
"Depositary"), and the owners and beneficial owners from time to time of
American Depositary Receipts ("ADRs") thereunder, as well as originals, or
copies identified to our satisfaction, of such corporate records of the Company,
certificates of officers of the Company and other persons, and such other
documents, agreements and instruments as we have deemed necessary as a basis for
the opinions hereinafter expressed. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity of originals of all documents submitted to us as
copies.
Our opinions set forth below are limited to the laws of the State of New
York and the Federal securities laws of the United States, and we do not express
any opinions herein concerning any other laws. In addition, we have not been
requested to express, and do not express, any opinion with respect to whether
the Deposit Agreement constitutes a valid and legally binding agreement by
owners and beneficial owners from time to time of ADRs.
Based upon and subject to the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that:
<PAGE> 52
18
(i) assuming due authorization, execution and delivery
thereof by the Company under the laws of Singapore, each of the
Underwriting Agreements have been duly executed and delivered by
the Company under the laws of New York;
(ii) the Company is not, and after giving effect to the
transactions contemplated by the Underwriting Agreements and the
Deposit Agreement will not become, an "investment company"within
the meaning of the Investment Company Act of 1940;
(iii) assuming due authorization, execution and delivery
thereof by the Company under the laws of Singapore, the Deposit
Agreement has been duly executed and delivered by the Company under
the laws of New York and assuming further the due authorization,
execution and delivery of the Deposit Agreement by the Depositary,
the Deposit Agreement constitutes a valid and legally binding
agreement of the Company (other than Section [5.8] thereof as to
which we do not express any opinion), enforceable in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally
and to general principles of equity (regardless of whether in a
proceeding in equity or at law).
(iv) assuming due authorization, execution and delivery of
the Deposit Agreement by the Depositary and the Company, upon due
issuance by the Depositary of the ADRs evidencing the ADSs being
delivered by the Company at the Closing Date against the deposit of
the Underlying Shares by the Company in respect thereof in
accordance with the provisions of the Deposit Agreement, such ADRs
have been duly and validly issued and the persons in whose names
such ADRs are registered are entitled to the rights specified
therein and in the Deposit Agreement; the ADSs and ADRs in respect
thereof conform in all material respects to the descriptions
thereof in the Prospectuses, insofar as such statements purport to
summarize certain provisions of the Deposit Agreement;
(v) no consent, approval, authorization or order of any court
or governmental agency or body of the United States or of the State
of New York is required for the consummation by the Company of the
transaction contemplated in the Underwriting Agreements or the
Deposit Agreement, except (A) the registration under the Securities
Act of the Shares and the ADSs and the registration under the
Exchange Act of the ADSs, and (B) any other consents, approvals,
authorizations or orders as may be required under the blue sky laws
of any jurisdiction in connection with the purchase and
distribution of the Shares and the ADSs to be purchased under the
Underwriting Agreements;
(vi) the deposit of the Shares being deposited with the
Depositary or its nominee against the issuance of the ADRs
evidencing the ADSs to be delivered at the Closing Date, the sale
and delivery by the Company of the Shares to be delivered at the
Closing Date, the consummation of the transactions contemplated by
the Underwriting Agreements or the Deposit Agreement and the
fulfilment of the terms thereof will not conflict with, result in a
breach or violation of, or constitute a default
<PAGE> 53
19
under, (A) any law of the United States or the State of New York
and (B) any judgment or decree know to us to be applicable to the
Company of any court, regulatory body, administrative agency,
governmental body or arbitrator of the United States or the State
of New York having jurisdiction over the Company;
(vii) the information contained in the Prospectuses under the
headings "Taxation" and "Shares Eligible for Future Sale", insofar
as it purports to summarize the provisions of federal laws of the
United States or the laws of the State of New York, is true and
accurate in all material respects and fairly summarizes the
material federal income tax considerations to an investment on the
Ordinary Shares directly or in the form of ADSs and the other
matters therein;
(viii)the choice of law provision set forth in Section 15
hereof and in the Deposit Agreement will be recognized by the New
York Courts provided, however, that we express no opinion as to
whether any United States federal court will accept venue of an
action which it may affirmatively determine not to accept as
inconvenient or otherwise inappropriate;
This opinion is being furnished to you solely for your benefit in
connection with the transactions contemplated by the Underwriting Agreements and
the Deposit Agreement, and is not to be used, circulated, quoted or otherwise
referred to for any other purpose without our express written consent, and no
party other than you is entitled to rely on it. Notwithstanding the foregoing
sentence, the Depositary may rely on our opinion in paragraph (iii) as if such
opinion were addressed to it.
Very truly yours
<PAGE> 54
Appendix C
FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM L.L.P.
[date]
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
SG Cowen Securities Corporation
As U.S. Representatives of the several U.S. Underwriters
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Salomon Brothers International Limited
Credit Suisse First Boston (Singapore) Limited
Hambrecht & Quist LLC
Societe Generale
As International Representatives of the several International Underwriters
c/o
Salomon Brothers International Limited
Victoria Plaza
111 Buckingham Palace Road
London SWIW OSB
England
Re: American Depositary Shares
Each Representing Ten (10) Ordinary Shares of
ST Assembly Test Services Ltd
Ladies and Gentlemen:
We have acted as special United States counsel for Citibank, N.A. in
connection with the Deposit Agreement, dated as of February [8], 2000 (the
"Deposit Agreement"), by and among ST Assembly Test Services Ltd, a company
incorporated under the laws of the Republic of Singapore (the "Company"),
Citibank, N.A., as depositary (the "Depositary"), and Holders and Beneficial
Owners of American Depositary Shares (the "ADSs") evidenced by American
Depositary Receipts (the "ADRs"), --each ADS representing ten (10) ordinary
shares, par value S$0.25 per share, of the Company (the "Shares").
This opinion is being furnished to you pursuant to Section 6(d) of the
U.S. Underwriting Agreement, dated January [27], 2000 among the Company and the
U.S. Underwriters named therein (the "Underwriting Agreement"). Capitalized
terms used and not otherwise defined herein shall have the respective meanings
set forth in the Underwriting Agreement.
