20-F

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

(Mark One)

o Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934.

OR

þ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the fiscal year ended December 31, 2006.

OR

o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from                      to                      .

OR

o Shell Company Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Date of event requiring this shell company report _____.

Commission File Number 000-27811

CHARTERED SEMICONDUCTOR MANUFACTURING LTD.

(Exact name of Registrant as specified in its charter)

Republic of Singapore
(Jurisdiction of incorporation or organization)

60 Woodlands industrial Park D
Street 2, Singapore 738406
+65-6362 2838
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class
American Depositary Shares,
each represented by ten Ordinary Shares Name of Each Exchange on Which Registered
NASDAQ Global Select Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of class)

Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act:
Not Applicable

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 2,535,895,593 Ordinary Shares and 28,350 Convertible Redeemable Preference Shares as of December 31, 2006.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

    Yes þ           No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

     Yes o           No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

     Yes þ           No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):

     Large accelerated filer þ      Accelerated filer o     Non-accelerated filer o

Indicate by check mark which financial statement item the registrant has elected to follow.

     Item 17 o     Item 18 þ

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

     Yes o           No þ

TABLE OF CONTENTS

Certain Definitions and Conventions	2
Presentation of Certain Financial Information	2
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	3
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	3
ITEM 3. KEY INFORMATION	3
ITEM 4. INFORMATION ON OUR COMPANY	20
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	37
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	64
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	78
ITEM 8. FINANCIAL INFORMATION	80
ITEM 9. THE OFFER AND LISTING	81
ITEM 10. ADDITIONAL INFORMATION	82
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	98
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	100
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	101
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	101
ITEM 15. CONTROLS AND PROCEDURES	101
ITEM 16.
A. AUDIT COMMITTEE FINANCIAL EXPERT	102B
B. CODE OF ETHICS	102B
C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	102B
D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	103
E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	103
PART III
ITEM 17. FINANCIAL STATEMENTS	103
ITEM 18. FINANCIAL STATEMENTS	103
ITEM 19. EXHIBITS	104
SIGNATURES
Index to Financial Statements	F-1
Ex-2.2 Specimen certificate for ordinary shares in respect of new issuances of shares issued on and after Jan 30, 2006.
Ex-2.3 Specimen certificate for ordinary shares transferred on and after Jan 30, 2006 in respect of shares issued before Jan 30, 2006.
Ex-4.11.8 Third Amended & Restated Amendment No.3 dated Nov 17, 2006.
Ex-4.11.13 Master IBM Joint Development Terms and Conditions dated Dec 15, 2006 for joint development projects with International Business Machines Corporation.
Ex-4.11.14 Participation Agreement dated Jan 1, 2007 by and between the company and International Business Machines Corporation.
Ex-4.11.15 Joint Development Project Agreement dated Dec 15, 2006 for 45nm Bulk-Industry Standard Semiconductor Process Technology.
Ex-4.11.16 Joint Development Project Agreement dated Dec 15, 2006 for 32nm Bulk-Industry Standard Semiconductor Process Technology.
Ex-4.16.3 Supplemental Agreement dated Jan 3, 2007 by and between Terra Investments Pte. Ltd.
Ex-4.18.4 Supplemental Agreement dated Jan 3, 2007 by and between Terra Investments Pte. Ltd.
Ex-4.19.1 Offer Letter dated Feb 16, 2006 from Jurong Town Corporation to Terra Investment Pte. Ltd.
Ex-4.19.2 Acceptance of Offer dated Feb 21, 2006 from the company to Terra Investments Pte. Ltd.
Ex-4.19.3 Acceptance of Offer dated Feb 24, 2006 from Terra Investments Pte. Ltd.
Ex-12.1 Certification of the President & Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Ex-12.2 Certification of the Senior Vice President & Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Ex-13.1 Certification of the President and Chief Executive Officer Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Ex-13.2 Certification of the Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-15.1 Consent of KPMG

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Certain Definitions and Conventions

     In this document, unless otherwise indicated, all references to “Chartered,” “our company,” “we,” “our” and “us” refer to Chartered Semiconductor Manufacturing Ltd., a limited liability company formed in the Republic of Singapore, and its subsidiaries. When we refer to “Singapore dollars” and “S$” in this document, we are referring to Singapore dollars, the legal currency of Singapore. When we refer to “U.S. dollars,” “dollars,” “$” and “US$” in this document, we are referring to United States dollars, the legal currency of the United States, and when we refer to “€,” we are referring to Euros.

     When we refer to the “noon buying rate,” we are referring to the noon buying rate in New York for cable transfers in Singapore dollars per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York. The noon buying rate on January 31, 2007 was S$1.5362 = $1.00.

Presentation of Certain Financial Information

     Our financial statements are reported in U.S. dollars and presented in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. Our 49%-owned joint venture company, Silicon Manufacturing Partners Pte Ltd, or SMP, a corporation incorporated under the laws of the Republic of Singapore, is not consolidated under U.S. GAAP. We account for our 49% investment in SMP using the equity method. SMP meets certain “significance” tests pursuant to Rule 3-09 of Regulation S-X. Accordingly, separate financial statements of SMP are required to be filed by us and we intend to file an amendment to this annual report on Form 20-F to include the separate financial statements of SMP as soon as available but no later than June 30, 2007. We have included in this annual report on Form 20-F information relating to our share of SMP revenue. The financial statements of SMP are reported in U.S. dollars and presented in accordance with U.S. GAAP. In 2005, SMP changed its fiscal year end to September 30. The financial statements of SMP to be filed by amendment to this annual report will consist of its audited annual financial statements as of and for the year ended December 31, 2004, its unaudited financial statements as of and for the twelve months ended December 31, 2005 (which period includes the nine months of SMP’s fiscal year 2005 and the first three months of SMP’s fiscal year 2006) and audited financial statements as of and for the twelve months ended December 31, 2006 (which period includes the last nine months of SMP’s fiscal year 2006 and the first three months of SMP’s fiscal year 2007).

     The share and per share data and American Depositary Share, or ADS, and per ADS data in this document for the year 2002 reflect a retroactive adjustment to give effect to our eight-for-ten rights offering which we completed in October 2002, or the October 2002 Rights Offering. The share price information contained in this document was derived from Bloomberg L.P.

     Certain reclassifications have been made in prior years’ financial information to conform to classifications used in the current year.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. SELECTED FINANCIAL DATA

     You should read the following selected financial data in conjunction with our consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” included in this document. The selected consolidated balance sheet data as of December 31, 2002, 2003 and 2004 and the selected consolidated statements of operations data for the years ended December 31, 2002 and 2003 are derived from our audited consolidated financial statements. However, we have not included our audited consolidated financial statements for those periods in this document. The selected consolidated balance sheet data as of December 31, 2005 and 2006 and the selected consolidated statements of operations data for each of the years in the three year period ended December 31, 2006 are derived from our audited consolidated financial statements included elsewhere in this document which have been audited by KPMG, an independent registered public accounting firm, whose report appearing elsewhere herein refers to the adoption of the fair value method of accounting for stock-based compensation as required by Statement of Financial Accounting Standards No. 123(R), Share-Based Payments effective January 1, 2006, and a change in the Company’s method of quantifying errors in 2006. Our consolidated financial statements are prepared in accordance with U.S. GAAP.

	Year Ended December 31,
	2002(16)			2003(16)			2004(16)			2005(16)			2006
	(in thousands, except share and per share data and ratios)
Consolidated Statements of Operations Data:
Net revenue	$	449,241		$	551,911		$	932,131		$	1,032,734		$	1,414,525
Cost of revenue		627,682			646,320			764,305			917,048			1,070,782
Gross profit (loss)		(178,441	)		(94,409	)		167,826			115,686			343,743
Other revenue (1)		18,314			16,956			17,927			20,685			21,030
Operating expenses:
Research and development		77,565			115,478			93,818			122,073			152,756
Sales and marketing		41,196			39,010			37,995			42,503			55,007
General and administrative		43,899			41,540			34,951			40,025			42,558
Fab start-up costs		8,338			9,219			33,199			22,697			—
Other operating expenses (income), net		23,415	(2)		2,292	(3)		(139	)(4)		14,202	(6)		13,766	(8)
Total operating expenses		194,413			207,539			199,824			241,500			264,087
Equity in income (loss) of SMP		(84,846	)		23,194			27,563			6,486			36,040
Other income (loss), net		(1,212	)		9,241			16,416	(5)		(6,744	)(7)		(2,689	)(9)
Interest income		16,637			12,168			11,530			28,625			44,591
Interest expense and amortization of debt discount		(41,661	)		(42,222	)		(30,093	)		(69,839	)		(87,950	)

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	Year Ended December 31,
	2002			2003			2004			2005			2006
	(in thousands, except share and per share data and ratios)
Income tax expense(10)		(7,029	)		(11,671	)		(4,774	)		(12,997	)		(23,924	)
Minority interest in loss of CSP		55,563			9,491			—			—			—
Net income (loss) before cumulative effect of change in accounting policy		(417,088	)		(284,791	)		6,571			(159,598	)		66,754
Cumulative effect adjustment for change in accounting policy(11)		—			(6,421	)		—			—			—
Net income (loss)		(417,088	)		(291,212	)		6,571			(159,598	)		66,754
Less:Accretion to redemption value of convertible redeemable preference shares		—			—			—			(3,196	)		(9,476	)
Net Income (loss) available to common shareholders	$	(417,088	)	$	(291,212	)	$	6,571		$	(162,794	)	$	57,278
Basic and diluted net earnings (loss) per ordinary share(12)	$	(0.23	)	$	(0.12	)	$	0.00		$	(0.06	)	$	0.02
Number of shares used in computing net earnings (loss) per ordinary share:
Basic		1,799,106			2,502,294			2,508,376			2,511,428			2,528,056
Diluted		1,799,106			2,502,294			2,516,942			2,511,428			2,534,065
Basic and diluted net earnings (loss) per ADS(12)	$	(2.32	)	$	(1.16	)	$	0.03		$	(0.65	)	$	0.23
Number of ADSs used in computing net earnings (loss) per ADS:
Basic		179,911			250,229			250,838			251,143			252,806
Diluted		179,911			250,229			251,694			251,143			253,407
Other Data(13):
Ratio of earnings to combined fixed charges and preferred dividends		—			—			—			—			1.76X
Deficiency of earnings available to cover combined fixed charges and preferred dividends	$	381,225		$	301,421		$	19,268		$	132,793			—

4

	As of December 31,
	2002		2003		2004		2005		2006
					(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	1,210,925	$	905,472	$	539,399	$	819,856	$	718,982
Working capital(14)		942,059		682,322		165,537		549,441		568,469
Total assets		3,333,463		3,021,027		3,090,012		3,517,294		3,618,431
Long-term obligations		1,154,815		1,049,837		960,660		1,187,004		1,329,908
Convertible redeemable preference shares		—		—		—		250,663		246,174
Long-term obligations and convertible redeemable preference shares		1,154,815		1,049,837		960,660		1,437,667		1,576,082
Ordinary share capital(15)		2,682,465		2,678,661		2,682,638		2,682,050		2,704,215
Total shareholders’ equity		1,785,459		1,494,555		1,505,631		1,346,374		1,428,857

Notes:

(1)	Other revenue consists of rental income and management fees.
(2)	Included in the 2002 other operating expenses (income), net line was a charge of $10.0 million associated with a restructuring charge on workforce re-sizing and a fixed asset impairment charge.
(3)	Included in the 2003 other operating expenses (income), net line were:

(a)	A gain of $27.5 million associated with the cancellation of our employee bonus award plan;
(b)	A gain of $4.9 million resulting from equipment disposition;
(c)	An impairment charge of $9.0 million on certain machinery and equipment, as part of our fab capacity rationalization; and
(d)	A restructuring charge of $12.4 million relating to the phase out of Fab 1.

(4) Included in the 2004 other operating expenses (income), net line were:

(a)	A gain of $10.4 million from the sale of equipment to CSMC Technologies Corporation, or CSMC;
(b)	A gain of $4.9 million associated with the resolution of a goods and services tax matter;
(c)	A restructuring charge of $4.6 million relating to the closing of Fab 1; and
(d)	An impairment charge of $1.7 million resulting from the migration to an enhanced manufacturing system.

(5)	Other income, net, in 2004 related primarily to a gain of $14.3 million from the sale of technology to CSMC.
(6)	Other operating expenses (income), net in 2005 included a fixed asset impairment charge of $3.9 million on assets held for sale.
(7)	Other loss, net, in 2005 related primarily to an expense of $7.0 million related to the termination of hedging transactions and other costs as a result of the cash tender offer for and repurchase of any and all of our $575.0 million original principal amount of 2.5% senior convertible notes due 2006.
(8)	Other operating expenses, net, in 2006 included losses of $6.1 million resulting from foreign currency fluctuations, partially offset by a gain of $2.6 million from the disposal of fixed assets from Fab 1.
(9)	Other loss, net, in 2006 related primarily to an other-than-temporary impairment loss of $2.7 million on securities classified as available-for-sale. Other loss, net, in 2006 also included net losses of $0.4 million relating to net losses of $1.4 million resulting from changes in the fair value of a call option transaction and net losses of $1.0 million relating to time value of our interest rate cap contracts which are excluded from the assessment of hedge effectiveness, partially offset by net gains of $1.4 million arising from the ineffective portion of our derivative instruments and net gains of $0.6 million resulting from changes in the fair value of an interest rate swap prior to its designation as a hedging instrument.

(10) The pioneer status had the effect of increasing (decreasing) basic and diluted net earnings per ordinary share or (increasing) decreasing basic and diluted net (loss) per ordinary share by $(0.04), $(0.02), $(0.00), $(0.01) and $0.00 and increasing (decreasing) basic and diluted net earnings per ADS or (increasing) decreasing basic and diluted net (loss) per ADS by

5

$(0.36), $(0.15), $(0.02), $(0.11) and $0.02 for the years ended December 31, 2002, 2003, 2004, 2005 and 2006, respectively.

(11)	Effective January 1, 2003, we adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting for obligations associated with the retirement of long-lived assets and associated asset retirement costs. This resulted in a cumulative effect loss of $6.4 million, after a reduction in minority interest of $0.5 million, for 2003. The cumulative effect loss represents the depreciation and accretion expense that would have been recorded previously if SFAS No. 143 had been in effect in prior years.
(12)	For 2003, basic and diluted net loss per ordinary share prior to the cumulative effect adjustment was $(0.11) and basic and diluted net loss per ADS prior to the cumulative effect adjustment was $(1.14).
(13)	For purposes of calculating the ratio of earnings to combined fixed charges and preferred dividends and the deficiency of earnings available to cover combined fixed charges and preferred dividends, if any, earnings consists of income (loss) before income taxes and minority interest, adjusted to remove equity in income (loss) of equity affiliates and to add fixed charges, amortization of capitalized interest and distributed income of equity affiliates, less interest capitalized. Fixed charges consist of interest expensed, interest capitalized, amortization of capitalized expenses related to indebtedness, plus an estimated interest portion of rental expenses on operating leases. Preferred dividends consist of accretion charges relating to our convertible redeemable preference shares.
(14)	Working capital is calculated as the excess of current assets over current liabilities.
(15)	Until January 30, 2006, ordinary shares of the Company had a par value of S$0.26. The Singapore Companies (Amendment) Act 2005, which came into effect on January 30, 2006, abolished the concept of “par value” and “authorized capital”. Accordingly, the amounts previously disclosed under “ordinary shares” and “additional paid-in capital” line items have been combined as “Ordinary Share Capital”.
(16)	Reclassifications and certain immaterial classification corrections have been made to prior years’ financial statements to conform to classifications used in the current year. These include reporting operating grant income as a reduction of the expenses that the grants are intended to reimburse rather than as other income, reporting rental income and management fees as other revenue rather than as other income, reporting depreciation of rental buildings as other operating expense rather than as other expense and certain other immaterial reclassifications.

B. CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D. RISK FACTORS

     We wish to caution readers that the following important factors, and those important factors described in other reports and documents submitted to, or filed with, the United States Securities and Exchange Commission, or the SEC, among other factors, could affect our results. If any of the following risks actually occur, our business, results of operations and financial condition would likely suffer and actual results could differ materially from those expressed in any forward-looking statements made by us, or on our behalf.

Risks Related to Our Financial Condition

We have a history of losses and we may not be profitable in the future.

     In 2002, 2003 and 2005, we incurred net losses of $417.1 million, $291.2 million and $159.6 million, respectively. In 2004 and for the year ended December 31, 2006, we generated net income of $6.6 million and $66.8 million, respectively.

     As of December 31, 2006, we had an accumulated deficit of $1,221.5 million. We cannot assure you that the accumulated deficit will not continue or increase in the future or that we will remain profitable.

6

We have a high level of debt. If we are unable to make interest and principal payments on our debt, it could seriously harm our company.

     We have now and will continue to have a significant amount of debt. Our high level of debt and the covenants contained in our financing documents such as financial, shareholding and other restrictive covenants which are customary to loan documents could have important consequences to our company. For example, they could:

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

• limit our ability to pursue our growth plan and technology upgrades or migrations;

• require us to seek lenders’ consent prior to paying dividends on our ordinary shares;

• require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes. The term “capital expenditures” means the amount we paid or will pay during a particular period for property, plant and equipment;

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

• limit our ability to incur additional borrowings or raise additional financing through equity or debt instruments.

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

We expect to incur substantial capital expenditures, research and development costs and fab start-up costs in connection with our growth plans and may require additional financing that may not be available.

     Our business and the nature of our industry require us to make substantial capital expenditures, leading to a high level of fixed costs. We expect to incur significant capital expenditures in connection with our growth plans and technology upgrades and migrations. For example, during 2004, 2005 and 2006, we made substantial capital expenditures of $686.3 million, $628.1 million and $554.3 million, respectively. We expect our total cash outflow for capital expenditures in 2007 to be approximately $800 million, including $65 million of capital expenditures in 2006 for our 90 nanometer, or nm, and below technologies which are expected to be paid in 2007. Capital expenditures planned for 2007 are primarily for increasing 65nm and below capacity. With the above capital expenditures, Fab 7 is expected to have equipment (installed or available for installation) that is equivalent to a capacity of 25,000 300 millimeter, or mm, wafers per month by December 2007. We had originally planned to equip Fab 7 with a full capacity of 30,000 300-mm wafers per month but have revised this estimate to 39,000 300-mm wafers per month covering mainly 0.13 micron, or um, to 65nm technology nodes. In addition, to further align our manufacturing capabilities with our technology position, we are adding an additional phase for our Fab 7 expansion that will be focused on 65nm and 45nm technologies. At completion, Fab 7 is expected to have a capacity of 45,000 300-mm wafers per month and our total capital investment in Fab 7 is expected to be approximately between $4,200 million and $4,500 million. As of December 31, 2006, we have spent $1,638.6 million equipping Fab 7. For more details on the costs of equipping Fab 7, see “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources.” We anticipate that from time to time we also may expand and add equipment to increase the capacity of our existing fabs, and this may require additional financing. We also expect to incur approximately $180 million for research and development in 2007.

     Our capital and research and development expenditures will be made in advance of sales. Given the fixed cost nature of our business, we may incur losses if our revenue does not adequately offset the level of depreciation resulting from these planned expenditures, as occurred in 2002, 2003 and 2005. Additionally, our actual expenditures may exceed our planned expenditures for a variety of reasons, including changes in our growth plan, our process technology, market conditions, customer requirements, interest rates and other factors.

     We may require additional financing to fund our future growth plans and technology upgrades and migrations, including to fund the capital expenditures to equip Fab 7 to its full planned capacity of 45,000 300-mm wafers per month, which is expected to take a number of years and will be paced by customer demand and industry conditions. There can be no assurance that additional financing will be available or, if available, that such financing will be obtained on terms favorable to us or that any additional financing will not be dilutive to our shareholders or creditors.

Failure to maintain high capacity utilization, optimize the technology mix of our semiconductor wafer production and continuously improve our device yields would seriously harm our prospects and financial condition.

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

• maintain high capacity utilization;

• optimize the technology mix of our semiconductor wafer production; and

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• continuously improve our device yields.

     The term “capacity utilization” means the actual number of semiconductor wafers we have processed at a fabrication facility in relation to the total number of wafers we have the capacity to process. Where we refer to capacity utilization in this document, such capacity utilization includes the utilization of our allocated capacity with SMP. Our capacity utilization affects our operating results because a large percentage of our operating costs are fixed. For example, in 2001, 2002 and the first half of 2003, weak market demand and a worldwide overcapacity of semiconductor wafer supply resulted in low utilization rates at our fabs. Our average capacity utilization improved from 58% in 2003 to 77% in 2006 but fluctuated during this period as well. We cannot assure you that market conditions will continue to improve or that the improved market conditions can be sustained. If market conditions were to deteriorate, we may not be able to sustain our capacity utilization.

     Other factors potentially affecting capacity utilization rates are the complexity and mix of the wafers produced, overall industry conditions, operating efficiencies, the level of customer orders, mechanical failure, disruption of operations due to expansion of operations or relocation of equipment and fire or natural disaster. We are unable to control many of the factors which may affect capacity utilization rates.

     Because the price of wafers varies significantly, the mix of wafers produced affects revenue and profitability. The value of a wafer is determined by the complexity of the device on the wafer. Production of devices with higher level functionality and greater system-level integration requires more manufacturing steps than the production of less complex devices and commands higher wafer prices. However, increasing the complexity of devices that we manufacture does not necessarily lead to increased profitability because the higher wafer prices for such devices may be offset by depreciation and other costs associated with an increase in capital expenditures needed to manufacture such devices.

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

     If we are unable to maintain high capacity utilization, optimize the technology mix of our wafer production or maintain and improve our device yields, we may not be able to achieve our targeted profit margin, in which case our financial condition could be seriously harmed and the market price of our securities could fall.

Risks Related to Our Operations

The cyclical nature of the semiconductor industry and the periodic overcapacity that results from this, as well as any rapid change in the end markets we serve, may seriously harm our company.

     The semiconductor industry has historically been highly cyclical and, at various times, has experienced significant economic downturns characterized by production overcapacity, reduced product demand and rapid erosion of ASPs.

     Historically, companies in the semiconductor industry have expanded aggressively during periods of increased demand, as we and our competitors have done. As a result, periods of overcapacity in the semiconductor industry have frequently followed periods of increased demand. We expect this pattern to be repeated in the future. In addition, the markets for semiconductors are characterized by rapid technological change, intense competition and fluctuations in end-user demand. For example, after experiencing average utilization rates around 100% in 2000, our average utilization rates in 2002 and 2003 fell to 37% and 58%, respectively. In 2004, although our average utilization rate improved to 80%, we experienced market weakness from the second half of June 2004 which continued into the first half of 2005 as the industry worked through excess inventories. Although we experienced subsequent sequential quarterly increases in our utilization rates from the second quarter of 2005, our average utilization rate in 2005 declined to 70%. In 2006, our average utilization rate was 77%. This was mainly due to higher utilization rate of 82% for each of the first and second quarters of the year. During the second half of 2006, companies in the supply chain, including our customers, experienced excess inventory and seasonally weaker than usual market conditions. The inventory correction and weaker market impacted our utilization in the third and fourth quarters of the year resulting in our utilization rates declining in those quarters to 74% and 70%, respectively. We cannot assure you that market conditions will improve in 2007 and beyond. Future downturns in the semiconductor industry may also be severe and could seriously harm our company.

We depend on our technology partners to advance our portfolio of process technologies.

     Enhancing our manufacturing process technologies is critical to our ability to provide services for our customers. We intend to continue to advance our process technologies through our internal research and development efforts and through alliances with leading semiconductor companies, and we are dependent on these partners for this advancement. Our technology alliance with International Business Machines, or IBM, began in November 2002 with a joint development agreement to jointly develop and standardize on 90nm, and 65nm bulk complementary metal oxide semiconductor, or

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CMOS, processes for foundry chip production on 300-mm silicon wafers. We extended our IBM joint development agreement to include Infineon Technologies AG, or Infineon, in June 2003 and Samsung Electronics Co., Ltd, or Samsung, in March 2004 in the joint development of a common advanced foundry manufacturing bulk CMOS process technology at 65nm, as well as variants of that process modified for high performance and low power products. We further expanded our joint development efforts with IBM to include 45nm bulk CMOS process technology in December 2004 and 32nm bulk CMOS logic process technology in December 2006. For more information on the joint development agreements with IBM, Infineon and Samsung, please see “Item 4. Information on Our Company — B. Business Overview — Research and Development.”

     We depended on our joint development agreements with our technology partners for faster introduction of 90nm and 65nm bulk CMOS process technologies and we continue to depend on our joint development agreement with IBM for faster introduction of 45nm and 32nm bulk CMOS process technologies. If we encounter problems in the successful implementation of our joint development agreements with these technology partners, our strategy of targeting “first-source” business and decreasing the time it takes us to bring the newest technologies to market would be adversely affected. “First source” business refers to being selected as the first manufacturing source for customers’ new product innovations. We would also have to incur additional costs to implement this strategy. If this were to happen, it could seriously harm our company.

     Our technology alliances have been and may from time to time be subject to changes, including changes in the technology partner’s business strategy (as was the case with Agere Systems Inc.’s “fab-lite” strategy and Agilent Technologies, Inc. ceasing technology development for certain technology nodes). Agere Systems Inc. announced in December 2006 that it has entered into an agreement to merge with LSI Logic Corporation under the LSI Logic name. In February 2007, pursuant to our joint venture agreement with Agere Systems Singapore Pte Ltd, or Agere Systems Singapore, a subsidiary of Agere Systems Inc., relating to SMP, we received a written notice from Agere Systems Singapore that a change of control of Agere Systems Singapore will occur upon the merger of Agere Systems Inc. and LSI logic Corporation which is expected to close in the second quarter of 2007. We are still evaluating our options under the joint venture agreement, including exercising our right to require Agere Systems Singapore to sell to us the SMP shares held by Agere Systems Singapore.

     For more information on these changes, please see “Item 4. Information on Our Company — B. Business Overview — Strategic Business and Technology Alliances — Chartered Silicon Partners.” Although the changes in our technology partnerships we have experienced so far have not had a significant impact on our company’s performance, there can be no assurance that this will continue to be the case.

     If we are unable to continue these technology alliances on mutually beneficial economic terms, if we are unable to comply with any restrictions contained in our technology alliance agreements, or if we are unable to enter into new technology alliances with other leading semiconductor companies, we may not be able to continue providing our customers with leading- edge process technologies, which could seriously harm our company.

We depend on a small number of customers for a significant portion of our revenue.

     We have been largely dependent on a small number of customers for a substantial portion of our business. Our top ten customers accounted for approximately 72% of our total net revenue for both 2005 and 2006. Our top five customers collectively accounted for approximately 60% of our total net revenue in 2006, compared with approximately 56% of our total net revenue in the previous year. Our top three customers for 2006, in order of revenue contribution, were Broadcom, IBM and Advanced Micro Devices, and each of them contributed more than 10% of our total net revenue in 2006. As the end markets we serve are typically cyclical, our top customer profile may change from period to period depending on the strength of various market sectors. We expect that we will continue to be dependent for a significant portion of our revenue upon a relatively limited number of customers, which from time to time may be concentrated in particular end markets, as a result of which we will be exposed to the volatility of those markets. Depending on a relatively small number of customers can also subject us to concentration problems that can negatively affect our fab utilization, which can in turn affect our revenue and results of operations, such as was experienced in the fourth quarter of 2004. Customer concentration is more significant for our leading-edge process technologies. We cannot assure you that revenue generated from these customers, individually or in the aggregate, will reach or exceed historical levels in any future period. Loss or cancellation of business from, significant changes in scheduled deliveries to, quality or reliability issues raised by, or decreases in the prices of services sold to, any of these customers could seriously harm our company.

We may not be able to implement new technology as it becomes available which may affect our ability to produce advanced products at competitive prices.

     The semiconductor industry is rapidly developing and the technology used is constantly evolving. If we do not anticipate the technology evolution and rapidly adopt new and innovative technology, we may not be able to produce sufficiently advanced products to meet market demand or produce such products at competitive prices. There is a risk

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that our competitors may adopt new technology before we do, resulting in our loss of market share. If we do not continue to produce the most advanced products at competitive prices, our customers may use the services of our competitors instead of our services, which could seriously harm our company.

A decrease in demand and average selling prices for end-use applications of semiconductor products such as communications equipment, personal computers, computer peripherals and consumer products may significantly decrease the demand for our services and may result in a decrease in our revenue and gross profit margin.

     A significant percentage of our revenue is derived from customers who use our manufacturing services to make semiconductors for communications equipment, personal computers, computer peripherals and consumer products. Any significant decrease in the demand for communications equipment, personal computers, computer peripherals or consumer products may decrease the demand for our services and could seriously harm our company. In addition, the historical and continuing trend of declining ASPs in these end markets places downward pressure on the prices of the components that are used in such equipment. If the ASPs of such equipment continue to decrease, the downward pricing pressure on components produced by our company may reduce our revenue and therefore reduce our gross profit margin significantly.

Our ability to successfully collaborate with electronic design automation, intellectual property and design service providers to meet customers’ design needs depends on the availability and quality of the relevant services, tools and technologies and our ability to meet our customers’ schedule and budget requirements.

     We have relationships with electronic design automation, or EDA, intellectual property and design service providers. We work with these service providers to develop a design platform that is tailored to our customers’ design needs. Our ability to successfully meet our customers’ design needs depends on the availability and quality of the relevant services, tools and technologies, and on whether we, together with our EDA, intellectual property and design service providers, are able to meet customers’ schedule and budget requirements. Difficulties or delays in these areas may adversely affect the success of our collaboration with EDA, intellectual property and design service providers and consequently, our ability to attract or serve customers, and thereby could seriously harm our company.

Our customers generally do not place purchase orders far in advance. Therefore, we do not have any significant backlog.

     Our customers generally do not place purchase orders far in advance of the commencement of the manufacture of the product. The time required to manufacture a product depends on the complexity of such product, with the more advanced technology products generally requiring a longer cycle time. In addition, due to the cyclical nature of the semiconductor industry, the length of time between our receipt of the purchase orders from our customers and the commencement date of the manufacture of the products have varied significantly from period to period. As a result, we do not typically operate with any significant backlog. The lack of a significant backlog makes it difficult for us to forecast our net revenue in future periods. Moreover, our expense levels are based in part on our expectations of future revenue and we may be unable to adjust costs in a timely manner to compensate for revenue shortfalls. We cannot assure you that any of our customers will continue to place orders with us in the future at the same levels as in prior periods.

Our growth, technology capabilities, planned capacity expansion and our competitive position depend on the success of our more advanced manufacturing facilities.

     Our more advanced manufacturing facilities, especially our 300-mm wafer fab, is critically important to the success of our company in a number of ways. As our more advanced manufacturing facilities will contain our leading-edge manufacturing capacity, any problem in those facilities may limit our ability to manufacture advanced semiconductor products. The process technologies that we intend to use in these facilities arise from our joint development agreements with IBM and other third parties, and any problems with implementing those agreements could have a material and adverse effect on our company. We typically ramp up production at our more advanced manufacturing facilities with a very narrow customer and product base initially. While we believe that this narrow customer base facilitates ramping up production more quickly than we otherwise might be able to do, we also are exposed to a greater risk of customer concentration at those facilities as a result. Any problems that arise with these customer relationships or orders (or lack of demand for the ultimate end-products in which the semiconductors we produce at these facilities are used) can be expected to have a significantly negative impact on the utilization of these facilities, which could have a material and adverse effect on our company.

We depend on our strategic business alliances relating to our tabs. Termination or modification of these alliances could seriously harm our company.

     We currently have two strategic business alliances relating to the operation of Fab 5 and Fab 6. Our equity-method joint venture company, SMP, which owns and operates Fab 5, is a joint venture with Agere Systems Singapore, a

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subsidiary of Agere Systems Inc. Our subsidiary, Chartered Silicon Partners Pte Ltd, or CSP, which owns and operates Fab 6, is a joint venture with Avago Technologies General IP (Singapore) Pte. Ltd., or Avago, (Avago having acquired all of the shares in CSP previously held by Agilent Technologies Europe B.V. in January 2006), EDB Investments Pte Ltd, or EDB Investments, and Singapex Investments Pte Ltd, or Singapex, an indirect wholly-owned subsidiary of Temasek Holdings (Private) Limited, or Temasek.

     Our alliances with these companies and their predecessors gave us access to select leading-edge process technologies and moderated our development costs and capital expenditures in the initial years in Fab 5 and Fab 6. We believe that our alliances with these companies provide us with access to business on an ongoing basis. The termination of either of these alliances or any modification of either alliance which adversely affects our rights under the alliance could seriously harm our company. Please see “Item 4. Information on Our Company— B. Business Overview — Strategic Business and Technology Alliances — Chartered Silicon Partners” and “Item 4. Information on Our Company — B. Business Overview — Strategic and Technology Alliances — Silicon Manufacturing Partners” for a more detailed description of these alliances.

We may not be able to compete successfully in our industry.

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

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

     The principal elements of competition in the wafer foundry market include technical competence, time-to-market, research and development quality, available capacity, device yields, customer service, price, design services, access to intellectual property, EDA and tool support. We cannot assure you that we will be able to compete successfully in the future, including our ability to obtain “first source” business, which could seriously harm our company.

Our operating results fluctuate from quarter to quarter, which makes it difficult to predict our future performance.

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

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

• pricing pressure from competitors in the foundry industry;

• changes in the economic conditions of geographical regions where our customers and their markets are located;

• shifts by IDMs between internal and outsourced production;

• changes in demand for products that incorporate semiconductors that we produce;

• inventory and supply chain management of our customers;

• the loss of a key customer or the postponement or reduction of an order from a key customer or the failure of a key customer to pay accounts receivable in a timely manner;

• the occurrence of losses from a customer’s inability to pay our accounts receivable from them;

• the rescheduling or cancellation of large orders;

• the rescheduling or cancellation of planned capital expenditures;

• our inability to qualify new processes or customer products in a timely manner;

• the return of wafers due to quality or reliability issues;

• malfunction of our wafer production equipment;

• unforeseen delays or interruptions in our plans for new fabrication facilities;

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

• our ability to obtain raw materials and equipment on a timely and cost effective basis;

• environmental events or industrial accidents such as fires or explosions;

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• our susceptibility to intellectual property rights disputes;

• our ability to continue with existing, and to enter into new technology and supply alliances on mutually beneficial terms;

• actual capital expenditures exceeding planned capital expenditures;

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

• technological changes.

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

Our business depends in part on our ability to obtain and preserve intellectual property rights.

     Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect our proprietary technology and our intellectual property, as well as the intellectual property of our customers. We seek to protect proprietary information and know-how through the use of confidentiality and non-disclosure agreements and limited access to and distribution of proprietary information. We have filed and intend to continue to file patent applications when and where appropriate to protect our proprietary technologies. The process of seeking patent protection may take a long time and may be expensive. We cannot assure you that patents will be issued from pending or future applications or that, if patents are issued, they will not be challenged, invalidated or circumvented or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. In addition, we cannot assure you that the Asian countries in which we market our services will protect our intellectual property rights to the same extent as the U.S. 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 processes, or that our confidentiality and non-disclosure agreements upon which we rely to protect our trade secrets and other proprietary information will be effective. The occurrence of any such events could seriously harm our company. Please see “Item 4. Information on Our Company — B. Business — Intellectual Property” for a more detailed description of our proprietary technology.

We may be subject to intellectual property rights disputes.

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

• discontinue using certain process technologies which could cause us to stop manufacturing certain semiconductor products;

• pay substantial monetary damages;

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

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

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

We are subject to the risk of increased income taxes

     A large portion of our operations in Singapore is afforded lower tax rates from tax incentives provided to attract and retain business. These tax incentives are subject to certain conditions with which we expect to comply, such as achieving fixed amounts of capital expenditure and headcount by certain dates. Our taxes could increase if we do not meet the incentive requirements, or tax rates applicable to us in Singapore are otherwise increased.

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     We base our tax positions upon the anticipated results from tax authority examinations. Our estimate of the potential outcome for any uncertain tax issues is highly judgmental. There can be no assurance that the outcome from examinations will not have an adverse effect on our operating results and financial condition.

We may experience difficulty in obtaining insurance coverage without incurring increased costs.

     While we have been able to obtain adequate insurance coverage in the past and while we did not experience any significant increase in premium rates of insurance coverage for 2006, we cannot assure you that we will continue to be able to do so in the future at similar or reasonable premium rates. For example, following the terrorists attacks on September 11, 2001 in the U.S., the premiums we paid for the renewal of our insurance coverage commencing from January 2002 were 2.2 times more than the premiums we paid for such coverage for the previous year. In the event that we fail to secure adequate coverage in the future at similar or reasonable premium rates, we could be seriously harmed by the occurrence of a loss that is not insured.

Risks Related to Manufacturing

We may experience difficulty in achieving acceptable device yields, product performance and product
delivery times as a result of manufacturing problems.

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

We depend on our vendors of raw materials, supplies and equipment and do not generally have long-term supply contracts with them.

     We depend on our vendors of raw materials and supplies. To maintain competitive manufacturing operations, we must obtain from our vendors, in a timely manner, sufficient quantities of quality raw materials and supplies at acceptable prices. We obtain most of our raw materials and supplies, including critical raw materials such as raw semiconductor wafers, from a limited number of vendors. Some of these raw materials and supplies are available from a limited number of vendors in limited quantity and their procurement may require a long lead time. We purchase most of our key raw materials and supplies on a purchase order basis. We generally do not have long-term contracts with our vendors. As a result, from time to time due to capacity constraints, vendors have extended lead times or limited the supply of required raw materials and supplies to us. Consequently, from time to time, and particularly during periods of sudden increase in demand, we have experienced and may experience difficulty in obtaining quantities of raw materials that we need on a timely basis. Further, where we only have one qualified supplier for raw materials and supplies and a need subsequently arises to look to other alternative suppliers, we would have to qualify these alternative suppliers, and such qualification could lead to delays in production and seriously harm our company.

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

     We also depend on a limited number of original equipment manufacturers and vendors that make and sell the complex equipment and equipment spare parts that we use in our manufacturing processes. In periods of high market demand, the lead times from order to delivery and complete qualification of some of this equipment could be as long as 15 months, or even longer. In addition, in the event of shortage of supply of equipment spare parts, we would need to qualify alternative sources and/or equipment spare parts. Any delay in the delivery or increase in the cost or availability of this equipment or equipment spare parts could seriously harm our company. Further, the long lead time reduces our flexibility in responding to changing market conditions. Please see “Item 4. Information on Our Company — B. Business Overview — Equipment and Materials” for additional information regarding our relationships with our suppliers of materials and equipment.

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We depend on assembly and test subcontractors for our semiconductor assembly and testing requirements.

     Semiconductor assembly and test operations are an integral part of the semiconductor manufacturing process, and involve specialized equipment and technology. If our customers require products which have been assembled and/or tested, we will need to depend on assembly and test subcontractors to provide us with the assembly, test and wafer bumping services as we do not have such in-house assembly and test capabilities and facilities. Wafer bumping is an advanced packaging technique where “bumps” made of solder are formed on the wafers before they are diced into individual chips. We currently subcontract a significant number of orders for assembly, testing and wafer bumping services to STATS ChipPAC Ltd. (formerly ST Assembly Test Services Ltd), or STATS ChipPAC, as well as to United Test and Assembly Center Limited, or UTAC, ASE Singapore Pte. Ltd., ASE Test Limited and Advanced Semiconductor Engineering, Inc., or collectively ASE, Amkor Technology Singapore Pte. Ltd, and Amkor Technology Taiwan, Ltd, or collectively Amkor, and EEMS Test Singapore Pte. Ltd., or EEMS. STATS ChipPAC, UTAC, ASE, Amkor and EEMS may, from time to time, experience tester capacity constrain and production interruption due to, among other things, technical problems occurring during the assembly, testing and wafer bumping processes. Because STATS ChipPAC, UTAC, ASE, Amkor and EEMS are our major providers of these services, any prolonged interruption in their operations could seriously harm our company.

As we migrate to more advanced technologies which may require access to advanced packaging and wafer bumping services, we may experience difficulties in securing such access in a timely manner due to the limited number of vendors providing such services.

     As our company migrates to more advanced technologies and devices that require very high pin counts (or number of connections to the printed circuit board), the need for advanced packaging and wafer bumping services may increase. The advanced packaging technology is new and there may be initial problems resulting from this. While we have, in the second half of 2006, qualified our subcontractor, Amkor Technology Singapore Pte. Ltd.’s, wafer bumping services in printing and plating technology on our 90nm and 65nm process technology nodes, the availability of such wafer bumping capabilities are limited and are still subject to qualification on our customers’ products. If we are unable to gain access to such advanced packaging and wafer bumping services in a timely manner, or if there is a shortage in the availability of such wafer bumping services, or if there are delays in the qualification of such technology, or if there are disruptions in such services, it would impact our ability to secure business for the more advanced technology nodes and could seriously harm our company.

We are subject to the risk of loss due to fire because the materials we use in our manufacturing processes are highly flammable.

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

Our failure to comply with certain environmental regulations could seriously harm our company.

     We are subject to a variety of laws and governmental regulations in Singapore relating to the use, discharge and disposal of toxic or otherwise hazardous materials used in our production process. While we believe that we are currently in compliance in all material respects with such laws and regulations, if we fail to use, discharge or dispose of hazardous materials appropriately, our company could be subject to substantial liability or could be required to suspend or modify our manufacturing operations at significant costs to us. In addition, we could be required to pay for the cleanup of our properties if they are found to be contaminated even if we are not found to be responsible for the contamination. We maintain insurance policies to guard against certain types of legal liability resulting from sudden, unintended and unexpected pollution causing damage to third parties. Our insurance policies do not cover losses incurred in relation to the cleanup of our properties if they are found to be contaminated by our company. While we believe our insurance coverage is adequate, we cannot assure you that it would be sufficient to cover all our potential losses.

Risks Related to Our Infrastructure

We face risks in constructing and equipping new fabrication plants.

     Where we expand by constructing new fabrication plants, there could be events that could delay the project or

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increase the costs of construction and equipping, even if we take the project management and planning steps we believe are necessary to complete the new fabrication plants on schedule and within budget. Such potential events include:

• a major design and/or construction change caused by changes to the initial building space utilization plan or equipment layout;

• technological, capacity and other changes to our plans for new fabrication plants necessitated by changes in market conditions;

• shortages and late delivery of building materials and facility equipment;

• delays in the installation, commissioning and qualification of our facility equipment;

• a long and intensive wet season that limits construction;

• a shortage of foreign construction workers or a change in immigration laws preventing such workers from entering Singapore;

• strikes and labor disputes;

• on-site construction problems such as industrial accidents, fires and structural collapse;

• delays in securing the necessary governmental approvals and land lease;

• delays arising from modifications in capacity expansion plans as a result of uncertainty in economic conditions; and

• delays arising from demand exceeding supply and long lead times for delivery of equipment during periods of growth in the industry.

We depend on key personnel and due to the shortage of skilled labor in Singapore, and we may have difficulty attracting and retaining sufficient numbers of skilled employees.

     Our success depends to a significant extent upon the continued service of our key senior executives and our engineering, marketing, customer services, manufacturing, support and other personnel. In addition, in connection with our growth plans, we are likely to need a greater number of experienced engineers and other employees in the future. The competition for skilled professionals remains intense and there is a shortage of such personnel in Singapore. Accordingly, we must recruit our personnel internationally. This is more expensive than hiring personnel locally, and therefore increases our operating costs. As of December 31, 2006, a majority of our employees were citizens of countries other than Singapore. We expect demand for personnel in Singapore to increase significantly in the future, particularly as new wafer fabrication facilities, including those of our competitors, are established in Singapore.

     We use share options and employee share purchase plans as compensation tools to attract and retain our personnel. Recent changes to the accounting standards applicable to our company require us to record share-based compensation charges as a result of those plans. If we were to terminate these plans, or were to modify such plans with decreased benefits to employees or were to reduce the share grants made under these plans to avoid or minimize an adverse impact on our financial results, we may become uncompetitive from an employee compensation perspective and may not be able to continue to attract and/or retain required personnel, which could seriously harm our company.

     If we were to lose the services of any of our existing key personnel without adequate replacements, or were unable to attract and retain experienced personnel as we grow, it could seriously harm our company. For example, although we strive to retain employees that we send on assignments with our technology partners, such as IBM, we cannot assure you that we will be successful in retaining these employees or that if our employees leave, our technology partners would re-train their replacements, If our employees leave, this may limit our ability to benefit from the alliances and could seriously harm our company. We do not carry insurance to protect us against the loss of any of our key personnel.

Risks Related to Covenants in Our Agreements

Many of our loans contain financial and other covenants which may restrict our operational and financing activities in ways that restrict our growth or are otherwise not in the best interests of our company or holders of our securities.

     Many of our loans contain various financial and other restrictive covenants. Among other things, these covenants require the maintenance of certain financial ratios (including total debt to net worth) and that Temasek owns, directly or indirectly, at least a certain percentage of our outstanding shares or is our single largest shareholder. These covenants may restrict our operational and financing activities in ways that restrict our growth or are otherwise not in the best interests of our company or holders of our securities. If we fail to comply with these covenants, we could be in default under these loans and the lenders would have the right to accelerate our obligation to repay the outstanding borrowings under these loans. Such default could also cause cross-defaults under other loans which could seriously harm us.

     In addition, many of our loans require that we obtain prior written consent from our lenders prior to incurring indebtedness or creating security interests over our assets. Consequently, although we have been able to obtain such

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lender consent in the past, we may be limited in our ability to obtain future financing. Any inability to obtain such future financing could seriously harm our company.

Risks Related to Investments in a Controlled Corporation

Temasek controls our company and its interests may conflict with the interests of our other shareholders.

     As of December 31, 2006, Temasek through its subsidiary Singapore Technologies Semiconductors Pte Ltd, or ST Semiconductors, beneficially owned approximately 59.56% of our outstanding ordinary shares. Temasek’s sole shareholder is the Minister for Finance (Incorporated), a body corporate constituted under the Minister for Finance (Incorporation) Act, Chapter 183 of Singapore. Accordingly, Temasek is able to exercise control over many matters requiring approval by our shareholders, including the election of directors and approval of significant corporate transactions.

     We also have contractual and other business relationships with several of Temasek’s affiliates and may engage in material transactions with them from time to time. Although the Audit Committee of our Board of Directors will review all material transactions between our company and Temasek and such affiliates, circumstances may arise in which the interests of Temasek and such affiliates could conflict with the interests of our other shareholders. Because Temasek, through its subsidiary, ST Semiconductors, beneficially owns a significant portion of our ordinary shares, it could delay or prevent a change in control of our company, even if a transaction of that nature would be beneficial to our other shareholders. Our Articles of Association do not contain any provision requiring that Temasek and/or its affiliates own at least a majority of our ordinary shares. Please see “Item 7. Major Shareholders and Related Party Transactions” for additional information regarding our relationship with Temasek, Singapore Technologies Pte Ltd, or Singapore Technologies, and their affiliates.

Risks Related to Investment in a Corporation with International Operations

Economic conditions where our customers and their markets are located may have a negative impact on our revenue.

     A significant portion of our revenue is derived from sales to customers whose semiconductors are used in products that are sold in the U.S., Taiwan, Japan, Europe and other countries in East and Southeast Asia. Our results of operations in the future could be negatively impacted if the economic environment in these countries deteriorates. For example, in 1998, many countries in Asia experienced considerable currency volatility and depreciation, high interest rates and declining asset values. As a result, there was a general decline in business and consumer spending and a decrease in economic growth as compared with prior years. Our results of operations in 1998 were affected by overall regional economic conditions because demand for semiconductor products generally rises as the overall level of economic activity increases and falls as activity decreases.

Terrorist attacks or a war could adversely affect our business, results of operations and financial condition.

     Terrorist attacks, such as the attacks on September 11, 2001 in the U.S. and other acts of violence or war, have the potential to have a direct impact on our customers. To the extent that such attacks affect or involve the U.S. and any other places in which our customers’ markets are located or affect the countries where our operations are located, our business may be significantly impacted.

     In addition, terrorist attacks or another act of war could adversely impact the transportation of our products, resulting in an adverse impact on our business, results of operations and financial condition and thereby could seriously harm our company.

Outbreak of an infectious disease or any other serious public health concerns in Asia (including Singapore) and elsewhere could adversely impact our business, results of operations and financial condition.