We have examined originals or copies of (i) the final Prospectuses, each
dated -, 2000, relating to the ADSs (the "Prospectuses"), (ii) the registration
statement with respect to the ADSs on Form F-6 under the Securities Act of 1933,
as amended (the "Act"), filed on January 11, 2000 (the "ADS Registration
Statement"), (iii) an executed copy of the Deposit Agreement,
<PAGE> 55
2
(iv) specimen certificates of the ADRs evidencing the ADSs, (v) the Depositary's
Certificate, dated -, 2000 and (vi) a certified copy of the Charter and By-Laws
of the Depositary as in effect on the date hereof. We have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such other documents, certificates and records as we have deemed necessary or
appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Depositary, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof. As to
any facts material to the opinions expressed herein which were not
independently established or verified, we have relied upon oral or written
statements and representations of officers and other representatives of the
Depositary and others.
Members of our firm are admitted to the bar in the State of New York, and
we do not express any opinion as to the laws of any other jurisdiction (or as to
the effect of the laws of any such jurisdiction on the opinions herein stated)
other than the federal laws of the United States of America to the extent
referred to specifically herein. We have assumed the accuracy, correct-ness and
validity of all matters relating to or dependent upon the laws of the Republic
of Singapore, including, but not limited to, (i) the due authorization,
execution and delivery of the Deposit Agreement by the Company under the laws of
the Republic of Singapore, (ii) the due execution and delivery under the laws of
the Republic of Singapore by the Depositary of the Deposit Agreement and the
validity and legality thereof under the laws of the Republic of Singapore, (iii)
that, under the laws of the Republic of Singapore, the Shares have been duly
authorized, executed and delivered by the Company and are validly issued, fully
paid and non-assessable, and the holders of the Shares - will be entitled to all
the rights of a shareholder conferred by the Memorandum and Articles of
Association of the Company and the Companies Act of the Republic of Singapore,
and (iv) that, under the laws of the Republic of Singapore, upon due issuance
and delivery by the Depositary of the ADRs evidencing the ADSs against the
deposit of the Shares in accordance with the terms of the Deposit Agreement,
such ADRs will be validly issued and will entitle the persons in whose name each
ADR is registered to the rights specified therein and in the Deposit Agreement.
Based upon the foregoing and subject to the limitations, qualifications,
exceptions and assumptions set forth herein, we are of the opinion that:
(i) the Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and constitutes a legal, valid and binding
instrument enforceable against the Depositary in accordance with its terms,
except to the extent that enforcement thereof may be limited by (a) bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (b) general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity);
(ii) the statements in the Prospectuses under the heading "Description of
American Depositary Receipts", insofar as such statements purport to summarize
certain provisions of the Deposit Agreement, the ADSs and the ADRs, are fair and
accurate;
(iii) the Depositary has full power and authority and legal right to
execute and deliver the Deposit Agreement and to perform its obligations
thereunder;
(iv) upon due issuance and delivery by the Depositary of the ADRs
evidencing the ADSs against the deposit of the Shares in accordance with the
terms of the Deposit Agreement, such ADRs will be validly issued and will
entitle the person in whose name each ADR is registered to the rights specified
therein and in the Deposit Agreement; and
<PAGE> 56
3
(v) the ADS Registration Statement and each amendment comply as to form
in all material respects with the applicable requirements of the Act and the
rules thereunder.
We have been advised by the U.S. Securities and Exchange Commission that
the ADS Registration Statement has become effective under the Act. To our
knowledge, no stop order suspending the effectiveness of the ADS Registration
Statement has been issued and no proceedings for that purpose have been
instituted or threatened.
This opinion is furnished to you for your benefit in connection with the
execution and delivery of the Deposit Agreement and is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our
express written permission.
Very truly yours,
<PAGE> 1
Exhibit 1.3
DATED [ ] JANUARY, 2000
ST ASSEMBLY TEST SERVICES LTD
AS COMPANY
CITICORP INVESTMENT BANK (SINGAPORE) LIMITED
AS LEAD MANAGER AND UNDERWRITER
- AND -
OVERSEAS UNION BANK LIMITED
AS CO-LEAD MANAGER AND UNDERWRITER
-------------------------------------------------
MANAGEMENT AND UNDERWRITING AGREEMENT
RELATING TO THE
SINGAPORE RETAIL OFFERING
-------------------------------------------------
ALLEN & GLEDHILL,
36, ROBINSON ROAD, #18-01,
CITY HOUSE,
SINGAPORE 068877.
<PAGE> 2
C O N T E N T S
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
- ------ ------- ----
<S> <C> <C>
1. DEFINITIONS
2. SINGAPORE RETAIL OFFERING
3. SUBSCRIPTION AND OPTION
4. SINGAPORE PROSPECTUS
5. FEE AND COMMISSION
6. DELIVERY AND PAYMENT
7. WARRANTIES AND UNDERTAKINGS
8. SUB-UNDERWRITING
9. BROKERAGE
10. CONDITIONS
11. RESCISSION AND TERMINATION
12. ANNOUNCEMENTS
13. ADVERTISEMENT
14. CONSENT TO DISCLOSURE
15. TIME OF ESSENCE
16. NOTICES
17. AGREEMENT AMONG MANAGERS
18. SUCCESSORS
19. GOVERNING LAW
SCHEDULE 1 - UNDERWRITING COMMITMENTS
SCHEDULE 2 - FORM OF CERTIFICATE
</TABLE>
<PAGE> 3
THIS AGREEMENT is made on [ ] January, 2000 BETWEEN:-
(1) ST ASSEMBLY TEST SERVICES LTD (the "Company"), a company
incorporated in Singapore with its registered office at 5,
Yishun Street 23, Singapore 768442;
(2) CITICORP INVESTMENT BANK (SINGAPORE) LIMITED ("Citicorp" or
the "Lead Manager"), a company incorporated in Singapore with
its registered office at [ ]; and
(3) OVERSEAS UNION BANK LIMITED, a company incorporated in
Singapore with its registered office at [ ] ("OUB" or the
"Co-Lead Manager " and together with the Lead Manager, the
"Managers").
WHEREAS:-
(A) The Company is a company limited by shares incorporated in Singapore on 31st
October, 1994 and has at the date of this Agreement an authorised share capital
of S$300,000,000 consisting of 1,200,000,000 ordinary shares of S$0.25 each, of
which [785,427,695] ordinary shares of S$0.25 each have been issued and are
fully paid as at [15th December, 1999].
(B) The Company proposes to issue the New Shares (as defined below) and to offer
the New Shares by way of a Global Offering (as defined below) comprising:-
(i) [102,000,000] New Shares directly or in the form of
ADSs (as defined below) pursuant to the U.S. Offering
(as defined below);
(ii) [51,000,000] New Shares directly or in the form of
ADSs pursuant to the International Offering (as
defined below); and
(iii) [17,000,000] New Shares pursuant to the Singapore
Retail Offering (as defined below),
at the Offering Price (as defined below).
(C) Pursuant to the U.S. Underwriting Agreement (as defined below), the Company
has agreed to issue an aggregate of 102,000,000 New Shares, directly or in the
form of ADSs (the "U.S. Underwritten Shares"), and to grant to the U.S.
Underwriters (as defined below) an option to purchase from the Company up to
15,300,000 additional new Shares directly or in the form of ADSs to cover
over-allotments (the "U.S. Option Shares" and together with the U.S.
Underwritten Shares, the "U.S. Securities").
(D) Pursuant to the International Underwriting Agreement (as defined below), the
Company has agreed to issue an aggregate of 51,000,000 New Shares, directly or
in the form of ADSs (the "International Underwritten Shares"), and to grant to
the International Underwriters (as defined below) an option to purchase from the
Company up to 7,650,000 additional new Shares directly or in the form of ADSs to
cover over-allotments (the "International Option Shares" and, together with the
International Underwritten Shares, the "International Securities").
(E) Pursuant to the Agreement Among U.S. Underwriters, International
Underwriters and Singapore Underwriters (as defined below), the International
Underwriters and the Managers may purchase from the U.S Underwriters a portion
of the U.S. Securities, the U.S Underwriters and the Managers may purchase from
the International Underwriters a portion of the International Securities and the
U.S Underwriters and the International Underwriters may purchase from the
Managers a
<PAGE> 4
2
portion of the Singapore Securities (as defined below).
(F) As part of the Global Offering, the U.S. Underwriters, the International
Underwriters and the Managers have agreed to reserve up to five per cent. of the
New Shares (including New Shares represented by ADSs) out of the Global Offering
(the "Directed Shares", representing in aggregate up to 7,500,000 New Shares)
for priority allocation to the Company's directors, officers and employees,
employees of business associates, officers and employees of the Company's
affiliates and to certain charitable organisations in Singapore (the
"Participants") as set out in the Prospectus (defined below) under the heading
"Underwriting", at the Offering Price. Any Directed Shares not orally confirmed
for purchase by any Participant by the end of the business day in Singapore
("Business Day") on which the Underwriting Agreements (as defined below) are
executed will be offered to the other Participants first and any of such
Directed Shares which are not taken up by such Participants shall be offered to
the public by the U.S. Underwriters, the International Underwriters and the
Managers as set out in the Prospectus and the Agreement Among U.S Underwriters,
International Underwriters and Singapore Underwriters.
(G) The Company has obtained the approval in-principle from the Stock Exchange
of Singapore Limited (the "Stock Exchange") for the admission of all the issued
ordinary shares of S$0.25 each in the capital of the Company and all the New
Shares to the Official List of the Stock Exchange.
(H) The Company has requested Citicorp to lead manage and OUB to co-lead manage,
and Citicorp and OUB have agreed to lead manage and co-lead manage,
respectively, the Singapore Retail Offering (as defined below) on its behalf and
the Company has requested the Managers, and the Managers have agreed, severally
and not jointly, to subscribe for, or procure subscription for, the Invitation
Shares (as defined below), upon the terms and subject to the conditions of this
Agreement.
IT IS AGREED as follows:-
1. DEFINITIONS
(A) In this Agreement:-
(i) except to the extent that the context requires
otherwise:-
"ADSs" means American Depositary Shares, evidenced by
American Depositary Receipts, with each ADS
representing 10 Shares;
"Agreement Among U.S. Underwriters, International
Underwriters and Singapore Underwriters" means the
agreement dated 27th January, 2000 made among the
International Underwriters, the Managers and the U.S.