     The outbreak of an infectious disease in Asia (including Singapore) and elsewhere, together with any resulting restrictions on travel or quarantines imposed, could have a negative impact on the economies, financial markets and business activities in countries in which our end markets are located and thereby adversely impact our revenue. Examples are the outbreak in 2003 of Severe Acute Respiratory Syndrome, or SARS, in East Asia and the outbreaks of Avian Influenza, or Bird Flu, in 2004 and 2005 in Asia and currently around the world. While we took precautionary measures in response to the outbreak of SARS in 2003, we cannot assure you that any precautionary measures we may take against SARS or any other infectious diseases in the future would be effective. A future outbreak of an infectious disease or any other serious public health concern could seriously harm our company.

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We operate internationally and are therefore affected by problems in other countries.

     Our principal customers are located in the U.S., Taiwan, Japan and Europe and our principal vendors are located in the U.S., Japan, Taiwan, Korea, Europe and Malaysia. As a result, we are affected by economic and political conditions in those countries, including:

• fluctuations in the values of currencies;

• changes in labor conditions;

• longer payment cycles;

• greater difficulty in collecting accounts receivable;

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

• political and economic instability;

• increases in duties and taxation;

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

• limitations on imports or exports;

• expropriation of private enterprises; and

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

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

Exchange rate fluctuations may increase our costs and capital expenditures, which could affect our operating results and financial position.

     Our revenue is generally denominated in U.S. dollars and our operating expenses are generally incurred in U.S. dollars and Singapore dollars. Our capital expenditures are generally denominated in U.S. dollars, Japanese Yen, Euros and Singapore dollars. Although we hedge a portion of the resulting net foreign exchange position through the use of forward exchange contracts and the maintenance of foreign currency bank deposits, we are still particularly affected by fluctuations in exchange rates between the U.S dollar and the above mentioned currencies. Any significant fluctuation in exchange rates may lead to an increase in our costs and capital expenditures, which could adversely affect our operating results and financial position.

We may be a passive foreign investment company.

     Based on our asset composition and operations, we do not believe that we were a passive foreign investment company, or PFIC, under U.S. tax laws during 2006. However, there can be no assurances that we will not be a PFIC in 2007 or in a later year. If the “passive income” earned by us exceeds 75% or more of our “gross income,” we will be a PFIC under the “income test.” In addition, we will be a PFIC under the “asset test” if at least 50% of the quarterly average value of our assets is attributable to assets that produce or are held to produce passive income. The determination of the value of our assets will be based in part on the market price of our ordinary shares and ADSs. Because we have historically held, and may continue to hold a substantial amount of passive assets, there is a risk that we may be a PFIC in 2007 or in a later year. Passive income for PFIC purposes includes, among other things, interest, dividends, royalties, rents and annuities. If we were to become a PFIC at any time during a U.S. person’s holding period, such U.S. person holding ordinary shares or ADS would be required, if the “mark to market” election were not made, to pay an interest charge on certain distributions from us or upon a sale or other disposition of ordinary shares or ADSs and face other adverse tax consequences. Please see “Item 10. Additional Information — E. Taxation — U.S. Federal Taxation — PFIC rules.” It is strongly urged that U.S. persons holding ordinary shares or ADSs consult their own tax advisers regarding the application of the PFIC rules.

Our public shareholders may have more difficulty protecting their interests than they would as shareholders of a U.S. corporation.

     Our corporate affairs are governed by our Memorandum and Articles of Association and by the laws governing corporations incorporated in Singapore. The rights of our shareholders and the responsibilities of the members of our Board of Directors under Singapore law may be different from those applicable to a corporation incorporated in the U.S. 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 shareholder than they would as shareholders of a corporation incorporated in the U.S. For example, controlling shareholders in U.S. corporations are subject to fiduciary duties while controlling shareholders in Singapore corporations are not subject to such duties. Please see “Item 7. Major Shareholders and Related Party Transactions” for a discussion relating to our controlling shareholder, Temasek,

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and its affiliates.

It may be difficult for you to enforce any judgment obtained in the U.S. against us or our affiliates.

     Our company is incorporated under the laws of the Republic of Singapore. Many of our directors and senior management, and some of the experts named in this document, reside outside the U.S. In addition, virtually all of our assets and the assets of those persons are located outside the U.S. As a result, it may be difficult for investors to effect service of process within the U.S. upon us or any of these persons or to enforce in the U.S. any judgment obtained in the U.S. courts against us or any of these persons, including judgments based upon the civil liability provisions of the federal securities laws of the U.S. or any state or territory of the U.S.

     Judgments of the U.S. courts based upon the civil liability provisions of the federal securities laws of the U.S. may not be enforceable in Singapore courts, and 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 U.S.

Singapore law contains provisions that could discourage a take-over of our company.

     The Singapore Code on Take-overs and Mergers contains certain provisions that may delay, deter or prevent a future take-over 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 30% or more of our voting shares may be required to extend a take-over offer for our remaining voting shares in accordance with the Singapore Code on Take-overs and Mergers. A take-over offer may also be required to be made if a person holding (either on his own or together with parties acting in concert with him) between 30% and 50% (both inclusive) of our voting shares acquires (either on his own or together with parties acting in concert with him) additional voting shares representing more than 1% of our voting shares in any six-month period. These provisions may discourage or prevent certain types of transactions involving an actual or threatened change of control of our company. Some of our shareholders, which may include you, may therefore be disadvantaged as a transaction of that kind might have allowed the sale of the shares at a price above the prevailing market price.

Risks Related to Our Securities and Our Trading Market

The future sales of securities by our company or existing shareholders may hurt the price of our securities.

     If we or our shareholders sell a large number of our securities in the public market the trading price of such securities could decrease dramatically. Any perception that these sales could occur could also result in a dramatic decline in the trading price of our securities. These sales also might make it more difficult for us to sell securities in the future at a time and at a price that we deem appropriate. All of our outstanding shares are freely tradable in Singapore and in the U.S. (in the form of ADSs), except that the shares owned by our affiliates, including ST Semiconductors, may be sold in the U.S. only if they are registered or if they qualify for an exemption from registration, including under Rule 144 under the Securities Act of 1933, or the Securities Act.

The market prices of our securities have been and may continue to be highly volatile.

     The market prices of our securities have fluctuated widely and may continue to do so. For example, from our initial public offering in October 1999 through December 31, 2006, the trading price of our ADSs, adjusted for the October 2002 Rights Offering, has ranged from a high of $95.07 per ADS to a low of $3.48 per ADS. During the same period, the trading price of our ordinary shares, adjusted for the October 2002 Rights Offering, has ranged from a high of S$16.03 per ordinary share to a low of S$0.63 per ordinary share. Many factors could cause the market prices of our securities to rise and fall. Some of these factors include:

• actual or anticipated variations in our quarterly operating results;

• announcements of technological innovations;

• changes in estimates of our performance or recommendations by financial analysts;

• market conditions in the semiconductor industry and economy as a whole;

• introduction of new services by us or our competitors;

• changes in market valuations of other foundries and semiconductor companies;

• announcements made by us or our competitors of significant acquisitions, strategic partnerships or joint ventures;

• problems in our advanced manufacturing facilities;

• announcements made by our customers of their performance or financial results and of their foundry alliances and relationships;

• market rumors or speculation about our business, operations, capital raising, change in our controlling shareholder or affairs;

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• issue of additional equity or equity linked offerings;

• significant reduction or increase of shareholding by our controlling shareholder;

• additions or departures of key personnel; and

• other events or factors, many of which are beyond our control.

     The financial markets in the U.S., Singapore and other countries have experienced significant price and volume fluctuations, and market prices of technology companies have been and continue to be extremely volatile. Volatility in the prices of our securities may be caused by factors outside of our control and may be unrelated or disproportionate to our operating results. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against that company. Such litigation could result in substantial costs and a diversion of our management’s attention and resources.

The Singapore securities market is relatively small and more volatile than the U.S. markets and may cause the market price of our securities to fluctuate.

     The Singapore Exchange Securities Trading Limited, or Singapore Exchange, is relatively small and more volatile than stock exchanges in the U.S. and certain European countries. As of December 31, 2006, there were 539 companies listed on the Main Board of the Singapore Exchange and the aggregate market capitalization of listed equity securities of these companies was approximately S$580.0 billion, or $378.1 billion (based on the noon buying rate as of December 29, 2006 of S$1.5338 to $1.00). For the year ended December 31, 2006, the aggregate equity trading value on the Singapore Exchange (including shares traded on the CLOB International trading system) was approximately S$291.2 billion or $189.9 billion (based on the noon buying rate as of December 29, 2006 of S$1.5338 to $1.00). The relatively small market capitalization of, and trading volume on, the Main Board of the Singapore Exchange may cause the market price of securities of listed companies, including our securities, to fluctuate in both the domestic and the international markets.

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 document, holders will not be able to exercise voting rights attaching to the ADSs.

Your ability to participate in any rights offering of our company is limited.

     We distributed in October 2002, and 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 in any jurisdictions unless both the rights and the securities to which such rights relate are either exempt from registration under the applicable securities laws of such jurisdictions or are registered in accordance with the provisions of such laws. However, we are under no obligation to file a registration statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declared effective. Accordingly, holders of our securities may be unable to participate in rights offerings by us and may experience dilution of their holdings as a result.

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FORWARD-LOOKING STATEMENTS

     This document contains forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Examples of these forward-looking statements include, without limitation, statements relating to:

• our business strategy;

• our outlook for 2007;

• our capacity utilization rate, production capacity and production capacity mix;

• our plans to expand our production capacity for 90nm and smaller process geometry technologies to meet the anticipated needs of our customers;

• our 2007 planned capital expenditures, research and development expenditures, depreciation and amortization and wafer capacity; and

• our sources of liquidity, cash flow, funding needs and financings;

     These forward-looking statements reflect our current views with respect to future events and financial performance, and are subject to certain risks and uncertainties which could cause actual results to differ materially from historical results or those anticipated. Among the factors that could cause actual results to differ materially are:

• changes in the demands from our major customers, excess inventory, life cycle, market outlook and trends or specific products;

• competition from other foundries;

• unforeseen delays, interruptions, performance level and technology mix in our fabrication facilities;

• our progress on leading-edge products;

• changes in capacity plans, changes in allocation and process technology mix, and the unavailability of materials, equipment, manpower and expertise;

• access to or delays in technological advances or our development of process technologies;

• the successful implementation of our technology and supply alliances (including our joint development agreements with IBM, Infineon and Samsung);

• the growth rate of fabless companies, the outsourcing strategy of IDMs and our expectation that IDMs will utilize foundry capacity more extensively;

• demand and supply outlook in the semiconductor market and the economic conditions in the United States as well as globally;

• the availability of financings and the terms thereof; and

• terrorist attacks, acts of war, or the possibility of an outbreak of Bird Flu or any other infectious disease in Singapore, as well as other parts of the world.

     Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained. In addition to the foregoing factors, a description of certain other risks and uncertainties which cause actual results to differ materially can be found in “Item 3. Key Information — D. Risk Factors” and elsewhere in this document. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s current analysis of future events. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 4. INFORMATION ON OUR COMPANY

A. HISTORY AND DEVELOPMENT OF OUR COMPANY

     Chartered’s full legal name is Chartered Semiconductor Manufacturing Ltd. Chartered is a limited liability company incorporated in the Republic of Singapore on November 16, 1987. Our principal executive and registered offices are located at 60 Woodlands Industrial Park D, Street 2, Singapore 738406. Our telephone number is +65-6362-2838. Information pertaining to our company and our SEC filings are available on our website, www.charteredsemi.com. However, information contained in our website does not constitute a part of this document.

     Our agent in the U.S. for the purpose of our securities filings is our subsidiary, Chartered Semiconductor Manufacturing, Inc., 880N. McCarthy Blvd, Suite 100, Milpitas, California 95035, telephone +1-408-941-1100.

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     In 1997, Chartered acquired equity interests in CSP and in SMP. For more information on this, please refer to “— B. Business Overview — Strategic Business and Technology Alliances.”

     We have a 51% equity interest in our subsidiary, CSP, a Singapore company incorporated in 1997. For information on our other subsidiaries, please see “— C. Organizational Structure.”

     Our principal capital expenditures for the fiscal years 2004, 2005 and 2006 were comprised mainly of the purchase of semiconductor equipment for the equipping of our fabs. Our capital expenditures amounted to $686.3 million in 2004, $628.1 million in 2005 and $554.3 million in 2006. We expect our total cash outflow for capital expenditures in 2007 to be approximately $800 million, including $65 million of capital expenditures in 2006 for our 90nm and below technologies which are expected to be paid in 2007. Capital expenditures planned for 2007 are primarily for increasing 65nm and below capacity. For more details on the costs of equipping Fab 7, see “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources.”

     For the year 2006, our capital expenditures were financed mainly from borrowings under our credit facilities and cash balances. A more detailed discussion of credit facilities can be found under “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources.”

B. BUSINESS OVERVIEW

Overview

     Chartered is one of the world’s leading dedicated semiconductor foundries. We provide comprehensive wafer fabrication services and technologies to semiconductor suppliers and systems companies. We focus on providing foundry services to customers that serve high-growth, technologically advanced applications for the communication, computer and consumer sectors.

     We currently own, or have an interest in, five fabrication facilities — Fabs 2, 3,5,6 and 7, all of which are located in Singapore. Fab 7 is our only 300-mm facility.

     We have service operations in ten locations and in nine countries in North America, Europe and Asia.

Industry Background

     Semiconductors are critical components used in an increasingly wide variety of applications such as computer systems, communications equipment and systems, automobiles, consumer products and industrial automation and control systems. As performance in relation to these applications has increased and size and cost have decreased, the use of semiconductors in these applications has grown significantly.

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

     The semiconductor industry generally experiences seasonality which is mainly driven by demand fluctuations for the electronic products that use semiconductor integrated circuits. The sequential growth of semiconductor revenue in the first quarter is typically weaker compared to that of other quarters.

The Growth of the Semiconductor Foundry Industry

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

     According to recent industry research reports and company announcements, the cost of a state-of-the-art 300-mm fab can range from $3 billion to $5 billion, which is approximately six times to ten times higher than the cost a decade ago. Today, only large and well-capitalized or funded companies can support the substantial technology and investment

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requirements of building state-of-the-art fabs. In addition, for companies to justify the enormous cost of a new fab, a high level of capacity utilization is essential to ensure that fixed costs are fully absorbed. These trends have led to the rapid growth in demand in the recent years for advanced semiconductor manufacturing services provided by semiconductor foundries.

     Foundry services are now utilized by nearly every major semiconductor company in the world. Historically, IDMs have used foundry services for their incremental manufacturing needs. Given the high cost of implementing 300-mm technology and the mounting pressure on them to improve profit margins and accelerate time-to-market, we expect IDMs to utilize foundries more extensively in the future for their core manufacturing needs.

The Requirements of a Full-Service Foundry

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

     Systems Integration Expertise. Business and consumer demand for convergent solutions that perform multiple functions that classically were done by different individual devices has increased dramatically. Fueling this demand has been growth in the merging of data communications, telecommunications, wireless and consumer markets, which in turn has resulted in greater demand for faster, more power efficient and denser semiconductors providing solutions for systems totally on a single die called a system on chip, or SOC, which is more cost effective than producing multiple devices. In addition, this system level integration requires semiconductor foundries to offer processes that will easily integrate logic (processes data), memory (stores data) and analog mixed signal (translates data and provides interface outside the system). To attract customers, semiconductor foundries are increasingly offering access to third party intellectual property and design solutions to aid customers, who have increasingly focused on system level expertise, in the design of, and time to market for, SOC solutions.

     Leading-Edge Process Technologies. In order to provide their customers with total systems solutions, semiconductor foundries are expected to provide a full range of semiconductor process technologies. A semiconductor foundry will struggle economically if it relies solely on mature technologies and must also be capable of driving the implementation of reduced geometries which are required for a continuing market convergence as computer, communications and consumer functions morph onto a single SOC. These advanced technologies require significant innovation in material sciences in order to meet the increasing manufacturing requirements of customers for cost efficient SOCs for their customers.

     Comprehensive Prefabrication Services. Because of increasing levels of product complexity and customer demand, foundries are increasingly expected to provide value-added services during the prefabrication phase, such as providing access to EDA tools, design libraries, and intellectual property and design services to ensure that customers’ designs can be implemented on silicon for commercial production.

     Long-Term Relationships. As foundries become more integral to the overall manufacturing strategies of their customers, it has become increasingly important for foundries to form long-term relationships with them. Semiconductor suppliers and systems companies need assurance that their foundry suppliers will continue to provide sufficient advanced manufacturing capacity to keep pace with their customers’ growth, and develop and make available advanced process technologies capable of producing next-generation products. Assurance of supply is critical to their success. These relationships must also be flexible, allowing customers to respond to the variable nature of the semiconductor market.

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

The Chartered Solution

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

     Chartered’s approach allows us to work with customers early on in the product definition stage, often sharing resources, knowledge and even physical assets to jointly develop solutions, thus giving our customers the flexibility to adapt quickly to new market opportunities.

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     Chartered has developed an array of technologies and capabilities to drive converging applications. Our fabrication facilities support the leading-edge requirements for high-bandwidth, feature-rich wireless and wired applications along with providing semiconductor processes for the highest performance microprocessors in the world. We have proven expertise in mixed signal and radio frequency complementary metal oxide silicon, or RF CMOS, enabling technologies essential to the convergence of communication, computer and consumer applications.

     In order to augment our internal development efforts, we have entered into strategic business alliances and technology alliances with leading semiconductor companies such as our technology alliances with IBM, Infineon and Samsung and our strategic business alliance with Agere Systems in SMP. For more details on these strategic business alliances and technology alliances, see “— Strategic Business and Technology Alliances — Silicon Manufacturing Partners” and “— Research and Development.”

     We have relationships with leading EDA, intellectual property and design services providers. Through these relations, our customers are provided with a design methodology coupled with design modules which have been tested and manufactured on silicon that will allow a faster time to market. We offer design solutions for a variety of applications and process nodes, giving customers valuable freedom of choice when it comes to EDA and intellectual property selection. Customers get early access to design rules and other important manufacturing specifications so that they can be incorporated into designs early. In June 2005, together with IBM and Samsung, we extended the Chartered-IBM Cross-Foundry Design Enablement Program, or Design Enablement Program, launched in March 2004 for 90nm bulk CMOS process, to include 65nm bulk CMOS process. In June 2006, together with IBM, Samsung and Infineon, we extended the Design Enablement Program to include 45nm bulk CMOS process. In December 2006, we extended our Design Enablement Program with IBM to include 32nm bulk CMOS logic process and to further define our enablement joint development activities for 45nm bulk CMOS logic process. Many EDA and intellectual property companies have supported and developed solutions on Chartered’s processes. Chartered will continue to expand our design service network to improve our customers’ access to more expertise allowing broader choices and more flexibility for their chip development.

     In October 2006, we announced our strategic investment in Gateway Silicon Inc, or GSI, a Taiwan-based company specializing in application specific integrated circuit and SOC design services and intellectual property development and integration. We plan to collaborate with GSI in developing and optimizing design services while leveraging GSI’s expertise to enhance our portfolio of value-added solutions, or VAS. The VAS offering is based on our proven CMOS process technologies supported with cost-effective wafer fab production capacity. It provides our customers with competitive solutions to develop their products timely in markets such as wireless, consumer, Radio Frequency Identification, or RFID, security and industrial control systems market.

     Our supply chain automation started in April 2004 when we launched our e-Business initiatives with our customers. Since then, we have continued to enhance our automation initiatives to increase the ability and ease of our customers to transact business online with us. In parallel, we have also implemented and will continue to augment our automation capabilities with our subcontractors and suppliers with the goal of providing increased seamless connectivity across the entire supply chain.

     We believe that our customers value Chartered as a trusted, customer-oriented service provider which adopts a collaborative approach to the foundry industry. All of our manufacturing operations are located in Singapore, a politically and economically stable nation with laws that protect our customers’ proprietary technology.

Business Strategy

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

Leverage improved technology position and improve revenue and margins

     The strengthening of our technology roadmap resulting from our joint development agreements with IBM and our other technology partners and the expansion of our third party network of pre-qualified EDA, intellectual property and design services solutions allows us to target a leading-edge blue-chip customer base and further diversify our customer base. In addition, we are also able to start offering leading-edge solutions to customers at a similar time frame as our leading competitors and are therefore able to target more “first source” business than we were able to in the past. We expect our improved technology position to improve our revenue growth and margins.

Align manufacturing capacity with technology position, optimize capacity utilization and improve cost structure

     We aim to optimize our capacity primarily by expanding capability for leading-edge technologies, to align with our

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technology position and maximize capacity utilization at mature technology nodes. To maximize productivity and resource utilization across fabs and increase flexibility in manufacturing, we adopt a “borderless fab” approach within our campus. This refers to the operation of our fabs in a manner where wafers may be moved from one fab to another according to available manufacturing capacity and manufacturing process technologies of our various fabs to meet production requirements.

     As mature technology products remain a growing and important part of Chartered’s business, we will also continue to focus on increasing our reach into new or additional applications. We emphasize leveraging our capabilities in mixed-signal and RF CMOS processes with complete solutions for our niche technologies for products such as smart cards, RFID, tags, display drivers and power management for mobile products. Using mature technologies in older fabs will allow the company to generate margins and cash flows to support the investment in the advanced technologies.

     Leading-edge Technologies. As part of our plan to expand our capability for leading-edge technologies, we intend to expand our production capacity for 90nm and smaller process geometry technologies to meet the anticipated needs of our customers. We expect our leading-edge technology capacity in 2007 to increase by over 80% compared to 2006 and to represent approximately 22% of our total expected capacity in December 2007. We believe that increasing our foundry capacity in 90nm and smaller process geometry technologies will allow us to take advantage of the market opportunities opening up to Chartered as a result of the technological progress we have made in recent years.

     Mature Technologies. We intend to utilize our capacity for mature technologies by leveraging on our existing technologies, targeting strategic partnerships for volume production and working towards establishing a manufacturing presence in China with appropriate partners to leverage on our equipment, technology and expertise in mature processes.

Focus on solutions that support the growing trend of product convergence

     We are focused on providing foundry services to customers that serve high-growth convergence applications which require a high degree of functional integration. These customers compete based on differentiated products, rapid time-to-market and device performance, as opposed to suppliers of less complex commodity semiconductor products, which compete primarily on price and manufacturing capacity. Many of our customers use our custom solution of technology and services to manufacture their products for applications such as cable modems, wireless, office automation products and consumer connectivity products.

Provide complete product support for customers

     We are continuing to expand our range of product support activities for customers so that we can effectively meet our customers’ evolving needs. Our goal is to seamlessly integrate the design and manufacturing process with a wide array of services, tools and technologies. The design enablement support we currently make available to our customers, in conjunction with our technology partners, include a number of EDA design tools, design libraries, third party intellectual property and process technologies that have been validated for our manufacturing process. We also offer our customers turnkey services, which typically include, in addition to fabricating semiconductor wafers, pre-fabrication services such as engineering services and masks generation, and associated assembly and test services.

Offer leading process technology

     We intend to continually expand our portfolio of process technologies in line with our customers’ requirements for timing and performance for use with their products. The schedule and initial process specifications of the new process technologies being developed, and to be developed, are provided by our technology roadmaps. The current roadmaps cover 2007 to 2010 and 65nm, 45nm and 32nm logic processes, including their generic, low power and high speed variants. The roadmaps also cover 90nm and 65nm mixed signal and RF modules, and 0.22um and 0.18um high voltage and eFLASH (embedded FLASH memory, a memory based on an erasable and programmable memory technology) processes.

     The current development programs for logic process are directed to the 45nm technology node. Under our March 2004 joint development agreement with IBM, Infineon and Samsung, we, together with our technology partners, have developed a common advanced foundry manufacturing process technology at 65nm, as well as variants of that process modified for high performance and low power products. Please see“— Research and Development” for more details on this joint development agreement.

     In December 2004, we expanded our joint development efforts with IBM under our joint development agreement entered into with IBM in November 2002 to include 45nm bulk CMOS process technology and in December 2006, we expanded our joint development efforts with IBM to include 32nm bulk CMOS logic process technology and to further define the terms of our joint development activities for 45nm bulk CMOS logic process. We expect our reciprocal

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manufacturing arrangement with IBM to enable us to achieve scale, cycle time and cost efficiencies in 300-mm manufacturing, while also providing customers multiple sources of supply. The strengthening of our technology roadmap resulting from our joint development agreements with IBM and other technology partners provides us with faster access to leading-edge technology. This faster technological development allows us to target substantially more “first source” business.

     In the case of mixed signal technologies, which employ additional devices such as metal-insulator-metal capacitors and poly silicon resistors that must be characterized for mixed-signal operation, timing typically follows the introduction of the logic development schedule. For RF CMOS, still more devices such as inductors and varactors must be developed, characterized and modeled. This process builds on the mixed signal and the logic processes, and is generally expected to be ready for pilot production within six months after the logic process becomes available. Bipolar complementary metal oxide silicon, or BiCMOS, which integrates bipolar transistors with the CMOS and selected modules from mixed signal and RF CMOS, comes to pilot production later.

     The availability of logic, mixed-signal RF CMOS, BiCMOS, Silicon Germanium, or SiGe, and embedded memories technologies enables us to provide process solutions essential to the convergence of communication, computer and consumer applications.

Enhance and expand alliances

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

Overview of Wafer Fabrication Services

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

Pre-Fabrication Services

     Circuit Design. Producing a semiconductor device involves designing the layout of its components and designating the interconnections between each component. The result is a pattern of components and connections that defines the function of the semiconductor device. In highly complex circuits, there may be more than 40 layers of electronic patterns.

     We do not design semiconductor devices for our customers. If requested, we assist our customers in the design process by providing them with access to our EDA vendors and intellectual property companies’ EDA tools, design libraries and intellectual property and design services that are proven and have been qualified for our manufacturing processes. Our field engineers assist our customers during the development process to ensure that their designs can be successfully manufactured in volume.

     Mask Making. The design for each layer of a semiconductor wafer is imprinted on a photographic negative called a mask. The mask is the blueprint for each specific layer of the semiconductor wafer. We do not manufacture masks for our customers but provide a service through third-party mask shops.

Wafer Fabrication

     Wafer Manufacturing. Transistors and other circuit elements comprising a semiconductor device are formed by repeating a series of processes in which a photosensitive material is deposited on the wafer and exposed to light through a mask. The unwanted material is then etched away, leaving only the desired circuit pattern on the wafer. This process is repeated for each mask layer. The final step in the wafer fabrication process is to visually and electronically inspect each individual semiconductor device, known as wafer probe, in order to identify the operable semiconductor devices for assembly.

     We manufacture semiconductors using CMOS and BiCMOS processes. CMOS is the most widely used process technology because it requires lower power than other technologies and allows dense placement of components onto a single semiconductor device. The low power consumption and high-density characteristics of the CMOS process allow

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the continued development of high performance semiconductor devices that are smaller and faster. BiCMOS process technology combines bipolar transistors’ attribute of high speed with the high density and low power consumption of CMOS. We use CMOS or a combination of CMOS and BiCMOS for the fabrication of semiconductor wafers, which are used in a full range of end market applications, including communication, computing, and consumer electronics. Examples of the types of semiconductors we manufacture are as follows:

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

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

• Memory. Memory devices store data and can be manufactured as stand-alone devices or embedded in system semiconductor devices that combine a number of functions, such as logic and memory components. We manufacture stand-alone memory devices including EPROM, EEPROM, SRAM and Flash memory and embedded memory including eSRAM, eEEPROM, and eFLASH memories. For more information on what these mean, please see “— Manufacturing Facilities.” Memory devices are used in a range of products from computers and mobile phones to “smart” chip cards.

     Wafer Probe. We provide all aspects of the wafer fabrication process except for wafer probe, which, if requested by the customer, is outsourced to a qualified third party. All steps in the wafer manufacturing process are controlled by our computer-integrated manufacturing, or CIM, system. The CIM system allows us to monitor equipment performance, wafer processing steps and the wafers themselves throughout the fabrication process.

Other Services

     Assembly and Test. After fabrication and wafer probe, the wafers are transferred to assembly and test facilities. The assembly process protects the semiconductor device, facilitates its integration into electronic systems and enables the dissipation of heat. Following assembly, each semiconductor device’s functionality, voltage, current and timing are tested. After testing, the completed semiconductor device is either delivered to the customer or directly to its final destination.

     Although we are an independent foundry specializing in wafer fabrication, we offer our customers the option to purchase from us turnkey services, which mean finished semiconductor products that have been assembled and tested. When requested by our customers, we outsource assembly and testing of the fabricated semiconductor devices. Alternatively, our customers may directly arrange with assembly and test facilities for these services.

Manufacturing Facilities

     As of December 31, 2006, we owned or had an interest in five fabs, all of which are located in Singapore. Fabs 2, 3 and 7 are wholly-owned and operated by our company. Fab 5 is owned and operated by SMP, our joint venture company with Agere Systems Singapore, a subsidiary of Agere Systems Inc. Fab 6 is owned and operated by CSP, our joint venture company with Avago, EDB Investments and Singapex. Fab 1, which was wholly-owned by our company, ceased operations at the end of March 2004 and some of its operations were moved to Fab 2. We do not have a Fab 4.

Production Capacity and Utilization

     The following table reflects our capacity utilization in our fabs, including our share of SMP, for the periods indicated.

Quarterly Shipment and Capacity

Data Including	1Q			2Q			3Q			4Q			1Q			2Q			3Q			4Q
Chartered’s Share of SMP	2005			2005			2005			2005			2006			2006			2006			2006
Thousand eight-inch equivalent wafers:
Total wafers shipped		186.2			224.5			295.2			345.8			349.4			355.7			337.0			322.9
Total capacity		317.0			346.5			401.4			435.9			427.5			436.4			458.2			461.7
Utilization		59	%		65	%		74	%		79	%		82	%		82	%		74	%		70	%

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	1Q		2Q		3Q		4Q		1Q		2Q		3Q		4Q
Capacity by Fab	2005		2005		2005		2005		2006		2006		2006		2006
Thousand eight-inch equivalent wafers:
Fab2		130.6		137.7		139.2		145.7		142.6		144.1		145.7		145.7
Fab3		71.4		74.3		74.2		74.2		69.5		70.3		71.0		71.0
Fab5(1)		34.5		35.8		36.2		35.6		34.3		34.6		35.0		35.0
Fab6		80.5		89.4		100.5		112.9		114.5		115.8		117.0		117.0
Fab7(2)		—		9.3		51.3		67.5		66.6		71.6		89.5		93.0
Total		317.0		346.5		401.4		435.9		427.5		436.4		458.2		461.7

Notes:

(1) 49% of total capacity, based on Chartered’s equity ownership.

(2) Fab 7, our only 300-mm wafer facility, started commercial shipments in June 2005.

Wafer Capacity

     Our fab capacity plans have been updated consistent with our company’s efforts to better align manufacturing capability with our growing market opportunities in leading-edge technologies. We expect to achieve total wafer capacity of approximately 2,000,000 wafers (eight-inch equivalent) for the full year 2007, compared to approximately 1,800,000 wafers (eight-inch equivalent) for the full year 2006. We plan to increase our leading-edge capacity (90nm and smaller process geometry technologies) in 2007 by over 80% as compared to 2006 and to represent approximately 22% of our total expected wafer capacity in December 2007. The following table reflects our wafer capacity figures as of December 31, 2006 for each of our fabs and the fab of our equity-method joint venture company, SMP (Fab 5).

	Fab 2	Fab 3	Fab 5(SMP)(1)	Fab 6(CSP)(1)	Fab 7
Production commenced	1995	1997	1999	2000	2005
Estimated full capacity(2)	50,000 wafers per month	25,000 wafers per month	24,000 wafers per month	39,000 wafers per month	45,000 wafers per month(3)
Wafer size	Eight-inch	Eight-inch	Eight-inch	Eight-inch	Twelve-inch
	(200-mm)	(200-mm)	(200-mm)	(200-mm)	(300-mm)
Process technologies	0.6 to 0.3um(4)	0.35 to	0.25 to	0.25 to	0.13um and
		0.18um(4)	0.13um(4)	0.11um(4)	smaller process
					geometry
					technologies including
					90nm, 65nm and 45nm
Manufacturing technologies(5)	Digital; Mixed	Digital; Mixed	Digital; RF CMOS;	High performance,	High performance,
	Signal; RF CMOS; SRAM;	Signal; RF	BiCMOS; Mixed Signal;	high-density CMOS; high	high-density CMOS;
	Flash Memory; HVCMOS;	CMOS; SRAM	eSRAM	density SRAM Mixed	Mixed Signal; SOI
	EEPROM; DMOS; BiCMOS,			Signal; RF CMOS
	BiPolar; OTP;
	PowerMos
Clean room	109,000 sq.ft.	81,000 sq.ft.	96,540 sq. ft.	126,000 sq. ft.	232,000 sq. ft.
	Class-1 SMIF(6)	Class-1 SMIF(6)	Class-1 SMIF(6)	Class-1 SMIF(6)	Class-1 SMIF(6)

Notes:

(1)	With respect to Fab 5 and Fab 6, the information includes capacity of our strategic partners.
(2)	Estimated full capacity is the production output capability based on our current and anticipated process technology mix, which may

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vary. Our projections of estimated full capacity have varied from previous projections in terms of number of wafers because of revisions to our earlier plans, including changes to our capacity expansion plans and capacity allocation in process technology mix. Such changes reflect developments in market conditions and demand.

(3)	Equivalent to 101,250 eight-inch wafers per month. A conversion rate of 2.25 is utilized in determining the number of eight-inch wafer equivalent to that of twelve-inch wafers. We are taking a phased approach to the full equipping of Fab 7 to 45,000 300-mm wafers per month, and this is expected to take a number of years and will be paced by customer demand and industry conditions.
(4)	Some of these manufacturing processes are preliminary and their successful implementation depends on various factors, including our ability to achieve advances in process technology or to obtain access to advanced process technology developed by others, or in the case of our 0.18um capability in Fab 3, our ability to leverage on certain tool capacities in SMP. These fabs can be retrofitted to achieve smaller process geometry technologies than those shown above.
(5)	Some of these manufacturing technologies are preliminary and their successful implementation depends on various factors, including our ability to achieve advances in manufacturing technology or to obtain access to advanced manufacturing technology developed by others. EEPROMs are electrically erasable programmable read-only memory devices. SRAMs are static random access memory devices. eSRAMs are embedded static random access memory devices. CMOS means complementary metal oxide silicon. RF CMOS means radio frequency complementary metal oxide silicon. BiCMOS means bipolar complementary metal oxide silicon. HVCMOS refers to high voltage complementary metal oxide silicon. DMOS refers to double diffused vertical MOSFET (metal oxide semiconductor field effect transistor). OTP refers to one time programmable memory. SOI refers to Silicon-On-lnsulator. PowerMos refers to discrete metal oxide silicon transistor to control high power.
(6)	Class 1 is a measurement of air cleanliness in which the amount of particles is controlled to no more that one particle at 0.5um per cubic foot of air. SMIF means standard mechanical interface.

     All our production fabs generally operate 24 hours per day, seven days per week. The only exceptions are when scheduled maintenance requires a facility shut-down, or in periods of weak demand where we idle fabs that are not required to meet manufacturing schedules to reduce certain operating costs, as was the case from time to time in 2001 and 2002 and as may be the case in the future, depending on customer demand. Regular maintenance is otherwise performed concurrently with production. Whether we choose to carry out scheduled maintenance requiring a facility shut-down or regular maintenance performed concurrently with production depends on which is more appropriate at any given time, having regard to minimizing disruption to our production schedule.

     The following table sets forth information regarding the total output of eight-inch equivalent wafers of our fabs, including our share of SMP:

			Year Ended December 31,
	2002		2003		2004		2005		2006
	(in thousands)
Total Output		445		722		1,035		1,052		1,365

Quality Assurance Programs

     We have implemented systems to ensure that products manufactured at our facilities in Singapore meet or exceed our customers’ specifications on quality and reliability. Our in-house laboratories are equipped with advanced analytical tools, providing the necessary equipment and resources for our engineering and research and development staff to continuously enhance product quality and reliability. Our quality assurance staff comprises engineers, technicians and other employees who monitor and control our manufacturing processes.

     Our production facilities in Singapore have been certified by the International Organization for Standardization, or ISO, to meet ISO 9001:2000 standards. ISO 9001:2000 standards set forth the requirements necessary to ensure the production of quality products and services, including standards relating to management systems, management responsibility, resource management, product realization, measurement, analysis and improvement.

     We have also achieved ISO/TS 16949:2002 (Technical Specification) certification since 2005 and have met the yearly surveillance audit requirements. ISO/TS 16949:2002, commonly referred to as TS2, was introduced by ISO in March 2002 and is currently considered to be one of the most comprehensive quality standards in the industry. It defines the quality system requirements for use in the automotive supply chain, which some of our products may go into, and requires companies to emphasize meeting customer requirements, defect prevention, reduction of variation and waste in the supply chain and to continually improve the effectiveness and efficiency of business processes. The ISO 9001:2000 and TS2 certifications involve stringent periodic third party review and verification of our production processes and quality management systems. Our customers often look to these certifications as a recognition of our manufacturing excellence and quality standards.

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Strategic Business and Technology Alliances

IBM, Infineon and Samsung

     In November 2002, we entered into a multi-year joint development agreement with IBM designed to provide customers with greater access to leading-edge semiconductor technologies and sourcing flexibility. Under the agreement, we agreed with IBM to jointly develop and standardize our 90nm and 65nm bulk CMOS processes for foundry chip production on 300-mm silicon wafers. Together, we are providing a common 90nm design manual and guidelines for the jointly developed process platform. To assist foundry customers in designing with these technologies, we and IBM have agreed to work together with third party providers of design enablement and open-standard formats to help customers move their products more easily between us and IBM for production.

     In June 2003, we extended the IBM joint development agreement to include Infineon and in March 2004, the agreement was further extended to include Samsung. Under the expanded agreement, IBM, Infineon, Samsung and Chartered are jointly developing a common advanced foundry manufacturing bulk CMOS process technology at 65nm, as well as variants of that process modified for high performance and low power products. In December 2004, we expanded our joint development efforts with IBM to include 45nm bulk CMOS process technology. In December 2006, we further extended our cooperation with IBM with a new agreement for the joint development of 32nm bulk CMOS logic process as well as for the expansion of our 45nm bulk CMOS logic process joint development activities. Our joint development with IBM now spans four separate generations of technologies from 90nm, 65nm, 45nm, to 32nm. With IBM, we have jointly completed the development of 90nm and 65nm bulk CMOS process. The development of 45nm bulk CMOS logic process and 32nm bulk CMOS logic process is currently being and will be carried out at IBM’s facilities at East Fishkill, New York. Each participating company to a particular joint development activity with IBM will have the ability to implement the jointly developed processes in its manufacturing facilities. Accordingly, Chartered has the ability to implement the jointly developed 90nm and 65nm bulk CMOS process as well as the 45nm and 32nm bulk CMOS logic process, when developed, in our manufacturing facility, Fab 7.

     Our agreement with IBM includes a reciprocal manufacturing arrangement pursuant to which we are able to offer our customers some capacity in IBM’s 300-mm chip manufacturing facility in East Fishkill, New York. In turn, IBM is able to utilize some capacity in our 300-mm Fab 7 to help meet additional capacity requirements. In order to reserve such capacity, we and IBM placed deposits with each other. Neither IBM nor we are required, however, to utilize this capacity. The capacity that we had reserved in IBM’s 300-mm chip manufacturing facility in East Fishkill, New York, was intended to support our customers’ capacity requirements while Fab 7 was not in the production stage. As our Fab 7 has commenced production and we intend to fully equip Fab 7 to a capacity of 45,000 300-mm wafers per month, we believe that we will have sufficient capacity in Fab 7 to support our customers’ capacity requirements for 300-mm wafers. Accordingly, in March 2006, IBM and our company reached an agreement pursuant to which IBM refunded the deposit that we had placed with IBM for the purposes of reserving manufacturing capacity at IBM’s facility at East Fishkill, New York. As a result of the refund of deposit from IBM in April 2006, IBM is no longer required to reserve any capacity for us.

     Further, in June 2005, together with IBM and Samsung, we extended the Design Enablement Program, launched in March 2004 for 90nm bulk CMOS processes, to include 65nm bulk CMOS processes and in June 2006, the Design Enablement Program was further extended to include 45nm bulk CMOS processes. Many of the leading EDA vendors and intellectual property companies have developed platform solutions and we are working with IBM to bring new EDA vendors and intellectual property companies to the program. The Design Enablement Program sets a platform for foundry compatibility, design portability and flexible sourcing between our company and IBM at 90nm bulk CMOS processes and for our company, IBM and Samsung at 65nm bulk CMOS processes. In December 2006, Chartered and IBM agreed to expand the joint development of the design kits for 32nm bulk CMOS logic process and to further expand the enablement activities for 45nm bulk CMOS logic process. The Design Enablement Program facilitates designers in the development of compatible design layout files that can be used interchangeably across manufacturing facilities at our company and our other technology partners. We also continue to expand our design service partnership network to improve our customers’ access to more expertise, broader choices and greater flexibility for their chip development.

     Through our joint development program with IBM and our other technology partners as well as our manufacturing arrangement with IBM, we are seeking to achieve scale, cycle time and cost efficiencies in both leading-edge process technology development and 300-mm manufacturing, while also providing customers multiple sources of supply.

Chartered Silicon Partners

     Our subsidiary, CSP, was established in March 1997 and is a joint venture with Avago, EDB Investments and Singapex. Avago’s shares in CSP were previously owned by Agilent Technologies Europe B.V. As part of Agilent Technologies, Inc’s restructuring in 2005, Agilent Technologies Europe B.V. transferred its entire shareholding in, as well as its rights and obligations in relation to, CSP to Avago in January 2006 and consequently, Avago has replaced Agilent Technologies Europe B.V. in January 2006 as a shareholder of CSP. Currently, Chartered, EDB Investments, Avago

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and Singapex hold 51%, 26.5%, 15%, and 7.5% equity interests in CSP, respectively.

     CSP owns and operates Fab 6. U.S. GAAP generally requires consolidation of all majority owned (greater than 50%) subsidiaries. CSP is a consolidated subsidiary. Due to the cumulative losses of CSP, our obligations to the minority shareholders of CSP were reduced to zero in the first quarter of 2003. Therefore, none of CSP’s losses from that point forward have been allocated to the minority interest in our consolidated statements of operations.

     Pursuant to a cost sharing agreement, we perform certain management and corporate support activities for the benefit of CSP including accounting, financial, sales and marketing. Under this agreement, CSP is allocated a portion of our costs in performing such activities.

     CSP’s Board of Directors comprises eight directors. As long as we own more than 50% of CSP, we can elect four of the directors. The joint venture parties had previously agreed with Agilent Technologies Europe B.V. in 2001 that the two directors appointed by Agilent Technologies Europe B.V. would remain on CSP’s Board of Directors even after it reduced its ownership in CSP to 15%, except that they would not have voting rights. Avago is subject to the same arrangement and may elect two directors as long as it owns at least 15% of CSP, although its directors have no voting rights. EDB Investments can elect one director as long as it holds any ownership interest in CSP and Singapex can elect one director as long as it holds 7.5% of CSP.

     We and Agilent Technologies, Inc. contributed the original process technologies needed by CSP. These process technologies are licensed to CSP for its own use and CSP cannot sub-license them to others. Agilent Technologies, Inc., CSP and ourselves also cross-license the rights to use such technologies to one another. These cross-licenses allow our respective companies to use the process technologies and related intellectual property licensed to CSP in our respective manufacturing facilities for our general businesses even if they are not related to CSP. Agilent Technologies, Inc. has ceased its technology development for technology nodes beyond 0.25um, and as such, Agilent Technologies, Inc. has ceased to contribute any process technologies involving these technology nodes to CSP and CSP has since then been relying solely on the process technologies contributed by our company. As part of Agilent Technologies, Inc.’s sale of its Semiconductor Products Group to Avago Technologies Limited, Agilent Technologies, Inc. has, with effect from December 2005, transferred or assigned all its rights and obligations under the cross-licenses to Avago Technologies General IP (Singapore) Pte. Ltd.

     Pursuant to our joint venture agreement, the CSP alliance will continue indefinitely so long as there are two or more parties to the alliance. Before any transfer of an interest in CSP can occur, the non-transferring parties may exercise a right of first refusal with respect to the interests proposed to be transferred. Upon a serious, uncured default of the joint-venture agreement, the non-defaulting parties have the right to purchase all of the defaulting party’s interest in CSP for fair value, as defined in the agreement. Upon a change of control of a party, the other parties have the right to purchase, at fair value, all of such party’s interest.

Silicon Manufacturing Partners

     In December 1997, we entered into the SMP strategic business alliance with Lucent Technologies Microelectronics Pte. Ltd., now known as Agere Systems Singapore, relating to the joint venture ownership of Fab 5. Agere Systems Inc. announced in December 2006 that it has entered into an agreement to merge with LSI Logic Corporation under the LSI Logic name. On February 13, 2007, pursuant to our joint venture agreement with Agere Systems Singapore relating to SMP, we received a written notice from Agere Systems Singapore that the merger of Agere Systems Inc. and LSI logic Corporation, which is expected to close in the second quarter of 2007, will result in a change of control of Agere Systems Singapore. Pursuant to the joint venture agreement, if we object to such change of control, we may, within 30 days after the notice from Agere Systems Singapore, give notice in writing to Agere Systems Singapore to require Agere Systems Singapore to sell to us all of SMP shares held by Agere Systems Singapore at fair market value, as defined in the joint venture agreement. We are still evaluating our options under the joint venture agreement.

     Agere Systems Singapore has a 51% equity interest in SMP and we have a 49% equity interest. SMP’s Board of Directors comprises five directors, three of whom are elected by Agere Systems Singapore and two of whom are elected by us. We nominate the chairman of the Board of Directors and the general manager, while Agere Systems Singapore names the finance director.

     Pursuant to our agreement, the SMP strategic business alliance continues indefinitely until it is terminated by written notice by either party. Termination of the alliance will take effect two years from the date of any such termination notice. In addition, the parties may only transfer their interests to their respective affiliates. Upon our dissolution, winding up or liquidation, Agere Systems Singapore can purchase all of our interests in SMP for fair value, as defined in the agreement. Upon any serious, uncured breach by us of our agreement, Agere Systems Singapore has the right to sell all of its interest in SMP to us at the higher of fair value or the value of its interest based on SMP’s net book value, as defined in the agreement. Upon Agere Systems Singapore’s dissolution, winding up or liquidation, we have the right to

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purchase all of its interest in SMP for fair value. Upon any serious, uncured breach by Agere Systems Singapore of our agreement, we have the right to purchase all of its interest in SMP at 90% of fair value.

     We and Agere Systems Singapore contributed the original process technologies needed by SMP. These process technologies are licensed to SMP for its own use and SMP cannot sub-license them to others. The licensed technologies are categorized as restricted and unrestricted technologies. We and Agere Systems Singapore also cross-license the unrestricted technologies to one another. These cross-licenses allow our respective companies and subsidiaries to use certain process technologies and related intellectual property licensed to SMP in our respective manufacturing facilities for our general businesses even if these uses are not related to SMP. We do not cross-license the restricted technologies to one another, which means that only SMP can use such restricted process technologies and intellectual property.

     We and Agere Systems Singapore have signed an assured supply and demand agreement with SMP. The agreement was intended to ensure that all of the fixed costs of SMP are recovered by allocating all of its wafer capacity to our company and Agere Systems Singapore in accordance with the respective parties’ equity interest in SMP and each party would bear the fixed costs attributable to its allocated capacity. In September 2004, we and Agere Systems Singapore entered into an agreement pursuant to which both parties agreed to annually reimburse any losses suffered by SMP that are attributable to the respective parties. For the year ended December 31, 2006, SMP did not suffer any losses that were attributable to our company and accordingly no reimbursements were payable by our company to SMP. There were also no such reimbursements payable to SMP by our company in 2005 and 2004. To the extent that the number of wafers started for us are less than our allocated capacity in the future, there is no assurance that there will be no reimbursements payable to SMP by our company in respect of unrecovered fixed costs of SMP.

     Pursuant to a cost sharing agreement, we perform certain management and corporate support activities for the benefit of SMP including accounting, financial and human resources. Under this agreement, SMP is allocated a portion of our costs in performing these activities.

     SMP owns and operates Fab 5, which is located on the same premises as the rest of our manufacturing facilities in Singapore. SMP owns the equipment used in Fab 5 and leases the space for Fab 5 from us. With effect from October 2001, Agere Systems Singapore and we agreed to run Fab 5 and Fab 3 as one integrated operation, while retaining the existing ownership and corporate structure of SMP. The fabs shared a single shell but had two separate administrative structures prior to their operational integration. By implementing this change, we and Agere Systems Singapore are able to free up key technical resources and also provide enhanced flexibility and better utilization of the combined equipment base.