Underwriters;
"Closing Date" means 8th February, 2000 (or such
later or other date provided in Clause 6(C));
"Depository" has the meaning ascribed to it in
Section 130A of the Companies Act, Chapter 50 of
Singapore;
"Directors" means the Directors of the Company named
in the Singapore Prospectus;
"Global Offering" means the International Offering,
the U.S. Offering and the
<PAGE> 5
3
Singapore Retail Offering;
"Group" means the Company and its subsidiary;
"International Offering" means the offering of New
Shares directly or in the form of ADSs to investors
outside the U.S. and Canada;
"International Underwriters" means the International
Underwriters named in the International Underwriting
Agreement;
"International Underwriting Agreement" means the
underwriting agreement dated 27th January, 2000
entered into between the Company and the
International Underwriters, relating to the
International Offering;
"Invitation Shares" means Offer Shares and the
Singapore Directed Shares;
"market day" means a day on which the Stock Exchange
is open for securities trading;
"NASDAQ" means the Nasdaq National Market;
"New Shares" means 170,000,000 new ordinary shares of
S$0.25 each in the capital of the Company;
"Offer Shares" means 17,000,000 of the New Shares
offered by way of a public offering in Singapore;
"Offering Price" means U.S.$[ ] for each ADS and
S$[ ] for each Share;
"Option Shares" has the meaning set out in Clause
3(B);
"Prospectus" means the International Prospectus, the
U.S. Prospectus and the Singapore Prospectus or any
of them;
"Shares" means ordinary shares of S$0.25 each in the
capital of the Company;
"Singapore Directed Shares" means the Directed Shares
to be allocated to Participants in Singapore;
"Singapore Dollar(s)" and the symbol "S$" mean the
lawful currency of Singapore;
"Singapore Prospectus" means the prospectus in the
agreed form and relating to the Singapore Retail
Offering;
"Singapore Retail Offering" means the offering of the
Invitation Shares to persons in Singapore on the
terms and conditions of the Singapore Prospectus;
"Singapore Securities" means the Invitation Shares
and the Option Shares;
"Specified Event" means an event occurring after the
date of this Agreement
<PAGE> 6
4
and prior to [10.00 p.m.] on the Closing Date or, in
the event the option provided for in Clause 3(B)
shall have been exercised, the settlement date for
the Option Shares, which, if it had occurred before
the date of this Agreement, would have rendered any
of the warranties contained in Clause 7(A) untrue or
incorrect in any material respect;
"subsidiary" has the meaning ascribed to it in
Section 5 of the Companies Act, Chapter 50;
"Total Underwriting Commitments" means the aggregate
of the Underwriting Commitments;
"Underwriting Commitment" means, in relation to a
Manager, the number of Invitation Shares set out
opposite its name in Schedule 1;
"U.S." means the United States of America;
"U.S. Dollars" or "US$" means the lawful currency of
the U.S.;
"U.S. Offering" means the offering of New Shares
directly or in the form of ADSs to investors in the
U.S. and Canada;
"U.S. Underwriters" means the U.S. Underwriters named
in the U.S. Underwriting Agreement;
"U.S. Underwriting Agreement" means the underwriting
agreement dated 27th January, 2000 entered into
between the Company and the U.S. Underwriters,
relating to the U.S. Offering; and
"Underwriting Agreements" means the International
Underwriting Agreement, the U.S. Underwriting
Agreement and this Agreement;
(ii) any reference to a document being "in the agreed
form" means in the form of the proof or draft thereof
signed for identification on behalf of the Company
and Citicorp with such alterations (if any) as may be
agreed between the Company and Citicorp;
(iii) words importing the masculine gender shall, where
applicable, include the feminine and neuter genders
and vice versa; and
(iv) a reference to a time of day shall be a reference to
Singapore time unless otherwise stated.
(B) References to "Recitals", "Clauses" and "Schedules" are to recitals of,
clauses of and schedules to this Agreement.
(C) The headings are for convenience only and shall not affect the
interpretation of the provisions of this Agreement.
2. SINGAPORE RETAIL OFFERING
(A) Subject to the terms and conditions of this Agreement:-
<PAGE> 7
5
(i) the Company irrevocably appoints Citicorp, and
Citicorp agrees, to lead manage the Singapore Retail
Offering; and
(ii) the Company irrevocably appoints OUB, and OUB agrees,
to co-lead manage the Singapore Retail Offering.
(B) The Company authorises and directs Citicorp to do all such acts and things
as it may deem necessary or advisable for or in connection with the Singapore
Retail Offering and, in particular, but without prejudice to the foregoing and
the other provisions of this Agreement:-
(i) to assist the Company in the Singapore Retail
Offering on the terms and subject to the conditions
of this Agreement; and
(ii) to send copies of the Singapore Prospectus to such
persons as it may in its discretion deem fit.
3. SUBSCRIPTION AND OPTION
(A) Subject to the terms and conditions of this Agreement and in reliance upon
the representations, warranties and undertakings set out in Clause 7, the
Company agrees to issue, and each Manager agrees, severally and not jointly, to
subscribe or procure subscriptions for the number of Invitation Shares
representing its Underwriting Commitment at the Offering Price for each
Invitation Share.
(B) Subject to the terms and conditions of this Agreement and in reliance upon
the representations, warranties and undertakings set out in Clause 7, the
Company hereby grants an option to the Managers, severally and not jointly and
each in the proportion borne by its Underwriting Commitment to the Total
Underwriting Commitments, to subscribe or procure subscriptions for up to
2,550,000 Shares at the Offering Price, to cover over-allotments in the
Singapore Retail Offering (the "Option Shares"). Such option may be exercised in
whole or in part at any time (but not more than once) on or before the 30th day
after the date of the Singapore Prospectus upon notice by Citicorp, on behalf of
the Managers, to the Company, setting out the number of Option Shares as to
which the Managers are exercising such option and the settlement date.
(C) The Company agrees with and undertakes to each of the Managers that the
Invitation Shares and the Option Shares will upon their issue rank in all
respects pari passu with the existing issued ordinary shares of S$0.25 each in
the capital of the Company.
4. SINGAPORE PROSPECTUS
Subject to the terms and conditions of this Agreement, not
later than [ ] January, 2000 (or such other date as the Company and Citicorp may
agree), the Company undertakes to procure:-
(i) a copy of the Singapore Prospectus (duly signed by or
on behalf of each of the Directors) to be lodged with
the Registrar of Companies and Businesses for
registration together with any other documents
required by law to be annexed to the Singapore
Prospectus; and
(ii) all necessary copies of the Singapore Prospectus to
be delivered to the Stock Exchange.
5. FEE AND COMMISSION
<PAGE> 8
6
(A) In consideration of the agreement by Citicorp to manage the Invitation
contained in Clause 2, the Company agrees to pay to Citicorp a management fee in
the amount and on the terms as stated in a letter dated 8th December, 1999 from
Citicorp to the Company.
(B) In consideration of the agreement by the Managers to subscribe or procure
subscriptions for the Invitation Shares contained in Clause 3(A) and the Option
Shares (subject to the option set out in Clause 3(B) having been duly exercised
in accordance with Clause 6), the Company agrees to pay to each Manager an
underwriting commission of 1.25 per cent. of the Offering Price for the total
number of Invitation Shares and the Option Shares (to the extent the option set
out in Clause 3(B) is exercised) which that Manager has agreed to subscribe or
procure subscriptions for pursuant to this Agreement. Such underwriting
commission shall be payable on the Closing Date or on the settlement date of the
Option Shares, as the case may be, and deducted from the aggregate Offering
Price for the Invitation Shares and the Option Shares, as the case may be, as
provided in Clause 6.
(C) The Company shall bear all expenses of or incidental to the Invitation
including, without limiting the generality of the foregoing, the fees of the
professional advisers of the Company, the cost of printing and distributing the
Singapore Prospectus, the cost of advertising the Singapore Prospectus, the cost
of printing this Agreement, registrar's charges, valuers' fees, receiving
bankers' fees, accountancy fees, legal fees, the listing fees, other incidental
fees payable to the Stock Exchange for the listing application, any stamp,
issue, registration or documentary taxes and duties arising as a result of the
issuance of the New Shares, of the sale and delivery of the New Shares by the
Company to or for the account of the Managers and of the sale and delivery of
the New Shares by the Managers to the initial purchasers thereof in the manner
contemplated under this Agreement. The Company shall forthwith upon request by
Citicorp reimburse the amount of any such expenses which the Managers may have
paid on its behalf. The Company shall reimburse the Managers for all reasonable
out-of-pocket expenses incurred by them in connection with this Agreement, as
agreed in a letter dated 8th December, 1999 from the Managers to the Company.
(D) Any goods and services tax or other levies now or hereafter imposed by law
(including but not limited to the Goods and Services Tax Act, Chapter 117A of
Singapore) or required to be paid in respect of any moneys payable to or
received or receivable by the Managers or any expenses incurred by the Managers
shall (except to the extent prohibited by law) be borne and paid by the Company.
6. DELIVERY AND PAYMENT
(A) Subject to Clause 6(C), delivery of and payment for the Invitation Shares
and the Option Shares (if the option provided for in Clause 3(B) shall have been
exercised on or before the third Business Day prior to the Closing Date) shall
be made at [10:00 p.m.] on the Closing Date.
(B) The share certificates in respect of the Invitation Shares and the Option
Shares (if the option provided for in Clause 3(B) shall have been exercised on
or before the third Business Day prior to the Closing Date) shall be issued in
the name of, and delivered to, the Depository for the account of the Managers or
such other persons as Citicorp, on behalf of the Managers, may direct, against
payment by the Managers, each in the proportion borne by its Underwriting
Commitment to the Total Underwriting Commitments, of the aggregate net
subscription moneys of the Invitation Shares and, if applicable, the Option
Shares (being the aggregate Offering Price of the Invitation Shares and, if
applicable, the Option Shares, less [(in the case of Citicorp only) the
management fee payable to Citicorp pursuant to Clause 5(A) and] the underwriting
commission and brokerage payable to the Managers pursuant to Clause 5(B) and
Clause 9) to or to the order of the Company in immediately available and freely
transferable funds to such account with such bank in Singapore as Salomon
<PAGE> 9
7
Brothers International Limited shall have notified to Citicorp, on behalf of the
Company, for such purpose.
(C) Notwithstanding Section 6(A), it is understood and agreed that the Closing
Date shall occur simultaneously with the "Closing Date" under the International
Underwriting Agreement and the U.S. Underwriting Agreement and that the
settlement date for any Singapore Option Securities occurring after the Closing
Date, shall occur simultaneously with the settlement date under the U.S.
Underwriting Agreement and the International Underwriting Agreement for any U.S.
Option Securities and International Option Securities occurring after the
Closing Date.
(D) If the option provided for in Clause 3(B) is exercised after the third
Business Day prior to the Closing Date, the Company will deliver (at the expense
of the Company) to the Managers on the date specified by the Managers (which
shall be within three Business Days after exercise of said option), share
certificates representing the Option Shares in respect of which such option
shall have been exercised and issued in the name of the Depository, to the
Depository for the account of the Managers or such other persons as Citicorp, on
behalf of the Managers, may direct, against payment by the Managers, each in the
proportion borne by its Underwriting Commitment to the Total Underwriting
Commitments, of the aggregate net subscription moneys of the relevant number of
Option Shares in respect of which such options shall have been exercised (being
the aggregate Offering Price of such Option Shares, less the underwriting
commission and brokerage payable to the Managers pursuant to Clause 5(B) and
Clause 9) to or to the order of the Company in immediately available and freely
transferable funds to such account with such bank in Singapore as Salomon
Brothers International Limited shall have notified to Citicorp, on behalf of the
Company, for such purpose.
(E) If settlement for the Option Shares is to occur after the Closing Date, the
Company will deliver to the Managers on the settlement date for the Option
Shares, and the several obligations of the Managers to subscribe or procure
subscriptions for the Option Shares shall be conditional upon receipt of,
supplemental opinions, certificates and letters confirming as of such date the
opinions, certificates and letters delivered on the Closing Date pursuant to
Clause 10 hereof.
7. WARRANTIES AND UNDERTAKINGS
(A) The Company warrants to and undertakes with each of the Managers as
follows:-
[to track warranties from U.S. Underwriting Agreement]
(B) The obligations of Citicorp under Clause 2 and the obligations of the
Managers under Clauses 3 and 6 are made on the basis of the warranties contained
in sub-Clause (A) above and are subject to the same being and remaining true and
accurate in all respects as at the date hereof and up to and including the
Closing Date and (in the event the option provided for in Clause 3(B) is
exercised) the settlement date for the Option Shares, and the Company undertakes
to and agrees with each of the Managers:-
(i) to use all reasonable endeavours not to permit any
Specified Event to occur before the Closing Date or,
as the case may be, the settlement date for the
Option Shares; and
(ii) to forthwith give notice to Citicorp of any Specified
Event which has occurred or come to its knowledge
prior to the Closing Date or, as the case may be, the
settlement date for the Option Shares, and forthwith
to take such steps as
<PAGE> 10
8
Citicorp may reasonably require to remedy and/or
publicise the same without prejudice to Citicorp's
rights and remedies under or pursuant to this
Agreement.