     We account for our 49% investment in SMP using the equity method. Under the strategic business alliance agreement, we and Agere Systems Singapore do not share SMP’s net results in the same ratio as our equity holdings. Instead, each party is entitled to the gross profits from sales to the customers that it directs to SMP, after deducting its share of the overhead costs of SMP. Accordingly, we account for our share of SMP’s net results based on the gross sales to the customers that we direct to SMP, after deducting our share of the overhead costs.

     The Supplemental Agreement to the Joint Venture Agreement entered into in September 2004 also provided that SMP could pay dividends out of the profits of the joint venture determined on a year to year basis rather than on a cumulative basis as was the case previously. We received dividends of $29.5 million and $38.2 million from SMP for the years ended December 31, 2005 and December 31, 2006, respectively. We did not receive any dividend from SMP for the year ended December 31, 2004.

     During 2005, we and Agere Systems Singapore agreed to a reduction in wafer prices for Agere Systems Singapore, related to the wafer capacity allocated to Agere Systems Singapore, to the minimum price allowed under the assured supply and demand agreement. As each shareholder is entitled to the gross profits from sales to the customers that it directs to SMP, the wafer price reduction did not affect the equity in income (loss) of SMP and the share of retained post formation loss that is included in our consolidated statements of operations and consolidated balance sheets.

     In October 2005, SMP reorganized its paid-up share capital and authorized a return of a portion to its shareholders in the form of cash, our entitlement being $20.4 million, in a capital reduction sanctioned by the High Court of Singapore. In October 2006, the board of directors of SMP agreed to further reduce the issued and paid-up capital of SMP from S$141,515,511 divided into 69,343,426 “A” ordinary shares and 72,172,085 “B” ordinary shares to S$74,159,103 divided into 69,343,426 “A” ordinary shares and 72,172,085 “B” ordinary shares. This second capital reduction for SMP was approved by the High Court of Singapore on November 9, 2006, and made effective pursuant to the lodgment of the Order of Court with the Accounting and Corporate Regulatory Authority of Singapore on November 13, 2006. Our entitlement arising from the second return of capital from SMP was $19.1 million. In 2006, we received $16.9 million

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arising from both the first and the second returns of capital from SMP. The balance of our entitlement from the second return of capital from SMP will be paid to us as and when payment is declared by the SMP board of directors.

Customers and Markets

     We manufactured semiconductors for over 150 different active customers in 2006. Our top five customers in 2006 collectively accounted for approximately 60% of our total net revenue in 2006, compared with approximately 56% in the previous year. Our top three customers for 2006, in order of revenue contribution, were Broadcom, IBM and Advanced Micro Devices, and each contributed more than 10% of our total net revenue in 2006 compared with 2005 where Broadcom and IBM each exceeded 10% of our total net revenue. As the end markets we serve are typically cyclical, our top customer profile may change from period to period depending on the strength of various market sectors.

     The following table sets forth our customers who have each exceeded 10% of our total net revenue in 2006 in order of revenue:

Customer	Representative Products or Applications
Broadcom	Local area network switches/routers, set-top boxes, cable modems, ethernet transceivers, network processors, bluetooth and high definition TV.
IBM	Video game devices.
Advanced Micro Devices	Central processing units (“CPUs”) for computers.

     We categorize revenue geographically based on the country in which the customer is headquartered. The following table sets forth the geographical distribution of our revenue for the periods indicated:

     By Percentage:

	2004			2005			2006
Americas		68	%		75	%		77	%
Europe		9			9			9
Asia-Pacific
— Singapore		1			1			3
— Others		19			12			9
Japan		3			3			2
Total		100	%		100	%		100	%

By $ (in thousands):

	2004		2005		2006
Americas	$	631,150	$	774,950	$	1,089,068
Europe		85,125		91,844		129,619
Asia-Pacific
— Singapore		3,392		8,995		37,716
— Others		179,206		123,449		134,261
Japan		33,258		33,496		23,861
Total	$	932,131	$	1,032,734		$1,414,525

     We expect that the majority of our sales will continue to be made to companies headquartered in the U.S. or to overseas affiliates of U.S. companies. All of our sales are direct sales to our customers with delivery in Singapore. We provide customer support in the U.S. through a wholly-owned subsidiary located in Milpitas, California which has an additional office in Austin, Texas. We also maintain customer support offices in Hsin-Chu, Taiwan; Yokohama, Japan; Paris, France; London, United Kingdom; Munich, Germany; Shanghai, China; and Seoul, Korea.

     We currently allocate a portion of our wafer manufacturing capacity to certain customers under several types of agreements.

     Please refer to “Item 5. Operating and Financial Review and Prospects — Results of Operations” for a breakdown of our revenues by market sector and by technology.

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Customer Service

     We focus on providing a high level of customer service in order to attract customers and maintain their on-going business. Our culture emphasizes responsiveness to customer needs, flexibility and delivery accuracy. In particular, in the area of flexibility, we work closely with customers to understand their needs and collaborate with them to deliver a solution that is customized to address their requirements. Our customer-oriented and collaborative approach is especially evident in three prime functional areas of customer interaction, customer design development and manufacturing services.

     We emphasize very close interaction with customers throughout the design development process and pre-contract customer design validation activities. We provide for an account manager to be assigned early in the design development process who coordinates an account team composed of marketing, EDA, silicon engineering, third party partner and customer service/logistical support. The account team is supported by additional marketing and customer engineering staff in Singapore.

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

Research and Development

     The semiconductor industry is characterized by rapid and relentless technical advances. We believe effective research and development is essential to our success, as that research and development spawns the leading-edge technologies that are critical to attracting and retaining customers who design highly sophisticated semiconductors. In 2004, 2005 and 2006, our research and development expenses, including our share of expenses related to the IBM joint-development agreement, were $118.3 million and $122.1 million and $152.8 million, respectively. Those expenses represented 12.7%, 11.8% and 10.8% of our net revenue for the respective periods. As of December 31, 2005, we employed 370 professionals in our research and development department, 62 of whom have PhDs. As of December 31, 2006, we employed 508 professionals in our research and development department, 91 of whom have PhDs. The increase in headcount in our research and development department was primarily to enhance Chartered’s capability in design services and customized technology developments to expand our customer base.

     Our investment in research and development allows us to continue developing new and advanced processes down to the 45nm technology node and beyond. The research and development programs are structured to ensure that our baseline manufacturing processes accommodate new technology modules that are the heart of highly differentiated system-level applications.

     Periodically, we update our technology roadmap based on industry trends, expected customer adoption of the technology and our internal development plans.

     In June 2003, we and IBM extended our joint development agreement to include Infineon and in March 2004, the agreement was extended to include Samsung. The March 2004 agreement replaces and is in substitution of our joint development agreement with IBM and Infineon. Under the March 2004 agreement, IBM, Infineon, Samsung and Chartered are jointly developing a common advanced foundry manufacturing bulk CMOS process technology at 65nm, as well as variants of that process modified for high performance and low power products.

     In December 2004, we and IBM expanded our joint development efforts to include 45nm bulk CMOS process technology and in December 2006, we further expanded our joint development efforts with IBM to include 32nm bulk CMOS logic process technology and to further define the terms of our joint development activities for 45nm bulk CMOS logic process technology. We believe the joint development efforts with our technology partners enable us to achieve scale, cycle time and cost efficiencies in both leading-edge process technology and 300-mm manufacturing, while also providing customers multiple sources of supply. The strengthening of our technology roadmap resulting from our joint development agreements with IBM and other technology partners provides us with faster access to leading-edge technology. This faster technological development allows us to target substantially more “first source” business.

     We have received grants from various agencies of the Government of Singapore. The amounts under these grants relate to a portion of depreciation expenses arising from our research and development related capital expenditures and the training and staffing costs associated with some of our process technology development programs. In 2004, 2005 and 2006, $19.0 million, $7.5 million and $1.9 million, respectively, of such grants were disbursed to us. These grants are disbursed in connection with research and development carried out in Singapore based on the amount of expenditures incurred and achievement of program milestones. The main condition attached to the grants is the completion of the project to which the grant relates.

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Equipment and Materials

     We depend on a limited number of manufacturers that make and sell the complex equipment that we use in our manufacturing processes. The principal pieces of equipment we use to manufacture semiconductors are scanners, steppers, tracks, etchers, furnaces, wet stations, implanters, sputterers, chemical vapor deposition equipment, chemical mechanical planarization equipment, and metrology equipment. In periods of high market demand, the lead times from order to delivery and complete qualification of some of these types of equipment can extend beyond 15 months. We seek to manage this process through early reservation of appropriate delivery slots and constant communication with our suppliers. In addition, we also depend on the original equipment manufacturers and other equipment suppliers for equipment spare parts to maintain and keep our equipment in operation. In the event of disruption of supply or shortage of equipment spare parts, we may need to qualify alternative sources or equipment spare parts which will take time and could lead to a delay in our production.

     Our manufacturing processes use highly specialized materials, including semiconductor wafers (including SOI wafers), chemicals, gases, targets, quartz, equipment spare parts and consumables and masks. We depend on our vendors of these materials and seek to have more than one vendor for our material requirements. To maintain competitive manufacturing operations, we must obtain from our vendors, in a timely manner, sufficient quantities of quality materials at acceptable prices. The prices of semiconductor wafers, bulk gases and chemicals tend to be volatile. We source most of our materials, including critical items such as semiconductor wafers, from a limited group of vendors. We purchase most of our key raw materials on a purchase order basis. We generally do not have long-term contracts with our vendors. For those materials that are wholly procured from one source, we look to identify and qualify alternative sources of supply. We have agreements with key material vendors under which they hold inventory on consignment for us. We are typically not under any obligation to purchase inventory that is held on consignment until we actually use it. We typically work with our suppliers to forecast our raw material requirements up to six months in advance.

Intellectual Property

     Our success depends in part on our ability to obtain patents, licenses and other intellectual property rights covering our production processes. To that end, we have acquired certain patents and patent licenses and intend to continue to seek patents on our production processes.

     As of December 31, 2006, we have filed in our company’s history an aggregate of 2,252 patent applications worldwide, (1,078 of which had been filed in the U.S.) and held an aggregate of 1,502 issued patents worldwide (804 of which are issued U.S. patents). Of the 1,078 aggregate applications filed in the U.S., 804 had been issued as of December 31, 2006 and 14 had been allowed but not issued. Those 14 allowed patent applications will be issued if and when we pay the applicable issuance fee. (Note: References in this paragraph to aggregate figures include not only the figures for the period itself but figures for previous years as well. Accordingly, if an aggregate of 2,252 patent applications have been filed as of December 31, 2006, these include not only the patent applications filed in the 12 months ended December 31, 2006 but all patent applications previously filed by our company.)

     The number of patents filed by us in 2005 and 2006 were 146 and 129, respectively, and the number of patents issued to us in 2005 and 2006 were 249 (of which 47 were issued U.S. patents) and 143 (of which 61 were issued U.S. patents), respectively.

     Our issued patents have expiration dates ranging from 2011 to 2025. All of the allowed and pending patents will expire after 2026. We have also entered into various patent licenses and cross-licenses with major semiconductor companies. We may choose to renew our present licenses or to obtain additional technology licenses in the future. There can be no assurance that any such licenses will be obtained on commercially reasonable terms.

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

Competition

     The worldwide semiconductor foundry industry is highly competitive. Our principal competitors are TSMC, UMC and SMIC as well as the foundry operation services of some IDMs, such as IBM. IDMs principally manufacture and sell their own proprietary semiconductor products, but may offer foundry services. In addition to those well-established companies,

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there have been a number of new entrants to the semiconductor foundry industry. In particular, foundries in China, Malaysia and Korea are now becoming increasingly significant. Our competitors may have greater access to capital and substantially greater production, research and development, marketing and other resources than we do. As a result, these companies may be able to compete more aggressively over a longer period of time than we can.

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

     The principal elements of competition in the wafer foundry market include technical competence, time-to-market, research and development, quality, available capacity, device yields, customer service, price, design services, access to intellectual property and EDA tool support.

Environmental Matters and Compliance

     We have implemented an extensive environmental management system. Four of the fabrication facilities which we currently own or have an interest in, namely Fabs 2, 3, 5 and 6, are third party certified through an internationally recognized ISO 14001 certifying body and our only 300-mm facility, Fab 7, which started commercial shipments in June 2005, is expected to be certified in 2007. This system enables our operations to identify applicable environmental regulations and assist in evaluating compliance status. Programs are established at manufacturing locations to ensure that all accidental spills and discharges are properly addressed.

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

Insurance

     We maintain industrial all-risk insurance for our facilities, equipment and inventories. The insurance for our fabs (including our strategic alliance fabs) and their equipment covers physical damage and business interruption losses arising from fire, natural disasters and certain other risks up to their respective policy limits. We also maintain public liability insurance for claims from third parties for bodily injury and property damage arising out of our business operations. In addition, we also maintain product liability insurance for damages sustained by others for bodily injury or property damage caused by our product(s). Some of our insurance coverage for SMP is under Agere Systems, Inc.’s global group insurance policies. The policies above are subject to terms, conditions and exclusions as defined in the respective policies, which are customary in the insurance market.

     In addition, we also have various insurance policies in place which cover our employees, including our key employees, for work-related and general claims, including hospitalization, personal accidents, business travel and workman’s compensation.

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

C. ORGANIZATIONAL STRUCTURE

     As of December 31, 2006, Chartered is part of the Temasek group of companies. A description of the Temasek group and Chartered’s position within the group may be found at “Item 7. Major Shareholders and Related Party Transactions — Related Party Transactions — The Temasek Group.”

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     Currently, Chartered has five subsidiaries, the particulars of which are as follows:

			Proportion of
	Country of	Date of	Ownership
Name of Subsidiary	Incorporation	Incorporation	Interest
Chartered Silicon Partners Pte Ltd	Singapore	March 1997		51	%
Chartered Semiconductor Manufacturing Incorporated	U.S.	June 1991		100	%
Chartered Semiconductor Japan Kabushiki Kaisha	Japan	October 2000		100	%
Chartered Semiconductor Taiwan Ltd	Taiwan	August 2000		100	%
Chartered Semiconductor Europe Limited	England and Wales	March 2001		100	%

D. PROPERTY, PLANT AND EQUIPMENT

Leases

     All of our fabrication facilities and our corporate offices are located in Singapore. We previously operated Fab 1, which ceased operations at the end of March 2004, on land leased from Ascendas Land (Singapore) Pte Ltd, or Ascendas, a private company wholly-owned by Jurong Town Corporation, or JTC, a statutory board established by the Government of Singapore to develop and manage industrial estates in Singapore. We sold and transferred our leasehold interest in respect of Fab 1 and the plant and equipment located in the property to Amkor Technology Pte Ltd for a total consideration of $6.5 million. The transaction was completed in January 2006.

     Fabs 2 and 3 and our corporate offices are located on land which we lease from Terra Investments Pte. Ltd., or Terra, a wholly owned subsidiary of Temasek, which in turn leases the land from JTC. These leases run until 2024 with conditional options to extend the leases for another 30 years. The sub-leases for Fab 2 and Fab 3 require us to make rental payments to Terra at rates equal to the rent paid by Terra to JTC for the subject land through 2024. The sub-leases are registered with the Singapore Land Authority (see “Item 19. Exhibits — Exhibit 4.14 and Exhibit 4.15.2”).

     The site slurry treatment plant for Fabs 2 and 3 is also located on land which we lease from Terra, which in turn leases the land from JTC. This lease runs until 2030 with a conditional option to extend for another 30 years. We are required to make rental payments to Terra at rates equal to the rent paid by Terra to JTC for the subject land through 2030 (see “Item 19. Exhibits — Exhibit 4.16.1 and Exhibit 4.16.2”). In January 2007, we entered into a supplemental agreement with Terra to amend the terms of the rental payments (see “Item 19. Exhibits — Exhibit 4.16.3”).

     CSP leases the land on which Fab 6 is located from Terra, which in turn leases it from JTC. The lease runs until 2027 with a conditional option to extend for an additional 30 years. CSP is required to make rental payments to Terra at rates equal to the rent paid by Terra to JTC for the subject land through 2027 (see “Item 19. Exhibits — Exhibit 4.17.2 and Exhibit 4.17.3”).

     Fab 7 is located on land which we lease from Terra which in turn leases the land from JTC. The lease runs until 2030 with a conditional option to extend for an additional 30 years. Our company is required to make rental payments to Terra at rates equal to the rent paid by Terra to JTC for the subject land through 2030 (see “Item 19. Exhibits — Exhibit 4.18.1 and Exhibit 4.18.3”). In January 2007, we entered into a supplemental agreement with Terra to amend the terms of the rental payments (see “Item 19. Exhibits — Exhibit 4.18.4”).

     We have in 2006 leased an additional plot of land from Terra which in turn leased the land from JTC. The lease runs until 2030. We intend to use this additional plot of land primarily for ancillary purposes to support our company’s business operations. Our company has paid in full all rental payments due for this lease (see “Item 19. Exhibits — Exhibit 4.19.1, Exhibit 4.19.2 and Exhibit 4.19.3”).

Production Capacity and Utilization

     For information on our production capacity and utilization, including wafer capacity, please see “— B. Business Overview — Manufacturing Facilities.”

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

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ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this document. The following also includes a discussion of our share of SMP revenue. SMP meets certain “significance” tests pursuant to Rule 3-09 of Regulation S-X. Accordingly, separate financial statements of SMP are required to be filed by us and we intend to file an amendment to this annual report on Form 20-F to include the separate financial statements of SMP as soon as available but no later than June 30, 2007. Further, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ significantly from those projected in the forward-looking statements include, but are not limited to, those discussed below and elsewhere in this document particularly in the cautionary risk factors described in “Item 3. Key Information — D. Risk Factors” above.

EXECUTIVE OVERVIEW

     Chartered is one of the world’s leading dedicated semiconductor foundries. We provide comprehensive wafer fabrication services and technologies to semiconductor suppliers and systems companies and focus on providing foundry services to customers that serve high-growth, technologically advanced applications for the communication, computer and consumer sectors. We currently own, or have an interest in, five fabrication facilities — Fabs 2, 3, 5, 6 and 7, all of which are located in Singapore. We have service operations in ten locations in nine countries in North America, Europe and Asia. Our principal customers are located in the U.S., Taiwan, Japan and Europe. We derive revenues primarily from fabricating semiconductor wafers and, to a lesser extent, from providing associated subcontracted assembly and test services and pre-fabricating services.

     As a dedicated foundry, our financial performance largely depends on a number of factors including timeliness in introducing technology and manufacturing solutions, ability to enter into arrangements with diverse customers for high volume production of our wafers, utilization rate of our capacity, and external factors such as pricing and general semiconductor market conditions and industry cycles.

     To enhance our position in technology and manufacturing solutions in the market place, we collaborate with other companies in the industry to develop the required solutions including process and manufacturing technologies, as well as electronic design automation and intellectual property enablement. This collaborative model allows sharing of cost and risks while accelerating our progress. A critical competence required in the foundry business is the ability to manufacture wafers efficiently for a diverse number of customers for a diverse number of products and devices. We strive to achieve this objective in our operations and serve multiple customers in the consumer, computer and communications sectors of the market. However, we do not set limits for our exposure in any specific sector mentioned above.

     Customers expect top-tier foundries to continuously invest in leading edge capacity to serve their needs in a timely manner. The equipment used in a foundry’s manufacturing facilities are complex and sophisticated and require a high level of investment. We make ongoing capital expenditure decisions based on an analysis of industry and market conditions, and opportunities and expected demand from existing and prospective customers. Due to the high level of investments made in equipment, a significant amount of our cost is fixed in nature in the form of depreciation. Therefore, maintaining a high level of utilization of our manufacturing capacity is critical to generating healthy financial performance.

INDUSTRY OVERVIEW

Cyclicality of the Semiconductor industry

     The semiconductor industry is highly cyclical. For example, according to the Semiconductor Industry Association, or the SIA, the worldwide semiconductor industry, in terms of revenue, remained at similar levels between 2001 and 2002, and then grew by approximately 18%, 28%, 7% and 9% sequentially in 2003, 2004, 2005 and 2006, respectively. Fabs can take several years to plan, construct and begin operations. Therefore, during periods of favorable market conditions semiconductor manufacturers, which include dedicated foundry service providers, often begin building new fabs in response to anticipated demand growth for semiconductors. As these new fabs commence operations a significant amount of manufacturing capacity is made available to the semiconductor market resulting from the steep initial ramp up of these fabs. In the absence of growth in demand, or if growth occurs more slowly than anticipated, this sudden increase in supply results in semiconductor manufacturing over capacity, which can lead to sharp drops in utilization of semiconductor fabs and put pressure on wafer selling prices.

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Substantial Capital Expenditures

     Semiconductor manufacturing is very capital intensive in nature. For example, even in the midst of challenging economic conditions in 2002 we invested $419.5 million in capital expenditures, primarily in equipping Fab 6 and for the purchase of equipment for research and development use, as part of our strategy to position ourselves to serve market needs during the market’s growth phase. We invested $220.8 million in capital expenditures in 2003, focused primarily on 0.13um technologies. In 2004, 2005 and 2006, we invested $686.3 million, $628.1 million and $554.3 million, respectively, in capital expenditures. Capital expenditures in 2004 were primarily for our 0.13um and below technologies, while capital expenditures in 2005 and 2006 were primarily for our 90nm and below technologies.

Pricing, Change in Product Mix and Technology Migration

     The pricing of a wafer is determined by the complexity of the device on the wafer. Production of devices with higher-level functionality and greater system-level integration requires more manufacturing steps and typically commands higher wafer prices. However, increasing the complexity of devices that we manufacture does not necessarily lead to increased profitability because the higher wafer prices for such devices may be offset by depreciation and other costs associated with an increase in the capital expenditures needed to manufacture such devices. As the price of wafers vary significantly with technology and device complexity, the mix of wafers produced affects revenue and profitability. The prices for wafers of a given level of technology and device complexity will generally decline over the product life cycle and foundries must continue to migrate to increasingly sophisticated technologies or introduce value added solutions to sustain the same level of profitability. Over the period from 2004 to 2006, our ASP per wafer (eight-inch equivalent) increased by 2.4% from $1,012 in 2004 to $1,036 in 2005 and then increased sequentially by 7.3% to $1,112 in 2006. The increase in our ASP was due primarily to a higher mix of advanced technologies (we define our advanced technologies in 2006 as 0.13um and smaller process geometry technologies) over the period which commanded higher selling prices. There is no assurance that we will continue to see increases in ASP or that it will not decrease in the future.

Capacity Utilization Rates (based on total shipments and total capacity, both of which include our share of SMP)

     Largely as a result of the muted semiconductor industry growth in 2002 following the severe downturn which started in 2001, our average utilization rate in 2002 was 37%, resulting in significant net losses. As the semiconductor industry resumed growth, our average capacity utilization improved to 58% in 2003. Driven primarily by sequential growth in shipments during the first half of 2004, despite experiencing market weakness from the second half of June 2004, our average capacity utilization improved further to 80% in 2004. The market weakness which we experienced from the second half of June 2004 due to excess inventories in the semiconductor companies and the softening in certain end markets continued into the first half of 2005 as the industry continued to work through the excess inventories. This, offset by the improving market conditions and the ramp up of 90nm shipments in the second half of 2005, resulted in an average capacity utilization of 70% for the year 2005. Our average capacity utilization increased from 70% in 2005 to 77% in 2006, due primarily to higher utilization of 82% for both the first and second quarters of 2006. During the second half of 2006 companies in the supply chain, including our customers, experienced excess inventory and seasonally weaker than usual market conditions. The inventory correction and weaker market impacted our utilization rate in the third and fourth quarters of 2006 resulting in our utilization rates declining in those quarters to 74% and 70%, respectively.

     Our average capacity utilization, based on eight-inch equivalent wafers, from 2002 to 2006 is as follows:

	2002			2003			2004(2)			2005(3)			2006
Average capacity utilization (1)		37	%		58	%		80	%		70	%		77	%

Notes:

(1)	Based on total shipments and total capacity, both of which include our share of SMP.
(2)	Fab 1 ceased operations at the end of March 2004, with some of its operations moved to Fab 2.
(3)	Fab 7 started commercial shipment in June 2005.

2006 OVERVIEW

     Our revenues in 2006 grew 37% compared to 2005, significantly outpacing the worldwide semiconductor industry growth of approximately 9%. We achieved this growth even though companies in the supply chain, including our customers, experienced excess inventory and seasonally weaker than usual market conditions during the second half of 2006. Our revenue growth was primarily driven by the ramp up of our leading-edge 90nm revenue. Revenue from our

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0.13um and smaller process geometry technologies, including 90nm, represented 57% of our total net revenue and revenue from 90nm technologies alone contributed 29% of our total net revenue for 2006. With our expanding business and corresponding revenue growth, we achieved a net income of $66.8 million for 2006. We also achieved a lower breakeven utilization rate of around 70% in the fourth quarter of 2006 compared to approximately 75% in the same period in 2005.

     For 2006, capacity for our advanced technologies increased by approximately 66% while total capacity increased by approximately 19% to 1.8 million eight-inch equivalent wafers from 1.5 million eight-inch equivalent wafers in 2005. In 2006, we invested $554.3 million in capital expenditures primarily for our 90nm and below technologies and incurred $152.8 million research and development expenses primarily for the 65nm and 45nm technology nodes.

     In March 2006, we entered into a call option transaction, or 2006 Option, with Goldman Sachs International, or GS, to replace the call option transaction that we had previously entered into with GS in August 2004 which expired on April 2, 2006. Under the 2006 Option, GS may purchase up to 214.8 million of our ordinary shares. If the 2006 Option is exercised in full at the price of S$2.15 per share and physically settled, we would receive approximately $300 million based on an exchange rate of $1.00 = S$1.54 that could be used for repayment of debt and general corporate purposes. See the “— Liquidity and Capital Resources — Current and expected liquidity” section below for more details.

     In 2006, we issued $300 million principal amount of 6.25% senior notes due 2013 at a price of 99.053% of the principal amount through a public offering. Proceeds from the offering were used to repay $300 million principal amount of existing bank loans.

2007 OUTLOOK AND PLANS

     The discussion under “2007 Outlook and Plans” contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from those projected in these forward-looking statements. Factors that might cause future results to differ significantly from those projected in these forward-looking statements include, but are not limited to, those discussed below and elsewhere in this document, particularly in the cautionary risk factors described in “Item 3. Key Information — D. Risk Factors” above.

2007 Outlook

     The overall macro economic conditions look favorable as we enter 2007. According to the SIA, the worldwide semiconductor industry is expected to grow by approximately 10% in 2007 compared to 2006, in terms of revenue, with generally healthy economic conditions in all of the world’s major semiconductor markets.

2007 Planned Capacity

     We expect to achieve total wafer capacity of approximately 2.0 million wafers (eight-inch equivalent) for the full year 2007, compared to approximately 1.8 million wafers (eight-inch equivalent) for the full year 2006. We plan to increase our capacity for 90nm and smaller process geometry technologies in 2007 by over 80% as compared to 2006 and to represent approximately 22% of our total expected wafer capacity in December 2007.

2007 Planned Capital Expenditures

     Our total cash outflow for capital expenditures in 2007 is expected to be approximately $800 million, compared to $554 million in 2006. The $800 million capital expenditure figure includes $65 million of capital expenditures in 2006 for our 90nm and below technologies which are expected to be paid in 2007. Capital expenditures planned for 2007 are primarily for increasing 65nm and below capacity. With the above capital expenditures, Fab 7 is expected to have equipment that are installed or available for installation equivalent to a capacity of 25,000 300-mm wafers per month by December 2007. We expect depreciation and amortization for the year 2007 to be approximately $550 million, compared to $504 million in 2006.

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2007 Planned Research and Development Expenditures

     We expect to incur approximately $180 million for research and development in 2007, compared to $153 million in 2006. The increased investment is intended to fund the development and qualification of 45nm process technology on an accelerated schedule, including costs associated with capital investment in leading-edge semiconductor tools.

CRITICAL ACCOUNTING POLICIES

     The preparation of the consolidated financial statements and related disclosures in the accompanying notes in accordance with U.S. GAAP requires management to make judgments, 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 revenue and expenses during the reporting period. Estimates are based on historical experience, current conditions and on various other assumptions that we believe to be reasonable under the present circumstances. Actual results could differ from these estimates. We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements:

Depreciation and Amortization of Long-lived Assets

     Our results of operations are generally affected by the capital-intensive nature of our business. A large proportion of our cost of revenue is fixed in nature. The major components of our fixed costs included in our cost of revenue relate to depreciation on property, plant and equipment and amortization of technology license arrangements.

     We depreciate wafer fab buildings over twenty years, mechanical and electrical installations in the fabs over ten years, and equipment and machinery over five years using the straight-line method to their estimated salvage values. We amortize technology licenses using the straight-line method over the shorter of the license period or the estimated useful life of the license, which on weighted average is approximately six years. These lives represent our estimate of the periods that we expect to derive economic benefits from the assets. In estimating these useful lives and salvage values of our property, plant and equipment and technology licenses and in determining whether subsequent revisions to the useful lives and salvage values are necessary, the significant factors we consider include the likelihood of technological obsolescence arising from changes in production techniques, technology, market demand and intended use. We routinely review the remaining estimated useful lives and salvage values of our property, plant and equipment and our technology licenses to determine if such lives and values should be adjusted.

     In commencing depreciation of Fab 7, our only 300-mm wafer fabrication facility, during the second quarter of 2005, we have estimated salvage values that are higher than our historical estimates for equipment when our other fabs began service. This is due primarily to the equipment in Fab 7 being put into use at the early stages of the 90nm and below process technology life cycles. Thus, we expect the estimates of salvage values at the end of our use of the equipment to be higher than we have historically expected in our other fabs using more mature process technologies where the equipment was generally put into use later in the process geometry technology life cycle.

     In the third quarter of 2006, we revised the estimated salvage values of some of our 200-mm equipment and machinery to reflect higher expected salvage values than we have historically estimated. These equipment and machinery primarily support our advanced technologies where we are observing higher salvage values in the equipment resale market. We believe a significant driver of this is that we initially placed this equipment into use earlier in the process geometry technology life cycle than we have done for other 200-mm equipment. This change will result in lower depreciation over the remaining lives of the affected eight-inch process equipment and machinery. The impact of this change was an improvement to our net income by $11.3 million in 2006, resulting in an improvement of both our basic and diluted net earnings per ADS by $0.04 each in 2006. Basic and diluted net earnings per ordinary share in 2006 were $0.02 both before and after the impact of this change.

     Actual useful lives and salvage values of our long-lived assets may be shorter or longer and higher or lower, respectively, than our estimates. If we had used different estimates of useful lives or salvage values of our long-lived assets, our results might have been materially different.

Recoverability of Long-lived Assets

     We review long-lived assets that are held and used, including technology licenses, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We are required to make judgments and assumptions in identifying those events or changes in circumstances that may trigger impairment. Some of the factors we consider include:

• A significant decrease in the market price of a long-lived asset group;

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• A significant adverse change in the extent or manner in which a long-lived asset group is being used or in its physical condition;

• A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset group, including an adverse action or assessment by a regulator;

• An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset group;

• A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset group; and

• A current expectation that, more likely than not, a long-lived asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

     We perform impairment tests for groups of long-lived assets at the lowest level of identifiable independent cash flows. In determining the appropriate asset groupings we make subjective judgments about the independent cash flows that can be related to each asset group considering our foundry model and the degree of interchangeability of the various components of our manufacturing capacity. We consider the degree to which each asset group’s revenue depends on the revenue-producing activities of one or more other asset groups and the availability of financial information on such asset groups. In some cases it is not practical to identify the cash flows associated with a particular asset or group of assets due to the integrated nature of our production process and the multi-technology capability of our equipment. We have identified our individual fabs to be the lowest level of identifiable independent cash flows for purposes of performing impairment tests.

     The determination of recoverability for long-lived assets held for use is based on an estimate of undiscounted cash flows expected to result from the use of the asset group and its eventual disposition. The estimate of cash flows is based upon, among other things, certain assumptions about expected future operating performance, ASP, utilization rates and other factors which require a considerable amount of judgment, If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value of the asset group, an impairment charge is recognized for the amount by which the carrying value of the asset group exceeds its fair value based on the best information available, including discounted cash flow analysis. However, due to the cyclical nature of our industry and changes in our business strategy, market requirements or the needs of our customers, we may not always be in a position to accurately anticipate declines in the utility of our equipment or licenses until they occur.

     We also routinely review our long-lived assets that are held for sale for impairment in comparison to their fair values less costs to sell. In calculating an impairment charge for assets held for sale, significant judgment is required in estimating fair values and costs to sell.

     In 2004 and 2005, we recorded impairment charges of $1.0 million and $3.9 million, respectively, on assets held for sale resulting from decisions to rationalize capacity and therefore to sell certain assets. In 2004, we also recorded an impairment charge of $1.7 million resulting from the migration to an enhanced manufacturing system. We did not record an impairment charge in 2006 on our long-lived assets.

     However, if we had made different judgments and assumptions in making our estimates of future cash flows of our assets held for use or fair values and costs to sell for our assets held for sale, we might have reached different conclusions regarding impairments, and our results might therefore have been materially different.

Valuation of Inventory

     Our inventories are stated at the lower of cost or market (net realizable value) and consist of work-in-progress, raw materials and consumable supplies and spares.

     Cost. Cost is determined using standard cost and an allocation of the cost variances arising in the period of production, which approximates actual costs determined on the weighted average basis. We determine the standard cost of each wafer based on estimates of the materials, labor, and other costs incurred in each process step associated with the manufacture of our products. We allocate labor and overhead costs to each step in the wafer production process based on normal fab capacity utilization, with costs arising from abnormal under-utilization of capacity expensed when incurred. The unit cost of a wafer generally decreases as fixed overhead charges are allocated over a larger number of units produced. Conversely, during periods of low utilization of capacity, the unit cost of a wafer would generally increase.

     Net Realizable Value. We routinely review our inventories for their saleability and for indications of obsolescence to determine if inventory carrying values are higher than net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make a sale. Some of the significant

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factors we consider in estimating the net realizable value of our inventories include the likelihood of changes in market and customer demand and expected changes in market prices for our inventories.

     Judgments, estimates and assumptions regarding future selling prices, level of demand and indications of obsolescence must be made and used in connection with evaluating whether such write-downs are needed and in what amount. While our estimates require us to make significant judgments and assumptions about the expected net realizable values of our inventories, we believe our estimates are reasonable as historically sales of inventories for which the actual net realizable values were higher than estimated have not significantly impacted our gross profit.

     As of December 31, 2005 and 2006, we reduced carrying values of inventory by $30.1 million and $15.8 million, respectively, to write down certain inventories, primarily work-in-progress, to estimated net realizable value. These write-downs were recognized in cost of revenue. Subsequent to such write-downs we sell or dispose of these inventories. In each of 2004, 2005 and 2006, we sold some of our inventories that we had written down to their estimated net realizable value in the previous year at prices which were higher than our previous estimate of the net realizable value. Such sales improved our gross profit by approximately $1.4 million, $0.7 million and $1.8 million for 2004, 2005 and 2006, respectively.

     If we had made different estimates on allocation of costs to different process steps, normal and abnormal capacity utilization, future demand for existing inventory or inventory selling prices, we might have reached different conclusions regarding inventory values and therefore our results might have been materially different.

Revenue Recognition

     We derive revenue primarily from fabricating semiconductor wafers and, to a lesser extent, from providing associated subcontracted assembly and test services as well as pre-fabricating services such as masks generation and engineering services. We enter into arrangements with customers which typically include some or all of the above deliverables.

     When our arrangements include multiple deliverables, we first determine whether each deliverable meets the separation criteria in Financial Accounting Standards Board, or FASB, Emerging Issues Task Force, or EITF, Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. In general, a deliverable (or a group of deliverables) meets the separation criteria if the deliverable has standalone value to the customer and if there is objective and reliable evidence of the fair value of the remaining deliverables in the arrangement. Each deliverable that meets the separation criteria is considered a “separate unit of accounting.” The total arrangement consideration is then allocated to each separate unit of accounting based on their relative fair values. Substantially all of our arrangements for the sale of semiconductor wafers and related services consist of a single unit of accounting. The application of EITF 00-21 requires judgment as to whether the deliverables can be divided into more than one unit of accounting and whether the separate units of accounting have value to the customer on a stand-alone basis. Changes to how we determine these elements could affect the timing of revenue recognition.

     Revenue for each unit of accounting is recognized when the contractual obligations have been performed and title and risk of loss has passed to the customer, there is evidence of a final arrangement as to the specific terms of the agreed upon sales, selling prices to the customers are fixed or determinable and collection of the revenue is reasonably assured, and, where applicable, delivery has occurred. Generally, this results in revenue recognition upon shipment of wafers.

     To a lesser extent, we also derive other revenue relating to rental income and management fees which is recognized when the contractual obligations have been performed, there is evidence of a final arrangement, fees are fixed or determinable and collection of the revenue is reasonably assured.

     Other arrangements include sale of equipment and contemporaneous licensing of intellectual property. Arrangement consideration is allocated between equipment and licensing of intellectual property using the residual method based on the fair value of equipment sold. Estimates of fair value of equipment are based on the resale prices of similar equipment sold on the used equipment market. However, if we had made different estimates of fair value of equipment, the allocation of consideration between gain on asset sales and income from intellectual property might have been materially different. Income from intellectual property is classified as a component of other income (loss), net, in our consolidated statement of operations as it is not considered as a source of income from our principal operations, and is recognized when the title and risk of loss have passed to the customer or the license is delivered, there is evidence of a final arrangement, fees are fixed or determinable, and collectibility is reasonably assured.

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Sales Credits and Returns Allowances

     Our revenue per wafer is generally dependent upon the wafer yield. The process technology for the manufacture of semiconductor wafers is highly complex and the presence of contaminants, difficulties in the production process, disruption in the supply of utilities or defects in key materials and tools can all cause reductions in device yields and increase the risk of sales credits or returns. We make estimates of wafer yield and potential sales credits and returns and provide for such credits and returns based upon historical experience and our estimate of the level of future claims. Additionally, we accrue for specific items at the time their existence is known and the amounts are estimable.

     Sales credits and returns as a percentage of gross revenue may fluctuate from year to year and not necessarily follow the gross revenue trend due to specific claims in any particular period related to certain new processes and variations in wafer yield. We typically experience lower sales credits and returns as the manufacturing processes mature and higher sales credits and returns on new processes. We have charged $4.8 million, $18.3 million and $6.3 million to results of our operations for sales credits and returns for 2004, 2005 and 2006, respectively. Our actual sales credits and returns have not historically been significantly different from our estimates, and our method of estimating sales credits and returns and the significant assumptions used have been consistently determined over the past three years.

     Significant management judgments and estimates must be made and used in connection with determining revenue per wafer and in establishing the sales credits and returns allowances in any accounting period. Had we made different estimates of wafer yield or future sales credits and returns, our results might have been materially different.

Collectibility of Accounts Receivable

     We manage the credit risk of collectibility of our accounts receivable through our credit evaluation process, credit policies, and credit control and collection procedures. In evaluating the collectibility of individual receivable balances we consider the age of the balance, the customer’s historical payment history, their current credit-worthiness and current economic trends. We review our accounts receivable on a periodic basis and make specific allowances when there is doubt as to the collectibility of individual receivable balances. Our actual uncollectible accounts have not historically been significantly different from our estimates. However, if we had made different estimates of collectibility of individual receivable balances, our results might have been materially different.

Income Taxes

     A large portion of our operations in Singapore are afforded lower tax rates from tax incentives provided to attract and retain business. These tax incentives expire over various periods till September 30, 2020 and are subject to certain conditions with which we expect to comply, such as achieving fixed amounts of capital expenditure and headcount by certain dates. Our taxes could increase if we do not meet the incentive requirements, or tax rates applicable to us in such jurisdictions are otherwise increased.

     We regularly assess the likelihood of adverse outcomes on our tax positions resulting from tax authority examinations to determine the adequacy of our provision for income taxes. Our estimate of the potential outcome for any uncertain tax issues is highly judgmental, and we believe we have adequately provided for probable outcomes relating to uncertain tax matters. We adjust our provision in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome from examinations of these matters is different than the amounts recorded, such differences will be recorded in the period in which such determination is made and may be materially different from amounts recorded to date.

     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 unutilized wear and tear allowances. A valuation allowance reduces deferred tax assets to estimated realizable value based on estimates, past performance and certain tax planning strategies, and our objective assessment of whether it is more likely than not that we will be able to generate sufficient future taxable income to realize the net deferred tax assets. A valuation allowance has been established for tax assets pertaining to certain fabs (operating under tax incentives) in the amount of $322.4 million and $273.8 million as of December 31, 2005 and 2006, respectively. The valuation allowance will be maintained until sufficient positive evidence exists to support reversal of the valuation allowance based upon current and preceding years’ results of operations and anticipated future taxable income levels.

     Our judgment regarding future profitability may change due to future market conditions, changes in Singapore or international tax laws and other factors, If these estimates and related assumptions change in the future, we may be required to increase or decrease our valuation allowance against deferred tax assets previously recognized, resulting in additional or lower income tax expense.

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CHANGE IN ACCOUNTING POLICIES

SFAS No. 123(R), Share-Based Payments

     In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payments.” SFAS No. 123(R) requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost is to be measured based on the fair value of the equity or liability instruments issued. SFAS No. 123(R) replaced SFAS No. 123, “Accounting for Stock-Based Compensation,” and superseded APB Opinion No. 25, or APB 25, “Accounting for Stock Issued to Employees.” In March 2005, the SEC issued Staff Accounting Bulletin No. 107, on the interaction between SFAS No. 123(R) and certain SEC rules and regulations, and on SEC Staff’s views regarding the valuation of share-based payment arrangements for public companies.

     We adopted the provisions of SFAS No. 123(R) on January 1, 2006, the first day of our fiscal year 2006, using the modified prospective application which provides for certain changes to the method for valuing share-based compensation. Under the modified prospective application, prior periods are not revised for comparative purposes. Under SFAS No. 123(R), share-based compensation cost is measured based on the estimated fair value of the award at the grant date and is recognized as expense over the employee’s requisite service period. Prior to adopting the provisions of SFAS No. 123(R), we measured share-based employee compensation cost in accordance with the intrinsic value method of APB 25 and related interpretations. Intrinsic value is determined based on the excess of fair market value of the stock subject to the option at the grant date and the option exercise price. The total fair value-based compensation expense associated with prior awards that were not vested at the adoption of SFAS No. 123R was $9.8 million which will be recorded in earnings over a weighted average period of approximately three years. In 2006, we recorded a compensation expense of $6.4 million in earnings associated with such awards. The remaining $2.5 million, $0.7 million and $0.2 million of compensation expenses associated with such awards are expected to be recorded in earnings in 2007, 2008 and 2009, respectively.

     Upon adoption of SFAS No. 123(R), we continued to use the Black-Scholes option-pricing model for valuation for share-based awards granted beginning January 1, 2006, which was also previously used for our pro forma information disclosures required under SFAS No. 123. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent reporting periods if actual forfeitures differ from those estimates. In our pro forma information disclosures required under SFAS No. 123 for the periods prior to 2006, we accounted for forfeitures as they occurred. Refer to Note 17 of the consolidated financial statements for more details on our share-based payments.

Staff Accounting Bulletin No. 108, or SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements

     Refer to Note 1(c) of the consolidated financial statements for more details on the errors adjusted upon the initial adoption of SAB 108. In addition to reporting a cumulative effect adjustment upon initial adoption of SAB 108 as of January 1, 2006, previously issued financial statements in the first, second and third quarters of 2006 have also been corrected for immaterial errors, resulting in an increase (decrease) to net income for these quarters by $(0.3) million, $0.5 million and $(0.5) million, respectively.

Other Adjustments and Reclassifications

     See Note 1(c) of the consolidated financial statements for more details on other adjustments and reclassifications.

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RESULTS OF OPERATIONS

     The following table sets forth our consolidated statements of operations data as a percentage of net revenue for the periods indicated:

	Years ended December 31,
	2004			2005			2006
Consolidated Statements of Operations data:
Net revenue		100.0	%		100.0	%		100.0	%
Cost of revenue		82.0			88.8			75.7
Gross profit		18.0			11.2			24.3
Other revenue		1.9			2.0			1.5
Operating expenses:
Research and development		10.1			11.8			10.8
Sales and marketing		4.1			4.1			3.9
General and administrative		3.7			3.9			3.0
Fab start-up costs		3.5			2.2			—
Other operating expenses (income), net		(0.0	)		1.4			1.0
Total operating expenses		21.4			23.4			18.7
Equity in income of SMP		2.9			0.6			2.5
Other income (loss), net		1.8			(0.6	)		(0.2	)
Interest income		1.2			2.8			3.2
Interest expense and amortization of debt discount		(3.2	)		(6.8	)		(6.2	)
Income (loss) before income taxes		1.2			(14.2	)		6.4
Income tax expense		0.5			1.3			1.7
Net income (loss)		0.7	%		(15.5	)%		4.7	%
Less: Accretion to redemption value of convertible redeemable preference shares		—			0.3			0.7
Net income (loss) available to ordinary shareholders		0.7	%		(15.8	)%		4.0	%

     The following table sets forth a breakdown of revenue by market sector for the periods indicated:

	Years ended December 31,
	2004			2005			2006
Communications		51	%		35	%		30	%
Computer		30			25			31
Consumer		15			35			37
Other *		4			5			2
Total		100	%		100	%		100	%

     The following table sets forth a breakdown of revenue by geographical region for the periods indicated:

	Years ended December 31,
	2004			2005			2006
Americas		68	%		75	%		77	%
Europe		9			9			9
Asia-Pacific		20			13			12
Japan		3			3			2
Total		100	%		100	%		100	%

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     The following table sets forth a breakdown of revenue by technology (um) for the periods indicated:

	Years ended December 31,
	2004			2005			2006
0.09 and below		—	%		19	%		29	%
Up to 0.13		19			23			28
Up to 0.18		16			10			8
Up to 0.25		19			10			9
Up to 0.35		29			23			16
Above 0.35		17			12			10
Other *		—			3			—
Total		100	%		100	%		100	%

Note:

* Includes revenue from generation of customers’ mask sets

Years ended December 31, 2005 and December 31, 2006

Net revenue

     We derive revenue primarily from fabricating semiconductor wafers and, to a lesser extent, under some arrangements with our customers, from providing associated subcontracted assembly and test services as well as pre-fabrication services such as masks generation and engineering services. As a dedicated foundry, our financial performance, including our revenue, largely depends on a number of factors including timeliness in introducing technology and manufacturing solutions, ability to enter into arrangements with diverse customers for high volume production of our wafers, utilization rate of our capacity, and external factors such as pricing and general semiconductor market conditions and industry cycles.

     In the first quarter of 2005, the semiconductor industry continued to work through the excess inventories resulting from the market weakness experienced from the second half of 2004. We began to see a recovery in demand in the second quarter of 2005 as revenue increased sequentially by 7.0% from the first quarter of 2005 to the second quarter of 2005. Our revenue continued to increase sequentially by 49.5% and 26.6% in the third and fourth quarters of 2005, respectively. The increase in revenue in the third quarter of 2005 was due mainly to the ramp up of our 90nm shipments. Our net revenue increased in the fourth quarter of 2005 as we capitalized on the growth in revenue from our advanced technologies and also benefited from favorable market conditions. The subsequent decrease in our revenue in the first quarter of 2006 compared to the fourth quarter of 2005 was not as significant as may have been expected considering the typical seasonality decrease in the first quarter. Capacity utilization rates remained high at 82% for both the first and second quarters of 2006. During the second half of 2006 companies in the supply chain, including our customers, experienced excess inventory and a seasonally weaker than usual market conditions which resulted in a decline in our utilization rates in the third and fourth quarters of 2006, which in turn caused a sequential decrease in our revenue in those quarters. Despite this, net revenue increased 37.0% from $1,032.7 million in 2005 to $1,414.5 million in 2006 due primarily to the continued growth in revenue from our advanced technologies. Our revenue growth in 2006 compared to 2005 significantly outpaced the worldwide semiconductor industry growth of approximately 9%.

     Our customers continued to make increased use of our advanced technologies, and revenue from our 0.13um and smaller process geometry technologies increased by 86% between 2005 and 2006. Revenue from these advanced technologies represented 42% of our total revenue in 2005 as compared to 57% of our total revenue in 2006, of which 19% and 29% of our total revenue was attributable to revenue from our 90nm technologies in 2005 and 2006, respectively. We started commercial shipment of 90nm technologies in June 2005.