(C) The Company undertakes to and agrees with each of the Managers to fully and
effectually indemnify each of the Managers from and against all losses, claims,
costs (including legal costs on a full indemnity basis), charges, liabilities,
actions and demands which any of the Managers may incur or suffer or which may
be made against any of the Managers in connection with or arising out of the
issue of the Singapore Prospectus or the Singapore Retail Offering or any breach
of the warranties contained in sub-Clause (A) above or any failure or delay by
the Company in performing the Company's undertakings in sub-Clause (E) below,
save and except for any loss or damage arising out of any wilful default, fraud
or negligence on the part of the relevant Manager.
(D) The warranties in sub-Clause (A) above shall be deemed to be repeated on and
as of the Closing Date and (in the event the option provided for in Clause 3(B)
is exercised) the settlement date for the Option Shares and the obligations of
the Company in respect thereof and under sub-Clause (C) above shall continue in
full force and effect notwithstanding completion of the subscription of the
Invitation Shares and (in the event the option provided for in Clause 3(B) is
exercised) the Option Shares under this Agreement or any investigation by any of
the Managers.
(E) The Company hereby undertakes to the Managers:-
(i) not to vary or issue any supplement to the Singapore
Prospectus without the prior consent in writing of
the Managers, such consent not to be unreasonably
withheld, and not to disclose, announce or otherwise
disseminate any information concerning the Group or
the New Shares pending the issue of the Singapore
Prospectus or any information which is not contained
in the Singapore Prospectus or which may in the
opinion of the Managers be inconsistent with the
information contained therein, without the consent of
the Managers, such consent not to be unreasonably
withheld;
(ii) to supply the Managers with any information or
document which it may reasonably require affecting
the accounts or affairs of the Company and to do all
such other things and sign or execute such documents
as may reasonably be required by the Managers in
order to complete the Singapore Retail Offering;
(iii) to use their best endeavours to procure the share
registrar to do all such acts and things as may be
required by the Managers in connection with the
Singapore Retail Offering and the transactions
associated with the New Shares including the
expeditious processing of the applications for the
New Shares;
(iv) to use its best endeavours to obtain and maintain the
listing and quotation of the New Shares on the Stock
Exchange;
(v) not to take any action to permit a public offering of
the New Shares or distribute the Singapore Prospectus
or any document or form relating to the New Shares or
other material relating to the Invitation in any
country or jurisdiction except in Singapore or any
other country or jurisdiction where such offering or
distribution is permitted;
(vi) except for the Option Shares and any Shares to be
issued by the Company
<PAGE> 11
9
pursuant to the exercise of options granted under the
ST Assembly Test Services Ltd Share Option Plan 1999,
not to issue at any time on or before the expiry of
60 days after the Closing Date, any marketable
securities (in the form of, or represented or
evidenced by, bonds, notes, debentures, loan stock or
other securities) or shares or options therefor
without the prior written consent of the Managers,
such consent not to be unreasonably withheld;
(vii) not to, and will procure that its subsidiaries will
not, at any time on or before the Closing Date
without the prior written consent of the Managers,
such consent not to be unreasonably withheld, dispose
of in any manner (otherwise than in the ordinary and
normal course of their respective businesses) any of
their respective properties, fixed assets and/or
subsidiaries or any other asset which is (in the
reasonable opinion of the Managers) of a material
nature; and
(viii) not to take any action or do any act or thing which
may be materially prejudicial to the Invitation.
8. SUB-UNDERWRITING
Citicorp shall be at liberty to sub-underwrite its
underwriting obligations under this Agreement upon such terms and conditions as
it deems fit. OUB shall not sub-underwrite its underwriting obligations under
this Agreement without the prior written consent of Citicorp.
9. BROKERAGE
The Company will pay brokerage at the rate of 1.0 per cent. of
the Offering Price of the Invitation Shares and (in the event the option
provided for in Clause 3(B) is exercised) the Option Shares to Citicorp for full
allocation amongst members of the Singapore Retail Syndicate (as defined in the
Singapore Prospectus) based on the final allocation of Invitation Shares to
investors through the relevant member of the Singapore Retail Syndicate.
10. CONDITIONS
(A) This Agreement and the obligations of the Managers under this Agreement are
conditional upon:-
(i) the Singapore Prospectus having been registered with
the Registrar of Companies and Businesses by [28th
January,] 2000;
(ii) such approvals as may be required for the
transactions described in this Agreement and in the
Singapore Prospectus being obtained, and not
withdrawn or amended, before [ ], 2000 (or such other
date as the Company and the Managers may agree);
(iii) the delivery to Citicorp on the Closing Date of a
certificate in the form set out in Schedule 2 signed
by [the Chief Executive Officer or President of the
Company];
(iv) the International Underwriting Agreement and the U.S.
Underwriting Agreement not having been terminated or
rescinded prior to the Closing Date; and
(v) the delivery of and payment for the New Shares (other
than the Invitation
<PAGE> 12
10
Shares) pursuant to the International Underwriting
Agreement and the U.S. Underwriting Agreement taking
place [concurrently] with the delivery of and payment
for the Invitation Shares pursuant to this Agreement
on the Closing Date.
(B) The Company shall use its best endeavours to procure the fulfilment of such
conditions and, in particular, shall furnish such information, supply such
documents, give such undertaking(s) and do all such acts and things as may be
required to enable the New Shares to be admitted to the Official List of the
Stock Exchange as aforesaid.
(C) If such conditions are not fulfilled, this Agreement shall ipso facto cease
and determine and (save in respect of any breach of sub-Clause (B) above) no
party shall have any claim against the others for costs, damage, compensation or
otherwise except that the Company shall continue to be bound by its obligations
under Clauses 5 and 7, shall indemnify the Managers in accordance with Clause 6
and shall reimburse the Managers for all out-of-pocket expenses incurred by it
in connection with this Agreement, provided that the Managers shall be entitled
to waive the condition in sub-Clause (A)(iv) above.