     Shipments increased by 29.4% from 965,045 wafers (eight-inch equivalent) in 2005 to 1,248,554 wafers (eight-inch equivalent) in 2006. ASP increased by 7.3% from $1,036 per wafer (eight-inch equivalent) in 2005 to $1,112 per wafer (eight-inch equivalent) in 2006, due primarily to a higher mix of advanced technologies which command higher selling prices.

     Revenue from the communications and the consumer sectors each represented 35% of our total revenue, while revenue from the computer sector represented 25% of our total revenue in 2005. In 2006, the consumer sector was our highest revenue contributor and represented 37% of our total revenue, while the computer and the communications sectors represented 31% and 30% of our total revenue, respectively.

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     Revenue from the computer, consumer and communications sectors increased by 70%, 45% and 17%, respectively, between 2005 and 2006. The increase in computer sector revenue was due primarily to a higher demand for workstations, personal computer and motherboard devices. The increase in consumer sector revenue was due primarily to higher demand for set-top box and video game devices, while the increase in communications sector revenue was due primarily to a higher demand for digital subscriber line, or xDSL cards, partially offset by a lower demand for Local Area Network, or LAN, switches/routers/hubs/cards and mobile phone handset devices.

     Revenue from the Americas region continued to be the largest contributor to our total revenue, increasing from 75% of our total revenue in 2005 to 77% of our total revenue in 2006, driven primarily by revenue from the computer sector. Revenue from all other regions remained largely unchanged in terms of their percentage contributions to our total revenue between 2005 and 2006. Net revenue in dollar terms for 2006 was higher across all geographical regions compared to 2005, except for net revenue for the Japan region which decreased by 9% between 2005 and 2006.

     Our top three customers for 2005, in order of revenue contribution, were Broadcom, IBM and Agilent Technologies, of which Broadcom and IBM contributed more than 10% of our total net revenue in 2005. Broadcom and IBM continued to be our top two customers for 2006, in order of revenue contribution, while Advanced Micro Devices replaced Agilent Technologies as a top three customer for 2006. Each of our top three customers for 2006 contributed more than 10% of our total net revenue in 2006.

Cost of revenue and gross profit

     Cost of revenue includes depreciation expense, attributed overheads, cost of labor and materials, subcontracted expenses for assembly and test services, masks generation costs and amortization of certain technology licenses. Cost of revenue increased by 16.8% from $917.0 million in 2005 to $1,070.8 million in 2006 although our shipments increased by 29.4% in 2006 compared to 2005, as a large proportion of our cost of revenue is fixed in nature. Depreciation continued to be a significant portion of our cost of revenue, comprising 47.6% and 40.7% of our cost of revenue in 2005 and 2006, respectively.

     In the third quarter of 2006, we changed the estimated salvage values in relation to certain eight-inch equipment and machinery to reflect higher expected salvage values than we have historically estimated. These equipment and machinery primarily support our advanced technologies. The change in the estimated salvage values is a change in accounting estimate that was applied prospectively from July 1, 2006. This change will result in lower depreciation over the remaining lives of the affected eight-inch process equipment and machinery. The impact of this change was a reduction to our cost of revenue of $11.3 million in 2006.

     The unit cost of a wafer generally decreases as fixed overhead charges, such as depreciation expense on the facility and semiconductor manufacturing equipment, are allocated over a larger number of wafers produced. Cost per wafer shipped decreased by 8.7% from $921 (eight-inch equivalent) in 2005 to $841 (eight-inch equivalent) in 2006, primarily as a result of an increase in shipments by 29.4% between 2005 and 2006.

     Our gross profit improved from $115.7 million in 2005 to $343.7 million in 2006, due primarily to higher revenues resulting from significantly higher shipments and to a lesser extent, higher ASP per wafer as a result of a higher mix of advanced technologies which command higher selling prices.

     In each of 2005 and 2006, we sold some of our inventories that we had written down to their estimated net realizable value in the previous year at prices which were higher than our previous estimate of the net realizable value. Such sales improved our gross profit by approximately $0.7 million and $1.8 million for 2005 and 2006, respectively.

     As described in “Item 3. Key Information — D. Risk Factors — Risks Related to Investment in a Corporation with International Operations — Exchange rate fluctuations may increase our costs and capital expenditures, which could affect our operating results and financial position,” exchange rate fluctuations may increase our costs. However in 2005 and 2006, there was no significant impact on our cost of revenue arising from fluctuations in exchange rates.

Other revenue

     Other revenue was $20.7 million in 2005 compared to $21.0 million in 2006, and relates to rental income and management fees.

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Research and development expenses

     Research and development, or R&D, expenses consist primarily of our share of expenses related to joint-development projects with IBM, Samsung and Infineon, payroll related costs for R&D personnel, depreciation of R&D equipment and expenses related to the development of design kits and intellectual property solutions for design of integrated circuits. R&D expenses increased by 25.1% from $122.1 million in 2005 to $152.8 million in 2006 due primarily to higher development activities related to the 65nm technology node, and to a lesser extent, higher activities related to development of design kits and intellectual property solutions for advanced technologies in 2006. There was no significant change in R&D expenses as a percentage of revenue which were 11.8% and 10.8% in 2005 and 2006, respectively.

Sales and marketing expenses

     Sales and marketing expenses consist primarily of payroll related costs for sales and marketing personnel, EDA-related expenses and costs related to pre-contract customer design validation activities. EDA-related expenses and costs related to pre-contract customer design validation activities relate to efforts to attract new customers and expand our penetration of existing customers. Sales and marketing expenses increased by 29.4% from $42.5 million in 2005 to $55.0 million in 2006 due primarily to higher payroll related expenses, and to a lesser extent, higher amortization of EDA software due to an increase in EDA software acquisition and higher expenses incurred for pre-contract customer design validation activities in 2006. The higher payroll related expenses in 2006 were due primarily to an increase in headcount and an increase in compensation cost relating to share-based payment transactions after adoption of SFAS No. 123(R) on January 1, 2006. Sales and marketing expenses as a percentage of revenue remained at approximately similar levels in 2005 and 2006 at 4.1% and 3.9%, respectively.

General and administrative expenses

     General and administrative, or G&A, expenses consist primarily of payroll related costs for administrative personnel, consultancy, legal and professional fees and depreciation of equipment used in G&A activities. G&A expenses increased by 6.3% from $40.0 million in 2005 to $42.6 million in 2006 due primarily to higher payroll related expenses resulting primarily from an increase in compensation cost relating to share-based payment transactions after adoption of SFAS No. 123(R), “Share-Based Payments” on January 1, 2006. G&A expenses as a percentage of revenue remained at approximately similar levels in 2005 and 2006 being 3.9% and 3.0%, respectively.

Fab start-up costs

     Fab start-up costs, all related to Fab 7, were $22.7 million in 2005. No fab start-up costs were recorded in 2006 as Fab 7 entered commercial production during the second quarter of 2005.

Other operating expenses, net

     Other operating expenses, net, were $14.2 million and $13.8 million in 2005 and 2006, respectively. Other operating expenses, net, in 2005 included a fixed asset impairment charge of $3.9 million on assets held for sale while there was no fixed asset impairment charge in 2006. Other operating expenses, net, in 2006 included losses of $6.1 million resulting from foreign currency fluctuations, partially offset by a gain of $2.6 million from the disposal of fixed assets from Fab 1.

Equity in income of SMP

     Equity in income of SMP was $6.5 million in 2005 compared to $36.0 million in 2006, due primarily to lower production costs and higher shipments in 2006. As with the results of our majority-owned fabs, the equity in income of SMP can have a material effect on our results of operations. In 2005, the equity in income of SMP was $6.5 million compared to our total net loss of $159.6 million, while in 2006, the equity in income of SMP was $36.0 million compared to our total net income of $66.8 million.

     The following information summarizes our total business base revenue, which includes our share of SMP revenue, in 2005 and 2006. Chartered’s share of SMP revenue and net revenue, including Chartered’s share of SMP presented in the following table, are non-U.S. GAAP financial measures. We have included this information because SMP can have a material effect on our consolidated statements of operations and we believe that it is useful to provide information on our share of SMP revenue in proportion to our total business base revenue. However, SMP is a minority-owned joint venture company that is not consolidated under U.S. GAAP. We account for our 49.0% investment in SMP using the equity method. Under the strategic alliance agreement with Agere, the parties do not share SMP’s net results in the same ratio as the equity holding. Instead, each party is entitled to the gross profits from sales to the customers that it directs to SMP, after deducting its share of the overhead costs of SMP. Accordingly, we account for our share of SMP’s net results

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based on the gross profits from sales to the customers that we direct to SMP, after deducting our share of the overhead costs. The following table provides a reconciliation showing comparable data based on net revenue determined in accordance with U.S. GAAP, which do not include our share of SMP:

	Year ended December 31,
	2005		2006
	(In millions)
Net revenue (U.S. GAAP)	$	1,032.7	$	1,414.5
Chartered’s share of SMP revenue	$	99.2	$	112.1
Net revenue including Chartered’s share of SMP	$	1,131.9	$	1,526.6

     The following table provides information that indicates the effect of SMP’s operations on some of our non-U.S. GAAP performance indicators:

	Year ended December 31,
	2005				2006
	Excluding		Including		Excluding		Including
	Chartered’s		Chartered’s		Chartered’s		Chartered’s
	share		share		share		share
	of SMP		of SMP		of SMP		of SMP
Shipments (in thousands)*		965.0		1,051.8		1 ,248.6		1,365.0
ASP per wafer	$	1,036	$	1,045	$	1,112	$	1,099

Note:

* Eight-inch equivalent wafers

Other loss, net

Other loss, net, in 2005 was $6.7 million compared to $2.7 million in 2006. Other loss, net, in 2005 related primarily to an expense of $7.0 million related to the termination of hedging transactions and other costs as a result of our cash tender offer for and repurchase of approximately $478 million of our then outstanding $575 million 2.5% senior convertible notes due 2006. Other loss, net, in 2006 related primarily to an other-than-temporary impairment loss of $2.7 million on securities classified as available-for-sale. Other loss, net, in 2006 also included net losses of $0.4 million relating to net losses of $1.4 million resulting from changes in the fair value of a call option transaction and net losses of $1.0 million relating to time value of our interest rate cap contracts which are excluded from the assessment of hedge effectiveness, partially offset by net gains of $1.4 million arising from the ineffective portion of our derivative instruments and net gains of $0.6 million resulting from changes in the fair value of an interest rate swap prior to its designation as a hedging instrument.

Interest income

     Interest income increased by 55.8% from $28.6 million in 2005 to $44.6 million in 2006, due primarily to higher interest rates, and to a lesser extent, higher average cash balances in 2006 compared to 2005.

Interest expense and amortization of debt discount

     Interest expense and amortization of debt discount increased by 25.9% from $69.8 million in 2005 to $88.0 million in 2006, due primarily to higher interest rates on outstanding floating rate debt, and to a lesser extent, lower interest capitalization associated with lower capital expenditures related to our 90nm and below technologies, partially offset by lower average outstanding debt balances in 2006.

Income tax expense

     We currently pay tax on (1) interest income, (2) rental income, (3) sales of wafers using technologies that do not benefit from preferential tax treatment and (4) other income not specifically exempted from income tax. In 2005, we recorded income tax expense of $13.0 million compared to $23.9 million in 2006. The pioneer tax-exempt status for Fab 2 expired on June 30, 2006 and income from our post-pioneer trade and development and expansion activities in Fab 2 is taxed at a concessionary tax rate of 10% for a 5-year period beginning July 1, 2006, as discussed in the “Special Tax Status” section below. Both the change in Fab 2’s tax rate and a higher taxable net interest income contributed to the increase in income tax expense for 2006 as compared to 2005.

Minority interest in CSP

     Due to cumulative losses, our obligations to the minority shareholders of CSP were reduced to zero in the first quarter of 2003. Therefore none of CSP’s losses from that point forward have been allocated to the minority interest in our

49

consolidated statements of operations. The effect of this on our results of operations was an increase of $64.9 million to our net loss in 2005 and a reduction of $12.8 million to our net income in 2006, for losses not allocated to the minority interest according to their proportionate ownership.

Accretion to redemption value of convertible redeemable preference shares

     In the third quarter of 2005, 30,000 convertible redeemable preference shares were issued. We accrete the carrying amounts of the convertible redeemable preference shares to their redemption values at maturity and record such accretion using the effective interest method over the remaining period until the maturity date on August 17, 2010. Such accretion adjusts net income (loss) available to ordinary shareholders. Accretion charges for 2005 and 2006 were $3.2 million and $9.5 million, respectively. In the second quarter of 2006, 1,650 convertible redeemable preference shares were converted into ordinary shares and the impact on the accretion charges arising from such conversion was not material.

Years ended December 31, 2004 and December 31, 2005

Net revenue

     Net revenue increased 10.8% from $932.1 million in 2004 to $1,032.7 million in 2005. The semiconductor industry recovery, which began to accelerate in the second half of 2003, continued into the first half of 2004. However, we experienced market weakness from the second half of June 2004 due to excess inventories in the semiconductor companies and softening in certain end markets. This weakness continued into the first half of 2005 as the industry continued to work through the excess inventories. We began to see a recovery in demand in the second quarter of 2005 as revenue increased sequentially by 7.0% from the first quarter of 2005 to the second quarter of 2005. Our revenue continued to increase sequentially by 49.5% and 26.6% in the third and fourth quarters of 2005, respectively. The increase in revenue in the third quarter of 2005 was due mainly to the ramp up of 90nm shipments. Our net revenue increased in the fourth quarter of 2005 as we capitalized on the growth in our leading-edge technologies and also benefited from favorable market conditions.

     Our customers continued to make increased use of our leading-edge technologies, and revenue from our 0.13um and smaller process geometry technologies increased by 145% between 2004 and 2005. Revenue from these leading-edge technologies represented 19% of our total revenue in 2004 as compared to 42% of our total revenue in 2005. Out of our total revenue in 2005, 19% was attributable to revenue from our 90nm technologies, driven by 90nm shipments in the second half of 2005.

     Shipments increased 4.8% from 921,014 wafers (eight-inch equivalent) in 2004 to 965,045 wafers (eight-inch equivalent) in 2005. ASP increased slightly from $1,012 per wafer (eight-inch equivalent) to $1,036 per wafer (eight-inch equivalent) over the same period.

     In 2004, the communications sector, which represented 51% of our total revenue, was our highest revenue contributor, followed by the computer sector at 30% of our total revenue. In 2005, each of the communications and the consumer sectors represented 35% of our total revenue, while the computer sector represented 25% of our total revenue.

     Due primarily to a significant decrease in demand for mobile phone handset devices, and to a lesser extent, a decrease in demand for cable modems partially offset by an increase in demand for digital subscriber line devices, communications sector revenue decreased by 24% between 2004 and 2005. Concurrently, computer sector revenue also decreased, but to a lesser extent, by 8% between 2004 and 2005, due primarily to a decrease in demand for optical storage devices, partially offset by an increase in demand for personal computer peripherals, workstations and personal computer motherboard devices.

     On the other hand, revenue from the consumer sector, which represented 15% of our total revenue in 2004, increased by 159% to account for 35% of our total revenue in 2005. This increase was due primarily to a significant increase in demand for video game devices, and to a lesser extent, an increase in demand for MP3/CD/MD audio player/recorders devices and set-top box devices, partially offset by a decrease in demand for DVD player/recorders devices.

     As a result of customer mix changes, net revenue by geographical region increased by 22%, 11%, 11% in the Americas, Japan and Europe regions, respectively, in 2005 as compared to 2004. The Asia Pacific region recorded a decline of 28% over the same period. The Americas continued to be our largest contributor to revenue, representing 75% of our total revenue in 2005, an increase from 68% of our total revenue in 2004.

Cost of revenue and gross profit

50

     Cost of revenue increased by 20.0% from $764.3 million in 2004 to $917.0 million in 2005 as compared to a 4.8% increase in shipments due primarily to increased depreciation and other manufacturing costs associated with the addition of new capacity in 2005. A large proportion of our cost of revenue is fixed in nature and depreciation continued to be a significant portion of our cost of revenue, comprising 51.2% and 47.6% of the cost of revenue in 2004 and 2005, respectively.

     The unit cost of a wafer generally decreases as fixed overhead charges, such as depreciation expense on the facility and semiconductor manufacturing equipment, are allocated over a larger number of wafers produced. Conversely, the unit cost of a wafer generally increases when a smaller number of wafers are produced. However, when cost of revenue increases at a faster rate compared to the increase in number of wafers produced, the unit cost of a wafer generally increases. Although shipments increased by 4.8% between 2004 and 2005, cost per wafer shipped increased by 11.0% from $830 (eight-inch equivalent) in 2004 to $921 (eight-inch equivalent) in 2005. This was due primarily to our cost of revenue increasing at a higher rate than the increase in shipments, arising from increased depreciation and other manufacturing costs associated with the addition of new capacity in 2005.

     As described in “Item 3. Key Information — D. Risk Factors — Risks Related to Investment in a Corporation with International Operations — Exchange rate fluctuations may increase our costs and capital expenditures, which could affect our operating results and financial position,” exchange rate fluctuations may increase our costs. However in 2004 and 2005, there was no significant impact on our cost of revenue arising from fluctuations in exchange rates.

     Our gross profit deteriorated from 18.0% of net revenue in 2004 to 11.2% of net revenue in 2005, due primarily to a lower utilization rate and increased depreciation and other manufacturing costs associated with the addition of new capacity in 2005.

Other revenue

     Other revenue was $17.9 million in 2004 compared to $20.7 million in 2005 and relates to rental income and management fees.

Research and development expenses

     R&D expenses increased by 30.1% from $93.8 million in 2004 to $122.1 million in 2005 due primarily to lower recognition of research grants received for the reimbursement of R&D expenses in 2005 compared to 2004. To a lesser extent, the increase in R&D expenses was also due to increased design services activities and higher development activities related to our 65nm technology node, partially offset by lower R&D expenditures related to 0.13um technologies as we completed our 0.13um technology development program.

Sales and marketing expenses

     Sales and marketing expenses increased by 11.9% from $38.0 million in 2004 to $42.5 million in 2005. The increase was due primarily to higher expenses resulting from expanded offering of EDA tools provided and higher expenses incurred for pre-contract customer design validation activities.

General and administrative expenses

     G&A expenses increased by 14.5% from $35.0 million in 2004 to $40.0 million in 2005. This was due primarily to higher payroll-related expenses in 2005 and several transactions in 2004 which reduced G&A expenses including a gain of $3.0 million associated with the resolution of contingencies related to a technology license agreement and a gain of $1.1 million associated with the resolution of a supplier advance against which an allowance was previously made.

Fab start-up costs

     Fab start-up costs, all related to Fab 7, decreased by 31.6% from $33.2 million in 2004 to $22.7 million in 2005. From the first quarter of 2004, the ramp up activity level had increased in support of our efforts to begin commercial shipments. Fab start-up costs decreased in the second quarter of 2005 as Fab 7 entered commercial production during that quarter. No fab start-up costs were recorded in the second half of 2005.

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Other operating expenses (income), net

     Other operating income, net, of $0.1 million in 2004 included the following:

• A gain of $10.4 million from the sale of equipment to CSMC; and

• A gain of $4.9 million resulting from resolution of a goods and services tax matter,

     partially offset by:

• Fab 1 restructuring charges of $4.6 million; and

• An impairment charge of $1.7 million resulting from our migration to an enhanced manufacturing system.

     Other operating expenses, net, of $14.2 million in 2005 included a fixed asset impairment charge of $3.9 million on assets held for sale resulting from decisions to rationalize capacity and therefore to sell certain assets. Excluding these items, other operating expenses, net, in 2004 and 2005 remained at approximately similar levels.

Equity in income of SMP

     Equity in income of SMP was $27.6 million in 2004 compared to $6.5 million in 2005, due primarily to significantly lower revenue in 2005 arising from demand weakness in certain end markets. As with the results of our majority-owned fabs, the equity in income of SMP can have a material effect on our results of operations, in 2004, the equity in income of SMP was $27.6 million compared to our net income of $6.6 million. The equity in income of SMP was $6.5 million in 2005 compared to our net loss of $159.6 million.

     We have provided, for the two fiscal years ended December 31, 2005, the following information on our total business base revenue, which includes our share of SMP revenue. Chartered’s share of SMP revenue and net revenue, including Chartered’s share of SMP presented in the following table, are non-U.S. GAAP financial measures. We have included this information because SMP can have a material effect on our consolidated statements of operations and we believe that it is useful to provide information on our share of SMP revenue in proportion to our total business base revenue. However, SMP is a minority-owned joint venture company that is not consolidated under U.S. GAAP, We account for our 49.0% investment in SMP using the equity method. Under the strategic alliance agreement with Agere Systems Singapore, the parties do not share SMP’s net results in the same ratio as the equity holding. Instead, each party is entitled to the gross profits from sales to the customers that it directs to SMP, after deducting its share of the overhead costs of SMP. Accordingly, we account for our share of SMP’s net results based on the gross profits from sales to the customers that we direct to SMP, after deducting our share of the overhead costs. The following table provides a reconciliation showing comparable data based on net revenue determined in accordance with U.S. GAAP, which do not include our share of SMP:

	Year ended December 31,
	2004		2005
	(in millions)
Net revenue (U.S. GAAP)	$	932.1	$	1,032.7
Chartered’s share of SMP revenue	$	170.8	$	99.2
Net revenue including Chartered’s share of SMP	$	1,102.9	$	1,131.9

     Additionally, the following table provides information that indicates the effect of SMP’s operations on some of our non-U.S. GAAP performance indicators:

	Year ended December 31,
	2004				2005
	Excluding		Including		Excluding		Including
	Chartered’s		Chartered’s		Chartered’s		Chartered’s
	share		share		share		share
	of SMP		of SMP		of SMP		of SMP
Shipments (in thousands)*		921.0		1,035.5		965.0		1,051.8
ASP per wafer	$	1,012	$	1,065	$	1,036	$	1,045

Note:

* Eight-inch equivalent wafers

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Other income (loss), net

     Other income, net, in 2004 of $16.4 million related primarily to a gain of $14.3 million from the sale of technology to CSMC. Other loss, net, in 2005 of $6.7 million related primarily to an expense of $7.0 million related to the termination of hedging transactions and other costs as a result of our cash tender offer for and repurchase of approximately $478 million of our then outstanding $575 million 2.5% senior convertible notes due 2006.

Interest expense and amortization of debt discount, net

     Interest expense and amortization of debt discount, net, increased by 122.0% from $18.6 million in 2004 to $41.2 million in 2005, due primarily to higher interest expense resulting from higher interest rates and higher outstanding debt balances, partially offset by higher interest income, and to a lesser extent, higher interest capitalization associated with capital expenditures related to our advanced technologies.

Income tax expense

     We currently pay tax on (1) interest income, (2) rental income, (3) sales of wafers using technologies that do not benefit from preferential tax treatment and (4) other income not specifically exempted from income tax. In 2004, we recorded income tax expense of $4.8 million on an income before income taxes of $11.3 million, including a reversal of $9.8 million of accrued taxes resulting from the resolution of certain matters related to the closure of Fab 1. In 2005, we recorded income tax expense of $13.0 million on a loss before income taxes of $146.6 million. The increase in the tax expense in 2005 was due primarily to higher taxable net interest income.

Minority interest in CSP

     Due to cumulative losses, our obligations to the minority shareholders of CSP were reduced to zero in the first quarter of 2003. Therefore none of CSP’s losses from that point forward have been allocated to the minority interest in our consolidated statements of operations. The effect of this on our results of operations was a reduction of $55.8 million to our net income in 2004 and an increase of $64.9 million to our net loss in 2005, for losses not allocated to the minority interest according to their proportionate ownership.

Accretion to redemption value of convertible redeemable preference shares

     The convertible redeemable preference shares were issued in the third quarter of 2005. We are required to accrete the carrying amounts of the convertible redeemable preference shares to their redemption values at maturity and record such accretion using the effective interest method over the remaining period until the maturity date on August 17, 2010. Such accretion adjusts net income (loss) available to ordinary shareholders. Accretion charges for 2005 were $3.2 million. There were no accretion charges for 2004.

Quarterly Results

     The following table sets forth certain unaudited consolidated financial information, including as a percentage of net revenue, for the eight fiscal quarters ended December 31, 2006.

     Reclassifications and certain immaterial classification corrections have been made to prior periods' financial statements to conform to classifications used in the current period. These include reporting operating grant income as a reduction of the expenses that the grants are intended to reimburse rather than as other income, reporting rental income and management fees as other revenue rather than as other income, reporting depreciation of rental buildings as other operating expense rather than as other expense and certain other immaterial reclassifications. Certain immaterial corrections have also been made to the financial statements for each of the quarters in 2006 including recording the 2006 Option as a derivative rather than as equity, and certain other immaterial adjustments.

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     Our consolidated statements of operations have varied and may continue to vary significantly from quarter to quarter and are not necessarily indicative of the results of any future period. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Operations — Our operating results fluctuate from quarter to quarter, which makes it difficult to predict our future performance.”

53A

	Quarter ended
	(in millions $)
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Dec 31,
	2005			2005			2005			2005			2006			2006			2006			2006
Consolidated Statements of Operations Data:
Net revenue		181.4			194.0			290.1			367.2			355.2			364.8			355.3			339.1
Cost of revenue		191.1			193.6			253.1			279.2			262.4			276.3			260.5			271.4
Gross profit (loss)		(9.7	)		0.4			37.0			88.0			92.8			88.5			94.8			67.7
Other Revenue		4.7			5.7			5.1			5.2			5.0			5.3			5.4			5.4
Operating expenses:
Research and development		27.3			27.7			31.7			35.4			34.9			37.9			42.0			38.1
Sales and marketing		10.5			10.1			11.7			10.2			13.6			11.9			14.2			15.4
General and administrative		9.3			10.7			9.1			11.0			9.7			9.8			11.0			12.1
Fab start-up costs		14.8			7.9			—			—			—			—			—			—
Other operating expenses (income), net		2.8			6.0			2.3			3.1			(0.7	)		8.4			4.3			1.7
Total operating expenses		64.7			62.4			54.8			59.7			57.5			68.0			71.5			67.3
Equity in income (loss) of SMP		(9.0	)		0.8			4.2			10.5			10.2			7.9			9.6			8.4
Other income (loss), net		0.0			0.1			(7.0	)		0.0			(7.3	)		(5.3	)		10.6			(0.7	)
Interest income		4.9			6.0			8.5			9.1			10.1			12.5			11.5			10.4
Interest expense and amortization of debt discount		(7.3	)		(14.6	)		(22.5	)		(25.2	)		(24.8	)		(22.9	)		(22.3	)		(17.9	)
Income (loss) before income taxes		(81.1	)		(64.0	)		(29.5	)		27.9			28.5			18.0			38.1			6.0
Income tax expense		3.4			3.1			5.0			1.4			6.5			5.1			11.4			0.9
Net income (loss)		(84.5	)		(67.1	)		(34.5	)		26.5			22.0			12.9			26.7			5.1
Less: Accretion to redemption value of convertible redeemable preference shares		—			—			0.8			2.4			2.4			2.4			2.3			2.3
Net income (loss) available to ordinary shareholders		(84.5	)		(67.1	)		(35.3	)		24.1			19.6			10.5			24.4			2.8

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	Quarter ended
	(as a percentage of net revenue)
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Dec 31,
	2005			2005			2005			2005			2006			2006			2006			2006
Consolidated Statements of Operations Data:
Net revenue		100.0	%		100.	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue		105.4			99.8			87.2			76.0			73.9			75.8			73.3			80.0
Gross profit (loss)		(5.4	)		0.2			12.8			24.0			26.1			24.2			26.7			20.0
Other Revenue		2.6			2.9			1.7			1.4			1.4			1.4			1.5			1.6
Operating expenses:
Research and development		15.1			14.2			10.9			9.6			9.8			10.4			11.8			11.3
Fab start-up costs		8.2			4.1			—			—			—			—			—			—
Sales and marketing		5.8			5.2			4.0			2.8			3.8			3.2			4.0			4.5
General and administrative		5.1			5.5			3.2			3.0			2.7			2.6			3.1			3.6
Other operating expenses (income), net		1.5			3.1			0.8			0.9			(0.2	)		2.3			1.2			0.5
Total operating expenses		35.7			32.1			18.9			16.3			16.1			18.5			20.1			19.9
Equity in income (loss) of SMP		(4.9	)		0.4			1.5			2.9			2.9			2.2			2.7			2.5
Other income (loss), net		0.0			0.0			(2.4	)		0.0			(2.1	)		(1.4	)		3.0			(0.2	)
Interest income		2.7			3.1			2.9			2.5			2.8			3.4			3.2			3.1
Interest expense and amortization of debt discount		(4.0	)		(7.5	)		(7.8	)		(6.9	)		(7.0	)		(6.3	)		(6.2	)		(5.3	)
Income (loss) before income taxes		(44.7	)		(33.0	)		(10.2	)		7.6			8.0			5.0			10.8			1.8
Income tax expense		1.9			1.6			1.7			0.4			1.8			1.4			3.2			0.3
Net income (loss)		(46.6	)		(34.6	)		(11.9	)		7.2			6.2			3.6			7.6			1.5
Less: Accretion to redemption value of convertible redeemable preference shares		—			—			0.3			0.6			0.7			0.7			0.7			0.7
Net income (loss) available to ordinary shareholders		(46.6	)%		(34.6	)%		(12.2	)%		6.6	%		5.5	%		2.9	%		6.9	%		0.8	%

Net revenue

     In the first quarter of 2005, the semiconductor industry continued to work through the excess inventories resulting from the market weakness experienced from the second half of 2004. We began to see a recovery in demand in the second quarter of 2005 as revenue increased sequentially by 7.0% from the first quarter of 2005 to the second quarter of 2005 . Our revenue continued to increase sequentially by 49.5% and 26.6% in the third and fourth quarters of 2005,

55

respectively. The increase in revenue in the third quarter of 2005 was due mainly to the ramp up of our 90nm shipments. Our net revenue increased in the fourth quarter of 2005 as we capitalized on the growth in revenue from our advanced technologies and also benefited from favorable market conditions. The decrease in our revenue in the first quarter of 2006 compared to the fourth quarter of 2005 was not as significant as may have been expected considering the typical seasonality decrease in the first quarter. Capacity utilization rates remained high at 82% for both the first and second quarters of 2006. During the second half of 2006, companies in the supply chain, including our customers, experienced excess inventory and seasonally weaker than usual market conditions. This resulted in the sequential decrease in our net revenue in the third and fourth quarters of 2006.

Gross profit (loss)

     Other than the first quarter of 2005 in which we recorded a negative gross margin of 5.4%, we recorded a positive gross margin for the remaining quarters from the second quarter of 2005 to the fourth quarter of 2006. The improvement in the gross margin from the first quarter of 2005 to the second quarter of 2005 was due primarily to higher shipments in the second quarter of 2005 which caused a decrease in cost per wafer due to fixed costs being spread over a larger base of shipments. The continued improvement in the gross margin sequentially in the third and the fourth quarters of 2005 was due primarily to an increase in ASP per wafer. Gross margin in each quarter from the fourth quarter of 2005 to the third quarter of 2006 remained at approximately similar levels. The sequential decrease in gross margin in the fourth quarter of 2006 was due primarily to higher cost per wafer resulting from lower production volumes over which fixed costs were allocated and a less favorable mix in the production levels.

Research and development expenses

     R&D expenses remained at approximately similar levels in the first and second quarters of 2005. The sequential increase in the third quarter of 2005 is due primarily to increased activity level at the 65nm technology node, while the sequential increase in the fourth quarter of 2005 was due primarily to increased activities related to development of design kits and intellectual property solutions for design of integrated circuits. R&D expenses remained at approximately similar levels between the fourth quarter of 2005 and the first quarter of 2006. The sequential increase in the second and third quarters of 2006 was due primarily to increased activities related to the 65nm technology node, while the development activities related to the 65nm technology node decreased in the fourth quarter of 2006 as we transitioned the development activities to the next technology node, resulting in a sequential decrease in R&D expenses from the third quarter of 2006 to the fourth quarter of 2006.

Fab start-up costs

     Fab start-up costs, all related to Fab 7, decreased in the second quarter of 2005 as Fab 7 entered commercial production during the second quarter of 2005. No fab start-up costs were recorded subsequent to the second quarter of 2005.

Other operating expenses (income), net

     Other operating expenses, net, of $6.0 million in the second quarter of 2005 included a fixed asset impairment charge of $3.9 million on assets held for sale, while other operating income, net, of $0.7 million in the first quarter of 2006 included a gain of $2.6 million from the disposal of fixed assets from Fab 1. The increase in other operating expenses, net, in the second quarter of 2006 to $8.4 million related primarily to losses resulting from foreign currency fluctuations. No significant changes in other operating expenses (income), net, were noted for the subsequent quarters in 2006.

Equity in income (loss) of SMP

     As with the results of our majority-owned fabs, the equity in income (loss) of SMP can have a material effect on our quarterly consolidated statements of operations. The equity in income (loss) of SMP for the eight fiscal quarters ended December 31, 2006 were significant amounts when compared to the net income or net loss of the respective fiscal quarters during that period, except for the second quarter of 2005.

     Other than the first quarter of 2005 in which we recognized equity in loss of SMP of $9.0 million, we recognized equity in income of SMP for the remaining quarters from the second quarter of 2005 to the fourth quarter of 2006. In the second quarter of 2005, we recognized equity in income of SMP of $0.8 million due primarily to higher revenue resulting primarily from higher shipments. The sequential increase in equity in income of SMP in the third quarter of 2005 was due primarily to lower production costs. Equity in income of SMP continued to increase sequentially in the fourth quarter of 2005 due primarily to higher revenue resulting mainly from higher shipments. Equity in income of SMP remained at approximately similar levels between the fourth quarter of 2005 and the first quarter of 2006 and decreased sequentially in the second quarter of 2006 due primarily to lower revenue resulting primarily from lower shipments. The subsequent increase in

56

equity in income of SMP in the third quarter of 2006 was due primarily to lower production costs, while the sequential decrease in the fourth quarter of 2006 was due primarily to lower revenue resulting from lower ASP per wafer and lower shipments.

     The following information summarizes our total business base revenue, which includes our share of SMP revenue for the eight fiscal quarters ended December 31, 2006. Chartered’s share of SMP revenue and net revenue, including Chartered’s share of SMP presented in the following table, are non-U.S. GAAP financial measures. We have included this information because SMP can have a material effect on our consolidated statements of operations and we believe that it is useful to provide information on our share of SMP revenue in proportion to our total business base revenue. However, SMP is a minority-owned joint venture company that is not consolidated under U.S. GAAP. We account for our 49.0% investment in SMP using the equity method. Under the strategic alliance agreement with Agere Systems Singapore, the parties do not share SMP’s net results in the same ratio as the equity holding. Instead, each party is entitled to the gross profits from sales to the customers that it directs to SMP, after deducting its share of the overhead costs of SMP. Accordingly, we account for our share of SMP’s net results based on the gross profits from sales to the customers that we direct to SMP, after deducting our share of the overhead costs. The following table provides a reconciliation showing comparable data based on net revenue determined in accordance with U.S. GAAP, which do not include our share of SMP:

	Mar 31,		Jun 30,		Sep 30,		Dec 31,		Mar 31,		Jun 30,		Sep 30,		Dec 31,
	2005		2005		2005		2005		2006		2006		2006		2006
	(in millions)
Net revenue (U.S. GAAP)	$	181.4	$	194.0	$	290.1	$	367.2	$	355.2	$	364.8	$	355.3	$	339.1
Chartered’s share of SMP revenue	$	14.7	$	25.9	$	26.4	$	32.2	$	30.9	$	28.9	$	27.8	$	24.6
Net revenue including Chartered’s share of SMP	$	196.1	$	219.9	$	316.5	$	399.4	$	386.1	$	393.7	$	383.1	$	363.7

     Additionally, the following tables provide information that indicates the effect of SMP’s operations on some of our non-U.S. GAAP performance indicators:

Mar 31, 2005

Jun 30, 2005

Sep 30, 2005

Dec 31, 2005

Excluding

Including

Excluding

Including

Excluding

Including

Excluding

Including

Chartered’s

Chartered’s

Chartered’s

Chartered’s

Chartered’s

Chartered’s

Chartered’s

Chartered’s

share of

share of

share of

share of

share of

share of

share of

share of

Quarter ended

SMP

SMP

SMP

SMP

SMP

SMP

SMP

SMP

Shipments

(in thousands)*

175.8

186.2

203.8

224.5

270.7

295.2

314.8

345.8

ASP per wafer

$

996

$

1,019

$

913

$

944

$

1,035

$

1,039

$

1,139

$

1,130

Mar 31 ,2006

Jun 30, 2006

Sep 30, 2006

Dec 31, 2006

Excluding

Including

Excluding

including

Excluding

including

Excluding

Including

Chartered’s

Chartered’s

Chartered’s

Chartered’s

Chartered’s

Chartered’s

Chartered’s

Chartered’s

share of

share of

share of

share of

share of

share of

share of

share of

Quarter ended

SMP

SMP

SMP

SMP

SMP

SMP

SMP

SMP

Shipments

(in thousands)*

318.2

349.4

327.0

355.7

307.9

337.0

295.5

322.9

ASP per wafer

$

1,089

$

1,080

$

1,089

$

1,082

$

1,136

$

1,120

$

1,135

$

1,115

Note:

* Eight-inch equivalent wafers

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Other income (loss), net

     Other loss, net, in the third quarter of 2005 was due primarily to an expense of $7.0 million related to the termination of hedging transactions and other costs as a result of our cash tender offer for and repurchase of approximately $478 million of our then outstanding $575 million 2.5% senior convertible notes due 2006. In the first quarter of 2006, we entered into an interest rate swap to economically swap the fixed-rate interest obligation associated with the 6.25% senior notes due 2013 from a fixed-rate interest obligation to a floating-rate interest obligation and also entered into the 2006 Option with GS. Other income (loss), net, in the first, second, third and fourth quarters of 2006 included gains (losses) resulting from changes in the fair value of this interest rate swap prior to its designation as a hedging instrument and changes in the fair value of the 2006 Option. Other loss, net, in the first quarter of 2006 also included an impairment loss of $2.7 million on securities classified as available-for-sale.

Interest income

     Interest income increased sequentially in each quarter from the first quarter of 2005 to the second quarter of 2006 due to higher interest rates and higher average cash balances. The sequential decrease in the third quarter of 2006 was due primarily to lower average cash balances, partially offset by higher interest rates. Interest income continued to decrease in the fourth quarter of 2006 due primarily to lower average cash balances.

Interest expense and amortization of debt discount

     Interest expense and amortization of debt discount increased sequentially from the first quarter of 2005 to the third quarter of 2005 and remained at approximately similar levels in each quarter up to the third quarter of 2006 and subsequently decreased in the fourth quarter of 2006. The sequential increase in the second and third quarters of 2005 was due to lower interest capitalization associated with capital expenditures related primarily for our 90nm and below technologies, higher average outstanding debt balances and higher interest rates. The sequential decrease in the fourth quarter of 2006 was due primarily to a recovery resulting from an approval of a withholding tax waiver associated with interest payment of an existing loan and higher interest capitalization associated with capital expenditures primarily related for our 90nm and below technologies.

Accretion to redemption value of convertible redeemable preference shares

     We are required to accrete the carrying amounts of the convertible redeemable preference shares, which were issued in the third quarter of 2005, to their redemption values at maturity and record such accretion using the effective interest method over the remaining period until the maturity date on August 17, 2010. Such accretion adjusts net income (loss) available to ordinary shareholders. In the second quarter of 2006, 1,650 convertible redeemable preference shares were converted into ordinary shares and the impact on the accretion charges arising from such conversion was not material.

LIQUIDITY AND CAPITAL RESOURCES

Current and expected liquidity

     As of December 31, 2006, our principal sources of liquidity included $719.0 million in cash and cash equivalents, and $591.4 million of unutilized banking facilities consisting of term loans and bank credit lines. $200.0 million of these unutilized banking facilities will expire on March 30, 2007 and there is no certainty that we will renew the facility related to this amount.

     There was no significant change in our working capital, which was $549.4 million and $568.5 million as of December 31, 2005 and December 31, 2006, respectively. Working capital is calculated as the excess of current assets over current liabilities.

     In March 2006, we entered into the 2006 Option with GS to replace the call option transaction that we had previously entered into with GS in August 2004 and that expired on April 2, 2006. Under the 2006 Option, GS may purchase up to 214.8 million of our ordinary shares at a price of S$2.15 per share. If the 2006 Option is exercised in full at the price of S$2.15 per share and physically settled, we would receive approximately $300 million based on an exchange rate of $1.00 = S$1.54 that could be used for repayment of debt and general corporate purposes. The 2006 Option contains early termination provisions, whereby we may choose to terminate the 2006 Option in whole or in part, triggered by the closing price of our ordinary shares reaching and maintaining specified levels for a defined period of time. Under the terms of the 2006 Option, we have the right in all cases either to issue new ordinary shares to GS or to settle the transaction in cash. If the 2006 Option is not exercised or terminated earlier, it will expire on March 29, 2011.

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The closing prices of our ordinary shares since we entered into the 2006 Option to the end of 2006 have not triggered the early termination provisions. As of December 31, 2006, GS had also not exercised its rights under the 2006 Option.

     In 2006, we issued $300.0 million of 6.25% senior notes due 2013. Following the issuance of the 6.25% senior notes due 2013, the SMBC/OCBC Term Loan was repaid in full using the proceeds from the issuance of the 6.25% senior notes due 2013 in 2006.

     Our target cash and cash equivalents balance, as of December 31, 2007 is approximately $700 million. This is based on our cash and cash equivalents of $719 million as of December 31, 2006, planned draw downs of our existing credit facilities of approximately $329 million, expected cash outflows for capital expenditures of approximately $800 million primarily for increasing 65nm and below capacity, and debt repayments of approximately $73 million in 2007. Achieving our target cash and cash equivalents balance also depends on our ability to generate operating cash flow in 2007 and will depend largely on our operations and other factors, as discussed in “Item 3. Key Information — D. Risk Factors — Risks Related To Our Operations — Our operating results fluctuate from quarter to quarter, which makes it difficult to predict our future performance” and elsewhere in this document.

     Based on our current level of operations, we believe that our cash on hand, planned use of existing credit facilities, credit terms with our vendors, and projected cash flows from operations will be sufficient to meet our 2007 capital and research and development expenditures and working capital needs. Depending on the pace of our future growth and technology upgrades and migration, we may require additional financing from time to time, including for purposes of funding the capital expenditure to bring Fab 7 to its estimated total capacity of 45,000 300-mm wafers per month. See the “— Liquidity and Capital Resources — Historic investing cash flows and capital expenditures ” section below for more details on our capital expenditures. We believe in maintaining maximum flexibility when it comes to financing our business. We regularly evaluate our current and future financing needs and may take advantage of favorable market conditions to raise additional financing.

     There can be no assurance that our business will generate and continue to generate sufficient cash flow to fund our liquidity needs in the future, or that additional financing will be available or, if available, that such financing will be obtained on terms favorable to us or that any additional financing will not be dilutive to our shareholders. We believe the following uncertainties exist regarding our liquidity:

• Ability to Increase Revenue — If our revenues and margins were to decline, our ability to generate net cash from operating activities in a sufficient amount to meet our cash needs could be adversely affected.

• Renewal of credit facilities —There is no certainty that we will renew our credit facilities which expire in 2007.

• Debt Ratings—Our ability to obtain external financing and the related cost of borrowing are affected by our debt ratings.

Historical cash flows

     The following table sets forth the summary of our cash flows for the periods presented:

	Year ended December 31,
	2004		2005		2006
	(In thousands)
Net cash provided by operating activities	$	331,684	$	404,374	$	520,670
Net cash used in investing activities		732,715		568,243		419,905
Net cash provided by (used in) financing activities		34,939		444,753		(204,987	)

Historical operating cash flows

     Net cash provided by operating activities was $331.7 million, $404.4 million and $520.7 million in 2004, 2005 and 2006, respectively. The $72.7 million increase in cash flow from operating activities in 2005 as compared to 2004 was due primarily to higher collections as a result of higher sales. The $116.3 million improvement in cash provided by operating activities between 2005 and 2006 was due primarily due to higher collections as a result of higher sales and higher dividend income from SMP, partially offset by higher payments to creditors and higher interest payments on outstanding loans in 2006.

     In 2005, pre-payments of $40.0 million were received from a customer for future purchases and to secure access to wafer capacity, of which a fixed amount per wafer will be recorded by us as additional revenue for every qualifying wafer purchased by the customer, with no future related cash inflows. There was no receipt of pre-payments for future purchases in either 2004 or 2006. We recorded revenue of $9.1 million and $11.6 million related to such arrangements with no related cash inflows in 2005 and 2006, respectively. Net cash provided by operating activities in 2005 and 2006

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also included dividends received from SMP of $29.5 million and $38.2 million, respectively. No dividends were received from SMP in 2004.

Historical investing cash flows and capital expenditures

     Net cash used in investing activities was $732.7 million, $568.2 million and $419.9 million in 2004, 2005 and 2006, respectively. Investing activities consisted primarily of capital expenditures totaling $686.3 million, $628.1 million and $554.3 million in 2004, 2005 and 2006, respectively. Capital expenditures in 2004 were primarily for our 0.13um and below technologies, while capital expenditures in 2005 and 2006 were primarily for our 90nm and below technologies. Investing activities in 2004 also included placement of a refundable deposit of $35.0 million to secure wafer capacity for one of our more advanced technologies while there were no such refundable deposits placed in 2005. We received $111.7 million in 2006 related to the refund of such deposits placed in 2004 and 2003.

     In October 2005, SMP reorganized its paid-up share capital and authorized a return of a portion to its shareholders in the form of cash, our entitlement being $20.4 million, in a capital reduction sanctioned by the High Court of Singapore. In 2005, we received $17.3 million arising from the return of capital approved in 2005. In October 2006, the board of directors of SMP approved a second capital reduction, which was subsequently approved by the High Court of Singapore and filed with the Accounting and Corporate Regulatory Authority of Singapore in November 2006. Our entitlement arising from the second return of capital from SMP was $19.1 million. In 2006, we received an additional $16.9 million arising from both the first and the second return of capital from SMP.

     We expect our capital expenditures for 2007 to be approximately $800 million, primarily for increasing 65nm and below capacity. With the above capital expenditure, Fab 7 is expected to have equipment (installed or available for installation) that is equivalent to a capacity of 25,000 300-mm wafers per month by December 2007. In December 2006, Fab 7 was equipped with a capacity of 15,000 300-mm wafers per month. We had originally planned Fab 7 to have a capacity of 30,000 300-mm wafers per month when completed. We have now revised this estimate to 39,000 300-mm wafers per month covering mainly 0.13um to 65nm technology nodes. In addition, to further align our manufacturing capabilities with our technology position, we are adding an additional phase of expansion for Fab 7 that will be focused on 65nm and 45nm technologies, to bring its total capacity to 45,000 300-mm wafers per month. The revised capacity plan will take several years to complete and depends on market conditions, customer demand, adoption of next generation technologies and our financial plans. The total capital expenditure for the revised capacity plan is expected to be approximately $4,200 million to $4,500 million, compared to our previous expectation of approximately $2,700 million to $3,000 million for the originally planned capacity of 30,000 300-mm wafers per month. As of December 31, 2004, December 31, 2005 and December 31, 2006, we have spent an accumulated total of $637.9 million, $1,201.9 million and $1,638.6 million, respectively, on the equipping of Fab 7. As of December 31, 2004, December 31, 2005 and December 31, 2006, we had commitments on contracts for capital expenditures of $312.9 million, $205.7 million and $525.2 million, respectively.

     The nature of our industry is such that, in the short-term, we may reduce our capital expenditures by delaying planned capital expenditures in response to a difficult business environment, such as the one that existed in 2001 and 2002. However, the semiconductor market is characterized by rapid technological change and the importance of economies of scale, which we expect to result in significant capital expenditure requirements. Factors that may affect our level of future capital expenditures include the degree and the timing of technological changes within our industry, changes in demand for the use of our equipment and machinery as a result of changes to our customer base and the level of growth within our industry as discussed in “Item 3. Key Information — D. Risk Factors” and elsewhere in this document.

Historical financing cash flows

     Net cash provided by financing activities was $34.9 million and $444.8 million in 2004 and 2005, respectively, while net cash used in financing activities was $205.0 million in 2006. In 2004, we obtained a loan with competitive interest rates that was guaranteed by the Export-Import Bank of the United States, or EXIM Guaranteed Loan, for a maximum of $653.1 million for purposes of financing certain capital expenditures purchased from U.S. vendors. In 2005 we issued the 5.75% senior notes due 2010, the 6.375% senior notes due 2015, the 6.00% amortizing bonds due 2010 and the convertible redeemable preference shares. The borrowings from the 5.75% senior notes due 2010, the 6.375% senior notes due 2015 and the 6.00% amortizing bonds due 2010 extended the maturity terms of our debt profile. With a portion of the proceeds from these borrowings and the issuance of the convertible redeemable preference shares, we also made repayments of debt in 2005, including the repurchase of the 2.5% convertible notes due 2006 and the related interest payments arising from our cash tender offer for the 2.5% convertible notes due 2006. In 2006, we replaced debt with short remaining terms to maturity with debt that matures over a longer term. Such repayments of debt in 2006 included the SMBC/OCBC Term

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Loan which was fully repaid in 2006 using the proceeds from the issuance of the 6.25% senior notes due 2013 in April 2006, the 2.5% senior convertible notes due 2006 which matured and were fully redeemed in April 2006 and the CSP syndicated loan which matured and was fully repaid in September 2006. Refer to Note 14 of the consolidated financial statements for more details on our outstanding loans.

     The restricted cash in 2005 and 2006 related to cash amounts reserved in a bank account and restricted for the purpose of semi-annual principal and interest repayments of the EXIM Guaranteed Loan. The increase in restricted cash in 2006 compared to 2005 was due primarily to the commencement of principal repayment of the EXIM Guaranteed Loan in early 2007. There was no restricted cash in 2004 as we only started to draw down the EXIM Guaranteed Loan in the first quarter of 2005.

Grants for research and development and training

     In 2004, 2005 and 2006 we received $19.0 million, $7.5 million and $1.9 million, respectively, in grants from various agencies of the Government of Singapore, which are included in operating cash flows. The amounts under these grants relate to a portion of depreciation expenses arising from our R&D related capital expenditures and the training and staffing costs associated with some of our process technology development programs. The grants are disbursed to us in connection with research and development carried out in Singapore based on the amount of expenditures incurred and achievement of program milestones. The main condition attached to the grants is the completion of the project to which the grant relates. Although the amount of grants we received from the Government of Singapore in 2006 was significantly lower than in 2005, we expect that the amount of such grants we may be eligible to receive to be higher in 2007. The grant income expected to be received in 2007 relates primarily to funding for capital expenditures and for the training and staffing costs associated with our 65nm process technology development programs to be incurred in Singapore. See also “Item 4, Information on our Company — B. Business Overview — Research and Development” for further details.

Off-balance sheet arrangements

     We were not a party to any off-balance sheet arrangements in 2006, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K. We do not currently have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which might be established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Outstanding indebtedness

     As of December 31, 2006, our total loans outstanding were $1,331.7 million, comprising our senior notes, amortizing bonds and other U.S. dollar loans as follows:

	As of
	December 31,
	2006
	(in thousands)
Floating rate loans:
Exim Guaranteed Loan		324,277
Bank of America Term Loan		50,000
6.00% amortizing bonds due 2010		38,433
5.75% senior notes due 2010		371,904
6.25% senior notes due 2013		297,405
6.375% senior notes due 2015		246,805
Other		2,836
Total	$	1,331,660

Refer to Note 14 of the consolidated financial statements for more details on our outstanding loans.

Loan covenant compliance

     Some of our outstanding loans and unutilized banking facilities available to us contain various financial, shareholding and other restrictive covenants that are customary to loan documents.

     Under the financial covenants, we are required to maintain certain financial conditions and/or ratios such as consolidated net worth, a total debt to net worth ratio and a historical debt service coverage ratio. We are required to ensure that our consolidated net worth will not at any time be less than $1,000 million and our total debt will not at any time exceed 180% of our total net worth.

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     Under the shareholding covenants of some of our loans, Temasek is required to own, directly or indirectly, a certain percentage of our outstanding shares, or is required to be our single largest shareholder. If Temasek fails to comply with these covenants, we could be in default under these loans and the lenders would have the right to require us to repay or accelerate our obligation to repay the outstanding borrowings under these loan documents. In some cases, a default could also cause cross-defaults under other loans and could seriously harm us. In addition, the outstanding loans and unutilized banking facilities available to us impose other restrictive covenants that are customary to loan documents, such as restrictions on incurring further indebtedness, creating security interests over our assets, payments of dividends, disposals of assets, and mergers and other corporate restructurings.

     As of December 31, 2006, we believe we were in compliance with the various financial, shareholding and other restrictive covenants in our loan documents. If we fail to comply with any of the loan covenants, we could be in default under the loan documents and the lenders would have the right to require us to repay or accelerate our obligation to repay the outstanding borrowings under the loan documents. In some cases, a default could also cause cross-defaults under other loans and could seriously harm us.

Contractual obligations

     The following table sets forth the payments due related to specific contractual obligations as of December 31, 2006:

	Payments due by period (in thousands)
			Less than		1 – 3		3 – 5		More than
	Total		1 year		years		years		5 years
Long-term debt including principal and interest (1)	$	1,714,885	$	197,965	$	283,580	$	602,791	$	630,549
Capital lease obligations including principal and interest		124,194		9,323		18,646		18,646		77,579
Capacity deposits (2)		33,766		33,766		—		—		—
Operating lease obligations		91,554		6,426		8,789		7,650		68,689
Purchase obligations under (3)
Capital expenditures		525,200		525,200		—		—		—
Technology agreements		335,463		94,366		188,847		52,250		—
Other		69,928		67,129		2,169		315		315
Other long-term liabilities		17,909		—		—		—		17,909
Total	$	2,912,899	$	934,175	$	502,031	$	681,652	$	795,041

Notes:
(1)	These amounts represent the expected principal and interest repayments at each of the periods indicated and do not include the unamortized debt discount relating to the senior notes. The 5.75% senior notes due 2010, the 6.25% senior notes due 2013 and the 6.375% senior notes due 2015 were issued at a price of 98.896%, 99.053% and 98.573%, respectively, of the principal amount. As of December 31, 2006, the carrying amounts of the 5.75% senior notes due 2010, the 6.25% senior notes due 2013 and the 6.375% senior notes due 2015 were $371.9 million, $297.4 million and $246.8 million, respectively, as the unamortized debt discount was reported as a direct reduction to the carrying amounts of the senior notes. The estimated interest repayments on floating-rate obligations were calculated using the floating interest rates related to these obligations as of December 31, 2006. Actual payments could differ from these estimates.
(2)	This amount relates to our contractual obligation to refund deposits placed with us to secure wafer capacity for one of our more advanced technologies.
(3)	We have not included purchase obligations that have been recorded on our consolidated balance sheet as of December 31, 2006. These obligations amounted to $270.7 million, $12.0 million and $213.4 million for capital expenditures, technology agreements and other purchase obligations primarily relating to operating expenses, respectively.

     In the second quarter of 2006, 1,650 out of the originally issued 30,000 preference shares were converted into ordinary shares. Assuming no further conversion or any redemption of the preference shares until the maturity date on August 17, 2010, we will redeem, out of funds legally available for such payment, each remaining preference share at a redemption price equal to $10,000 per preference share. Refer to Note 15 of the consolidated financial statements for more details on the preference shares.

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     We and Agere Systems Singapore have signed an assured supply and demand agreement with SMP. The agreement was intended to ensure that all of the fixed costs of SMP are recovered by allocating all of its wafer capacity to our company and Agere Systems Singapore in accordance with the respective parties’ equity interest in SMP and each party would bear the fixed costs attributable to its allocated capacity. In September 2004, we and Agere Systems Singapore entered into an agreement pursuant to which both parties agreed to annually reimburse any losses suffered by SMP that are attributable to the respective parties. For the year ended December 31, 2006, SMP did not suffer any losses that were attributable to our company and accordingly no reimbursements were payable by our company to SMP. There were also no such reimbursements payable to SMP by our company in 2005 and 2004. To the extent that the number of wafers started for us is less than our allocated capacity in the future, there is no assurance that there will be no reimbursements payable to SMP by our company in respect of unrecovered fixed costs of SMP.

     We have disclosed the expected timing of payment of obligations and the amounts to be paid based on current information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts or events for some obligations.

Special Tax Status

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

• the manufacture of integrated circuits using submicron technology at Fab 2 for a ten-year period beginning July 1, 1996. The pioneer status expired on June 30, 2006;

• the manufacture of integrated circuits using submicron technology at Fab 3 for a ten-year period beginning July 1, 1999;

• the wafer fabrication of ASIC and other advanced semiconductor devices at Fab 6 for a ten-year period beginning September 1, 2003; and

• the wafer fabrication of integrated circuits at Fab 7 for a fifteen-year period beginning October 1, 2005.

     Under the Economic Expansion Incentives (Relief from Income Tax) Act (Chapter 86) of Singapore, we have also been granted:

• post-pioneer enterprise status for the manufacture of integrated circuits using submicron technology at Fab 2 for a five-year period beginning July 1, 2006;

• development and expansion incentive status for the manufacture of integrated circuits using submicron technology at Fab 3 for a five-year period beginning July 1, 2009; and

• development and expansion incentive status for the wafer fabrication of ASICs and other advanced semiconductor devices at Fab 6 for a five-year period beginning September 1, 2013.

     During the period in which our pioneer status is effective, subject to our compliance with certain conditions, income arising from our pioneer trade is exempted from Singapore income tax. During the period in which our post-pioneer status or development and expansion incentive status is effective, subject to our compliance with certain conditions, income arising from the post-pioneer activities or development and expansion incentive activities is taxed at a concessionary rate of 10%.

     The profits arising from our pioneer trade which are tax-exempted or our post-pioneer trade and development and expansion activities which have been taxed at a concessionary rate of 10% may be distributed as tax-exempt dividends. Holders of the ordinary shares will not be subject to Singapore income tax on such dividends. Please see “Item 10. Additional Information — E. Taxation — Singapore Taxation — Dividends paid out of Tax-Exempt income or Income subject to Concessionary Tax Rates” for information regarding the taxation of such dividends.

     Under Singapore tax law, loss carryforwards and tax depreciation of property, plant and equipment (hereinafter referred to as wear and tear allowances) are deductible to the extent of income before loss carryforwards and wear and tear allowances. Unutilized losses and wear and tear allowances can be carried forward indefinitely to set off against income in future tax years, subject to our compliance with certain conditions.

     Income arising from activities not covered under the pioneer status, post-pioneer status or development and expansion incentive status (hereinafter referred to as non-qualifying income) is taxed at the normal Singapore corporate tax rate of 20% for the year ended December 31, 2006. Thus, the income tax expense for the year ended December 31, 2006 is primarily on non-qualifying income, such as interest income, rental income and income from the sale of wafers manufactured by technologies that are not granted preferential tax treatment.

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Foreign Currency Risk

     See “Item 11, Quantitative and Qualitative Disclosures about Market Risk — Foreign currency risk.”

RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

     In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial instruments”, which amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS No. 155 provides guidance to simplify the accounting for certain hybrid instruments by permitting fair value remeasurement for any hybrid financial instrument that contains an embedded derivative, as well as clarifies that beneficial interests in securitized financial assets are subject to SFAS No, 133. In addition, SFAS No. 155 eliminates a restriction on the passive derivative instruments that a qualifying special-purpose entity may hold under SFAS No. 140. SFAS No. 155 is effective for all financial instruments acquired, issued or subject to a new basis occurring after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of SFAS No. 155 is not expected to have a material impact on our consolidated financial position or consolidated statements of operations.

     In June 2006, the FASB ratified the consensus reached by the Emerging Issue Task Force, or EITF, on Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)”, or EITF 06-3. EITF 06-3 states that a company should disclose its accounting policy regarding the gross or net presentation of certain taxes. If taxes included in gross revenues are significant, a company should disclose the amount of such taxes for each period for which an income statement is presented (i.e., both interim and annual periods). Taxes within the scope of EITF 06-3 are those that are imposed on and concurrent with a specific revenue-producing transaction, such as sales tax or value-added tax. Taxes assessed on an entity’s activities over a period of time, such as gross receipts taxes, are not within the scope of the issue. The guidance in this consensus is effective for the first interim reporting period beginning after December 15, 2006, which is the first quarter of our fiscal year 2007. The adoption of EITF 06-3 is not expected to have a material impact on our consolidated statements of operations or financial position.

     In July 2006, the FASB issued FASB interpretation No. 48, or FIN 48, “Accounting for Uncertainty in Income Taxes.” This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We do not expect any material impact on our consolidated financial position or consolidated statements of operations upon initial adoption of FIN 48.

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements and eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are required to adopt this Statement in the first quarter of our fiscal year 2008 and are currently assessing the impact of adopting SFAS No. 157 but do not believe the adoption of SFAS No. 157 will have a material impact on our consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, “Fair Value Option for Financial Assets and Financial Liabilities”. Under SFAS No. 159, entities will be permitted to measure various financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the fair value option). SFAS No. 159 is effective for financial statements issued for fiscal years beginning after Nov. 15, 2007. We are currently assessing the impact SFAS No. 159 will have on our consolidated financial position and consolidated statements of operations.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

     The following table sets forth, as of January 31, 2007, the name, age and position of each director and member of senior management of our company. The business address of our directors and senior management is our principal office in Singapore.

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Board of Directors

Name	Age		Position
James A. Norling(1)(2)(4)		64	Chairman of the Board
Chia Song Hwee(1)		44	Director
Andre Borrel(2)(3)(4)		70	Director
Charles E. Thompson(2)(4)		77	Director
Tsugio Makimoto, PhD		69	Director
Tay Siew Choon(1)(2)(4)		59	Director
Peter Seah Lim Huat(1)(2)(4)		60	Director
Philip Tan Yuen Fah(3)		62	Director
Pasquale Pistorio		71	Director
Steven H. Hamblin(3)		58	Director
Maurizio Ghirga(3)(5)		68	Director
Senior Management
Name	Age		Position
Chia Song Hwee		44	President and Chief Executive Officer
George Thomas		53	Senior Vice President and Chief Financial Officer
Ang Kay Chai		47	Senior Vice President, Fab Operations
Hsia Liang Choo, PhD		58	Senior Vice President, Technology Development
Michael J. Rekuc		57	Senior Vice President, Worldwide Sales and Marketing
Simon Yang, PhD		47	Senior Vice President and Chief Technology Officer
Roy Kannan(6)		54	Vice President and Chief Information Officer
Leow Kim Keat		44	Vice President, Customer Support Operations and Supply Management Organization
Ng Seng Huwi		49	Vice President, Human Resources
Tan Seng Chai		44	Vice President, Strategy Resources
Tony Tsai		57	Vice President, Quality and Reliability Assurance

Notes:
(1)	Member of the Executive Committee.
(2)	Member of the Executive Resource and Compensation Committee, or the ERCC.
(3)	Member of the Audit Committee. Mr. Andre Borrel ceased to be a member of the Audit Committee on February 1, 2007.
(4)	Member of the Nominating Committee.
(5)	Appointed as a Director to our Board of Directors on November 2, 2006.
(6)	Mr. Roy Kannan will be leaving our company and his last day is on March 9, 2007. Mr. Tan Seng Chai will, with effect from March 10, 2007, act as our interim Chief Information Officer.

Biographical Information

James A. Norling

     James A. Norling has served on our Board of Directors since March 1, 2001 and as our Chairman of the Board since August 1, 2002. Mr. Norling also served as interim Chief Executive Officer from May 2002 to June 2002. He has 37 years of working experience in the electronics industry. Mr. Norling was with Motorola Inc. from 1965 to 2000 holding various positions, including President of the Semiconductor Products Sector in 1986, President of the Europe, Middle East and Africa region in 1993, Deputy to the Chief Executive Officer in 1998 and President of the Personal Communications Sector in 1999 until his retirement. He has previously served as a board member and the Chairman of the Semiconductor Industry Association. Mr. Norling is currently a board member of Harley-Davidson, Inc. Mr. Norling holds a Bachelor of Science and a Master’s degree in Electrical Engineering from the University of Illinois.

Chia Song Hwee

     Chia Song Hwee has served on our Board of Directors and as our President and Chief Executive Officer since June 2002. Prior to his appointment, Mr. Chia had served as our Chief Administrative Officer since September 2000, as our Senior Vice President since February 2000 and as our Chief Financial Officer since December 1997. Mr. Chia was our Director of Finance from April 1996 to December 1997. Since joining our company in 1996, his responsibilities have steadily expanded to include the areas of finance, strategic development, technology alliances and legal. From May 1992

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through December 1994, Mr. Chia was Regional Financial Controller (Asia and Middle East) for Anadrill Technical Services, Inc. From January 1995 to April 1996, Mr. Chia was Regional Controller (Asia, Australia and Middle East) for Sedco Forex Technical Services, Inc. Mr. Chia received his Bachelor of Business (Accountancy), with distinction, from Edith Cowan University, Australia and is a member of CPA Australia.

Andre Borrel

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

Charles E. Thompson

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

Tsugio Makimoto, PhD

     Dr. Tsugio Makimoto has served on our Board of Directors since September 1999 and has more than 40 years of working experience in the semiconductor industry. He is currently a consultant in the field of electronics after retiring from Sony Corporation, or Sony, in May 2005. He joined Sony in 2000 as Corporate Senior Executive Vice President, followed by Corporate Advisor in 2001. Prior to joining Sony, Dr. Makimoto has worked for Hitachi Ltd since 1959 where he has held various senior positions, including Executive Managing Director in 1993, Senior Executive Managing Director in 1997 and Corporate Chief Technologist since 1998. Dr. Makimoto was an auditor of Hitachi Chemical Corporation from 2000 to 2003. Dr. Makimoto is currently the Chairman of PDF Solutions (Japan) KK. He was nominated a Fellow of the Institute of Electrical and Electronics Engineers, Inc. in 1997. Dr. Makimoto was also a visiting professor at Toyo University (1999-2001).

Tay Siew Choon

     Tay Siew Choon has served on our Board of Directors since July 2001. Mr. Tay was formerly a corporate advisor to Singapore Technologies Pte Ltd which ceased operations on December 31, 2004. Prior to that, he was Managing Director and Chief Operating Officer in Singapore Technologies Pte Ltd. From 1998 to 2000, Mr. Tay was the Managing Director and Deputy Chief Executive Officer of SembCorp Industries Ltd and has held various senior positions in Singapore Technologies Industrial Corporation Ltd. Mr. Tay currently also sits on the board of various companies including Straco Corporation Limited, Pan-United Corporation Ltd, TauRx Therapeutics Ltd and Civil Aviation Authority of Singapore. Mr. Tay received his Bachelor of Engineering (Electrical) (Honors) from Auckland University and his Masters of Science in Systems Engineering from the former University of Singapore (now National University of Singapore).

Peter Seah Lim Huat

     Peter Seah has served on our Board of Directors since January 2002. Mr. Seah is currently a member of the Temasek Advisory Panel. Prior to the cessation of operations of Singapore Technologies Pte Ltd on December 31, 2004, Mr. Seah was the President and Chief Executive Officer of Singapore Technologies Pte Ltd. Before joining Singapore Technologies Pte Ltd, he was a banker for 32 years, 22 of which were with the Overseas Union Bank Ltd and before that with Citibank. He retired from his position as Vice Chairman and Chief Executive Officer at Overseas Union Bank Ltd in September 2001. Mr. Seah currently sits on the board of various companies including SembCorp Industries Ltd, CapitaLand Ltd, ST Engineering Ltd and STATS ChipPAC Ltd (formerly known as ST Assembly Test Services Ltd). Mr. Seah graduated from the former University of Singapore in 1968 with an honors degree in Business Administration. For his public service, he was awarded the Public Service Medal (1995) as well as the Public Service Star (1999) by the Singapore Government.

Philip Tan Yuen Fah

     Philip Tan has served on our Board of Directors and as our Chairman of the Audit Committee since October 2003. He also currently sits on the board of various companies including Guthrie GTS Ltd and Singapore Food Industries Ltd. Mr. Tan was in the commerce and industry sector for 11 years prior to entering the banking and financial sector. He joined

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the Overseas Union Bank in 1979 holding various senior positions and retired in 2002 as Executive Vice President, Corporate Services. Mr. Tan holds a Bachelor of Accountancy from the University of Singapore and a Bachelor of Laws from the University of Wolverhampton, UK. He also holds a post-graduate diploma in Business Administration from the Manchester Business School, UK. He is a Fellow of the Institute of Certified Public Accountants of Singapore, CPA (Australia), Chartered Association of Certified Accountants, UK and an Associate of the Chartered Institute of Management Accountants, UK.

Pasquale Pistorio

     Pasquale Pistorio has served on our Board of Directors since May 2005 and is currently the Honorary Chairman of STMicroelectronics. Mr. Pistorio brings to Chartered more than 38 years of industry leadership experience. Mr. Pistorio is known for his business acumen, his contributions to Europe’s microelectronics industry, and his strong advocacy of environmental protection and corporate social responsibility. Among his numerous accolades, Mr. Pistorio received the “Lifetime Achievement Award” from Reed Electronics Group in 2003, was named first place in the “Top 25 Movers and Shakers” ranking by Time magazine in 2002, and was voted among the top 50 “Stars of Europe” by Business Week magazine. Mr. Pistorio’s greatest achievement was the integration of SGS Group with Thomson Semiconducteurs in 1987 to form SGS-THOMSON Microelectronics, which was renamed STMicroelectronics in 1998. Mr. Pistorio served as STMicroelectronics’ president and Chief Executive Officer from 1998 until his retirement in March 2005, during which STMicroelectronics grew to become one of the world’s top semiconductor companies. Mr. Pistorio holds a degree in electronics from the Polytechnic of Turin, Italy.

Steven H. Hamblin

     Steven H. Hamblin has served on our Board of Directors and as a member of the Audit Committee since January 2006. He is currently an independent consultant and also sits on the Board of STATS ChipPAC Ltd, which is also dual listed on the Singapore Exchange and Nasdaq. Mr. Hamblin brings to Chartered more than 30 years of experience in the electronics industry. From 1984 to 1996, Mr. Hamblin held various senior positions in Compaq Computer Corporation or Compaq, including Vice President of Systems Division Operations, Vice President of Finance and Manufacturing Strategy, and Vice President and General Manager of the Asia/Pacific Division. Prior to joining Compaq, Mr. Hamblin held various financial controller positions with Texas Instruments and General Instrument. Mr. Hamblin holds a Bachelor of Science degree in Civil Engineering from the University of Missouri, Columbia and a Master of Science degree in Industrial Administration from Carnegie-Mellon University. Mr. Hamblin is also a licensed CPA in the state of Texas.

Maurizio Ghirga

     Maurizio Ghirga has served on our Board of Directors and as a member of the Audit Committee since November 2006. Mr. Ghirga brings to Chartered more than 40 years of experience in the electronics and oil industries. Mr. Ghirga held various senior positions with ESSO Italy and ESSO Chemical Italy, both subsidiaries of EXXON Co. prior to joining SGS Microelectronics in 1983 as the chief financial officer. After a merger of SGS Microelectronics and Thomson Semiconductors and the formation of SGS-Thomson (now known as STMicroelectronics) in 1987, Mr. Ghirga was appointed as the corporate vice president and chief financial officer. Mr Ghirga, in his capacity as chief financial officer of ST Microelectronics, contributed to the initial public offering of ST Microelectronics on the New York Stock Exchange in 1994. After his retirement in 2003, Mr. Ghirga served as the senior advisor to the president of ST Microelectronics. From early 2005 to the middle of 2006, Mr. Ghirga was the president and chief executive officer of Accent srl Design Technology Services, a silicon-design joint venture company between ST Microelectronics and Cadence Design Systems Inc. Mr. Ghirga holds degrees in economics and finance at the University of Genoa.

George Thomas

     George Thomas has served as our Senior Vice President and Chief Financial Officer since March 2005 and oversees our company’s finance, investor relations and legal functions. He also served as our Vice President and Chief Financial Officer since August 2002 and Vice President of Finance since September 2000. He joined our company in May 2000 as Group Controller. Mr. Thomas began his Finance/Accounting career with Canadian Met-Chem, a subsidiary of U.S. Steel Corporation as Internal Auditor and Senior Accounts Executive in 1978. From June 1983 to April 2000, he held various positions at Schlumberger’s Sedco Forex Division, including Controller, Operations-Worldwide, Regional Controller, Asia & Australia, Controller, Indonesia Operations, and Finance Manager of Arabian Drilling Company, a joint venture between Schlumberger and Petromin. He has served on the Board of Directors of Chartered Silicon Partners Pte Ltd since April 2001 and the Board of Directors of Silicon Manufacturing Partners Pte Ltd as an alternate director since July 2003. Mr. Thomas received his bachelor degree in Commerce and in General Law. He is also a member of the Institute of Chartered Accountants of India.

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Ang Kay Chai

     Ang Kay Chai has served as our Senior Vice President, Fab Operations, since September 2002. Mr. Ang is responsible for the manufacturing strategy and operational excellence across all of Chartered’s fabs. Mr. Ang returned to Chartered after spending four years at Silterra Malaysia Sdn, Bhd., where he was responsible for fab operations. There, he led teams in technology partner selection, green field fab start-up, transfer of 0.25um and 0.18um technology and development of foundry-compatible process capabilities. Prior to that, Mr. Ang spent nine years at Chartered where he led the initial conception, development and ramp of Fab 2 and Fab 3. Mr. Ang first joined Chartered in 1989 and was one of the pioneers on Chartered’s Fab 1 team. Mr. Ang holds a Master of Science degree in Engineering from the University of Texas and a Bachelor of Engineering degree from the National University of Taiwan.

Hsia Liang Choo, PhD

     Dr. Hsia Liang Choo has served as our Senior Vice President, Technology Development since June 2005. He is responsible for Chartered’s technology development organization and directing our company’s efforts toward technology leadership in the foundry industry. From October 2000 to May 2005, Dr. Hsia served as our Vice President of Advanced Module Development and led Chartered’s collaborative development efforts at 90nm and 65nm. Dr. Hsia draws on nearly 25 years of experience in semiconductor technology development. Prior to joining Chartered, Dr. Hsia was director of technology development at United Microelectronics Corporation in Taiwan. He also spent over a decade with IBM as an advisory scientist in various divisions. Dr. Hsia was awarded 25 US patents with 16 more pending, and his work was featured in more than 80 technical publications. Dr. Hsia holds a doctorate degree in physics from Ohio State University.

Michael J. Rekuc

     Michael J. Rekuc has served as our Senior Vice President, Worldwide Sales and Marketing since August 2003. He has the overall responsibility for global sales, marketing and services, customer support and regional business operations. From January 1999 to July 2003, Mr. Rekuc served as our President of our Americas operations. Mr. Rekuc has over 30 years of electronics and semiconductor industry experience. From 1976 until joining Chartered in January 1999, Mr. Rekuc held sales, management and director positions in the semiconductor product sector of Motorola Inc. His last few positions at Motorola Inc. included worldwide responsibilities as global sales director for wireless subscriber systems and a two-year role as vice president and sales director for personal computers, computing and peripherals. Mr. Rekuc holds a BSEE from Lawrence University of Technology.

Simon Yang, PhD

     Dr Simon Yang has served as our Senior Vice President and Chief Technology Officer since October 2005. Dr. Yang is responsible for developing and driving strategic programs in support of Chartered’s corporate objectives and long-term strategic direction. Dr. Yang brings more than 18 years of experience in the semiconductor industry. He previously held key positions in technology development and advanced fab operations. Dr. Yang was a senior vice president for logic technology development and manufacturing at Semiconductor Manufacturing International Corporation (SMIC) and prior to that, a director of logic device and process integration at Intel. Prior to joining Chartered, he was president and Chief Executive Officer of Ciwest, a semiconductor start-up based in China. Dr. Yang has been awarded 12 U.S. patents and is the author or co-author of more than 30 technical papers. Dr. Yang holds a bachelor’s degree in electrical engineering from Shanghai University of Science and Technology, and a master’s degree in physics and doctorate degree in materials engineering from Rensselaer Polytechnic Institute in Troy, New York.

Roy Kannan

     Roy Kannan has served as our Vice President and Chief Information Officer, or CIO, since September 2003. Mr. Kannan is responsible for our global information technology organization and for driving our company’s strategic initiative to extend a virtual business systems network for supporting the business systems network for supporting the business requirements of customers, partners, suppliers and employees. He joined us from the RGM group, a multi-divisional conglomerate, where he was the CIO. His responsibilities included the revamp of our company’s data, voice, network and security infrastructure, as well as the management of information systems, or IS, operations and data centers. During Mr. Kannan’s more than 20 years of experience in the IS industry, he has held senior positions at leading IS solutions companies such as Compaq, Mastek, Digital Equipment and Patni. Mr. Kannan holds a Bachelor of Chemical Engineering from the Indian Institute of Technology, Madras, and a post-graduate diploma in management from the Indian Institute of Management, Ahmedabad. Mr. Roy Kannan will be leaving our company and his last day is on March 9, 2007.

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Leow Kim Keat

     Leow Kim Keat was appointed vice president, customer support operations and supply management organization (SMO) in November 2006. Previously vice president of customer support operations, Mr. Leow took on the added role of SMO leadership in November 2006, overseeing the company’s relationships with vendors and turnkey partners. Meanwhile, Mr. Leow continues to lead the customer support operations, as he has since February 2002, with responsibilities for corporate factory planning, industrial engineering, factory capacity; business planning and planning systems as well as tapeout operations and pricing. Mr. Leow has over 21 years of experience in semiconductor manufacturing, including more than 14 years with Chartered. Prior to Chartered, Mr. Leow spent over seven years at Texas Instruments Singapore where he held various manufacturing positions. Mr. Leow holds a Bachelor of Science from the National University of Singapore and a Graduate Diploma in Business Administration from the Singapore Institute of Management.

Ng Seng Huwi

     Ng Seng Huwi has served as our Vice President, Human Resources since July 2003. Mr. Ng is responsible for the overall development and implementation of policies and processes in our company’s human resources management system. Mr. Ng brings with him extensive work experience in a number of large multi-national companies. He joined us from Praxair Inc., where he was vice president of Asia Human Resources with responsibilities that included ensuring organizational effectiveness, improving productivity and managing performance. During his 24-year professional career, Mr. Ng has lived and worked around the world, holding a variety of human resources, engineering and operations positions in global companies, including Schlumberger, Unilever and ICI. Mr. Ng holds a Bachelor of Engineering (Honors) from the University of Aberdeen in Scotland and an MBA from the University of Sheffield, England.

Tan Seng Chai

     Tan Seng Chai has served as our Vice President, Strategy Resources since July 2003. Mr. Tan has overall responsibility for the coordination of Chartered’s long-term strategic initiatives and serves as the liaison with the management team, as well as the external communication teams. Prior to his appointment, Mr. Tan served as our Vice President, Human Resources from July 1999 to July 2003. He joined our company in April 1996 as a human resource manager. Mr. Tan has more than 17 years of experience in the semiconductor industry. He began his career at National Semiconductor Manufacturer Pte Ltd in 1987 where he held various positions in engineering, production and human resource management. Mr. Tan later joined Creative Technology Ltd in 1994 and prior to joining our company, he was Creative Technology Ltd’s Senior Manager, Human Resource. Mr. Tan holds a Bachelor of Engineering (Honors) from the National University of Singapore in 1987 and a Master of Science (Industrial and System Engineering) from the National University of Singapore in 1991.

Tony Tsai

     Tony Tsai has served as our Vice President, Quality and Reliability Assurance since October 2006. Mr. Tsai is responsible for our quality and reliability assurance operations. Mr. Tsai has over 30 years of experience in driving quality in manufacturing operations. Before joining Chartered, he spent more than 10 years with Powerchip Semiconductor Corporation, where he last held the position of chief quality officer. Prior to that, Mr. Tsai was head of reliability and quality assurance operations at Motorola Taiwan. He also held quality control and assurance positions in Bourns (Electronics) Taiwan and Precision Monolithic Incorporation, an analog integrated circuit testing company which has since been bought over by Analog Devices Inc. Mr. Tsai holds a Bachelor of Electronics Engineering from Tamkang University, Taiwan, and an Executive Master of Business Administration from the National Chiao Tung University, Taiwan.

B. COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT

     Our company’s total compensation framework is aimed to link our employees’ compensation to annual overall business and personal performance targets, and create sustained wealth for the shareholders. To ensure competitiveness, we consistently benchmark our total compensation plan with relevant market practices to attract and retain talents in the tight market human capital environment in the semiconductor industry.

     Our compensation mix consists of annual base salary, short-term incentives, long-term incentives and other benefits. We provide competitive annual base salary to our employees. Short-term incentives are paid in the form of variable cash bonuses on a quarterly and annual basis. Employees are rewarded for meeting short- term company financial targets. The short-term incentives are also based on overall individual performance and behavioral ratings.

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     The long-term incentives comprise deferred retention plans for critical resources and share-based compensation plan. Deferred retention plans refer to compensation schemes where monetary rewards are granted to employees who are our critical resources but the payments are deferred over a period of time. We currently have three share-based compensation plans, namely our Share Option Plan 1999, or the 1999 Option Plan, our Chartered Employee Share Purchase Plan, or Chartered ESPP 2004, and the Share Purchase Plan for employees of SMP, or SMP ESPP 2004. The objective of the share-based compensation plans is to reward key employees for achieving long-term company targets and to create employee share ownership. Participation in the share-based compensation plan depends on the individual responsibility, performance level and contributions to the business. Other benefits provided to employees include leave, medical, group insurance and other employee welfare benefits, which we believe are comparable to industry practices. We also regularly organize activities for employees and their families to enhance their work-life balance.

     Our overall compensation philosophy is to ensure competitive annual base salary and benefits to our employees, with variable components tied to delivery of company financial results, and individual performance and contributions to the business.

     To drive growth and profitability of the company and to motivate our senior management and employees to work towards achieving the company’s annual and long-term performance goals, the ERCC has introduced, and may from time to time introduce, compensation schemes such as performance bonus, executive incentive plans and share-based compensation plans. At the 2007 shareholders’ annual general meeting, we intend to propose the adoption of two new share-based compensation plans, namely, the Restricted Share Unit Plan 2007 and the Performance Share Unit Plan 2007 for shareholders’ approval. More details will be provided in the proxy statement for the annual general meeting to be distributed to the shareholders.

     During 2006, we granted options to purchase 4,750,000 ordinary shares to our directors and senior management. These options were granted under our Option Plan 1999. The exercise price of these options is S$1.21. The expiration dates of these options range from August 25, 2011 to August 26, 2016, subject to annual vesting requirements. See “Item 6. Directors, Senior Management and Employees — E. Share ownership for Directors and Senior Management” for further details.

     The aggregate compensation we paid to or accrued for all of our directors and senior management for services rendered to us and our subsidiaries during the fiscal years ended December 31, 2005 and 2006 were approximately $5.2 million and $6.0 million, respectively. The increase is mainly due to the increase in retainer fees payable to directors and the variable bonus awarded to the senior management (including amounts paid to or accrued for our Chief Executive Officer and President and our top five senior executives) in view of the goals attained and performance of our company in 2006.

     We also provide our directors and our senior management with customary director or senior management insurance, as appropriate. Our President and Chief Executive Officer does not have a guaranteed minimum annual bonus.

     We provide a table below setting out the compensation paid or proposed to be paid to our directors for services rendered during the fiscal year ended December 31, 2006.

     We also provide below a table setting out the aggregate compensation paid or proposed to be paid to our Chief Executive Officer and President and our top five senior executives for services rendered during the fiscal year ended December 31, 2006. The table also sets out the names of the top five senior executives, their compensation categorized in the bands of $200,000 and a breakdown in percentage terms of the remuneration earned through base salary, variable or performance-related bonuses, benefits in kind and share options granted.

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     Compensation table for directors for services rendered in the year ended December 31, 2006

											Options		Exercise
							Director’s				Granted		Price
	Salary(1)		Bonus(2)		Others(3)		Fees(4)		Total		in 2006		S$		Exercise Period
	(US$ in thousands, except options data)
Chia Song Hwee		490		469		149		—		1,108		1,000,000		1.21	25/08/2007 to 25/08/2016
James A. Norling		—		—		—		108		108		120,000		1.21	25/08/2007 to 25/08/2011
Andre Borrel		—		—		—		66		66		70,000		1.21	25/08/2007 to 25/08/2011
Charles E. Thompson		—		—		—		57		57		70,000		1.21	25/08/2007 to 25/08/2011
Tsugio Makimoto		—		—		—		50		50		70,000		1.21	25/08/2007 to 25/08/2011
Tay Siew Choon		—		—		—		45		45		70,000		1.21	25/08/2007 to 25/08/2011
Peter Seah Lim Huat		—		—		—		51		51		95,000		1.21	25/08/2007 to 25/08/2011
Philip Tan Yuen Fah		—		—		—		49		49		95,000		1.21	25/08/2007 to 25/08/2011
Pasquale Pistorio		—		—		—		51		51		70,000		1.21	25/08/2007 to 25/08/2011
Steven H. Hamblin(5)		—		—		—		61		61		70,000		1.21	25/08/2007 to 25/08/2011
Sum Soon Lim(6)		—		—		—		18		18		—		—	—
Robert E. La Blanc(6)		—		—		—		23		23		—		—	—
Maurizio Ghirga(5)		—		—		—		12		12		—		—	—
Total as of December 31, 2006		490		469		149		591		1,699
Total as of December 31, 2005		406		194		35		463		1,098

Notes:
(1)	Base salary (inclusive of employers’ Central Provident Fund, or CPF).
(2)	Bonus paid in February 2007 for services rendered in 2006, inclusive of employer CPF contribution.
(3)	Allowances (inclusive of employers’ CPF) and others.
(4)	Shareholders’ approval will be sought at our annual general meeting to be held in April 2007 for the payment of our directors’ fees of approximately $591,000 for the fiscal year ended December 31, 2006.
(5)	Messrs. Steven H. Hamblin and Maurizio Ghirga were appointed as our Directors in January 2006 and November 2006, respectively.
(6)	Messrs Sum Soon Lim and Robert E. La Blanc. retired from our Board of Directors in April 2006.
(7)	For disclosure purposes, all payments in Singapore dollars are converted to United States dollars based on the exchange rate of S$1.5418 = US$1.00 as of December 31, 2006.

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     Compensation table for Chief Executive Officer and President and top five senior executives for services rendered in the year ended December 31, 2006.

													Total Options
	Salary			Bonus			Others			Total			Granted in 2006		Exercise Price		Exercise Period
	(1)			(2)			(3)							(4)	S$
	(US$ in thousands, except options data)
Above US$900,000
Chia Song Hwee		490			469			149			1,108			1,000,000		1.21	25/08/2007 to 25/08/2016
		44	%		42	%		14	%		100	%
US$700,000 –US$899,000
Nil
US$500,000 – US$699,000
Aggregate of top five senior executives		1,694			613			716			3,023			2,100,000		1.21	25/08/2007 to 25/08/2016
Average per person		339			123			143			605
Ang Kay Chai		65	%		26	%		9	%		100	%		400,000		1.21	25/08/2007 to 25/08/2016
George Thomas		56	%		22	%		22	%		100	%		400,000		1.21	25/08/2007 to 25/08/2016
Hsia Liang Choo		50	%		13	%		37	%		100	%		400,000		1.21	25/08/2007 to 25/08/2016
Michael J Rekuc		58	%		16	%		26	%		100	%		400,000		1.21	25/08/2007 to 25/08/2016
Yang Simon Shi-Ning		53	%		25	%		22	%		100	%		500,000		1.21	25/08/2007 to 25/08/2016

Notes:
(1)	Base salary (inclusive of employers’ Central Provident Fund, or CPF).
(2)	Bonus paid in February 2007 for services rendered in 2006, inclusive of employer CPF contribution.
(3)	Allowances (inclusive of employers’ CPF) and others.
(4)	In number of ordinary shares.
(5)	For disclosure purposes, all payments in Singapore dollars are converted to United States dollars based on the exchange rate of S$1.5418 = US$1.00 as of December 31, 2006.

C. BOARD PRACTICES

BOARD COMPOSITION

     Our Articles of Association set the minimum number of directors at two. We currently have 11 directors. A portion of our directors (including our President and Chief Executive Officer) retire by rotation and are re-elected at each annual general meeting of shareholders. The number of directors retiring and eligible to stand for re-election 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 re-election or appointment standing for re-election. Our contracts with our directors (and also our senior management) do not have fixed expiry dates but can be terminated by either party subject to notice provisions. None of our directors receive benefits upon termination of their appointment in their capacity as directors. Messrs. Sum Soon Lim and Robert E. La Blanc retired at our annual general meeting of shareholders in April 2006 and did not seek re-election. Messrs. Steven H. Hamblin and Maurizio Ghirga were appointed to our Board of Directors on January 1, 2006 and November 2, 2006, respectively.

     As of December 31, 2006, Temasek, through its subsidiary, ST Semiconductors, beneficially owned approximately 59.56% of our outstanding ordinary shares. As such, it is able to control actions over many matters requiring approval by our shareholders, including the election of directors.

     Under Nasdaq rules, companies that satisfy the definition of a “Controlled Company” may be exempt from certain

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regulatory requirements. The regulatory requirements which a “Controlled Company” is exempt from include:

• the requirement that a majority of Board members must be independent;

• the requirement that the compensation committee must be comprised solely of independent directors, or that compensation of our senior management must be made by a majority of the independent directors on the full Board; and

• the requirement that the nomination committee must be comprised solely of independent directors or that nominations must be made by a majority of the independent directors on the full Board.

     A “Controlled Company” is defined as a company of which more than 50% of the voting power is held by an individual, group or another company. As Temasek through its subsidiary owns more than 50% of our outstanding ordinary shares, our company falls under the definition of “Controlled Company” and our Board has resolved to rely on the exemption for a “Controlled Company” as provided under the Nasdaq rules. However, our Board may from time to time review this decision.

     The Board of Directors held five meetings during the fiscal year ended December 31, 2006, including four regularly scheduled meetings and one special meeting. The Board of Directors also held meetings without senior management in regular sessions which are generally held immediately after a regularly scheduled Board meeting.

Committees of the Board of Directors

Executive Committee

     The Executive Committee of our Board of Directors was established to enable our Board to delegate some of its powers and functions regarding the governing of the affairs of our company and our subsidiaries to the Executive Committee in order to facilitate timely decision-making processes within the limits of authority as determined by our Board. The members of the Executive Committee are Messrs. James A. Norling (chairman), Peter Seah Lim Huat, Tay Siew Choon and Chia Song Hwee. The Executive Committee held one meeting during the fiscal year ended December 31, 2006.

Audit Committee

     The Audit Committee of our Board of Directors consists of three members. The Audit Committee reviews, acts on and reports to the Board of Directors regarding various auditing and accounting matters. In particular, the Audit Committee reviews the financial statements of our company, the scope and results of annual audits (both internal and external), the recommendations of our independent auditors and the response of our company’s management to both the internal and external audits. The Audit Committee met four times in 2006 with the external and internal auditors without the presence of management. It also oversees related party transactions, including all material transactions between us and the Temasek group. In December 2004, the Audit Committee adopted a Whistleblower Program to encourage ethical conduct and facilitate disclosures. In addition, the Audit Committee has also established a Business Ethics and Review Committee to implement and administer our company’s policies on ethical conduct and to receive, retain, investigate and act on complaints and concerns of employees regarding violations of our company’s human resource policies addressing employee business practices and our code of ethics.

     The members of the Audit Committee are Messrs. Philip Tan Yuen Fah (chairman), Steven H. Hamblin and Maurizio Ghirga (appointed as of November 2, 2006). The Audit Committee held nine meetings during the fiscal year ended December 31, 2006. Mr. Andre Borrel ceased to be a member of the Audit Committee on February 1, 2007.

Executive Resource and Compensation Committee

     The ERCC of our Board of Directors oversees executive compensation and development in our company with the goal of building capable and committed management teams through competitive compensation, focused management and progressive policies which can attract, motivate and retain a pool of talented executives to meet our current and future growth plans. The ERCC establishes compensation policies for key executives, approves salary reviews, bonuses and incentives for key executives, approves share incentives, including share options and share ownership plans for executives, approves key appointments and reviews succession plans for key positions, and oversees the development of key executives and talented executives.

     The members of the ERCC are Messrs. Peter Seah Lim Huat (chairman), James A. Norling, Andre Borrel, Charles E. Thompson and Tay Siew Choon. The ERCC held five meetings during the fiscal year ended December 31, 2006.

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Nominating Committee

     The Nominating Committee, or the NC, of our Board of Directors was established primarily to support and advise our company in ensuring that the Board of our company is comprised of individuals who are best able to discharge their responsibilities as directors having regard to the law and the highest standards of governance. The NC is responsible for recommending suitable candidates to the Board for election as directors of our company focusing, in particular, on candidates who can add value to the management through their contributions in the relevant strategic business areas and who collectively will result in a strong and diverse board.

     The members of the NC are Messrs. James A. Norling (chairman), Peter Seah Lim Huat, Andre Borrel, Charles E. Thompson and Tay Siew Choon. The NC held four meetings during the fiscal year ended December 31, 2006.

D. EMPLOYEES

     As of December 31, 2006, our total staff strength (including employees of our subsidiary, CSP) was 4,681 employees. The following tables sets forth the total number of employees as of the dates indicated by functional responsibility and by geographical locations.

	As of December 31,
Functions	2004		2005		2006
Engineering (Modules, Yield Engineering, Process Integration, Product Engineering, Joint Venture Technology, Metrology)		1,410		1,677		1,856
Manufacturing Operations		900		880		1,011
Manufacturing Support		572		638		724
Research and Development		253		370		508
Administration, Marketing and Finance		471		508		582
Total		3,606		4,073		4,681

	As of December 31,
Geographical Locations	2004		2005		2006
Singapore		3,479		3,932		4,540
Americas		87		104		103
Europe		17		16		15
Asia-Pacific (other than Singapore)		23		21		23
Total		3,606		4,073		4,681

     As of December 31, 2006, we had a total of 629 temporary employees. The average number of temporary employees in 2006 based on the number of temporary employees at the end of each month end was 700 per month.

     Our employees are not covered by any collective bargaining agreements and are not members of a union. We have not experienced any strikes or work stoppages by our employees. We consider our relationship with our employees to be good.

     We provide our employees with customary compensation and benefit plans, including employee bonus plans, an employee share option plan and an employee share purchase plan. Employees of SMP, our 49% owned affiliate, are eligible to receive option grants under our company’s employee share option plan subject to certain exceptions as provided in the plan. In addition, employees of SMP also participate in an employee share purchase plan with terms substantially similar to the share purchase plan for our employees. Please see “Item 6. Directors, Senior Management and Employees — E. Share Ownership for Directors and Senior Management — Employee Benefit Plans” for a discussion of our share option plan and our share purchase plan.

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E. SHARE OWNERSHIP FOR DIRECTORS AND SENIOR MANAGEMENT

     The following table sets forth certain information with respect to the beneficial ownership of our ordinary shares including ordinary shares held directly or in the form of ADSs for each of our directors and our president and chief executive officer and all of our directors and senior management as a group as of December 31, 2006, based on an aggregate of 2,535,895,593 ordinary shares outstanding as of such date.

	No. of Ordinary
	Shares Beneficially
Directors	Owned(1)
James A. Norling		1,596,804
Chia Song Hwee		6,227,128
Andre Borrel		312,947
Charles E. Thompson		285,054
Tsugio Makimoto		228,304
Tay Siew Choon		461,326	> Please see note (2)
Peter Seah Lim Huat		301,887	below
Philip Tan Yuen Fah		170,000
Pasquale Pistorio		2,560,000
Steven H. Hamblin		10,000
Maurizio Ghirga		0
All directors and senior management(3) as a group (21 persons)		21,173,271

Notes:
(1)	Gives effect to the ordinary shares issuable within 60 days from December 31, 2006 upon the exercise of all options and other rights beneficially owned by the indicated shareholders on that date. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to ordinary shares. Except for 36,000 shares held by James A. Norling and 132,070 shares held by Michael J. Rekuc which are jointly held, the persons named in the table have sole voting and sole investment control with respect to all ordinary shares beneficially owned
(2)	Less than 1% of our outstanding ordinary shares as of December 31, 2006.
(3)	None of our directors or senior management individually owns 1% or more of our outstanding ordinary shares.

Share Options for Directors

     The following table contains information pertaining to share options held by directors as of December 31, 2006.