11. RESCISSION AND TERMINATION
(A) Notwithstanding anything herein contained, the Managers may, in their
absolute discretion, by notice in writing to the Company, rescind or terminate
this Agreement if prior to [10.00 p.m.] on the Closing Date:-
(i) there shall come to the knowledge of the Managers any
breach in any material respect of any of the
warranties, undertakings or covenants contained in
Clause 7(A) or 7(D) or that any of the warranties by
the Company in Clause 7(A) is untrue or incorrect in
any material respect; or
(ii) any Specified Event comes to the knowledge of the
Managers; or
(iii) [track Section 10 of U.S. Underwriting Agreement.]
(B) If this Agreement is so rescinded or terminated, the Company shall reimburse
the Managers for all out-of-pocket expenses incurred by them in connection with
this Agreement.
(C) In addition, rescission or termination of this Agreement for any reason
shall be without prejudice to any rights of the Managers in respect of any such
breach as is therein referred to and shall not release the Company from its
obligations under Clauses 5, 6 and 7, which shall continue in full force and
effect.
12. ANNOUNCEMENTS
No public announcement or communication concerning the
Singapore Retail Offering may be made or despatched by the Company without the
prior consent in writing of Citicorp (save as may be required by law or the
rules of the Stock Exchange).
13. ADVERTISEMENT
The Company and Citicorp agree that tombstone advertisements
of the Invitation shall be made by Citicorp on behalf of and at the expense of
the Company on such dates and in such newspapers as Citicorp may, in
consultation with the Company, determine.
14. CONSENT TO DISCLOSURE
<PAGE> 13
11
The Company consents to the disclosure by the Managers to the
Stock Exchange of any information relating to the Company and its affairs,
operations or business, where such disclosure is deemed to be necessary by the
Managers for the purposes of or in connection with the Invitation.
15. TIME OF ESSENCE
Any time, date or period mentioned in any provision of this
Agreement may be extended by mutual agreement between the parties but as regards
any time, date or period originally fixed or any time, date or period so
extended as aforesaid, time shall be of the essence.
16. NOTICES
Any notice or other communication shall be in writing
addressed to the office of the party receiving such notice or other
communication as set out below and shall be delivered by hand or sent by fax,
telex or prepaid registered post:-
the Company : ST Assembly Test Services Ltd
5, Yishun Street 23,
Singapore 768442.
Attention : [ ]
Fax number : [ ]
Telex number : [ ]
Citicorp : Citicorp Investment Bank (Singapore) Limited
3, Temasek Avenue, #17-00,
Centennial Tower,
Singapore 039190.
Attention : [ ]
Fax number : [ ]
Telex number : [ ]
OUB : Overseas Union Bank Limited
1, Raffles Place,
OUB Centre, Singapore
048616.
Attention : [ ]
Fax number : [ ]
Telex number : [ ]
Any notice sent by fax or telex shall be deemed to have been received
immediately and any notice sent by letter shall be deemed to have been received
48 hours after the time of posting.
18. AGREEMENT AMONG MANAGERS
(A) OUB hereby confirms its authorisation of Citicorp to act as the
representative of the Managers in Singapore in offering the Invitation Shares to
such persons and in such amounts as Citicorp may in its sole discretion select,
including to members of any selling group, if any, selected by Citicorp, on the
terms and conditions of this Agreement and related documentation.
<PAGE> 14
12
(B) In making or giving any such notice, decision, approval, consent or waiver,
Citicorp is hereby irrevocably authorised by OUB to exercise its sole
discretion, and Citicorp shall not be under any obligation to account or
disclose to OUB its reason(s) for so doing.
(C) OUB hereby authorises Citicorp as its agent to execute and deliver the
Agreement Among U.S. Underwriters, International Underwriters and Singapore
Underwriters to be made between the U.S. Underwriters and International
Underwriters named therein and the Managers (the "Agreement Among Underwriters")
in its name and on its behalf of, and to agree to any variation of its terms
(except as to the purchase price) that, in the judgment of Citicorp, is not a
material variation. OUB also authorises Citicorp to exercise all the authority
and discretion vested in the Managers or in the Singapore Representative by this
Agreement (including in respect of the Option Shares) and the Agreement Among
Underwriters and to take all such action as Citicorp may in its discretion
believe necessary or desirable to carry out the provisions of this Agreement or
the Agreement Among Underwriters and to effect the sale and distribution of the
Invitation Shares, including without prejudice to the generality of the
foregoing, the right to determine the terms of any proposed offering, the
concession to dealers and the reallowance, if any, and to make the judgments
provided for in Clauses [10] and [11] of this Agreement and in respect of the
Option Shares, and further authorises Citicorp as its agent and on its behalf to
do all acts and things which it is required or entitled to do under this
Agreement including without prejudice to the generality of the foregoing:-
(i) arranging for payment for the Invitation Shares for
which OUB has applied or procured applications for
pursuant to Clause 5; and
(ii) arranging for delivery to the Depository of the
Invitation Shares for which OUB has applied or
procured applications for pursuant to Clause 5.
(D) OUB hereby authorises the Managers to publish its name, in the form in which
it appears in this Agreement, in any publications relating to the Singapore
Retail Offering.
(E) In acting under this Agreement, the Managers shall be entitled to rely on
any communication or document believed by it to be genuine and correct and to
have been signed or sent by the proper person and shall be entitled to rely as
to legal or other professional matters on opinions or statements of any legal or
other professional advisers appointed by it.
(F) Nothing contained in this Agreement shall constitute the Managers an
association or partners with each other or render any of the Managers liable for
the obligations of the other Manager. Neither of the Managers shall be bound in
any way by the acts of the other Manager and none of the Managers shall have any
right to contribution or account against the other Manager except as expressly
or by necessary implication provided in this Agreement. Except as otherwise
expressly provided in this Agreement, each Manager shall bear all losses and
expenses incurred by it and be entitled to retain all profits earned by it in
connection with this Agreement.