Directors	As of December 31, 2006			Exercise Price S$		Exercise Period
James A. Norling		58,609			3.46	22/02/2003 to 22/02/2007
		1,172,195			3.88	01/05/2002 to 01/05/2012
		58,609			1.86	30/08/2003 to 30/08/2007
		50,000			0.72	28/02/2004 to 28/02/2008
		60,000			1.10	29/08/2004 to 29/08/2008
		110,000			1.70	27/02/2005 to 27/02/2009
		110,000			1.16	26/08/2006 to 26/08/2010
		120,000	*		1.21	25/08/2007 to 25/08/2011
Chia Song Hwee		20,935			1.00	28/11/1998 to 28/11/2007
		61,704			0.80	30/11/1998 to 29/11/2008
		26,444			0.80	30/04/1999 to 29/04/2009
		234,439			2.86	29/10/1999 to 29/10/2009
		70,331			2.86	29/04/2000 to 29/10/2009
		410,268			14.24	06/04/2001 to 06/04/2010
		527,487			10.12	03/10/2001 to 03/10/2010
		263,743			4.05	28/03/2002 to 28/03/2011
		263,743			4.26	15/08/2002 to 15/08/2011
		234,439			3.46	22/02/2003 to 22/02/2012
		2,344,391			1.86	30/08/2003 to 30/08/2012
		300,000			0.72	28/02/2004 to 28/02/2013
		700,000			1.10	29/08/2004 to 29/08/2013
		1,000,000			1.70	27/02/2005 to 27/02/2014
		220,000			1.02	30/07/2004 to 30/07/2014
		1,000,000			1.16	26/08/2006 to 26/08/2015
		1,000,000	*		1.21	25/08/2007 to 25/08/2016

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Directors	As of December 31, 2006			Exercise Price S$		Exercise Period
Andre Borrel		46,887			3.46	22/02/2003 to 22/02/2007
		46,887			1.86	30/08/2003 to 30/08/2007
		40,000			0.72	28/02/2004 to 28/02/2008
		45,000			1.10	29/08/2004 to 29/08/2008
		85,000			1.70	27/02/2005 to 27/02/2009
		60,000			1.16	26/08/2006 to 26/08/2010
		70,000	*		1.21	25/08/2007 to 25/08/2011
Charles E. Thompson		29,304			3.46	22/02/2003 to 22/02/2007
		29,304			1.86	30/08/2003 to 30/08/2007
		25,000			0.72	28/02/2004 to 28/02/2008
		35,000			1.10	29/08/2004 to 29/08/2008
		60,000			1.70	27/02/2005 to 27/02/2009
		60,000			1.16	26/08/2006 to 26/08/2010
		70,000	*		1.21	25/08/2007 to 25/08/2011
Tsugio Makimoto		29,304			3.46	22/02/2003 to 22/02/2007
		29,304			1.86	30/08/2003 to 30/08/2007
		25,000			0.72	28/02/2004 to 28/02/2008
		35,000			1.10	29/08/2004 to 29/08/2008
		60,000			1.70	27/02/2005 to 27/02/2009
		60,000			1.16	26/08/2006 to 26/08/2010
		70,000	*		1.21	25/08/2007 to 25/08/2011
Peter Seah Lim Huat		23,443			3.46	22/02/2003 to 22/02/2007
		46,887			1.86	30/08/2003 to 30/08/2007
		40,000			0.72	28/02/2004 to 28/02/2008
		45,000			1.10	29/08/2004 to 29/08/2008
		85,000			1.70	27/02/2005 to 27/02/2009
		85,000			1.16	26/08/2006 to 26/08/2010
		95,000	*		1.21	25/08/2007 to 25/08/2011
Tay Siew Choon		29,304			3.46	22/02/2003 to 22/02/2007
		234,439			3.88	01/05/2002 to 01/05/2007
		46,887			1.86	30/08/2003 to 30/08/2007
		25,000			0.72	28/02/2004 to 28/02/2008
		35,000			1.10	29/08/2004 to 29/08/2008
		60,000			1.70	27/02/2005 to 27/02/2009
		60,000			1.16	26/08/2006 to 26/08/2010
		70,000	*		1.21	25/08/2007 to 25/08/2011
Philip Tan Yuen Fah		85,000			1.70	27/02/2005 to 27/02/2009
		85,000			1.16	26/08/2006 to 26/08/2010
		95,000	*		1.21	25/08/2007 to 25/08/2011
Pasquale Pistorio		60,000			1.16	26/08/2006 to 26/08/2010
		70,000	*		1.21	25/08/2007 to 25/08/2011
Steven H. Hamblin		70,000	*		1.21	25/08/2007 to 25/08/2011

Note:
*	Options that were granted in 2006.

Employee Benefit Plans

Share Option Plan 1999

     On March 30,1999, we adopted our Share Option Plan 1999, which we refer to as the 1999 Option Plan. The purpose of the plan is to put our company in a competitive position as an employer. Options granted under the 1999 Option Plan may be non-statutory options or incentive stock options intended to qualify under Section 422 of the U.S. Internal Revenue Code of 1986, as amended, or the Code.

     The 1999 Option Plan is administered by the ERCC. Our employees, employees of SMP, our outside directors and consultants are eligible to receive option grants subject to certain exceptions as provided in the 1999 Option Plan. An individual who owns more than 10% of the total combined voting power of all classes of our outstanding shares is not eligible for the grant of options unless:

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• the exercise price of the option is at least 110% of the fair market value of an ordinary share on the date of grant; and

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

     The aggregate number of ordinary shares that may be issued under the 1999 Option Plan and under any other share incentive and option schemes or agreements may not exceed 227,647,883 ordinary shares, as adjusted from 197,160,000 to give effect to the October 2002 Rights Offering.

     If an outstanding option expires for any reason or is cancelled or otherwise terminated, the ordinary shares allocable to the unexercised portion of such option will again be available for the purposes of the plan and all other share incentive and option schemes approved by the ERCC. The exercise price of an incentive stock option shall not be less than 100% of the fair market value of an ordinary share on the date of grant. In no event will the exercise price for an option be below par value.

     The exercisability of options outstanding under the 1999 Option Plan may be fully or partially accelerated under certain circumstances such as a change in control of our company, as defined in the 1999 Option Plan.

     Each grant under the 1999 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.

     As of December 31, 2006, options to purchase 119,842,980 ordinary shares were issued and outstanding under our 1999 Option Plan, of which options to purchase 28,659,419 ordinary shares were held by our directors and senior management. The exercise prices of all outstanding options range from S$0.69 to S$14.24 and the expiration dates of all options range from February 22, 2007 to October 3, 2016.

     The 1999 Option Plan will terminate automatically on January 28, 2009, ten years after the date on which the Board adopted the 1999 Option Plan. The ERCC may amend, suspend or terminate the 1999 Option Plan at any time and for any reason, provided that any amendment which increases the number of shares available for issuance under the 1999 Option Plan, or which materially changes the class of persons who are eligible for the grant of incentive share options, will be subject to the approval of our shareholders.

Employee Share Purchase Plans

     In April 2004, we adopted our Chartered Employee Share Purchase Plan, which we refer to as the Chartered ESPP 2004, and Share Purchase Plan for employees of SMP, which we refer to as the SMP ESPP 2004. The Chartered ESPP 2004 was established as part of our overall employee compensation policy to put our company and SMP in a competitive position as an employer. The Chartered ESPP 2004 and the SMP 2004 are on substantially similar terms except that the Chartered ESPP 2004 is intended to qualify under Section 423 of the Code while the SMP ESPP 2004 is not intended to qualify under Section 423 of the Code.

     The Chartered ESPP 2004 and SMP ESPP 2004 are administered by the ERCC. Subject to certain restrictions, our employees are eligible to participate in the Chartered ESPP 2004 and certain employees of SMP are eligible to participate in the SMP 2004. Eligible employees who elect to participate in the Chartered ESPP 2004 or the SMP ESPP 2004 may designate up to 10% of their respective monthly compensation towards the purchase of our company’s shares. Prior to March 2005, the purchase price of our company’s shares under Chartered ESPP 2004 and SMP ESPP 2004 prior to the offering cycle commencing March 1, 2005 was at a price representing the lower of (a) a 15% discount from the fair market value of the ordinary shares on the last trading day in such offering period, or (b) a 15% discount of the fair market value of the ordinary shares on the last trading day before the commencement of such offering period. The ERCC however may alter the method of determining the purchase price payable by the participants in order to reduce or eliminate any share based compensation charge which our company may incur with respect to the Chartered ESPP 2004 or SMP ESPP 2004. With effect from March 1, 2005, the purchase price of our company’s shares under Chartered ESPP 2004 and SMP ESPP 2004 was increased to a price representing 95% of the fair market value of the ordinary shares applied to our company’s average share price on the last trading day of the offer period.

     The aggregate number of ordinary shares that are available for purchase under the Chartered ESPP 2004 and the SMP ESPP 2004 taken together is 30,000,000 ordinary shares with a limit of 3,000,000 ordinary shares per calendar year. A total of 1,155,720 ordinary shares were issued in 2006 under the Chartered ESPP 2004 and the SMP ESPP 2004.

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     The Board has the right to amend, suspend or terminate the Chartered ESPP 2004 or the SMP ESPP 2004 at any time and without notice. Shareholders’ approval will be required, however, to change the maximum aggregate number of ordinary shares to be issued under the plans, except for a change in the number of ordinary shares due to a share dividend, a subdivision or consolidation of ordinary shares, or other change in our capital structure. In addition, shareholders’ approval will be required to change the eligibility requirements for participation in the Chartered ESPP 2004 or the SMP ESPP 2004, and for any other amendment of the plans to the extent required by applicable law or regulation.

Equity Compensation Plan Information as of December 31, 2006

			(b)		(c)
			Weighted-		Number of Securities
	(a)		average		Remaining Available
	Number of Securities		Exercise Price of		for Future Issuance
	to be Issued upon		Outstanding		under Equity
	Exercise of		Options,		Compensation Plans
	Outstanding Options,		Warrants and		(Excluding Securities
Plan Category	Warrants and Rights		Rights		in Column (a))
Equity compensation plans approved by shareholders		119,842,980	$	1.89		108,223,143
Equity compensation plans not approved by shareholders	N.A.*		N.A.*			N.A.*
Total		119,842,980	$	1.89		108,223,143

Note:
*	Chartered does not have any equity compensation plans which have not been approved by shareholders.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

     The following table sets forth certain information with respect to each person or group of affiliated persons who is known by us to beneficially own 5% or more of our ordinary shares as of January 31, 2007 based on an aggregate of 2,536,172,438 ordinary shares outstanding as of such date:

	Ordinary Shares(1)
	Beneficially Owned(2)
Shareholders Holding 5% or More(3)	Number		Percentage
Temasek Holdings (Private) Limited		1,510,324,883		59.55	%

Notes:
(1)	The number of ordinary shares listed in this table includes ordinary shares held directly or in the form of ADSs.
(2)	Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to ordinary shares. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all ordinary shares beneficially owned.
(3)	The 1,510,324,883 ordinary shares beneficially owned by Temasek consists of the 1,510,324,883 ordinary shares held by ST Semiconductors out of which 215,000,000 ordinary shares are subject to the terms of a securities lending agreement entered into by ST Semiconductors with a certain financial institution. ST Semiconductors is a wholly-owned subsidiary of Temasek. Temasek may therefore be deemed to beneficially own the shares owned by ST Semiconductors.

     As of January 31, 2007, 669,129 of our ordinary shares, representing 0.03% of our outstanding ordinary shares, were held by a total of 108 holders of record with addresses in the U.S. As of the same date, 8,274,110 of our ADSs (representing 82,741,100 ordinary shares), representing 3.26% of our outstanding ordinary shares, were held by a total of 10 registered holders of record with addresses in and outside of the U.S. Since certain of these ordinary shares and ADSs were held by brokers or other nominees, the number of record holders in the U.S. may not be representative of the

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number of beneficial holders or where the beneficial holders are resident. All holders of our ordinary shares are entitled to the same voting rights.

B. RELATED PARTY TRANSACTIONS

The Temasek Group

     As of December 31, 2006, Temasek, through its subsidiary, ST Semiconductors, beneficially owned approximately 59.56% of our outstanding ordinary shares. As a result, Temasek is able to control actions over many matters requiring approval by our shareholders, including the election of directors and approval of significant corporate transactions. Temasek is owned by the Minister for Finance (Incorporated) of Singapore and is an Asia investment company with investments in a range of industries, which include telecommunications and media, financial services, property, transportation and logistics, energy and resources, infrastructure, engineering and technology, as well as pharmaceuticals and biosciences. Mr. Peter Sean Lim Huat is a member of the Temasek Advisory Panel.

     We also have contractual and other business relationships with several of Temasek’s affiliates and we may also engage in material transactions with several of Temasek’s affiliates from time to time. Consequently, conflicts of interest may arise between us in certain circumstances. See Note 2(a) to the consolidated financial statements.

Financial Support Provided by Singapore Technologies

     Prior to December 31, 2004, Singapore Technologies Pte Ltd, or Singapore Technologies, (then a subsidiary of Temasek) was our substantial shareholder and was a holding company for a group of companies. On December 31, 2004, Temasek, as part of the rationalization plan to manage Temasek’s capital structure more efficiently, acquired all of Singapore Technologies’ interest in our company and pursuant to such restructuring, Singapore Technologies’ holdings in our company were transferred to Temasek.

     Prior to December 31, 2004, we had contracted with Singapore Technologies a majority of our forward purchases of foreign exchange and from time to time, we had also advanced funds to or borrowed funds from Singapore Technologies at interest rates comparable to rates offered by commercial banks in Singapore. We also participated with Singapore Technologies and/or its affiliates in a pooled cash management arrangement managed by a bank where cash balances were pooled and daily cash surpluses or shortfalls were allowed, on a short-term basis, to be lent to or borrowed from other Singapore Technologies affiliates participating in the arrangement at prevailing interbank rates. In addition, we had also placed short-term deposits with Singapore Technologies and/or its affiliates having maturities of less than three months. The interest income received in 2004 was $2.9 million. Singapore Technologies also provided us with a short-term credit facility. Since December 31, 2004, these activities have been discontinued.

     As of December 31, 2004, $28.1 million of our debt was guaranteed by Singapore Technologies and as of December 31, 2005 and 2006, none of our debt was guaranteed by Singapore Technologies.

Corporate Services Provided by Singapore Technologies

     Prior to December 31, 2004, we had a service agreement with Singapore Technologies pursuant to which it provided us with management and corporate support services such as treasury, cash management, internal audit, training and executive resources, information technology, bank guarantees and provision of standby credit facilities. In return for those services, support and benefits, we paid Singapore Technologies an annual management fee based on a service based fee arrangement. The management fee was itemized to allow us to compare them with similar services provided by unrelated third parties. In addition, we reimbursed Singapore Technologies for the third-party costs and expenses it incurred on our behalf. Effective from December 31, 2004, the service agreement with Singapore Technologies was terminated and we now perform these services internally or directly contract with other service providers.

     In 2004, management fees with Singapore Technologies amounted to $2.7 million. There were no management fees payable to Singapore Technologies in 2005 and 2006 as our service agreement with Singapore Technologies was terminated effective from December 31, 2004. We also reimbursed Singapore Technologies for costs and expenses incurred on our behalf, principally certain of our payroll expenses paid through Singapore Technologies. Such reimbursements totaled $7.1 million in 2004. There were no such reimbursements in 2005 and 2006.

Other Transactions

     In 2006, we transacted business with affiliates of Temasek in the normal course of our respective businesses.

     We paid STATS ChipPAC $19.1 million, $12.9 million and $10.6 million in 2004, 2005 and 2006, respectively, for

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services rendered in those years. We also paid other affiliates of Temasek $2.2 million, $0.9 million and $0.5 million in 2004, 2005 and 2006, respectively, for services rendered in those years. We purchased $0.4 million, $4.0 million and $1.8 million in assets from affiliates of Temasek in 2004, 2005 and 2006, respectively. These transactions were in the normal course of business.

     Our company previously operated Fab 1, which ceased operations at the end of March 2004, on land leased from Ascendas. Our company has sold and transferred its leasehold interest in respect of Fab 1 and the plant and equipment located in the property to Amkor Technology Pte Ltd for a total consideration of $6.5 million. The transaction was completed in January 2006.

     Fabs 2 and 3 and our corporate offices are located on land which we lease from Terra which in turn leases the land from JTC. These leases run until 2024 with conditional options to extend for another 30 years. The sub-leases for Fab 2 and Fab 3 require us to make rental payments to Terra at rates equal to the rent paid by Terra to JTC for the subject land through 2024.

     The site slurry treatment plant for fabs 2 and 3 is also located on land which we lease from Terra, which in turn leases the land from JTC. This lease runs until 2030 with a conditional option to extend for another 30 years. Our company is required to make rental payments to Terra at rates equal to the rent paid by Terra to JTC for the subject land through 2030.

     CSP leases the land on which Fab 6 is located from Terra, which in turn leases it from JTC. The lease runs until 2027 with a conditional option to extend for an additional 30 years. CSP is required to make rental payments to Terra at rates equal to the rent paid by Terra to JTC for the subject land through 2027.

     Fab 7 is located on land which we lease from Terra which in turn leases the land from JTC. The JTC lease runs until 2030 with a conditional option to extend for an additional 30 years. Our company is required to make rental payments to Terra at rates equal to the rent paid by Terra to JTC for the subject land through 2030.

     Lease payments in respect of the leases described above for the years ended December 31, 2004, 2005 and 2006 were approximately $2.8 million, $2.7 million and $3.3 million, respectively.

     We also engaged in transactions with other companies directly or indirectly controlled by Temasek in the ordinary course of business. These transactions, such as phone services from Singapore Telecommunications and airline tickets from Singapore Airlines, are on customary terms and conditions and are generally not subject to review by the Audit Committee.

C. INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Please see “Item 18. Financial Statements” for a list of financial statements filed under Item 17.

Export Sales

Please see “Item 4. Information On Our Company — B. Business Overview — Customers and Markets.”

Dividend Policy

     In December 1995 and January 1997, we paid a cash dividend on our ordinary shares in an amount equivalent to $87,000 and $93,000, respectively, for the purpose of qualifying our ordinary shares as “trustee stock” eligible for investment by account holders of the CPF, a mandatory employee pension plan administered by the Government of Singapore. Except for these dividends, we have not, since our inception, declared or paid any cash dividends on our ordinary shares. We do not currently anticipate paying any cash dividends for 2006. We may, by ordinary resolution, declare dividends at a general meeting, but we may not pay dividends in excess of the amount recommended by our Board of Directors. Our Board of Directors may also declare interim dividends without seeking shareholder approval. We must pay all dividends out of our profits or pursuant to Section 403 of the Companies Act, Chapter 50 of Singapore, or the Companies Act. In making its recommendation, our Board of Directors will consider, among other things, our future

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earnings, operations, capital requirements and general financial condition, as well as general business conditions and other factors which our Board of Directors may determine are appropriate. Some of our loan agreements restrict the payment of dividends without the prior consent of the lender. We currently intend to retain future earnings, if any, to finance expansion of our business.

Legal Proceedings

     As of December 31, 2006, we are not involved in any legal or arbitration proceedings that we believe would be significantly harmful to our company.

B. SIGNIFICANT CHANGES

     There have been no significant subsequent events following the close of the last financial year up to the date of this document that are known to us and require disclosure in this document for which disclosure was not made in this document.

ITEM 9. THE OFFER AND LISTING

PRICE RANGE OF OUR ADSs AND ORDINARY SHARES

     The following table sets forth, for the periods indicated, the high and low last reported sales prices per ADS and ordinary share since trading on October 29, 1999 as furnished by Nasdaq and the Singapore Exchange. The initial public offering price of our ADSs on October 29, 1999 was $20.00 per ADS and S$3.344 per ordinary share. Per ADS and per share prices below reflect the adjustment due to the October 2002 Rights Offering.

(a) Annual high and low market prices

	Nasdaq
	High		Low
January 1, through December 31, 2002	$	27.10	$	3.94
January 1, through December 31, 2003	$	11.00	$	3.48
January 1, through December 31, 2004	$	11.35	$	5.76
January 1, through December 31, 2005	$	9.01	$	5.52
January 1, through December 31, 2006	$	11.81	$	6.70

	Singapore Exchange
	High		Low
January 1, through December 31, 2002		S$4.81		S$0.71
January 1, through December 31, 2003		S$1.93		S$0.63
January 1, through December 31, 2004		S$1.89		S$0.92
January 1, through December 31, 2005		S$1.44		S$0.92
January 1, through December 31, 2006		S$1.84		S$1.03

(b)  Quarterly high and low market prices

	Nasdaq
	High		Low
January 1, through March 31, 2005	$	7.37	$	5.62
April 1, through June 30, 2005	$	8.21	$	5.56
July 1, through September 30, 2005	$	9.01	$	6.58
October 1, through December 31, 2005	$	7.90	$	5.52
January 1, through March 31, 2006	$	9.67	$	7.60
April 1, through June 30, 2006	$	11.81	$	8.16
July 1, through September 30, 2006	$	8.84	$	6.70
October 1, through December 31, 2006	$	9.15	$	7.29

		Singapore Exchange
	High		Low
January 1, through March 31, 2005		S$1.20		S$0.92
April 1, through June 30, 2005		S$1.35		S$0.93
July 1, through September 30, 2005		S$1.44		S$1.10
October 1, through December 31, 2005		S$1.34		S$0.95
January 1, through March 31, 2006	S$1.57			S$1.26
April 1, through June 30, 2006		S$1.84		S$1.29
July 1, through September 30, 2006		S$1.40		S$1.03
October 1, through December 31, 2006	S$1.40		S$1.15

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(c)  Monthly high and low market prices

	Nasdaq
	High		Low
September 1, through September 30, 2006		$  8.04		$7.41
October 1, through October 31, 2006		$  7.89		$7.29
November 1, through November 30, 2006		$  9.00		$7.60
December 1, through December 31, 2006		$  9.15		$7.99
January 1, through January 31, 2007		$  8.99		$8.08
February 1, through February 28, 2007		$10.48		$9.22

	Singapore Exchange
	High		Low
September 1, through September 30, 2006		S$1.27		S$1.19
October 1, through October 31, 2006		S$1.23		S$1.15
November 1, through November 30, 2006		S$1.40		S$1.17
December 1, through December 31, 2006		S$1.40		S$1.25
January 1, through January 31, 2007		S$1.40	S$1.22
February 1, through February 28, 2007		S$1.61		S$1.40

     The last reported sale price of the ADSs as quoted on Nasdaq on February 28, 2007 was $9.82 per ADS. The last reported sale price of the ordinary shares as quoted on the Singapore Exchange on February 28, 2007 was S$1.46 per ordinary share.

     Please see “Item 3. Key Information — D. Risk Factors — Risks Related to Our Securities and Our Trading Market” regarding the nature of the trading market for our ADSs and ordinary shares.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

B. OUR MEMORANDUM AND ARTICLES OF ASSOCIATION

     A summary of various provisions in our Memorandum and Articles of Association is provided below. This summary is qualified in its entirety by reference to our Memorandum and Articles of Association (see “Item 19. Exhibits — Exhibit 1”). The Companies (Amendment) Act 2005 of Singapore, or the Companies (Amendment) Act, which came into operation on January 30, 2006 introduced several changes to the company law regime which included the abolishment of the concepts of par value, authorized capital, share premium and the issue of shares at a discount. In addition, the Companies (Amendment) Act also introduced new provisions on share repurchases and treasury shares. Under these new provisions, a company can now repurchase shares out of share capital, as well as from profits so long as the company is solvent. Ordinary shares which are the subject of a share repurchase by a company can be held by that company as treasury shares instead of being cancelled. The right to attend and vote at meetings and the right to dividends or other distributions will be suspended for so long as the repurchased shares are held as treasury shares.

     Our company intends to propose changes to our Articles of Association at our next annual general meeting to be held on April 24, 2007 to address the above key changes introduced by the Companies (Amendment) Act as well as to streamline and rationalize certain other existing provisions in our Articles of Association.

Objects and purposes

     Our objects and purposes are found in paragraph 3 of our Memorandum of Association. Our main object and purpose includes, but is not limited to, the business of manufacturing, assembling and testing semiconductor components and related activities.

Directors

     A Director is not entitled to vote in respect of any contract or arrangement or any other proposal whatsoever in which he has any interest, directly or indirectly. A Director will not be counted in the quorum at a Board of Directors’ meeting in relation to a resolution in which he is not entitled to vote.

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     The ordinary remuneration of our Directors is determined by our shareholders in general meeting. Our Directors determine the payment of extra remuneration to an executive Director, a Director who serves on a Directors’ committee or to a Director who performs services which are outside the scope of the ordinary duties of a Director. Our Directors have the power to determine pensions and other retirement, superannuation, death or disability benefits for an executive Director and to fix the remuneration of a President or Chief Executive Officer.

     Our Directors may exercise all powers of our company to borrow money, to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities.

     At each annual general meeting, at least one-third of our Directors must retire from office by rotation. A retiring Director is eligible for re-election and the Directors to retire every year are those who have been longest in office since their last re-election or appointment. A Director holding office as President or Chief Executive Officer is subject to retirement by rotation as with the other Directors of the company.

     No shares are required to be held by a Director for director’s qualification.

     No person over the age of 70 years may be appointed as a Director of our company unless an ordinary resolution is passed at our company’s annual general meeting to appoint such person as a Director.

Shares

     We have two classes of shares — ordinary shares and convertible redeemable preference shares, or preference shares. As of December 31, 2006, there were 2,535,895,593 ordinary shares and 28,350 preference shares issued and allotted by our company.

     Prior to the Companies (Amendment) Act becoming effective on January 30, 2006, our company’s ordinary shares had a par value of S$0.26 and each preference share had a par value of $0.01 each. As of January 30, 2006, with the abolishment of the concept of “par value” and “authorized capital”, the shares of our company have no par or nominal value.

New ordinary shares

     New ordinary shares may only be issued with the prior approval in a general meeting of shareholders of our ordinary shares, or ordinary shareholders. The approval, if granted, will lapse at the conclusion of the annual general meeting following the date on which the approval was granted or the date by which such annual general meeting is required to be held, whichever is earlier. Our ordinary 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 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, provided that new ordinary shares may not be issued to transfer a controlling interest in our company without the prior approval in general meeting of our shareholders. Our ordinary shareholders are not entitled to pre-emptive rights under our Articles of Association.

     Our Directors may make calls upon our shareholders in respect of any moneys unpaid on their shares but subject to the terms of issue of such shares. This call right does not apply to our currently outstanding ordinary shares, all of which are fully paid.

Transfer of ordinary shares

     There is no restriction on the transfer of fully paid ordinary shares except where required by law. Our Board of Directors may only decline to register any transfer of ordinary shares which are not fully paid shares or ordinary shares on which we have a lien. Ordinary shares may be transferred by a duly signed instrument of transfer in any form acceptable to our Board of Directors. Our Board of Directors may also decline to register any instrument of transfer unless, among other things, it has been duly stamped and is 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 the applicant pays a fee which will not exceed S$2 and furnishes any evidence and indemnity that our Board of Directors may require.

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Convertible redeemable preference shares

     Pursuant to a special resolution of our ordinary shareholders obtained on August 17, 2005, we amended our Articles of Association to facilitate the issuance of preference shares. The preference shares rank, with respect to rights upon liquidation, winding up or dissolution as follows:

• junior to all our existing and future debt obligations;

• junior to each class of our shares the terms of which provide that such class will rank senior to the preference shares as regards repayment of amounts paid up or credited as paid up on such class of shares;

• on a parity with any class of our shares that has terms which provide that such class will rank on a parity with the preference shares as regards repayment of amounts paid up or credited as paid up on such class of shares; and

• senior to our ordinary shares (including those represented by ADSs) and to any class of our shares that has terms which provide that such class will rank junior to the preference shares as regards payment of amounts paid up or credited as paid up on such class of shares.

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 ordinary shareholders request in writing that such a meeting be held. In addition, two or more ordinary 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. 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

     An ordinary 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 book-entry clearance system maintained by The Central Depository (Pte) Limited, or CDP, is entitled to vote at a genera! 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 under our Articles of Association, two or more shareholders holding at least 33¹/₃% of our issued and fully paid up 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 ordinary shareholder present in person and each proxy shall have one vote, and on a poll, every ordinary 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 ordinary shareholder present in person or by proxy and entitled to vote.

     Holders of our preference shares, or preference shareholders, are entitled to receive copies of our reports, accounts, circulars and notes of general meetings sent to our ordinary shareholders.

     Preference shareholders are entitled to attend, speak and vote at any class meeting of the preference shareholders, in person or by proxy, but they are not entitled to attend, speak or vote at our general meetings. However, the preference shareholders are only entitled to attend and vote (but not speak) at those general meetings, in person or by proxy, where at least one of the proposed resolutions is either in respect of amending the rights of the preference shareholders or in respect of our winding-up and such vote is restricted to those resolutions that pertain to the election of the chairman of such meeting, amendment of the rights of the preference shareholders, to our winding-up or any motion for adjournment of such meeting.

     Under our Articles of Association, at class meetings of the preference shareholders or general meetings where the preference shareholders are entitled to attend and vote, on a show of hands, every preference shareholder present in person and each proxy shall have one vote, and on a poll, every preference shareholder present in person or by proxy shall have one vote for each ordinary share into which each preference share held by such preference shareholder would have been converted if the Conversion Date as defined in our Articles of Association for such preference share were the date 48 hours preceding the date of such class meeting or general meeting. A proxy need not be a shareholder.

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Dividends

     We may, by ordinary resolution of our ordinary 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. Our Board of Directors may also declare interim dividends without seeking shareholder approval. All dividends are paid pro rata among the ordinary shareholders in proportion to the amount paid up on each ordinary shareholder’s ordinary shares, unless the rights attaching to an issue of any ordinary share provide otherwise. Unless otherwise directed, dividends are paid by cheque or warrant sent through the post to each shareholder at his registered address. Notwithstanding the foregoing, our payment to CDP of any dividend payable to an ordinary shareholder whose name is entered in the depository register shall, to the extent of payment made to CDP, discharge us from any liability to that shareholder in respect of that payment.

     Our preference shareholders are not entitled to receive any dividends, regardless of whether dividends are paid to our ordinary shareholders.

Bonus and rights issue

     Our Board of Directors may, with the approval of our ordinary shareholders at a general meeting, capitalize any reserves or profits (including profit or monies carried and standing to any reserve 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 ordinary shareholders in proportion to their shareholdings. Such rights are subject to any conditions attached to such issue and the regulations of any stock exchanges on which we are listed.

Liquidation or other return of capital

     Preference shareholders, upon our liquidation will be entitled to payment, out of our assets available for distribution to our shareholders (ordinary or otherwise), of $10,000 per preference share. After payment in full of the liquidation preference, preference shareholders will not be entitled to any further participation in any distribution of our assets. If, upon our liquidation, the amounts payable with respect to preference shares and all other shares that have terms which provide that such shares will rank on a parity with the preference shares are not paid in full, preference shareholders and the holders of such parity shares will share equally and ratably in any distribution of our assets in proportion to the full liquidation preference to which each such holder is entitled.

     If our company liquidates or in the event of any other return of capital, holders of ordinary shares will be entitled to participate in the distribution of any surplus assets (including after paying the preference share liquidation preference) in proportion to their shareholdings.

Redemption of preference shares

     Under our Articles of Association, we are required to redeem, out of funds legally available for such redemption, each preference share on the maturity date, which is August 17, 2010, at the redemption amount in accordance with all applicable law and the provisions of our Articles of Association, unless earlier redeemed, converted or purchased and cancelled by our company. In addition, we may at any time prior to the maturity date redeem the preference shares at the early redemption price under the following circumstances:

• Tax call
 
If we determine that, as a result of:

• any change in or amendment to the laws or regulations of Singapore or any authority of or in Singapore having power to tax, or rulings promulgated under any such laws or regulations by any authority of or in Singapore having power to tax, or

• any change in the general application or official or judicial interpretation of any such laws, regulations or rulings, or

• any change in the application or official or judicial interpretation of, or any execution or amendment to, any treaty or treaties affecting taxation to which Singapore is a party, which change, execution or amendment, in each case, becomes effective on or after August 17, 2005, the date on which the preference shares are first allotted and issued,

we will be required to pay additional amounts with respect to the preference shares (notwithstanding the foregoing, we may not redeem those preference shares, the holders of which have irrevocably waived their rights to such additional amounts at least seven business days prior to such redemption), we will have the option to redeem in whole, but not in part, the outstanding preference shares at the early redemption price.

•

Clean-up call

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	If at least 95% of the preference shares originally issued have been converted, redeemed or purchased and cancelled, we will have the option to redeem in whole, but not in part, the outstanding preference shares at the early redemption price.
•	Optional call redemption
	We may, at any time on or after August 17, 2007, redeem the preference shares in whole or in part at any time, at the early redemption price, if the closing sale price of our ordinary shares on the Singapore Exchange for any 20 trading days (translated in U.S. dollars at the U.S. dollar / Singapore dollar noon buying rate in New York on each such day, as certified for customs purposes by the Federal Reserve Bank of New York) in any 45 consecutive calendar day period ending not more than five business days prior to the date on which notice of such redemption is given, is at least 125% of the conversion price per ordinary share, in each case as adjusted through, and effective on, such notice date.

     The early redemption price and the closing sale price are defined in our Articles of Association.

     In addition, if a specified fundamental change event occurs before the close of business on the seventh business day prior to maturity or early redemption, the preference shareholders may under certain circumstances require our company to redeem all or any of the preference shares at the early redemption price per preference share.

     Our preference shareholders will not have the right to require our company to redeem any preference shares if a fundamental change occurs as defined in Article 4A.8(2)(b), (c) and (d) of our Articles of Association in certain specified circumstances.

     Singapore law contains certain restrictions on our ability to redeem our preference shares, as described in our Articles of Association.

Conversion rights of Preference Shareholders

     Our preference shareholders may convert all or any of the preference shares that they hold into either ordinary shares or ADSs during hours as may be agreed between our company and the appointed conversion agent on any business day during the conversion period:

• commencing on September 26, 2005; and

• ending on the date falling seven business days prior to the earlier of:

• in the case of any preference share called for redemption, the date fixed for such redemption unless our company shall default in making the redemption payment, provided that in no event shall any such conversion right extend beyond the maturity date; or

• the maturity date.

     The conversion price will be a price expressed in U.S. dollars per ordinary share. The initial conversion price per ordinary share will be determined by multiplying (1) the sum of the conversion premium, 20%, plus 100%, by (2) the reference share price (converted to U.S. dollars). The reference share price is defined in our Articles of Association. The conversion price is subject to adjustments in certain circumstances prescribed in our Articles of Association.

Limitations on rights to hold or vote shares

     Except as described in “— Voting Rights” above, there are no limitations imposed under our Articles of Association on the rights of ordinary shareholders who are non-resident in Singapore to hold or exercise voting rights attached to ordinary shares.

Provisions discriminating against any existing or prospective holder of shares

     There are no provisions under our Articles of Association discriminating against any existing or prospective holder of shares as a result of a shareholder owning a substantial number of shares.

Take-overs

     The Singapore Code on Take-overs and Mergers, or the Take-Over Code, regulates the acquisition of ordinary shares of public companies and contains certain provisions that may delay, deter or prevent a future take-over or change in control of our company. If a person acquires an interest (either on his own or together with parties acting in concert with him) in 30% or more of our voting shares or, if such person holding (either on his own or together with parties acting in concert with him) between 30% and 50% (both inclusive) of our voting shares acquires (either on his own or together with parties acting in concert with him) additional voting shares representing more than 1% of our voting shares in any six-

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month period, he must, except with the consent of the Singapore Securities Industry Council, extend a take-over offer for the remaining voting shares in accordance with the provisions of the Take-Over Code.

     “Parties acting in concert” comprise individuals or companies who, pursuant to an arrangement or understanding (whether formal or informal), co-operate, through the acquisition by any of them of shares in a company, to obtain or consolidate effective control of that company. Certain persons are presumed (unless the presumption is rebutted) to be acting in concert with each other. They are as follows: a company and its related and associated companies and companies whose associated companies include any of these companies; a company and its directors (including their close relatives, related trusts and companies controlled by any of the directors, their close relatives and related trusts); a company and its pension funds and employee share schemes; a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis; a financial or other professional adviser and its client in respect of shares held by the adviser and persons controlling, controlled by or under the same control as the adviser and all the funds managed by the adviser on a discretionary basis, where the shareholdings of the adviser and any of those funds in the client total 10% or more of the client’s equity share capital; directors of a company (including their close relatives, related trusts and companies controlled by any of such directors, their close relatives and related trusts) which is subject to an offer or where the directors have reason to believe a bona fide offer for the company may be imminent; partners; and an individual and his close relatives, related trusts, any person who is accustomed to act in accordance with his instructions and companies controlled by the individual, his close relatives, his related trusts or any person who is accustomed to act in accordance with his instructions.

     Subject to certain exceptions, a take-over offer must be in cash or be accompanied by a cash alternative at not less than the highest price paid by the offerer or parties acting in concert with the offerer within the preceding six months.

     Under the Take-Over Code, where effective control of a company is acquired or consolidated by a person, or persons acting in concert, a general offer to all other shareholders is normally required. An offerer must treat all shareholders of the same class in an offeree company equally. A fundamental requirement is that shareholders in the company subject to the take-over offer must be given sufficient information, advice and time to consider and decide on the offer.

Indemnity

     As permitted by Singapore law, our Articles of Association provide that, subject to the Companies Act, we will indemnify our Board of Directors and officers against any liability incurred in defending any proceedings, whether civil or criminal, which relate to anything done or omitted to have been done as an officer, director or employee. We may not indemnify our 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.

Substantial shareholdings

     The Companies Act and the Securities and Futures Act, Chapter 289 of Singapore require the substantial shareholders of our company to give notice to our company and the Singapore Exchange, including particulars of their interest and the circumstances by reason of which they have such interest, within two business days of their becoming substantial shareholders of our company and of any change in the percentage level of their interest.

     Under the Companies Act, a person has a substantial shareholding in our company if he has an interest (or interests) in one or more voting shares in our company and the total votes attached to that share, or those shares, is not less than 5% of the totai votes attached to all the voting shares in our company.

     “Percentage level”, in relation to a substantial shareholder, means the percentage figure ascertained by expressing the total votes attached to our voting shares in which the substantial shareholder has an interest or interests immediately before or (as the case may be) immediately after the relevant time as a percentage of the total votes attached to all the voting shares in our company, and, if it is not a whole number, rounding that figure down to the next whole number.

Minority rights

     The rights of minority shareholders of Singapore-incorporated companies are protected under Section 216 of the Companies Act, which gives the Singapore courts a general power to make any order, upon application by any shareholder of our company, as they think fit to remedy any of the following situations:

• if the affairs of our company 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

• if our company takes an action, or threatens to take an action, or our shareholders pass a resolution, or propose to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more of our shareholders, including the applicant.

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     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 the conduct of our affairs in the future;

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

• provide for the purchase of a minority shareholder’s shares by the 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 the Memorandum or Articles of Association be amended; or

• provide that our company be wound up.

C. MATERIAL CONTRACTS

     The following is a summary of each contract that is or was material to us during the last two years.

(a) Loan and financing agreements

CSP Loan Agreements

     CSP entered into a loan agreement with a syndicate of banks and ABN Amro Bank N.V., Singapore Branch, as agent in September 2000 for an amount of up to $820 million. We refer to this loan agreement as the CSP Second Phase Credit Agreement. On September 18, 2003, CSP entered into a Supplemental Agreement to the Second Phase Credit Agreement to extend the availability period of the loan for a further one year period.

     In 2002, we sought consents from one or more of our lenders and several of CSP’s lenders to allow us to substantially increase CSP’s net worth to enable CSP to satisfy a total debt to net worth ratio for the CSP Second Phase Credit Agreement. Such increase in CSP’s net worth was effected by converting amounts payable by CSP to us into a loan from us to CSP, which we refer to as the Chartered Loan.

     In obtaining the consents, the CSP Second Phase Credit Agreement was amended to provide for the subordination of the amount of the Chartered Loan to the amounts due by CSP to its other lenders.

     The CSP syndicated loan matured and was fully repaid in September 2006.

Chartered Loan Agreements

EXIM Guaranteed Loan

     On December 23, 2004, we entered into a facility agreement as borrower with JPMorgan Chase Bank, N.A, or JP Morgan, as lender, Export-Import Bank of the United States, or Exim, as guarantor and JP Morgan as facility agent (see “item 19. Exhibits — Exhibit 4.3”). Pursuant to this agreement, we secured a $653 million term loan facility from JP Morgan, guaranteed by Exim. This facility may only be used to finance the purchase of equipment from U.S. vendors for our company’s Fab 7 facility and may be drawn down only in accordance with the equipment purchases which follow an agreed ramp schedule. The facility is divided into two tranches, has an availability period of between two to four years, and each tranche will be repaid over a period of five years. This facility bears interest at LiBOR plus 0.125% and interest is payable semi-annually.

SMBC/OCBC Term Loan

     On December 23, 2004, we entered into a facility agreement as borrower with Sumitomo Mitsui Banking Corporation, or SMBC, and Oversea-Chinese Banking Corporation Limited, or OCBC, as lenders and arrangers, pursuant to which the lenders agreed to provide us with a $200 million term loan facility (with a $100 million green-shoe option). The $100 million green-shoe option was subsequently subscribed by ABN AMRO Bank, United Overseas Bank and Deutsche Bank.In 2005, the entire $300 million loan facility, which included the $100 million green-shoe option, was fully drawn down. The repayment period was to commence from the end of the 30^th month from the date of the first draw down, and the amount drawn down was to be repaid in six equal semi-annual installments. This facility was fully repaid in April 2006 using the proceeds from the issuance of the 6.25% senior notes due 2013 as described below.

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BOA Term Loan

     On December 22, 2004, we entered into a facility agreement as borrower with Bank of America, or BOA, as lender, pursuant to which BOA has agreed to provide us with a $50 million term loan facility (see “Item 19. Exhibits — Exhibit 4.4”). The facility bears interest at LIBOR plus 0.80% and interest is payable semi-annually. The purpose of the facility is to fund our company’s capital expenditure and for our company’s general corporate purposes. The facility has an availability period of three months from the date of the facility agreement, and is repayable as a lump sum repayment 36 months after the date of the facility agreement. This $50 million loan facility was fully drawn down in March 2005.

SMBC Facility Agreement

     We entered into a facility agreement with SMBC as arranger and Sumitomo Mitsui Banking Corporation, Singapore Branch, as Agent, on March 3, 2006 (see “Item 19. Exhibits — Exhibit 4.6”). This facility agreement is in relation to a $150 million revolving credit facility with a greenshoe option to increase to $250 million and is a renewal of the facility agreement dated December 23, 2004 (described above) which has expired. This facility bears interest at a floating rate determined by reference to LIBOR, payable on the last day of each interest period selected by us. The amounts borrowed under this facility are to be applied towards repaying our company’s existing borrowings or our working capital requirements. This facility agreement provides for the termination of the facility on March 30, 2007 with an option for parties to extend the term for a further period of 364 days subject to certain conditions.

     On June 30, 2006, we entered into a syndication agreement with SMBC as arranger, Sumitomo Mitsui Banking Corporation, Singapore Branch as original lender, and with Bayerische Hypo-und Vereinsbank AG, WestLB and Societe Generale as new lenders , pursuant to which SMBC transferred US$50 million of its commitment under the facility agreement dated March 3, 2006 to Bayerische Hypo-und Vereinsbank AG, WestLB and Societe Generale (“Syndicated Lenders”). As a result of this syndication, SMBC has a commitment of US$150 million and the Syndicated Lenders have an aggregate commitment of US$50 million under the facility agreement dated March 3, 2006 (see “Item 19. Exhibits — Exhibit 4.6.1”).

Equity Call Option

     In August 2004, we entered into a bilateral option transaction with Goidman Sachs International, as counter-party, to pro-actively manage our convertible notes due April 2, 2006.

     In March 2006, we replaced the bilateral option transaction with Goldman Sachs International which we had entered into in August 2004 and which was due to expire on April 2, 2006 with a new call option transaction (“2006 Option”) (see “Item 19. Exhibits — Exhibit 4.5”) for the same number of our ordinary shares. Under the 2006 Option transaction, we have a choice of physical or cash settlement. Goldman Sachs International may purchase 214,800,000 of our ordinary shares at S$2.15 per share and the option to purchase these shares is exercisable by Goldman Sachs International from March 29, 2006 and will expire on March 29, 2011.

     In the first year of the 2006 Option, we have the right to terminate the 2006 Option early in whole or in part on the first occasion that the closing price of our ordinary shares equals or exceeds S$1.75 on each of any 20 business days in any consecutive 30 business day period. If we elect to do so and elect to settle the portion of the 2006 Option being terminated early by delivering shares, Goldman Sachs International will have the right but not the obligation during the following 30 business days to buy from us such number of our ordinary shares up to the amount terminated early at S$1.60 per share. In respect of any portion not terminated early under those circumstances or if we do not terminate any part of the 2006 Option early, then the 2006 Option (or the relevant part) will continue under its terms.

     In the second year of the 2006 Option, we have the right to terminate the 2006 Option early in whole or in part if the closing price of our ordinary shares is equal to or exceeds S$2.6875 on each of any 20 business days in any consecutive 30 business day period. If we elect to exercise this right of termination, Goldman Sachs International will be required to buy from us such number of ordinary shares relating to the terminated portion of the 2006 Option at S$2.15 per share.

     The closing prices of our ordinary shares since we entered into the 2006 Option to the end of 2006 did not trigger the early termination provisions. As of December 31, 2006, Goldman Sachs International had not exercised its rights under the 2006 Option.

5.75% senior notes due 2010 and 6.375% senior notes due 2015

     In 2005, we issued $375 million of 5.75% senior notes due 2010 and $250 million of 6.375% senior notes due 2015. These senior notes are our unsecured, senior and unsubordinated obligations. The senior notes, however, are effectively subordinated to the indebtedness and other liabilities of our subsidiaries and joint ventures and any of our secured

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obligations with respect to assets that secure such obligations. The 5.75% senior notes due 2010 will mature on August 3, 2010, with interest at the rate of 5.75% per annum payable semi-annually on February 3 and August 3 of each year, commencing February 3, 2006. The 6.375% senior notes due 2015 will mature on August 3, 2015, with interest at the rate of 6.375% per annum payable semi-annually on February 3, and August 3 of each year, commencing on February 3, 2006. We will pay 100% of the principal amount of the senior notes, together with any accrued and unpaid interest, on their respective maturity dates.

     In the event we determine that, as a result of any change in or amendment to the laws or regulations of Singapore, we have been or will be required to pay additional amounts, we may, at our option, redeem each series of these senior notes at a redemption price equal to the principal amount, plus any accrued and unpaid interest to the redemption date.

     Upon the occurrence of specified change of control events, holders of these senior notes may require us to repurchase ail or any part of their senior notes at a repayment price equal to 101% of the principal amount, plus any accrued and unpaid interest at the time of the repayment.

     Subject to certain exceptions, we and our material subsidiaries are restricted in creating or permitting the subsistence of any security interest upon any property or assets to secure the repayment of, or any guarantee or indemnity in respect of, any indebtedness.

Convertible Redeemable Preference Shares and 6% Amortizing Bonds due 2010

     In July 2005, we issued 30,000 units which comprised of 30,000 non-voting convertible redeemable preferred shares due 2010 (“preference shares”) and $46.7 million of 6.00% amortizing bonds due 2010 (“Amortizing Bonds”). The units were each priced at $10,000 and they raised an aggregate amount of $300 million, which was allocated to the preference shares and the Amortizing Bonds based on their relative fair values. The preference shares and Amortizing Bonds are legally separable instruments. The Amortizing Bonds are our unsecured, senior and unsubordinated obligations. The Amortizing Bonds, however, are effectively subordinated to the indebtedness and other liabilities of our subsidiaries and joint ventures and any of our secured obligations with respect to assets that secure such obligations. Principal in semi-annual installments are payable on the Amortizing Bonds on February 17 and August 17 of each year, commencing on February 17, 2006, with the final principal installment to be paid at maturity on August 17, 2010. Interest at the rate of 6.00% per annum is payable semi-annually on February 17 and August 17 of each year, commencing February 17, 2006. We will redeem the Amortizing Bonds at 100% of the then outstanding principal amount, together with any accrued and unpaid interest, on the maturity date.

     In the event we determine that, as a result of any change in or amendment to the laws or regulations of Singapore, we have been or will be required to pay additional amounts, we may, at our option, redeem the Amortizing Bonds at a redemption price equal to the outstanding principal amount, plus any accrued and unpaid interest to the redemption date.

     Upon the occurrence of specified change of control events, holders of these Amortizing Bonds may require us to repay in cash their Amortizing Bonds at a repayment price equal to 101% of the principal amount, plus any accrued and unpaid interest at the time of the repayment.

     Subject to certain exceptions, we and our material subsidiaries are restricted from creating or permitting the subsistence of any security interest upon any property or assets to secure the repayment of, or any guarantee or indemnity in respect of, any indebtedness.

     Please see “Item 10. Additional Information — B. Our Memorandum and Articles of Association” for information on our preference shares.

6.25% senior notes due 2013

     In 2006, we issued $300 million of 6.25% senior notes due 2013. These senior notes are our unsecured, senior and unsubordinated obligations. The senior notes, however, are effectively subordinated to the indebtedness and other liabilities of our subsidiaries and joint ventures and any of our secured obligations with respect to assets that secure such obligations. The 6.25% senior notes due 2013 will mature on April 4, 2013, with interest at the rate of 6.25% per annum payable semi-annually on April 4 and October 4 of each year, commencing October 4, 2006. We will pay 100% of the principal amount of the senior notes, together with any accrued and unpaid interest, on the maturity date.

     In the event we determine that, as a result of any change in or amendment to the laws or regulations of Singapore, we have been or will be required to pay additional amounts, we may, at our option, redeem the 6.25% senior notes at a redemption price equal to the principal amount, plus any accrued and unpaid interest to the redemption date.

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     Upon the occurrence of specified change of control events, holders of these 6.25% senior notes may require us to repurchase all or any part of their senior notes at a repayment price equal to 101% of the principal amount, plus any accrued and unpaid interest at the time of the repayment.

     Subject to certain exceptions, we and our material subsidiaries are restricted in creating or permitting the subsistence of any security interest upon any property or assets to secure the repayment of, or any guarantee or indemnity in respect of, any indebtedness,

(b) Strategic business alliances

CSP

     Our subsidiary, CSP, is a joint venture established in March 1997 among Chartered, EDB Investments, Agilent Technologies Europe B.V. (previously Hewlett-Packard Europe B.V.), and Singapex. As of December 31, 2006, the equity interests of CSP were held as follows: Chartered (51%), EDB Investments (26.5%), Agilent Technologies Europe B.V. (15%) and Singapex (7.5%).

     As part of Agilent Technologies Inc.’s strategy that led to Agilent Technologies Europe B.V. reducing its ownership in CSP from 30% to 15% in October 2001, Agilent Technologies Europe B.V. relinquished the voting rights of its nominees on the Board of Directors of CSP. The parties entered into Amendment Agreement No. 1 dated January 31, 2002 to the Restated Joint Venture Agreement dated October 23, 2001 to effect such change.

     As part of Agilent Technologies, Inc’s restructuring in 2005, Agilent Technologies Europe B.V. has, in January 2006, transferred its entire shareholding in the capital of CSP to Avago and, as such, Avago has in January 2006 replaced Agilent Technologies Europe B.V. as a 15% shareholder of CSP and party to the joint venture agreement (see “Item 19. Exhibits — Exhibit 4.7.3”).

SMP

     We entered into a Joint Venture Agreement with Lucent Technologies Microelectronics Pte. Ltd., now known as Agere Systems Singapore, to form the SMP strategic alliance relating to the joint ownership of Fab 5. In September 2004, we entered into a Supplemental Agreement to the Joint Venture Agreement to provide that SMP can pay dividends out of the profits of the venture determined on a year to year basis rather than a cumulative basis as previously was the case. In January 2005, we entered into a Second Supplemental Agreement to the Joint Venture Agreement to clarify a provision under the Joint Venture Agreement relating to billings in the event of cumulative losses in SMP (see “Item 19. Exhibits — Exhibit 4.8.3”).

     As part of the SMP strategic alliance, we also entered into a License and Technology Transfer Agreement with SMP and Lucent Technologies Microelectronics Pte. Ltd. This agreement has been amended several times, with the last amendment made on July 1, 2003 (see “Item 19. Exhibits — Exhibit 4.8.10”) to provide for additional process technologies to be transferred. For a summary of this arrangement, see “Item 4. Information on Our Company — B. Business Overview — Strategic Business and Technology Alliances — Silicon Manufacturing Partners”).

(c) Technology transfer, licenses, joint development and other related agreements

Agere Systems

     We entered into a Technology Transfer Agreement with Lucent Technologies Inc., now known as Agere Systems Inc. in February 1998 to transfer technology to one another. Under this Agreement, Lucent and our company transferred to one another 0.25um process technology. The agreement has been amended several times, with the last amendment made on March 28, 2002 (see “Item 19. Exhibits — Exhibit 4.9.4”), for the purpose of updating the list of process technologies transferred to one another.

     We also entered into a Patent License Agreement with Agere Systems Inc. in January 1998 which was amended in 2000. Under this Agreement, Agere Systems Inc. and our company granted to one another a license to use certain of each other’s patents and for us to provide wafer capacity to Agere Systems Inc. in lieu of royalty payments for the use of Agere Systems Inc.’s patents.

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     In September 2002, we entered into a Letter Agreement with Agere Systems Inc. (see “Item 19. Exhibits — Exhibit 4.9.7”), where in exchange for our agreement to waive Agere Systems Inc.’s capacity shortfall fees under our manufacturing agreement with them, Agere Systems Inc. agreed to treat our royalty obligations under the patent license agreement with Agere Systems Inc. as satisfied until such time as Agere Systems Inc.’s ownership interest in SMP falls below 49%. Thereafter, the existing provisions in the patent license agreement allowing us to offset royalty payments in exchange for the provision of short and long term flexibility in wafer capacity to Agere Systems Inc. continue to apply.

IBM

     We entered into a Patent Cross-License Agreement with IBM dated January 1, 2001 (see “Item 19. Exhibits — Exhibit 4.11.1”). Under this agreement, IBM and our company granted to one another a license to use certain of each other’s patents. This agreement was amended effective as of November 26, 2002, to expand the scope of the licenses and to extend the term of the licenses granted to each party (see “Item 19. Exhibits — Exhibit 4.11.2”).

     Effective as of November 26, 2002, we entered into the following agreements with IBM: “SF” Process Development and Cost Sharing Agreement (see “item 19. Exhibits — Exhibit 4.11.3”), Copper/Related FEOL Technology License Agreement (see “Item 19. Exhibits — Exhibit 4.11.4”) and Refundable Cross Deposit Agreement (see “Item 19. Exhibits — Exhibit 4.11.10”).

     The “SF” Process Development and Cost Sharing Agreement provides for the development of 90nm and 65nm logic processes on 300-mm silicon wafers. The “SF” Process Development and Cost Sharing Agreement was amended on several occasions to, among other things, address certain matters between the parties pertaining to the “SF” Process 65nm/45nm Development and Cost Sharing Agreement which the parties entered into together with Infineon and Samsung on March 5, 2004 (see “Item 19. Exhibits — Exhibit 4.11.7”), to extend parties’ collaboration to include 45nm process technologies (see Item 19. Exhibits — Exhibit 4.11.9”), and to expand parties’ agreement with regard to the design kit models as well as to include development of design enablement for certain other 90nm technologies as described in the agreement and to broaden the scope of the license grant (see “Item 19. Exhibits — Exhibit 4.11.8”).

     In December 2006, IBM and our company agreed, subject to the necessary consents of Infineon and Samsung, to use a new contract structure to continue our existing development work for 45nm bulk CMOS process technology and 45nm bulk CMOS enablement as well to define the framework for future joint development activities. The new contract structure comprises the Master IBM Joint Development Terms and Conditions for joint development projects with IBM (see “Item 19. Exhibits — Exhibit 4.11.13”) and project agreements which will provide the terms and conditions specific to individual joint development project activities. In December 2006, we entered into project agreements with IBM for the joint development of 32nm bulk CMOS logic process technology (see “Item 19. Exhibits — Exhibit 4.11.16) and to further define the terms of the joint development activities for 45nm bulk CMOS logic process (see “Item 19. Exhibits — Exhibit 4.11.15”). As part of the new contract structure, IBM and our company also entered into a Participation Agreement (see “Item 19. Exhibits — Exhibit 4.11.14”) to address additional matters agreed between our companies.

     Under the Copper/Related FEOL Technology License Agreement, IBM transferred and licensed to Chartered certain know-how and skills relating to certain copper back end of line and related front end of line techniques. Under the Refundable Cross Deposit Agreement, each of IBM and Chartered would deposit certain funds with the other party to secure certain manufacturing capacity in each other’s facility This Refundable Cross Deposit Agreement was further amended and supplemented by way of a Supplemental Agreement and a Letter Agreement effective as of December 19, 2003 and March 15, 2006, respectively, (to revise some of the terms relating to the deposit and pricing of the goods sold by Chartered to IBM see “Item 19. Exhibits — Exhibit 4.11.11 and Exhibit 4.11.12”).

IBM, Infineon and Samsung

     As of March 5, 2004, we extended the “SF” Process 65nm/45nm Development and Cost Sharing Agreement” with IBM and Infineon to include Samsung (see “Item 19. Exhibits — Exhibit 4.12”). This agreement replaces and is in substitution of the “SF” Process 65nm/45nm Development and Cost Sharing Agreement dated June 26, 2003 by and amongst IBM, Infineon and Chartered. For more information on this agreement with IBM, Infineon and Samsung, please see “Item 4. Information on Our Company — B. Business Overview — Research and Development.”

Motorola

     We entered into a Patent License Agreement with Motorola Inc., or Motorola, dated July 1, 2003 (see “Item 19. Exhibits — Exhibit 4.13”). Under this Agreement, Motorola and our company granted to one another a license to use certain of each other’s patents.

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(d) Leases

     Please see “Item 4. Information On Our Company — D. Property, Plant and Equipment — Leases” for information on our leases.

D.  EXCHANGE CONTROLS

     Currently, no exchange control restrictions exist in Singapore. There are no provisions under Singapore law or under our Articles of Association that limit our ADS holders’ ability to exercise their voting rights. However, under the deposit agreement for the ADSs, there may be practical limitations upon the ability of our ADS holders to exercise their voting rights. Please see “Item 3. Key Information — D. Risk Factors — Risks Related to Our Securities and Our Trading Market — Your voting rights with respect to the ADSs are limited by the terms of the deposit agreement for the ADSs” regarding the practical limitations applicable to holders of our ADSs with respect to voting rights.

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 and, as a result, are expected to affect the market price of 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.

     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.

	Singapore Dollar Per US$1.00
	Noon Buying Rate
Fiscal Year Ended December 31,	Average (1)		High		Low		Period End
2002		1.7908		1.8525		1.7310		1.7352
2003		1.7432		1.7838		1.6990		1.6990
2004		1.6870		1.7291		1.6308		1.6319
2005		1.6648		1.7058		1.6180		1.6628
2006		1.5804		1.6521		1.5338		1.5338

	Singapore Dolllars Per US$1. 00
	Noon Buying Rate
Month	High		Low
September 2006		1.5900		1.5676
October 2006		1.5904		1.5575
November 2006		1.5662		1.5373
December 2006		1.5456		1.5338
January 2007		1.5428		1.5316
February 2007		1.5424		1.5258

Note :
(1)	The average of the daily noon buying rates on the last business day of each month during the year.

E.  TAXATION

Singapore Taxation

     The following discussion is a summary of 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

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holder of the securities that is not resident in Singapore. This discussion does not purport to be a comprehensive description of all of the Singapore tax considerations that may be relevant to a decision to purchase, own or dispose off the securities and does not purport to deal with the Singapore tax consequences applicable to all categories of investors. Holders of the securities and prospective purchasers of the securities should consult their own tax advisers as to the Singapore or other tax consequences of the purchase, ownership or disposal of the securities including, in particular, the effect of any foreign, state or local tax laws to which they are subject.

     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 document, 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 or deemed received in Singapore, subject to certain exceptions. A non-resident individual is subject to income tax on income accrued in or derived from Singapore.

     Subject to the provisions of any applicable tax treaties and certain exceptions, non-residents who derive certain types of income from Singapore are subject to a withholding tax on that income currently at a rate of 20% for the year ended December 31, 2006 (or 15% in the case of interest and rental of movable equipment; and 10% in the case of royalties). We are obligated by law to withhold tax when making such payments to a non-resident. No comprehensive tax treaty currently exists between Singapore and the U.S.

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

Dividend distributions

     Dividends received in respect of the ordinary shares or ADSs by either a resident or non-resident of Singapore are not subject to Singapore withholding tax.

Dividends paid out of Tax-Exempt Income or Income subject to Concessionary Tax Rates

     If we pay dividends on the ordinary shares or ADSs out of income received that is exempt from tax because of our pioneer status or out of our income received that is subject to tax at a concessionary rate, if any, such dividends will be free from Singapore tax in the hands of the holders of the ordinary shares and ADSs. Please see “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources — Special Tax Status” for a discussion of our tax incentive status.

Dividends paid out of income subject to normal corporate taxation

     Imputation System. Before January 1, 2003 (and to a certain extent between January 1, 2003 and December 31, 2007, pursuant to the transitional rules for the new one-tier corporate tax system (see “— One-Tier Corporate Tax System” below)), the imputation system of corporate taxation applied in Singapore. Under this system, the tax we paid on income subject to tax at the normal corporate income tax rate (which is currently 20%) would be imputed to, and deemed to be paid on behalf of, our shareholders upon distribution of such income as dividends. Our shareholders would have received dividends (“Franked Dividends”) net of such tax and would be taxed on the gross amount of dividends. In this way, the tax we paid would have been available to our shareholders as a tax credit to offset their tax liabilities on their overall income (including the gross amount of dividends) subject to Singapore income tax.

     A non-resident shareholder is effectively taxed on Franked 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 dividends received by a non-resident holder of ordinary shares or ADSs. Further, a non-resident shareholder who does not have deductible expenses attributed to such dividend income would not be able to claim any tax refund from the Inland Revenue Authority of Singapore.

     One-Tier Corporate Tax System. The one-tier corporate tax system (“one-tier system”) became effective from January 1, 2003 (subject to certain transitional rules). Under this new system, the tax on corporate profits is final and dividends paid by a Singapore resident company will be tax exempt in Singapore, in the hands of a shareholder of ordinary shares or ADSs, regardless of whether the shareholder is a company or an individual and whether or not the shareholder is a

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Singapore tax resident. Accordingly, under the one-tier system, no further Singapore income tax will be imposed on the net dividends received by a non-resident holder of ordinary shares or ADSs.

     However, companies with unutilized dividend franking credits as of December 31, 2002, are given a five year transitional period from January 1, 2003 to December 31, 2007 to remain on the imputation system for the purposes of paying Franked Dividends.

     We do not presently intend to migrate to the one-tier system until our dividend franking credits as of December 31, 2002 are fully utilized or until the transitional period comes to an end, whichever is earlier. Accordingly, for so long as we have not moved to the one-tier system, shareholders may continue to receive dividends with credits attached as described above under"— Imputation System.” In this regard, tax vouchers issued by us, if any, will distinguish between franked dividends and normal tax exempt dividends. The latter comprise dividends paid out of income that has been exempt from tax, or income net of tax payable at a concessionary tax rate, approved deduction or approved further deduction of expenses; or foreign tax credit allowed. Once we have fully utilized our dividend franking credits (that is, we are required to move to the one-tier system) or elected to move to the one-tier system at an earlier date, tax vouchers issued by us, if any, will distinguish between normal tax exempt dividends and exempt dividends under the one-tier system.

Tax on capital gains

     Singapore does not impose tax on capital gains. There are currently no specific laws or regulations which address the characterization of capital gains. Hence, gains or profits arising from the ordinary shares or ADSs may be construed to be of an income nature and subject to tax if they arise from activities which the Inland Revenue Authority of Singapore regards as the carrying on of a trade or business in Singapore.

Stamp duty

     There is no stamp duty payable in respect of the issuance and holding of 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 or part thereof 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. However, stamp duty may be payable if the instrument of transfer is executed outside Singapore and received in Singapore.

Estate duty

     In the case of an individual who is not domiciled in Singapore, Singapore estate duty is imposed on the value of immovable properties of the individual situated in Singapore. Estate duty is not imposed on the movable properties in Singapore owned by a non-domiciled person. Thus, an individual holder of the ordinary shares or ADSs who is not domiciled in Singapore at the time of his or her death will not be subject to Singapore estate duty on the value of the ordinary shares or ADSs held by the individual upon the individual’s death.

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

U.S. Federal Taxation

     The following is a summary of certain material U.S. federal income and estate tax consequences that may be relevant to a U.S. holder with respect to the acquisition, ownership and disposition of ordinary shares or ADSs. For purposes of this summary, a “U.S. holder” is a beneficial owner of ordinary shares or ADSs who is included in at least one of the following categories:

• citizens or residents of the U.S. for U.S. federal income tax purposes,

• corporations or other entities created or organized under the laws of the U.S. or of any political subdivision thereof,

• estates the income of which is subject to U.S. federal income taxation regardless of source, or

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

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

Ownership of ADSs

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

Dividends

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

     U.S. holders should be aware that dividends paid by our company generally will constitute “passive income” or, in the case of certain U.S. holders, “financial services income” for purposes of the foreign tax credit. Dividends paid by our company for taxable years beginning after December 31, 2006 will generally be “passive category income” or, in the case of certain U.S. holders, “general category income” for purposes of the foreign tax credit.

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

     Dividends received by a non-corporate U.S. holder on the ordinary shares or ADSs for taxable years of such holder beginning before January 1, 2011 may be taxed at the lower applicable capital gains rate provided that (1) we are not a PFIC (as discussed below) for either our taxable year in which the dividend was paid or the preceding taxable year, (2) our ADSs or ordinary shares, as applicable, are readily tradable on an established securities market in the U.S. and (3) certain holding period requirements are met. You should consult your own tax advisors regarding the availability of the lower rate for dividends paid with respect to ADSs or ordinary shares.

Sale or exchange of ordinary shares or ADSs

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

PFIC rules

     A non-U.S. corporation will be classified as a PFIC for U.S. federal income tax purposes if either (i) 75% or more of its gross income for the taxable year is passive income, or (ii) on a quarterly average for the taxable year by value (or, if it is

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not a publicly traded corporation and so elects, by adjusted basis), 50% or more of its gross assets produce or are held for the production of passive income.

     We do not believe that we satisfied either of the tests for PFIC status in 2006. However, there can be no assurance that we will not be a PFIC in 2007 or a later year, If, for example, the “passive income” earned by us exceeds 75% or more of our “gross income,” we will be a PFIC under the “income test.” In addition, it is also possible that we will be a PFIC under the “asset test.” The determination of the value of our assets will be based in part on the market price of our ordinary shares and ADSs. Because we have historically held, and may continue to hold a substantial amount of passive assets, there is a risk that we may be a PFIC in 2007 or in a later year. Passive income for PFIC purposes includes, among other things, interest, dividends, royalties, rents and annuities.

     If we were to be a PFIC at any time during a U.S. holder’s holding period, such U.S. holder would be required to either: (i) pay an interest charge together with tax calculated at maximum ordinary income rates on “excess distributions,” which is defined to include gain on a sale or other disposition of ordinary shares or ADSs, or (ii) so long as the ordinary shares or ADSs are “regularly traded” on a qualifying exchange, elect to recognize as ordinary income each such year the excess in the fair market value, if any, of its ordinary shares or ADSs at the end of the taxable year over such holder’s adjusted basis in such ordinary shares or ADSs and, to the extent of prior inclusions of ordinary income, recognize ordinary loss for the decrease in value of such ordinary shares or ADSs (the “mark to market” election). For this purpose, the Nasdaq Global Select Market will qualify as a qualifying exchange. U.S. holders are strongly urged to consult their own tax advisers regarding the application of the PFIC rules.

Estate taxes

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

Backup withholding tax and information reporting requirements

     In general, information reporting requirements will apply to payments of dividends in respect of the ordinary shares or ADSs or the proceeds received on the sale, exchange or redemption of the ordinary shares or ADSs by a paying agent within the U.S. or with certain U.S. connections to a U.S. holder that is not otherwise exempt, and a backup withholding tax may apply to such amounts if such U.S. holder fails to provide an accurate taxpayer identification number (certified on IRS Form W-9) to the paying agent. Amounts withheld as backup withholding will be creditable against the U.S. holder’s U.S. federal income tax liability, provided that the required information is furnished in a timely manner to the IRS.

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

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

     Publicly filed documents concerning our company can be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., 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 required to use the EDGAR system. We have done so in the past and will continue to do so in order to make our reports available over the Internet.

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I. SUBSIDIARY INFORMATION

     For more information on our subsidiaries, please see “Item 4. Information on Our Company — C. Organizational Structure.”

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk

     Our exposure to financial market risks is derived primarily from the changes in interest rates, foreign exchange rates and the price of our ordinary shares. To mitigate these risks, we utilize derivative financial instruments and natural hedging by maintaining foreign currency bank deposits, the application of which is intended for hedging purposes and not for speculative purposes.

Interest rate risk

     We are exposed to interest rate risk on our existing floating rate debt and on additional floating rate debt financing that may periodically be needed for the capital expenditures associated with our capacity expansion and new fabs. The interest rate that we will be able to obtain on debt financing will depend on market conditions at that time, and may differ from the rates we have secured on our current debt. To manage interest rate risk, we may utilize interest rate derivative instruments to modify the interest characteristics of our outstanding debts. The market risk associated with such interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

     The tables below provide information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate contracts and long-term debt. For long-term debt, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate contracts, the tables present notional amounts and weighted average interest rates by expected (contractual) maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average floating rates are based on prevailing floating interest rates related to the outstanding obligations as of December 31, 2006.

	As of December 31, 2006
	Expected Maturity Date
	(In thousands, except interest rates)
																						Fair
	2007			2008			2009			2010			2011			Thereafter			Total			Value
LONG-TERM DEBT:
Floating rate debt (US$)	$	114,855		$	64,855		$	64,855		$	64,855		$	64,857		$	—		$	374,277		$	373,905
Weighted average interest rate		5.95	%		5.73	%		5.73	%		5.73	%		5.73	%		—	%		5.80	%(1)
Fixed rate debt (US$)(2)	$	8,774		$	9,308		$	9,875		$	385,476		$	—		$	550,000		$	963,433		$	962,140
Weighted average interest rate		6.00	%		6.00	%		6.00	%		5.76	%		—	%		6.31	%		6.08	%(1)
Total	$	123,629		$	74,163		$	74,730		$	450,333		$	64,855		$	550,000		$	1,337,710		$	1,336,045

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	As of December 31, 2006
	Expected Maturity Date
	(In thousands, except interest rates)
	2006		2007		2008		2009		2010		Thereafter			Total		Fair Value
INTEREST RATE DERIVATIVES
Interest rate swap(2):
Fixed to Floating (US$)		—		—		—		—		—	$	300,000		$	300,000	$	3,109
Average pay rate											LIBOR plus
		—		—		—		—		—		0.93	%
Average receive rate		—		—		—		—		—		6.25	%

	As of
	December 31, 2005
	(In Thousands)
	Total		Fair Value
LONG-TERM DEBT
Floating rate debt(2)	$	686,657	$	686,657
Fixed rate debt		768,858		779,768
Total	$	1,455,515	$	1,466,425
INTEREST RATE DERIVATIVES
Interest rate cap contracts(3)	$	183,333	$	1,394

Note:
(1)	Average interest rate under “Total” are the weighted average interest rates of loans outstanding as of December 31, 2006.
(2)	The SMBC/OCBC Term Loan, which bears floating interest at LIBOR plus 1.75% as of December 31, 2005, was fully repaid using the proceeds from the issuance of the 6.25% senior notes due 2013 in 2006. We entered into an interest rate swap to economically swap the fixed-rate interest obligation associated with the 6.25% senior notes due 2013 from a fixed-rate interest obligation to a floating-rate interest obligation based on LIBOR for U.S. dollars plus 0.93%.
(3)	As of December 31, 2005, we entered into four interest rate cap contracts related to the floating rate obligations associated with $300.0 million of one of the U.S. dollar loans, with the effect of placing an upper limit on the cash flow and earnings exposure due to market interest rate changes. These interest rate cap contracts matured in September 2006.

     As of December 31, 2006, after taking into account the economic effect of hedging instruments, 49.5% and 50.5% of our interest rate payment obligations are at fixed rates and floating rates, respectively. We do not have cash flow and earnings exposure due to market interest rate changes for our fixed rate debt obligations, however we do have cash flow and earnings exposure due to market interest rate changes for our floating rate debt obligations. Based on our interest payment obligations as of December 31, 2006, a 0.5% increase in interest rates would increase our floating rate interest payments by 8.3% annually.

Foreign currency risk

     Our foreign currency exposures give rise to market risk associated with exchange rate movements of the U.S. dollar, which is our reporting and functional currency, against the Japanese yen, the Singapore dollar and the Euro. Substantially all of our revenue was denominated in U.S. dollars during 2005 and 2006 and as a result, we had relatively little foreign currency exchange risk with respect to our revenue. In 2005, approximately 78% and 20% of our cost of revenue was denominated in U.S. dollars and Singapore dollars, respectively. This did not significantly change in 2006 where approximately 76% and 22% of our cost of revenue was denominated in U.S. dollars and Singapore dollars, respectively. Approximately 55% of our 2005 capital expenditures were denominated in U.S. dollars, approximately 13% were denominated in Euro, approximately 28% were denominated in Japanese yen and approximately 4% were

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denominated in Singapore dollars. In 2006, approximately 59% of our capital expenditures were denominated in U.S. dollars, approximately 16% were denominated in Euro, approximately 20% were denominated in Japanese yen and approximately 5% were denominated in Singapore dollars.

     Other than a portion of our cash and cash equivalents, payables, and capital lease obligations, our financial assets and liabilities are primarily denominated in U.S. dollars. As of December 31, 2005, 96% of our cash and cash equivalents were denominated in U.S. dollars, with the remaining cash and cash equivalents denominated in Japanese yen, Singapore dollars and Euro. As of December 31, 2006, 90% and 8% of our cash and cash equivalents were denominated in U.S. dollars and Singapore dollars, respectively, with the remaining cash and cash equivalents denominated in Japanese yen and Euro. For our payables, 12% were denominated in Japanese yen and Singapore dollars each while 3% were denominated in Euro in 2005. In 2006, 17%, 6%, and 9% of our payables were denominated in Japanese yen, Singapore dollars and Euro, respectively. 100% of our capital lease obligations were denominated in Singapore dollars in 2005 and 2006.

     We minimize our currency risk by purchasing certain raw materials and equipment in U.S. dollars and borrowing in U.S. dollars. In addition, to protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, from time to time we utilize currency forward contracts. We use these instruments as economic hedges to minimize our exposure to specific currency risks related to equipment purchase commitments denominated primarily in Japanese yen and Euros. We do not use currency forward contracts to hedge 100% of our foreign currency denominated firm commitments. Other than currency forward contracts, we also utilize natural hedging by maintaining foreign currency bank deposits and utilizing these for settlement of foreign currency liabilities. As of December 31, 2005, we had $5.9 million, $10.8 million and $16.1 million in U.S. dollar equivalents of bank deposits denominated in Japanese yen, Singapore dollars and Euro, respectively. As of December 31, 2006, we had $4.0 million, $54.6 million and $6.3 million in U.S. dollar equivalents of cash and cash equivalents denominated in Japanese yen, Singapore dollars and Euro, respectively. Our Singapore dollar cash balance is used primarily to naturally hedge our capital lease obligations and expenses denominated in Singapore dollars while our Euro and Japanese yen cash balances are used primarily for capital expenditure payments.

     The table below provides information about our foreign currency forward contracts and presents the information in U.S. dollar equivalents.

	As of December 31, 2006
	Expected Maturity Date of Notional Amounts									As of December 31, 2005
	(In thousands, except exchange rates)									(In thousands)
	2007		Thereafter		Total		Fair Value			Total		Fair Value
FORWARD FOREIGN EXCHANGE AGREEMENTS:
(Receive Yen/Pay US$)
Contract Amount	$	51,264		—	$	51,264	$	(1,724	)	$	30,024	$	(208	)
Average Contractual Exchange Rate		114.43		—
(Receive S$/Pay US$)
Contract Amount	$	8,997		—	$	8,997	$	41		$	11,976	$	1
Average Contractual Exchange Rate		1.54		—
(Receive Euros/Pay US$)
Contract Amount	$	11,997		—	$	11,997	$	50		$	1,102	$	(107	)
Average Contractual Exchange Rate		1.31		—
Total Contract Amount	$	72,258		—	$	72,258	$	(1,633	)	$	43,102	$	(314	)

     In addition, we also entered into purchase contracts for which payments are denominated in currencies other than the functional currency or the local currency of the parties to the contracts or, in some cases, their parent company where the parent company provides the majority of resources required under the contract on behalf of the subsidiary who is party to the contract. Therefore these contracts contain embedded foreign currency derivatives. The outstanding notional amounts of these purchase contracts as of December 31, 2006 are as follows:

Denominated in Japanese yen (in thousands)	743,349
Denominated in Euro (in thousands)	29

     The fair values of these embedded foreign currency derivatives as of December 31, 2006 are $0.3 million.

Equity Price Risk

     In March 2006, we entered into the 2006 Option with GS to replace the call option transaction that we had previously entered into with GS in August 2004 and that expired on April 2, 2006. Under the 2006 Option, GS may purchase up to 214.8 million of our ordinary shares at a price of S$2.15 per share. If the 2006 Option is exercised in full at the price of S$2.15 per share and physically settled, we would receive approximately $300 million based on an exchange rate of $1.00 = S$1.54 that could be used for repayment of debt and general corporate purposes. The 2006 Option contains early termination provisions, whereby we may choose to terminate the 2006 Option in whole or in part, triggered by the closing price of our ordinary shares reaching and maintaining specified levels for a defined period of time. Under the terms of the 2006 Option, we have the right in all cases either to issue new ordinary shares to GS or to settle the transaction in cash. If the 2006 Option is not exercised or terminated earlier, it will expire on March 29, 2011. The 2006 Option which we entered into with GS is a derivative instrument that is dual indexed to our ordinary share price and currency exchange rates. As a result we are exposed to both price fluctuations of our ordinary shares as well as exchange rate movements of the U.S. dollar, which is our reporting and functional currency, against the Singapore dollar. The fair value of the 2006 Option as of December 31, 2006 is $7.5 million.

     A hypothetical 10% increase (decrease) to the last closing price of our ordinary shares as of December 31, 2006 of S$1.28 using the exchange rate as of that date would result in an increase (a reduction) of approximately $3.1 million and $(2.7) million in the fair value of the 2006 Option, which would decrease (increase) our earnings by $3.1 million and $(2.7) million, respectively.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     As required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures. Also, our company has investments in certain unconsolidated entities. As our company’s ability to influence these entities is limited only to certain management and operational aspects, our disclosure controls and procedures with respect to such entities are necessarily limited compared to those we maintain with respect to our consolidated subsidiaries.

     Based on the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2006, the end of the period covered by this report, our disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

     Management is responsible for establishing and maintaining adequate internal control over financial reporting.

     Internal control over financial reporting refers to a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and members of our board of directors; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

     Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial

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reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

     Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2006 using the framework set forth in the report of the Treadway Commission’s Committee of Sponsoring Organizations (COSO), “Internal Control — Integrated Framework.”

     Based on the foregoing, management has concluded that our internal control over financial reporting was effective as of December 31, 2006. Our company’s independent registered public accounting firm, KPMG, has issued a report on our company’s assessment of our internal control over financial reporting which is set forth below.

Changes in Internal Control over Financial Reporting

     Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during our last fiscal year have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, management has concluded that no such changes have occurred.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Chartered Semiconductor Manufacturing Ltd:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Chartered Semiconductor Manufacturing Ltd maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Chartered Semiconductor Manufacturing Ltd’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Chartered Semiconductor Manufacturing Ltd maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by COSO. Also, in our opinion, Chartered Semiconductor Manufacturing Ltd maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Chartered Semiconductor Manufacturing Ltd as of December 31, 2005 and 2006, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2006, and our report dated March 9, 2007 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG

Singapore
March 9, 2007

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ITEM 16.

A. AUDIT COMMITTEE FINANCIAL EXPERT

     Our Audit Committee members are Messrs. Philip Tan Yuen Fah (chairman), Steven H. Hamblin and Maurizio Ghirga (appointed as of November 2, 2006). Mr. Andre Borrel ceased to be a member of the Audit Committee on February 1, 2007. Please see “Item 6. Directors, Senior Management and Employees” for their experience and qualifications. Our Board has determined that Messrs. Steven H. Hamblin and Maurizio Ghirga meet all of the criteria required to be named an Audit Committee “Financial Expert,” as defined in the applicable rules of the SEC.

B. CODE OF ETHICS

     Our company has adopted a Code of Ethics that is applicable to all our directors, senior management and employees. The Code of Ethics contains general guidelines for conducting the business of our company.

     Our company will make available a copy of the Code of Ethics to any person without charge, if a written request is made to its Company Secretary at our company’s registered address at 60 Woodlands Industrial Park D, Street 2, Singapore 738406.

C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Below are the fees billed in 2005 and 2006 by our auditors for professional services rendered by our auditors for the said period.

	Audit fees		Audit-related fees		Tax fees		All other fees		Total
	($ in thousands)
2005		788		76		206		233		1,303
2006		1,257		21		150		6		1,434

Audit-related fees

     Services provided relate to assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and which are not reported under “Audit fees,” including consultations regarding the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of proposed rules, standards or interpretations by regulatory or standard setting bodies.

Tax fees

     Services provided primarily consist of routine corporate tax advisory services and compilation of corporate tax returns.

102B

All other fees

     Services provided related to assistance with process documentation pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.

     Our Audit Committee has established pre-approval policies and procedures for services to be performed by our independent auditors. Under our pre-approval policies and procedures, our independent auditors cannot perform services unless they are pre-approved by our Audit Committee. In October 2005 and November 2006, our Audit Committee pre-approved a list of services that could be rendered by the independent auditors in 2006 and 2007, respectively. In January 2007, our Audit Committee pre-approved the personal income tax services that could be rendered to certain employees by the independent auditors in 2007. None of the services performed by our independent auditors were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable.

E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

None.

PART III

ITEM 17. FINANCIAL STATEMENTS

See Item 18 for a list of financial statements filed under Item 17.

ITEM 18. FINANCIAL STATEMENTS

     The following financial statements are filed as part of this document, together with the report of the independent auditors:

Chartered Semiconductor Manufacturing Ltd. Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2005 and 2006

Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2004, 2005 and 2006

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2004, 2005 and 2006

Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006

Notes to Consolidated Financial Statements

Silicon Manufacturing Partners Pte Ltd Financial Statements

SMP, our 49.0%-owned equity-method joint venture company, meets certain “significance” tests pursuant to Rule 3-09 of Regulation S-X. Accordingly, separate financial statements of SMP are required to be filed by us and we intend to file an amendment to this annual report on Form 20-F to include the separate financial statements of SMP as soon as available but no later than June 30, 2007.

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ITEM 19. EXHIBITS

1(1)	Memorandum and Articles of Association of the company.
2.1(2)	Specimen certificate for ordinary shares issued prior to January 30, 2006.
2.2(27)	Specimen certificate for ordinary shares in respect of new issuances of shares issued on and after January 30, 2006.
2.3(27)	Specimen certificate for ordinary shares transferred on and after January 30, 2006 in respect of shares issued before January 30, 2006.
2.4 (23)	Specimen certificate for convertible redeemable preference shares.
2.5(3)	Deposit Agreement dated November 4, 1999 by and among the company, Citibank, N.A. and the holders and beneficial owners of American Depositary Shares evidenced by American Depositary Receipts issued thereunder (including as an exhibit, the form of American Depositary Receipt).
2.6(19)	Conversion Price Certificate dated August 17, 2005 of the company.
	Loan Agreements and Indentures
4.1.1(6)	Indenture dated as of April 2, 2001 by and between the company and Wells Fargo Bank Minnesota, National Association.
4.1.2(20)	Second Supplemental Indenture dated August 3, 2005 by and between the company and The Bank of New York.
4.1.3(20)	Third Supplemental indenture dated August 3, 2005 by and between the company and The Bank of New York.
4.1.4(21)	Fourth Supplemental Indenture dated August 17, 2005 by and between the company and The Bank of New York.
4.1.5(24)	Fifth Supplemental Indenture dated April 4, 2006 by and between the company and The Bank of New York.
4.2(21)	Master Agency Agreement dated August 17, 2005 by and between the company and The Bank of New York.
4.3(18)(+)	Facility Agreement dated December 23, 2004 by and among the company as Borrower, JPMorgan Chase Bank, N.A. as Lender, Export-Import Bank of the United States as guarantor and JPMorgan Chase Bank, N.A as Facility Agent.
4.4(18)(+)	Facility Agreement dated December 22, 2004 by and between the company as Borrower and Bank of America as Lender.
4.5(25)(++)	Letter of Confirmation from Goldman Sachs International to the company dated March 29, 2006 supplementing the ISDA Master Agreement (Multicurrency-Cross Border) dated August 10, 2004 by and between the company and Goldman Sachs international, as counter-party together with the Schedule to the Master Agreement.
4.6(25)(++)	Facility Agreement dated March 3, 2006 by and between the company as Borrower and Sumitomo Mitsui Banking Corporation as Arranger and Sumitomo Mitsui Banking Corporation, Singapore Branch as Agent.
4.6.1(26)	Syndication Agreement dated June 30, 2006 relating to the Facility Agreement dated March 3, 2006 by and between the company as Borrower and Sumitomo Mitsui Banking Corporation as Arranger and Sumitomo Mitsui Banking Corporation, Singapore Branch as Agent.
	Strategic Alliances

104

	CSP
4.7.1(7)	Deed of Accession and Ratification dated October 22, 2001 by and among the company, EDB Investments Pte Ltd, Agilent Technologies Europe B.V. and Singapex Investments Pte Ltd relating to the Joint Venture Agreement dated March 13,1997, as amended and restated on October 23, 2001 (the “Restated Joint Venture Agreement” dated October 23, 2001).
4.7.2(7)	Amendment Agreement No. 1 dated January 31, 2002 to Restated Joint Venture Agreement dated October 23, 2001.
4.7.3(23)	Deed of Accession and Ratification dated January 26, 2006 by and among the company, EDB Investments Pte Ltd, Singapex Investments Pte Ltd, Agilent Technologies Europe B.V. and Avago Technologies General IP (Singapore) Pte. Ltd. relating to the Restated Joint Venture Agreement dated October 23, 2001 and as further amended by an amendment (No.1) dated January 31, 2002.
	SMP
4.8.1(2)(+)	Joint Venture Agreement dated December 19, 1997 by and between the company and Lucent Technologies Microelectronics Pte. Ltd.
4.8.2(17)	Supplemental Agreement dated September 17, 2004 to the Joint Venture Agreement dated December 19, 1997 by and between the company and Agere Systems Singapore Pte Ltd. (formerly known as “Lucent Technologies Microelectronics Pte. Ltd.”).
4.8.3(22)	Second Supplemental Agreement dated January 1, 2005 to the Joint Venture Agreement dated December 19, 1997 by and between the company and Agere Systems Singapore Pte Ltd.
4.8.4(2)(+)	Assured Supply and Demand Agreement dated February 17, 1998 by and among the company, Silicon Manufacturing Partners Pte Ltd and Lucent Technologies Microelectronics Pte. Ltd.
4.8.5(2)(+)	Supplemental Assured Supply and Demand Agreement dated September 3, 1999 by and among the company, Silicon Manufacturing Partners Pte Ltd and Lucent Technologies Microelectronics Pte. Ltd.
4.8.6(2)(+)	License and Technology Transfer Agreement dated February 17,1998 by and among the company, Lucent Technologies Microelectronics Pte. Ltd. and Silicon Manufacturing Partners Pte Ltd.
4.8.7(10)(+)	Amendment Agreement (No. 1) to License and Technology Transfer Agreement dated July 27, 2000 by and between the company, Lucent Technologies Microelectronics Pte. Ltd. and Silicon Manufacturing Partners Pte Ltd.
4.8.8(8)(+)	Amendment Agreement (No. 2) dated March 22, 2001 to License and Technology Transfer Agreement dated February 17, 1998 by and between the company, Agere Systems Singapore Pte Ltd (formerly known as “Lucent Technologies Microelectronics Pte. Ltd.”) and Silicon Manufacturing Partners Pte Ltd.
4.8.9(9)(+)	Amendment Agreement (No. 3) dated March 28, 2002 to License and Technology Transfer Agreement dated February 17, 1998 by and among the company, Agere Systems Singapore Pte Ltd (formerly known as “Lucent Technologies Microelectronics Pte. Ltd.”) and Silicon Manufacturing Partners Pte Ltd.
4.8.10(4)(+)	Amendment Agreement (No. 4) dated July 1, 2003 to License and Technology Transfer Agreement dated February 17, 1998 by and among the company, Agere Systems Singapore Pte Ltd (formerly known as “Lucent Technologies Microelectronics Pte. Ltd.”) and Silicon Manufacturing Partners Pte Ltd.
	Technology transfer, license, joint development and other related agreements
	Agere/Lucent

105

4.9.1(2)(+)	Technology Transfer Agreement dated February 17, 1998 by and between the company and Lucent Technologies Inc.
4.9.2(8)(+)	Amendment Agreement (No. 1) dated July 31, 2000 to Technology Transfer Agreement dated February 17, 1998 between Lucent Technologies Inc. and the company.
4.9.3(8)(+)	Amendment Agreement (No. 2) dated March 20, 2001 to Technology Transfer Agreement dated February 17, 1998 between Agere Systems Inc. (formerly known as the “Microelectronics Group of Lucent Technologies Inc.”) and the company.
4.9.4(8)(+)	Amendment Agreement (No. 3) dated March 28, 2002 to Technology Transfer Agreement dated February 17, 1998 between Agere Systems Inc. (formerly known as the “Microelectronics Group of Lucent Technologies Inc.”) and the company.
4.9.5(2)(+)	Patent License Agreement dated January 1,1998 by and between the company and Lucent Technologies Inc.
4.9.6(14)(+)	Patent License Agreement Amendment dated August 3, 2000 by and between the company and Lucent Technologies Inc.
4.9.7(10)	Letter Agreement dated September 26, 2002 by and between the company and Agere Systems Inc. amending the Patent License Agreement between the parties dated January 1, 1998.
	Toshiba
4.10(2)(+)	Patent Cross License Agreement dated August 12, 1999 by and between the company and Toshiba Corporation.
	IBM
4.11.1(7)(++)	Patent Cross-License Agreement dated January 1, 2001 by and between the company and International Business Machines Corporation.
4.11.2(11)(+)	Amendment No. 1 dated November 26, 2002 to Patent License Agreement dated January 1, 2001 by and between the company and International Business Machines Corporation.
4.11.3(11)(++)	“SF” Process Development and Cost Sharing Agreement dated November 26, 2002 by and between the company and International Business Machines Corporation.
4.11.4(11)(+)	Copper / Related FEOL Technology License Agreement dated November 26, 2002 by and between the company and International Business Machines Corporation.
4.11.5(22)(++)	Amendment No. 1 dated January 19, 2005 to the Copper / Related FEOL Technology License Agreement dated November 26, 2002 by and between the company and International Business Machines Corporation.
4.11.6(12)(++)	Amendment No. 1 dated June 26, 2003 to “SF” Process Development and Cost Sharing Agreement dated November 26, 2002 by and between the company and International Business Machines Corporation.
4.11.7(16)(++)	Amended and Restated Amendment No. 2 dated March 9, 2004 to the “SF” Process Development and Cost Sharing Agreement dated November 26, 2002 by and between the company and International Business Machines Corporation.
4.11.8(27)(++)	Third Amended and Restated Amendment No.3 dated November 17, 2006 to “SF” Process Development and Cost Sharing Agreement dated November 26, 2002 by and between the company and International Business Machines Corporation.
4.11.9(18)(+)	Amendment No. 4 dated December 15, 2004 to “SF” Process Development and Cost Scaring Agreement dated November 26, 2002 by and between the company and International Business Machines Corporation.

106

4.11.10(11)(+)	Refundable Cross Deposit Agreement dated November 26, 2002 by and between the company and International Business Machines Corporation.
4.11.11(15)(+)	First Supplemental Agreement dated December 19, 2003 to the Refundable Cross Deposit Agreement dated November 26, 2002 by and between the company and International Business Machines Corporation.
4.11.12(25)(++)	Letter Agreement dated March 27, 2006 to vary the terms of the Refundable Cross Deposit Agreement dated November 26, 2002, as amended and supplemented, by and between the company and International Business Machines Corporation.
4.11.13(27)(++)	Master IBM Joint Development Terms and Conditions dated December 15, 2006 for joint development projects with International Business Machines Corporation.
4.11.14(27)(++)	Participation Agreement dated January 1, 2007 by and between the company and International Business Machines Corporation.
4.11.15(27)(++)	Joint Development Project Agreement dated December 15, 2006 for 45nm Bulk-Industry Standard Semiconductor Process Technology by and between the company and International Business Machines Corporation.
4.11.16{27)(++)	Joint Development Project Agreement dated December 15, 2006 for 32nm Bulk-Industry Standard Semiconductor Process Technology by and between the company and International Business Machines Corporation.
	IBM, Infineon and Samsung
4.12(16)(+)	“SF” Process 65nm/45nm Development and Cost Sharing Agreement dated March 5, 2004 by and among the company, International Business Machines Corporation, Infineon Technologies, A.G. and Samsung Electronics Co., Ltd.
	Motorola
4.13(4)(+)	Patent License Agreement dated July 1, 2003 by and between the company and Motorola, Inc.
	Property Agreements
	Fab 2
4.14(18)	Sub-Lease dated October 19, 2004 by and between Singapore Technologies Pte Ltd and the company relating to Private Lots A12787 and A12787(a) Mukim No. 13 Sembawang.
	Fabs 3 and 5
4.15.1(5)	Sub-Lease Agreement dated February 17, 1998 by and between the company and Silicon Manufacturing Partners Pte Ltd.
4.15.2(18)	Sub-Lease dated October 19, 2004 by and between Singapore Technologies Pte Ltd and the company relating to Private Lot A12787(b) Mukim No. 13.
	Fabs 2 and 3 Site Slurry Treatment Plant
4.16.1(23)	Agreement for Sub-License and Sub-Lease (Private Lot A12787(k)) dated July 8, 2005 by and between Singapore Technologies Pte Ltd and the company.
4.16.2(23)	Novation Agreement dated July 8, 2005 by and among Singapore Technologies Pte Ltd, Terra Investments Pte. Ltd. and the company relating to the Agreement for Sub-License and Sub-Lease (Private Lot A12787(k)) dated July 8, 2005.
4.16.3(27)	Supplemental Agreement dated January 3, 2007 by and between Terra Investments Pte. Ltd. and the company relating to the Agreement for Sub-License and Sub-Lease (Private Lot

107

	A12787(k) now known as A1964508) dated July 8, 2005.
	Fab 6
4.17.1(5)	Building Agreement relating to Private Lot A12787(d) Mukim No. 13 Sembawang dated September 24, 1999 by and between Jurong Town Corporation and Singapore Technologies Pte Ltd.
4.17.2(5)	Agreement for Sub-License and Sub-Lease (Private Lot A12787(d)) dated September 24, 1999 by and between Singapore Technologies Pte Ltd and Chartered Silicon Partners Pte Ltd.
4.17.3(18)	Novation Agreement dated December 31, 2004 by and among Singapore Technologies Pte Ltd, Terra Investments Pte. Ltd. and Chartered Silicon Partners Pte Ltd relating to the Agreement for Sub-License and Sub-Lease (Private Lot A12787(d)) dated September 24, 1999.
	Fab 7
4.18.1(13)	Agreement for Sub-License and Sub-Lease (Private Lot A12787(e)) dated July 30, 2001 by and between Singapore Technologies Pte Ltd and the company.
4.18.2(13)	Building Agreement relating to Private Lot A12787(e) Woodlands Industrial Park D, G.S. No. 3696K, Mukim No. 13 dated July 30, 2001 by and between Jurong Town Corporation and Singapore Technologies Pte Ltd.
4.18.3(18)	Novation Agreement dated December 31, 2004 by and among Singapore Technologies Pte Ltd, Terra Investments Pte. Ltd. and the company relating to the Agreement for Sub-License and Sub-Lease (Private Lot A12787(e)) dated July 30, 2001.
4.18.4(27)	Supplemental Agreement dated January 3, 2007 by and between Terra Investments Pte. Ltd. and the company relating to the Agreement for Sub-License and Sub-Lease (Private Lot A12787(e) now known as A1964507) dated July 30, 2001.
4.19.1(27)	Offer Letter dated February 16, 2006 from Jurong Town Corporation to Terra Investments Pte. Ltd. for the lease of land known as Private Lot A1964510 at Plot 6 Woodlands Industrial Park D in Woodlands Wafer Fab Park.
4.19.2(27)	Acceptance of Offer dated February 21, 2006 from the company to Terra Investments Pte Ltd. relating to Private Lot A1964510 at Plot 6 Woodlands Industrial Park D in Woodlands Wafer Fab Park.
4.19.3(27)	Acceptance of Offer dated February 24, 2006 from Terra Investments Pte. Ltd. to Jurong Town Corporation relating to Private Lot A1964510 at Plot 6 Woodlands Industrial Park D in Woodlands Wafer Fab Park.
	Related Party Agreements
4.20(11)	Amended and Restated Turnkey Subcontract Agreement for Sort, Assembly and/or Final Test Services dated October 30, 2002 by and between the company and ST Assembly Test Services Ltd.
4.21(15)	Mr. Chia Song Hwee’s, President and Chief Executive Officer, Contract of Employment.
8(11)	List of the company’s subsidiaries.
12.1(27)	Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2(27)	Certification of the Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1(27)	Certification of the President and Chief Executive Officer pursuant to 18 U.S.C Section 1350,

108

	as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2(27)	Certification of the Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1(27)	Consent of KPMG.