(G) Each Manager acknowledges that it has not relied on any statement, opinion,
forecast or other representation made by the other Manager to induce it to enter
into this Agreement or the transactions contemplated by this Agreement and that
it has made and will continue to make, without reliance on the other Manager and
based on such documents as it considers appropriate, its own appraisal of the
creditworthiness of the Company and its own independent investigation of the
financial condition and affairs of the Company and of its own tax position in
connection with the execution of this Agreement or the transactions contemplated
by this Agreement, and the sale or purchase and resale (as the case may be) of
the Invitation Shares.
(H) No Manager shall have any responsibility to the other Manager on account of
the condition (financial or otherwise) of the Company or for the completeness or
accuracy of any
<PAGE> 15
13
statements, representations or warranties in, or the validity, enforceability or
sufficiency of, this Agreement or any other document executed pursuant hereto or
as hereby contemplated.
(I) No Manager shall be liable to the other Manager for any loss or damage
howsoever arising from any action taken or omitted under or in connection with
this Agreement or the transactions hereby contemplated. Notwithstanding anything
contained in this Agreement, no manager shall have any responsibility or
liability to the other Manager on account of any loss such other Manager may
suffer as a result of its execution or performance of this Agreement or for the
execution, effectiveness, adequacy, genuineness, validity, enforceability or
admissibility in evidence of this Agreement or the transactions hereby
contemplated or for acting (or for refraining from acting) in accordance with
the instructions of such other Manager.
(J) Citicorp may, without any liability to account to OUB, accept deposits from,
lend money to, and generally engage in any kind of banking or trust or other
business with the Company or any of its subsidiaries or associated companies.
(K) Each Manager shall contribute (in the proportion in which its Underwriting
Commitment bears to the Total Underwriting Commitments) in reimbursement of any
costs and expenses incurred by the Managers in contemplation of, or otherwise in
connection with, the enforcement or preservation of any rights or the
performance of any term under this Agreement (including, in each case, the fees
and expenses of legal or other professional advisers on a full indemnity basis)
which are not recovered, or which the Managers agree not to claim, from the
Company under this Agreement. The liability of each Manager for such
contribution under this sub-Clause shall remain notwithstanding that this
Agreement is terminated pursuant to the terms of this Agreement.
(L) It is understood, for the avoidance of doubt, that the Managers may
separately agree to any amendment, modification or variation any of their rights
against, or obligations to, each other set in this Clause, provided that any
such amendment, modification or variation shall not affect any of the rights or
obligations of the Company under this Agreement.
19. SUCCESSORS
This Agreement shall be binding upon and shall enure to the
benefit of the respective successors in title of the parties thereto.
20. GOVERNING LAW
This Agreement shall be governed by, and construed in all
respects in accordance with, the laws of Singapore.
<PAGE> 16
14
SCHEDULE 1
UNDERWRITING COMMITMENTS
<TABLE>
<CAPTION>
Name of Manager Number of
---------------
Invitation Shares
-----------------
<S> <C>
1. Citicorp Investment Bank (Singapore) Limited [ ]
2. Overseas Union Bank Limited [ ]
-------------------
Total Underwriting Commitments [ ]
===================
</TABLE>
<PAGE> 17
15
SCHEDULE 2
FORM OF CERTIFICATE
To: Citicorp Investment Bank (Singapore) Limited,
5, Shenton Way, #37-03/04,
UIC Building,
Singapore 068808. [8th] February, 2000
Dear Sirs,
I, [ ], the [Chief Executive Officer]/[President] of ST
Assembly Test Services Ltd (the "Company"), refer to the Management and
Underwriting Agreement (the "Agreement") dated [ ]th January, 2000 made between
(1) the Company, as Company, (2) Citicorp Investment Bank (Singapore) Limited,
as Lead Manager and Underwriter for the Singapore Retail Offering, and (3)
Overseas Union Bank Limited, as Co-Lead Manager and Underwriter for the
Singapore Retail Offering, and hereby certify, on behalf of the Company, that:-
(i) I have been duly authorised by the Company to sign
this Certificate; and
[(ii) to the best of my knowledge and belief, having made
all reasonable enquiries, since the date of the most
recent financial statements included in the Singapore
Prospectus (exclusive of any supplement thereto),
there has been no material adverse change in the
condition (financial or otherwise), prospects,
earnings, business or properties of the Company or of
the Group, taken as a whole, whether or not arising
from transactions in the ordinary course of the
business of the Company or the Group, except as set
forth in or contemplated in the Singapore Prospectus
(exclusive of any supplement thereto) and the
representations and warranties of the Company in the
Agreement are true and correct in all material
respects on and as of the [Closing Date/settlement
date for the Option Shares]1 with the same effect as
if made on the [Closing Date/settlement date for the
Option Shares]1 and the Company has complied with all
the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to
the [Closing Date/settlement date for the Option
Shares](1).
Terms defined and references construed in the Agreement shall
bear the same meanings and construction in this Certificate.
Yours faithfully,
For and on behalf of
ST ASSEMBLY TEST SERVICES LTD
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
IN WITNESS WHEREOF this Agreement has been entered into on the
date stated at the beginning.
- ----------------------------
(1) Delete as appropriate.
<PAGE> 18
16
The Company
SIGNED by )
--------------------------------
for and on behalf of )
ST ASSEMBLY TEST SERVICES LTD )
in the presence of:- )
The Lead Manager and Underwriter
SIGNED by )
---------------------------------
for and on behalf of )
CITICORP INVESTMENT BANK )
(SINGAPORE) LIMITED )
in the presence of:- )
The Co-Lead Manager and Underwriter
SIGNED by )
--------------------------------
for and on behalf of )
OVERSEAS UNION BANK LIMITED )
in the presence of:- )
<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
January 24, 2000