Notes:

(1)	Filed as an exhibit to our company’s Registration Statement on Form F-1 (Registration No. 333-88397), as filed with the Securities and Exchange Commission on October 4,1999. The Memorandum and Articles of Association were first amended by shareholders resolutions which were filed as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on June 29, 2001, and were as set forth in the proxy statement for our company’s annual general meeting in May 2001 which was filed as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on April 18, 2001. The Memorandum and Articles of Association were further amended by shareholders resolutions which were filed as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on August 18, 2005, and were set forth in the proxy statement for our extraordinary general meeting in August 2005 which was filed as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on July 25, 2005. All such exhibits are incorporated herein by reference.
(2)	Filed as an exhibit to our company’s Amended Registration Statement on Form F-1/A, as filed with the Securities and Exchange Commission on October 25,1999, which exhibit is incorporated herein by reference.
(3)	Submitted as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on November 23, 1999, which exhibit is incorporated herein by reference.
(4)	Submitted as an exhibit to our company’s Third Quarterly Report 2003 on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on November 13, 2003, which exhibit is incorporated herein by reference.
(5)	Filed as an exhibit to our company’s Registration Statement on Form F-1 (Registration No. 333-88397), as filed with the Securities and Exchange Commission on October 4,1999.
(6)	Submitted as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on April 4, 2001, which exhibit is incorporated herein by reference.
(7)	Filed as an exhibit to our company’s Annual Report on Form 20-F (File No. 000-27811), as filed with the Securities and Exchange Commission on March 11, 2002, which exhibit is incorporated herein by reference.
(8)	Submitted as an exhibit to our company’s First Quarterly Report 2001 on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on May 15, 2001, which exhibit is incorporated herein by reference.
(9)	Submitted as an exhibit to our company’s First Quarterly Report 2002 on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on May 14, 2002, which exhibit is incorporated herein by reference.
(10)	Submitted as an exhibit to our company’s Third Quarterly Report 2002 on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on November 14, 2002, which exhibit is incorporated herein by reference.
(11)	Filed as an exhibit to our company’s Annual Report on Form 20-F (File No. 000-27811), as filed with the Securities and Exchange Commission on March 13, 2003, which exhibit is incorporated herein by reference.
(12)	Submitted as an exhibit to our company’s Second Quarterly Report 2003 on Form 6-K (File No. 000- 27811), as submitted with the Securities and Exchange Commission on August 13, 2003, which exhibit is incorporated herein by reference.
(13)	Submitted as an exhibit to our company’s Third Quarterly Report 2001 on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on November 14, 2001, which exhibit is

109

	incorporated herein by reference.
(14)	Submitted as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on November 14, 2000, which exhibit is incorporated herein by reference.
(15)	Filed as an exhibit to our company’s Annual Report on Form 20-F (File No. 000-27811), as filed with the Securities and Exchange Commission on March 3, 2004, which exhibit is incorporated herein by reference.
(16)	Submitted as an exhibit to our company’s First Quarterly Report 2004 on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on May 10, 2004, which exhibit is incorporated herein by reference.
(17)	Submitted as an exhibit to our company’s Third Quarterly Report 2004 on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on November 8, 2004, which exhibit is incorporated herein by reference.
(18)	Filed as an exhibit to our company’s Annual Report on Form 20-F (File No. 000-27811), as filed with the Securities and Exchange Commission on March 7, 2005, which exhibit is incorporated herein by reference.
(19)	Submitted as an exhibit to our company’s Current Report 2005 on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on August 17, 2005, which exhibit is incorporated herein by reference.
(20)	Submitted as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on August 4, 2005, which exhibit is incorporated herein by reference.
(21)	Submitted as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on August 18, 2005, which exhibit is incorporated herein by reference.
(22)	Submitted as an exhibit to our company’s First Quarterly Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on May 6, 2005, which exhibit is incorporated herein by reference.
(23)	Filed as an exhibit to our company’s Annual Report on Form 20-F (File No. 000-27811), as filed with the Securities and Exchange Commission on March 1, 2006, which exhibit is incorporated herein by reference.
(24)	Submitted as an exhibit to our company’s Current Report on Form 6-K (file No. 000-27811), as submitted with the Securities and Exchange Commission on April 5, 2006, which exhibit is incorporated herein by reference.
(25)	Submitted as an exhibit to our company’s First Quarterly Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on May 10, 2006, which exhibit is incorporated herein by reference.
(26)	Submitted as an exhibit to our company’s Current Report on Form 6-K (File No. 000-27811), as submitted with the Securities and Exchange Commission on August 9, 2006, which exhibit is incorporated herein by reference.
(27)	Filed herewith.
(+)	Certain portions of this exhibit have been omitted pursuant to a confidential treatment order of the Securities and Exchange Commission. The omitted portions have been separately filed with the Commission.
(++)	Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. The omitted portions have been separately filed with the Commission.

110

SIGNATURES

     The company certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized on this 15^th day of March 2007.

CHARTERED SEMICONDUCTOR MANUFACTURING LTD
By:	/s/ George Thomas
Name: George Thomas
Title: Senior Vice President and Chief Financial Officer

This annual report has been signed by the following persons in the capacities indicated:

SIGNATURE	TITLE	DATE
/s/ James A. Norling	Chairman of the Board	March 15, 2007
James A. Norling
/s/ Chia Song Hwee	President and Chief Executive Officer (principal executive officer)	March 15, 2007
Chia Song Hwee
/s/ George Thomas	Senior Vice President and Chief Financial Officer (principal financial and accounting officer)	March 15, 2007
George Thomas
/s/ Andre Borrel	Director	March 15, 2007
Andre Borrel
/s/ Charles E. Thompson	Director	March 15, 2007
Charles E. Thompson
/s/ Tsugio Makimoto	Director	March 15, 2007
Tsugio Makimoto
/s/ Tay Siew Choon	Director	March 15, 2007
Tay Siew Choon
/s/ Peter Seah Lim Huat	Director	March 15, 2007
Peter Seah Lim Huat

111

SIGNATURE	TITLE	DATE
/s/ Philip Tan Yuen Fah	Director	March 15, 2007
Philip Tan Yuen Fah
/s/ Pasquale Pistorio	Director	March 15, 2007
Pasquale Pistorio
/s/ Steven H. Hamblin	Director	March 15, 2007
Steven H. Hamblin
/s/ Maurizio Ghirga	Director	March 15, 2007
Maurizio Ghirga

112

CHARTERED SEMICONDUCTOR MANUFACTURING LTD
AND SUBSIDIARIES

FINANCIAL STATEMENTS INDEX

	Page Number
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-2
Consolidated Statements of Operations	F-3
Consolidated Statements of Comprehensive Income (Loss)	F-4
Consolidated Statements of Shareholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to the Consolidated Financial Statements	F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Chartered Semiconductor Manufacturing Ltd:

We have audited the accompanying consolidated balance sheets of Chartered Semiconductor Manufacturing Ltd and subsidiaries as of December 31, 2005 and 2006, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chartered Semiconductor Manufacturing Ltd and subsidiaries as of December 31, 2005 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As described in Note 1(q) and Note 17 to the consolidated financial statements, effective January 1, 2006, the Company adopted the fair value method of accounting for stock-based compensation as required by Statement of Financial Accounting Standards No. 123(R), Share-Based Payments. As described in Note 1(c) to the consolidated financial statements, the Company changed its method of quantifying errors in 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Chartered Semiconductor Manufacturing Ltd’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 9, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

KPMG

Singapore
March 9, 2007

F-1

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS — in US Dollars

As of December 31
In thousands (except per share data)

	2005			2006
ASSETS
Cash and cash equivalents	$	819,856		$	718,982
Restricted cash		2,832			43,063
Marketable securities		7,467			2,283
Receivables, net		180,764			243,361
Inventories		134,240			157,047
Prepaid expenses		7,670			6,978
Other current assets		129,865			10,247
Total current assets		1,282,694			1,181,961
Investment in SMP		54,517			36,044
Technology licenses, net		106,612			84,991
Property, plant and equipment, net		2,049,695			2,273,119
Other non-current assets		23,776			42,316
Total assets	$	3,517,294		$	3,618,431
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERENCE SHARES AND SHAREHOLDERS’ EQUITY
Payables	$	166,681		$	302,004
Income taxes payable		27,674			33,280
Current installments of long-term debt and capital lease obligations		322,453			127,627
Other current liabilities		216,445			150,581
Total current liabilities		733,253			613,492
Long-term debt and capital lease obligations, excluding current installments		1,169,034			1,280,972
Other non-current liabilities		17,970			48,936
Total liabilities		1,920,257			1,943,400
Convertible redeemable preference shares
Authorized: 30 shares in 2005 and 2006
Issued and outstanding: 30 shares in 2005 and 28 shares in 2006
Redemption value at maturity: $10,000 per share		250,663			246,174
Ordinary share capital
Authorized: 4,615,385 shares in 2005 and 2006
Issued and outstanding: 2,513,384 shares in 2005 and 2,535,896 shares in 2006		2,682,050			2,704,215
Accumulated deficit		(1,278,252	)		(1,221,527	)
Accumulated other comprehensive loss		(57,424	)		(53,831	)
Total shareholders’ equity	$	1,346,374		$	1,428,857
Commitments and contingencies
Total liabilities, convertible redeemable preference shares and shareholders’ equity	$	3,517,294		$	3,618,431

See accompanying notes to consolidated financial statements.

F-2

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS — in US Dollars

For the Years Ended December 31
In thousands (except per share data)

	2004			2005			2006
Net revenue	$	932,131		$	1,032,734		$	1,414,525
Cost of revenue		(764,305	)		(917,048	)		(1,070,782	)
Gross profit		167,826			115,686			343,743
Other revenue		17,927			20,685			21,030
OPERATING EXPENSES
Research and development		93,818			122,073			152,756
Sales and marketing		37,995			42,503			55,007
General and administrative		34,951			40,025			42,558
Fab start-up costs		33,199			22,697			—
Other operating expenses (income), net		(139	)		14,202			13,766
Total operating expenses		199,824			241,500			264,087
Equity in income of SMP		27,563			6,486			36,040
Other income (loss), net		16,416			(6,744	)		(2,689	)
Interest income		11,530			28,625			44,591
Interest expense and amortization of debt discount		(30,093	)		(69,839	)		(87,950	)
Income (loss) before income taxes		11,345			(146,601	)		90,678
Income tax expense		4,774			12,997			23,924
Net income (loss)		6,571			(159,598	)		66,754
Less: Accretion to redemption value of convertible redeemable preference shares		—			3,196			9,476
Net income (loss) available to ordinary shareholders	$	6,571		$	(162,794	)	$	57,278
Basic net earnings (loss) per ordinary share	$	0.00		$	(0.06	)	$	0.02
Diluted net earnings (loss) per ordinary share	$	0.00		$	(0.06	)	$	0.02
Basic net earnings (loss) per ADS	$	0.03		$	(0.65	)	$	0.23
Diluted net earnings (loss) per ADS	$	0.03		$	(0.65	)	$	0.23
Number of ordinary shares used in computing:
Basic net earnings (loss) per ordinary share		2,508,376			2,511,428			2,528,056
Effect of dilutive options		8,566			—			6,009
Diluted net earnings (loss) per ordinary share		2,516,942			2,511,428			2,534,065
Number of ADS used in computing:
Basic net earnings (loss) per ADS		250,838			251,143			252,806
Effect of dilutive options		856			—			601
Diluted net earnings (loss) per ADS		251,694			251,143			253,407

See accompanying notes to consolidated financial statements.

F-3

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — in US Dollars

For the Years Ended December 31
In thousands

	2004			2005			2006
Net income (loss)	$	6,571		$	(159,598	)	$	66,754
Net unrealized gains (losses) on change in cash flow hedging fair values		598			112			(1,362	)
Share of cash flow hedging gains of SMP		3,945			17			9
Reclassification of cash flow hedging (gains) losses into earnings		(2,942	)		469			133
Foreign currency translation		—			1,721			568
Unrealized losses on available-for-sale securities		(1,073	)		(1,390	)		(11	)
Reclassification of losses on available-for-sale securities into earnings		—			—			2,350
Other comprehensive income, net		528			929			1,687
Comprehensive income (loss)	$	7,099		$	(158,669	)	$	68,441

See accompanying notes to consolidated financial statements.

F-4

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY — in US Dollars

In thousands

									Accumulated			Total
									Other			Share
	Ordinary Share					Accumulated			Compre-			holders’
	Capital					Deficit			hensive Loss			Equity
	No.		$			$			$			$
Balance at January 1, 2004		2,505,480		2,678,661			(1,125,225	)		(58,881	)		1,494,555
Net income		—		—			6,571			—			6,571
Other comprehensive income		—		—			—			528			528
Issuance of shares		3,758		2,001			—			—			2,001
Employee stock compensation		—		3			—			—			3
Non-employee stock compensation		—		173			—			—			173
Others		—		1,800			—			—			1,800
Balance at December 31, 2004		2,509,238		2,682,638			(1,118,654	)		(58,353	)		1,505,631
Net loss		—		—			(159,598	)		—			(159,598	)
Other comprehensive income		—		—			—			929			929
Accretion to redemption value of convertible redeemable preference shares		—		(3,196	)		—			—			(3,196	)
Issuance of shares		4,146		2,387			—			—			2,387
Employee stock compensation		—		1			—			—			1
Non-employee stock compensation		—		220			—			—			220
Balance at December 31, 2005		2,513,384		2,682,050			(1,278,252	)		(57,424	)		1,346,374
Cumulative effect adjustment for change in accounting policy (adoption of SAB 108)		—		8,114			(10,029	)		1,906			(9	)
Balance at January 1, 2006, as adjusted		2,513,384		2,690,164			(1,288,281	)		(55,518	)		1,346,365
Net income		—		—			66,754			—			66,754
Other comprehensive income		—		—			—			1,687			1,687
Accretion to redemption value of convertible redeemable preference shares		—		(9,476	)		—			—			(9,476	)
Issuance of shares arising from conversion of convertible redeemable preference shares		18,924		13,965			—			—			13,965
Issuance of shares		3,588		2,357			—			—			2,357
Employee share-based compensation		—		7,376			—			—			7,376
Non-employee share-based compensation		—		117			—			—			117
Others		—		(288	)		—			—			(288	)
Balance at December 31, 2006		2,535,896		2,704,215			(1,221,527	)		(53,831	)		1,428,857

See accompanying notes to consolidated financial statements.

F-5

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — in US Dollars

For the Years Ended December 31
In thousands

	2004			2005			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	6,571		$	(159,598	)	$	66,754
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in income of SMP		(27,563	)		(6,486	)		(36,040	)
Cash dividends received from SMP		—			29,460			38,178
Depreciation and amortization		437,590			507,687			503,789
Foreign exchange (gain) loss, net		(19	)		434			1,946
Gain on disposal of property, plant and equipment		(11,703	)		(1,594	)		(4,822	)
(Gain) loss on derivatives		(1,270	)		5,993			2,391
Impairment loss on investments		—			—			2,698
Share-based compensation		3			1			7,376
Gain on sale of technology and equipment		(11,708	)		—			—
Others, net		(6,106	)		(6,615	)		(1,417	)
Change in assets and liabilities:
Receivables		16,327			(44,280	)		(61,687	)
Inventories		(15,726	)		(62,081	)		(21,193	)
Prepaid expenses and other current assets		(180	)		853			(5,716	)
Payables and other liabilities		(49,346	)		136,347			20,355
Income taxes payable		(5,186	)		4,253			8,058
Net cash provided by operating activities		331,684			404,374			520,670
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment		(686,252	)		(628,127	)		(554,292	)
Payments for technology licenses		(37,083	)		(9,351	)		(9,667	)
Purchases of term deposits		(30,000	)		—			—
Refundable deposits placed with vendors		(35,000	)		—			(15,000	)
Refund of deposits placed with a vendor		—			—			111,656
Proceeds from sale of property, plant and equipment		31,217			6,245			9,975
Proceeds from redemption, maturity and disposal of marketable securities and term deposits		15,000			45,000			20,998
Return of capital from SMP		—			17,300			16,913
Others		9,403			690			(488	)
Net cash used in investing activities		(732,715	)		(568,243	)		(419,905	)
CASH FLOWS FROM FINANCING ACTIVITIES
Debt
Borrowings		318,000			1,128,592			492,915
Repayments		(287,312	)		(990,172	)		(635,010	)
Capital lease payments		—			—			(3,845	)
Receipts of refundable customer deposits		450			81,300			45,183
Refund of customer deposits		—			(22,035	)		(72,108	)
Issuance of ordinary shares		2,001			2,387			2,357
Issuance of convertible redeemable preference shares		—			247,513			—
Increase in cash restricted for debt repayment		—			(2,832	)		(40,231	)
Others		1,800			—			5,752
Net cash provided by (used in) financing activities		34,939			444,753			(204,987	)
Effect of exchange rate changes on cash and cash equivalents		19			(427	)		3,348
Net increase (decrease) in cash and cash equivalents		(366,073	)		280,457			(100,874	)
Cash and cash equivalents at the beginning of the year		905,472			539,399			819,856
Cash and cash equivalents at the end of the year	$	539,399		$	819,856		$	718,982
Supplemental Cash Flow Information
Interest paid (net of amounts capitalized)	$	18,215		$	77,510		$	85,585
Income taxes paid	$	11,276		$	9,576		$	15,434
Non-cash investing and financing activities
Equity securities received from sale of technology and equipment	$	11,708		$	—		$	—
Property, plant and equipment acquired through capital lease	$	—		$	45,933		$	31,998
Property, plant and equipment acquired on credit	$	129,147		$	52,280		$	193,742
Issuance of ordinary shares arising from conversion of convertible redeemable preference shares	$	—		$	—		$	13,965
Property, plant and equipment contributed by landlord	$	—		$	—		$	858

See accompanying notes to consolidated financial statements.

F-6

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars

In thousands (except per share data)

1. Background and Summary of Significant Accounting Policies

(a) Business and Organization

The Company is one of the world’s top dedicated semiconductor foundries providing wafer fabrication services and technologies. The Company operates in Singapore and has service operations in nine countries in North America, Europe and Asia, including Singapore. Its principal markets are the United States of America, Taiwan, Europe and Japan.

The Company was incorporated in Singapore in 1987. As of December 31, 2006, Singapore Technologies Semiconductors Pte Ltd (“ST Semiconductors”), a wholly owned subsidiary of Temasek Holdings (Private) Limited (“Temasek”), owns a majority of the shares of the Company. Temasek is a holding company through which corporate investments of the government of Singapore are held.

Chartered Silicon Partners Pte Ltd (“CSP”) was formed in March 1997. The Company, EDB Investments Pte Ltd, Avago Technologies General IP (Singapore) Pte Ltd (“Avago Singapore”) (previously Agilent Europe B.V. who transferred its entire shareholding in CSP to Avago Singapore in 2006) and Singapex Investments Pte Ltd own a 51.0%, 26.5%, 15.0% and 7.5% equity interest in CSP, respectively. The Company accounts for CSP as a consolidated subsidiary.

Silicon Manufacturing Partners Pte Ltd (“SMP”) was formed in January 1998. Agere Systems Singapore Pte Ltd (“Agere”) and the Company own a 51.0% and 49.0% equity interest in SMP, respectively. The Company accounts for SMP using the equity method.

(b) Basis of Presentation

The consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“US GAAP”).

The consolidated financial statements reflect the accounts of Chartered Semiconductor Manufacturing Ltd and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Where losses applicable to the minority interest in a subsidiary exceed the minority interest in the equity capital of the subsidiary, such excess and any further losses applicable to the minority interest have been charged to the Company’s consolidated statements of operations, unless the minority interest has a binding obligation, and is able, to make good the losses. When the subsidiary subsequently reports profits, the profits applicable to the minority interest are taken to the consolidated statements of operations until the minority interest’s share of losses previously taken to the consolidated statements of operations is fully recovered.

Due to cumulative losses, the obligation of the minority shareholders of CSP was reduced to zero in the first quarter of 2003. Therefore none of CSP’s losses from that point forward have been allocated to the minority interest in the consolidated statements of operations. The effect of this on the results of operations:

	2004	2005	2006
Losses not allocated to the minority shareholders of CSP according to their proportionate ownership	$55,786	$64,889	$12,831

The cumulative losses not allocated to the minority shareholders of CSP according to their proportionate ownership as of December 31, 2005 and 2006 are $194,992 and $207,823, respectively.

F-7

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

(c) Accounting Changes, Reclassifications and Adjustments

Cumulative Effect Adjustment — SAB 108

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”), “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” which requires companies to evaluate the materiality of identified unadjusted errors on each financial statement and related financial statement disclosure using both the rollover approach and the iron curtain approach (“dual approach”). The rollover approach quantifies misstatements based on the amount of the error originating in the current year statement of operations whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year(s) of origin. Financial statements would require adjustment when either approach results in quantifying a misstatement that is material. The Company adopted SAB 108 effective January 1, 2006.

As a transition accommodation SAB 108 permits a cumulative effect adjustment, without restatement of previously issued financial statements, to be used for errors that are determined to be immaterial pursuant to the Company’s previous method of quantification of unadjusted errors but are determined to be material under the dual approach. Prior to the adoption of SAB 108, the Company had quantified unadjusted errors under the rollover approach and had assessed these unadjusted errors to be immaterial — individually and in the aggregate. Upon initial adoption of SAB 108 for the fiscal year 2006, the Company quantified unadjusted errors under the dual approach and assessed that these unadjusted errors are material. As such, the Company elected to report a cumulative effect adjustment as of January 1, 2006 for those unadjusted errors quantified as of January 1, 2006. The impact to the Company’s beginning accumulated deficit was an increase of $10,029.

Accrued rent. The Company did not recognize rental expense for its operating leases on land using the required straight-line method during the years 1994 to 2004 and began using the straight-line method prospectively in 2005 following a clarification issued by the SEC in 2005 related to the accounting for leases. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, rental expense was cumulatively understated by $20,449 at January 1, 2006. The Company recorded a $20,449 increase in the liability for accrued rent as of January 1, 2006 with a corresponding increase to accumulated deficit to correct this misstatement.

Accrued purchase order cancellation penalties. The Company incorrectly recorded certain loss contingency accruals for purchase order cancellation penalties during 2000 and 2001. These did not qualify for recognition as a liability in the balance sheet as it was not probable that the penalties would be imposed. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, accrued operating expenses were overstated by $9,962 at January 1, 2006. The Company recorded a $9,962 decrease in the liability for accrued purchase order cancellation penalties as of January 1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.

Stock compensation charge. The Company had certain computation errors in its stock compensation charge in the years 2000 to 2005 which include incorrect basis used for options issued to non-employees and incorrect measurement dates for certain awards. These misstatements were determined to be immaterial to each period based on the prior method of assessing materiality and the circumstances giving rise to the misstatements have been corrected in 2006. As a result, ordinary share capital was understated by $8,114 at January 1, 2006. The Company recorded a $8,114 increase in ordinary share capital as of January 1, 2006 with a corresponding increase to accumulated deficit to correct these misstatements.

F-8

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

Income taxes payable. The Company overprovided for income taxes arising out of certain incorrect data used in its tax provision calculations for years 2001 to 2005. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, income taxes payable was overstated by $3,062 at January 1, 2006. The Company recorded a $3,062 reduction to income taxes payable as of January 1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.

Accrued research and development costs. The Company over-accrued certain amounts in 2001 for research and development costs payable to a research partner arising from the data used in the calculations being incorrect. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, accrued expenses were overstated by $1,787 at January 1, 2006. The Company recorded a $1,787 decrease in accrued research and development costs as of January 1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.

Inventory carrying value. The Company wrote down the carrying value of certain aged inventory although the cost basis was realizable. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, inventories were understated by $1,572 at January 1, 2006. The Company recorded a $1,572 increase to inventories as of January 1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.

Debt issuance costs. The Company used certain incorrect assumptions in applying the interest method to amortize debt issuance costs in 2005. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, debt issuance costs were understated by $1,194 at January 1, 2006. The Company recorded a $1,194 decrease to deferred debt issuance costs as of January 1, 2006 with a corresponding increase to accumulated deficit to correct these misstatements.

Insurance receivable. The Company did not recognize an asset in 2004 and 2005 for amounts that were receivable from an insurance company based on experience to date under an insurance contract. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, other receivables were understated by $908 at January 1, 2006. The Company recorded a $908 increase in other receivables as of January 1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.

Management fees receivable. The Company historically recognized certain management fees based on billings instead of accruing at the time services were rendered. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, management fees receivable was understated by $775 at January 1, 2006. The Company recorded a $775 increase in management fees receivable as of January 1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.

Research and development cost sharing fees. The Company recognized certain research and development cost sharing fees in 2005 on a payment basis rather than when the expenses were incurred. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, accrued research and development cost sharing fees were understated by $550 at January 1, 2006. The Company recorded a $550 increase in the liability for accrued research and development cost sharing fees as of January 1, 2006 with a corresponding increase to accumulated deficit to correct these misstatements.

Deferred payroll-related expenses. The Company recognized certain payroll related expenses on a payment basis rather than amortizing such prepaid expenses over the requisite service period during 2004 and 2005. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, deferred payroll related expenses were understated by $546 at January 1, 2006. The Company recorded a $546 increase in asset for deferred payroll related expenses as of January 1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.

F-9

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

Advances to suppliers. The exchange rate fluctuations between the date of advance payments made in foreign currencies for equipment and the date of delivery of the equipment were deferred in other comprehensive loss rather than recorded as a component of property, plant and equipment during 2004 and 2005. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, other comprehensive loss was overstated by $1,906 and property, plant and equipment, net was understated by $1,396 at January 1, 2006. The Company recorded a $1,906 decrease in other comprehensive loss and a $1,396 increase in property, plant and equipment, net as of January 1, 2006 with a corresponding net increase of $510 to accumulated deficit to correct these misstatements.

Deferred grant income. The Company incorrectly calculated the amount of grant to be refunded to the grantor and hence the amount of grant income to be recognized during 2003 to 2005. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, deferred grant income was understated by $475 at January 1, 2006. The Company recorded a $475 increase in deferred grant income as of January 1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.

Translation of income taxes payable. The Company historically did not translate foreign currency denominated income taxes payable using the current exchange rate. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, income taxes payable were understated by $430 at January 1, 2006. The Company recorded a $430 increase in income taxes payable as of January 1, 2006 with a corresponding increase to accumulated deficit to correct these misstatements.

Withholding taxes receivable. The Company did not recognize an asset in 2005 for refundable withholding taxes that were receivable from a tax authority. The misstatements were determined to be immaterial to each period based on the prior method of assessing materiality. As a result, withholding taxes receivable were understated by $164 at January 1, 2006. The Company recorded a $164 increase in withholding taxes receivable as of January 1, 2006 with a corresponding decrease to accumulated deficit to correct these misstatements.

Provision for income taxes (deferred and current). As a result of the misstatements described above, provision for income taxes was misstated by $1,967 at January 1, 2006. The Company recorded an increase in deferred tax assets, valuation allowance and income taxes payable in the amounts of $3,993, $1,846 and $180, respectively, as of January 1, 2006 with a corresponding (decrease) increase to accumulated deficit to correct these misstatements.

Other Adjustments and Reclassifications

Reclassifications and certain immaterial classification corrections have been made to prior years’ financial statements to conform to classifications used in the current year. These include reporting operating grant income as a reduction of the expenses that the grants are intended to reimburse rather than as other income, reporting rental income and management fees as other revenue rather than as other income, reporting depreciation of rental buildings as other operating expenses rather than as other expense and certain other immaterial reclassifications.

Until January 30, 2006, ordinary shares of the Company had a par value of S$0.26. The Singapore Companies (Amendment) Act 2005, which came into effect on January 30, 2006, abolished the concept of “par value” and “authorized capital.” Accordingly, the amounts previously disclosed under “ordinary shares” and “additional paid-in capital” line items have been combined as “Ordinary Share Capital.”

F-10

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F-11

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

(d) Use of Estimates

The preparation of the consolidated financial statements 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. Estimates are based on historical experience, current conditions and on various other assumptions that are believed to be reasonable under the circumstances. Significant items subject to judgment and such estimates include estimated useful lives and salvage values of long-lived assets, the recoverability of the carrying value of long-lived assets, the realization of deferred income tax assets, valuation of accounts receivable and inventories, the recognition and measurement of revenue and sales credits and returns allowance, and the fair value of share-based employee compensation awards and financial instruments. Actual results could differ from these estimates.

During 2006, the Company changed the estimated salvage values in relation to certain eight-inch process equipment and machinery to reflect higher expected salvage values than the Company had historically estimated. The change in the estimated salvage values is a change in accounting estimate that was applied prospectively from July 1, 2006. This change will result in lower depreciation over the remaining lives of the affected eight-inch process equipment and machinery. The impact of this change was an improvement to the Company’s net income by $11,289 for the year ended December 31, 2006, resulting in an improvement of basic and diluted net earnings per American Depository Shares (“ADS”) by $0.04 for the year ended December 31, 2006. Basic and diluted net earnings per ordinary share for the year ended December 31, 2006 were $0.02 and $0.02, respectively, both before and after the impact of this change.

(e) Foreign Currency

The functional currency of the Company and its subsidiaries is the US dollar. Assets and liabilities which are denominated in foreign currencies are translated into the functional currency at the rates of exchange prevailing at the balance sheet date. Foreign currency transactions are translated using the exchange rates prevailing at the date of transactions. Foreign exchange gains or losses, resulting from the settlement of foreign currency transactions and from the translation at financial year-end exchange rates of assets and liabilities denominated in foreign currencies, are included in the line item “Other operating expenses, net” in the consolidated statements of operations.

(f) Business and Credit Concentrations

The semiconductor industry has historically been highly cyclical and, at various times, has experienced significant economic downturns characterized by production overcapacity, reduced product demand and rapid erosion of selling prices. The market for semiconductors is characterized by rapid technological change, intense competition and fluctuations in end-user demand. The Company depends, and will continue to depend, for a significant portion of its revenue on a relatively limited number of customers who from time to time may be concentrated in particular end markets. Customer concentration is more significant for the Company’s leading-edge process technologies. The five largest customers of the Company accounted for 52%, 56% and 60% of net revenue in the years ended December 31, 2004, 2005 and 2006, respectively. Total accounts receivable from these customers was $92,668 and $166,297 at December 31, 2005 and 2006, respectively. The Company’s top customer profile may change from period to period depending on the strength of various market sectors.

The Company obtains most of its raw materials and supplies, including critical raw materials such as raw semiconductor wafers, from a limited number of vendors. Some of these raw materials and supplies are available from a limited number of vendors in limited quantities and their procurement may require a long lead time. In certain instances, the Company only has one qualified supplier for raw materials and supplies.

The Company also depends on a limited number of original equipment manufacturers and vendors that make and sell certain complex equipment and equipment spare parts that the Company uses in its manufacturing processes. In the event of shortage of supply of equipment spare parts, the Company would need to qualify alternative sources and/or equipment spare parts.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, investments, derivative financial instruments and receivables. The Company mitigates the concentration of its credit risk in trade receivables through its credit evaluation process, credit policies and credit control and collection procedures.

The Company’s cash and cash equivalents are placed with major international banks and financial institutions. Cash and cash equivalents deposited with a single counterparty bank accounted for 20% of total balances at December 31, 2005 and 2006.

F-12

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

The amounts related to derivative instruments which are subject to credit risk are generally limited to the amounts, if any, by which a counterparty’s obligations exceed the obligations of the Company with that counterparty. The Company’s hedging practices are further described in Note 19.

(g) Cash Equivalents

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

(h) Marketable Securities

The Company classifies its investments in marketable equity and debt securities as “available-for-sale”, “held to maturity” or “trading” at the time of purchase in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities”. There are no investments classified as trading or held-to-maturity as of December 31, 2005 and 2006. There have been no transfers between investment classifications in any of the periods presented.

Available-for-sale securities are carried at fair value with unrealized gains and losses, net of related tax, if any, reported as a component of other comprehensive income (loss) until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary will result in an impairment, which is included in the line item “Other income (loss), net” in the consolidated statement of operations.

(i) Accounts Receivable

The Company reviews its accounts receivable on a periodic basis and makes specific allowances when there is doubt as to the collectibility of individual receivable balances. In evaluating the collectibility of individual receivable balances, the Company considers the age of the balance, the customer’s historical payment history, their current credit-worthiness and current economic trends.

(j) Inventories

Inventories consist of work in progress, raw materials and consumable supplies and spares and are stated at the lower of cost or market (net realizable value). Cost is determined using standard cost and an allocation of the cost variances arising in the period of production, which approximates actual costs determined on the weighted average basis. Standard cost is based on estimates of materials, labor and other costs incurred in each process step associated with the manufacture of the Company’s products. Labor and overhead costs are allocated to each step in the wafer production process based on normal fab capacity utilization, with costs arising from abnormal under-utilization of capacity expensed when incurred.

F-13

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

(k) Derivative Instruments and Hedging Activities

In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Certain Hedging Activities”, as amended, the Company records derivatives on the balance sheet as assets or liabilities measured at fair value.

On the date a derivative contract is entered into, the Company will consider if the derivative instrument is part of a hedging relationship. Once a hedging relationship is established, the Company designates the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair-value” hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash-flow” hedge), or a foreign-currency fair-value or cash-flow hedge (“foreign-currency” hedge). The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions, at the hedge’s inception. This process includes linking all derivatives that are designated as fair-value, cash-flow, or foreign-currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Changes in the fair value of derivatives that are highly effective and that are designated and qualify as fair-value hedges are recorded in earnings, along with the loss or gain on the hedged assets or liabilities or unrecognized firm commitment of the hedged item that are attributable to the hedged risks. Changes in the fair value of derivatives that are highly effective and that are designated and qualify as cash-flow hedges are recorded in other comprehensive income until earnings are affected by the variability in cash flows of the designated hedged items. Changes in the fair value of derivatives that are highly effective as hedges and that are designated and qualify as foreign-currency hedges are recorded in either earnings or other comprehensive income, depending on whether the hedge transaction is a fair-value hedge or a cash-flow hedge. Changes in the fair value of derivative instruments that are not designated as part of a hedging relationship are reported in current period earnings.

The Company discontinues hedge accounting prospectively when it determines that a derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative expires or is sold, terminated, or exercised, the derivative is de-designated as a hedging instrument because it is unlikely that a forecasted transaction will occur, a hedged firm commitment no longer meets the definition of a firm commitment, or management determines that designation of the derivative as a hedging instrument is no longer appropriate. When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair-value hedge, the Company no longer adjusts the hedged asset or liability for changes in fair value. The adjustment of the carrying amount of the hedged asset or liability is accounted for in the same manner as other components of the carrying amount of that asset or liability. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Company removes any asset or liability that was recorded pursuant to recognition of the firm commitment from the balance sheet and recognizes any gain or loss in earnings. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, gains and losses that were accumulated in other comprehensive income are recognized immediately in earnings. In all situations in which hedge accounting is discontinued, the Company continues to carry the derivative at its fair value on the balance sheet, and recognizes any changes in its fair value in earnings.

(l) Technology Licenses

Technology license agreements are stated at cost and amortized on a straight-line basis over the shorter of the expected technology life or the license period.

F-14

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

(m) Property, Plant and Equipment

Property, plant and equipment are recorded at cost and depreciated to their estimated salvage values using the straight-line method over their estimated useful lives as follows:

Buildings	—	20 years (or, if shorter, the remaining period of the lease of the land on which the buildings are erected)
Mechanical and electrical installations	—	10 years
Equipment and machinery	—	5 years
Office and computer equipment	—	2 to 5 years

The Company capitalizes interest with respect to major assets under installation and construction until such assets are ready for use. Interest capitalized is based on the average cost of the Company’s pooled borrowings. Repairs and replacements of a routine nature are expensed, while those that extend the life of an asset are capitalized. Upon retirement or disposal of assets, the cost and related accumulated depreciation are removed from the consolidated balance sheets and any gain or loss is included in the consolidated statements of operations.

Property, plant and equipment acquired through capital leases are capitalized at the lower of fair value or the present value of the minimum lease payments at the inception of the lease. The minimum lease payments are allocated between interest expense and reductions of the lease obligation so as to produce a constant periodic rate of interest on the remaining balance of the lease obligation. Assets under capital leases are depreciated over the shorter of their estimated useful lives or the lease term.

(n) Impairment of Long-Lived Assets and Intangible Assets

The Company reviews long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of long-lived asset groups to be held and used are measured by a comparison of the carrying amount to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. If an asset group is considered to be impaired, the impairment loss is measured as the amount by which the carrying amounts of the long-lived assets exceed their fair value. The Company does not have any intangible assets with indefinite useful lives.

Long-lived assets to be disposed of by sale are measured at the lower of their carrying amounts or fair value less cost to sell, and depreciation is ceased. Long-lived assets to be abandoned are considered held and used until they are disposed of, which is the point at which they cease to be used.

(o) Revenue Recognition

The Company derives revenue primarily from fabricating semiconductor wafers and, to a lesser extent, from providing associated subcontracted assembly and test services as well as pre-fabricating services such as masks generation and engineering services. The Company enters into arrangements with customers which typically include some or all of the above deliverables.

F-15

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

When arrangements include multiple deliverables, the Company first determines whether each deliverable meets the separation criteria in FASB Emerging Issues Task Force (“EITF”) Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. In general, a deliverable (or a group of deliverables) meets the separation criteria if the deliverable has standalone value to the customer and if there is objective and reliable evidence of the fair value of the remaining deliverables in the arrangement. Each deliverable that meets the separation criteria is considered a separate “unit of accounting.” The total arrangement consideration is then allocated to each unit of accounting based on their relative fair values. Substantially all of the Company’s arrangements for the sale of semiconductor wafers and related services consist of a single unit of accounting.

Revenue for each unit of accounting is recognized when the contractual obligations have been performed and title and risk of loss has passed to the customer, there is evidence of a final arrangement as to the specific terms of the agreed upon sales, selling prices to the customers are fixed or determinable, collection of the revenue is reasonably assured, and, where applicable, delivery has occurred. Generally this results in revenue recognition upon shipment of wafers. Revenue represents the invoiced value of goods and services supplied excluding goods and services tax, less allowances for estimated sales credits and returns. The Company estimates allowances for sales credits and returns based on historical experience and management’s estimate of the level of future claims. Additionally, the Company accrues for specific items at the time their existence is known and amounts are estimable.

The Company also derives other revenue relating to rental income and management fees which is recognized when the contractual obligations have been performed, there is evidence of a final arrangement, fees are fixed or determinable and collection of the revenue is reasonably assured. Generally, revenue from rental is recognized over the lease period and management fee revenue is recognized when services are rendered. These are recorded in the line item “Other revenue” in the consolidated statements of operations.

Other arrangements include sale of equipment and contemporaneous licensing of intellectual property. Arrangement consideration is allocated between equipment and licensing of intellectual property using the residual method based on the fair value of equipment sold. Estimates of fair value of equipment are based on the resale prices of similar equipment sold on the used equipment market. Income from intellectual property is classified as a component of “Other income (loss), net” in the consolidated statements of operations as it is not considered as a source of income from principal operations, and is recognized when the title and risk of loss have passed to the customer or the license is delivered, there is evidence of a final arrangement, fees are fixed or determinable, and collectibility is reasonably assured.

(p) Government Grants

Income-related government grants are subsidies of expenses incurred. Income-related grants are credited to the related expenses when expenditures already incurred constitute qualifying expenditures for purposes of reimbursement under the grants.

Asset-related government grants consist of grants for the purchase of equipment. Asset-related grants are credited to the related expenses on a straight-line basis over the estimated useful lives of the relevant assets or the qualifying period of the relevant grant projects, depending on the conditions of the grants.

F-16

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

(q) Share-Based Compensation

The Company adopted the provisions of SFAS No. 123(R), “Share-Based Payments” on January 1, 2006, the first day of the Company’s fiscal year 2006. Under SFAS No. 123(R), share-based compensation cost related to employee grants is measured based on the estimated fair value of the award at the grant date and is recognized as expense over the employee’s requisite service period. Share-based compensation cost related to non-employees, primarily granted to employees of SMP, is accounted for utilizing the measurement guidance of EITF 96-18 “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. The Company adopted the provisions of SFAS No. 123(R) using the modified prospective application. Under the modified prospective application, prior periods are not revised for comparative purposes. The provisions of SFAS No. 123(R) apply to new awards, unvested awards that are outstanding on the effective date, and to subsequent modification or cancellation of awards. Share-based compensation cost for new awards granted to employees is recognized on a straight-line basis over the vesting period. Share-based compensation cost for unvested awards that are outstanding at the date of adoption and awards for non-employees continues to be recognized in accordance with FASB Interpretation No. 28 (“FIN 28”), “Accounting for Stock Appreciation Rights and Other Variable Stock Option Award Plans”.

Prior to adopting the provisions of SFAS No. 123(R), the Company measured stock-based employee compensation cost for financial statement purposes in accordance with the intrinsic value method of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations. Employee compensation cost was 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.

The Company uses the Black-Scholes option-pricing model for valuation of share-based awards granted on or after January 1, 2006, which was also previously used for the Company’s pro forma information disclosures required under SFAS No. 123, “Accounting for Stock-Based Compensation”.

Had the Company determined employee compensation cost based on the fair value at the grant date for its share options under SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”, the Company’s net income (loss) would have changed to the pro forma amounts indicated below for the years ended December 31, 2004 and 2005:

	2004			2005
Stock-based employee compensation cost
As reported (intrinsic method)	$	3		$	1
Pro forma (fair-value method)	$	21,406		$	9,431
Net income (loss) available to ordinary shareholders
As reported	$	6,571		$	(162,794	)
Pro forma	$	(14,832	)	$	(172,224	)
Basic and diluted net earnings (loss) per ordinary share
As reported	$	0.00		$	(0.06	)
Pro forma	$	(0.01	)	$	(0.07	)
Basic and diluted net earnings (loss) per ADS
As reported	$	0.03		$	(0.65	)
Pro forma	$	(0.06	)	$	(0.69	)

F-17

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

(r) Product Warranties

The Company guarantees that products will meet the stated functionality as agreed to in each sales arrangement. The Company provides for the estimated warranty costs under these guarantees based upon historical experience and management’s estimate of the level of future claims, and accrues for specific items at the time their existence is known and the amounts are estimable. Expenses for warranty costs were not significant in any of the years presented.

(s) Fab Start-up Costs

The Company records costs related to start-up activities, including fab start-up costs, as expenses when they are incurred. Such costs primarily include employee related expenses and engineering activities associated with the start-up of a fab.

(t) Deferred Loan Costs

Expenses associated with the issuance of long-term debt are capitalized and are amortized over the terms of the respective arrangement using the effective interest rate method.

(u) Operating Leases

Rental on operating leases, including the effects of scheduled rent increases, lease incentives and rent holidays, are charged to expense on a straight-line basis over the term of the lease. Contingent rentals are charged to expense when they are incurred.

(v) 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 deferred tax assets where it is more likely than not that they will not be realized.

(w) Net Earnings (Loss) Per Ordinary Share

Basic net earnings (loss) per ordinary share is computed by deducting from net income or adding to net (loss) the accretion to redemption value of the convertible redeemable preference shares over the weighted average number of ordinary shares outstanding. Diluted net earnings (loss) per ordinary share is computed by deducting from net income or adding to net (loss) the accretion to redemption value of the convertible redeemable preference shares over the weighted average number of ordinary shares outstanding plus dilutive potential ordinary shares from the assumed exercise of options outstanding during the period, if any, using the treasury stock method and other potentially dilutive securities outstanding, such as convertible redeemable preference shares.

F-18

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

The Company excluded potentially dilutive securities for each period presented from its diluted net earnings (loss) per ordinary share computation because either the exercise price or conversion price of the securities exceeded the average fair value of the Company’s share price or when the accretion to redemption value of convertible securities per ordinary share obtainable on conversion exceeds basic net earnings per ordinary share, and therefore these securities were anti-dilutive. A summary of the excluded potentially dilutive securities and the range of related exercise prices are as follows:

	Years ended December 31,
	2004		2005		2006
Convertible debt		214,792		36,300		—
Employee stock options		98,468		71,841		96,479
Call options with Goldman Sachs International		214,792		214,792		214,792
Convertible redeemable preference shares		—		344,067		325,144

The conversion price of convertible debt during the period outstanding was S$4.7980 per share (equivalent to approximately US$26.7701 per ADS). The weighted average exercise prices of employee stock options outstanding were $2.36, $2.04 and $1.89 as of December 31, 2004, 2005 and 2006, respectively. The call options have a per share exercise price of S$1.60 as of December 31, 2006. The conversion price of the convertible redeemable preference shares is $0.8719 per share.

2. Related Parties

(a) Temasek and affiliates

The Company is a majority owned subsidiary of ST Semiconductors, which is a wholly-owned subsidiary of Temasek. Temasek is a holding company through which corporate investments of the government of Singapore are held. The Company transacts business in the normal course of its operations with Temasek and its affiliates as well as with other companies and entities that are partially or wholly owned or controlled by the government of Singapore.

The Company had the following significant transactions with related parties:

	2004		2005		2006
Affiliates of Temasek
Services purchased from STATS ChipPAC	$	19,104	$	12,872	$	10,625
Property, plant and equipment purchased		415		4,016		1,762
Services purchased		2,178		883		531
Interest income received		2,853		—		—
Management fees paid		2,739		—		—
Sub-lease rental billed for leasehold land from JTC		2,460		2,416		3,170
Rental billed for leasehold land from Ascendas		335		331		108

F-19

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

Included in receivables from related parties and payables to related parties are amounts due from or to affiliates of Temasek:

	December 31,
	2005		2006
Amounts due from affiliates of Temasek	$	217	$	8
Amounts due to affiliates of Temasek	$	8,008	$	2,763

The balances with affiliates of Temasek are unsecured, interest free and repayable within 12 months.

The fabs of the Company are built on land held on long-term operating leases from entities controlled by the government of Singapore. The Jurong Town Corporation (“JTC”) is a statutory board established by the Singapore government to develop and manage industrial estates in Singapore. Fab 1 was built on land leased by the Company from Ascendas Land (Singapore) Pte Ltd (“Ascendas”), a private company wholly-owned by JTC. Following the cessation of Fab 1 operations in March 2004, the Company classified its leasehold interest in Fab 1 as held for sale. The sale was completed in January 2006.

Fabs 2, 3, 5 (occupied by SMP), 6 (occupied by CSP) and 7 and Fab 2 and Fab 3 slurry treatment plant occupy land leased by Terra Investments Pte Ltd (“Terra”) (a wholly-owned subsidiary of Temasek) from JTC. The Company entered into sub-leases for the underlying land for the entire term of the leases between Terra and JTC, expiring between 2024 and 2030, with an option, subject to certain conditions, to extend for another 30 years.

The Company has in 2006 leased an additional plot of land from Terra which in turn leased the land from JTC. The lease runs until 2030. The Company intends to use this additional plot of land primarily for ancillary purposes to support the Company’s business operations.

Rental rates on the long-term leases are subject to revisions at periodic intervals in accordance with the rental agreements, with such increases generally capped between 4% to 9% per annum.

Rental expense for land leased from related parties for the years ended December 31, 2004, 2005 and 2006 was $2,795, $2,747 and $2,768, respectively.

Minimum future rental payments on non-cancellable operating leases of land from the above related parties as of December 31, 2006 are as follows:

Payable in year ending December 31,
2007	$	2,616
2008		2,762
2009		2,923
2010		3,097
2011		3,287
Thereafter		67,861
	$	82,546

F-20

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

(b) SMP

The Company has a 49% ownership interest in SMP that is accounted for using the equity method. SMP’s net operating results are not shared between the Company and SMP’s majority shareholder, Agere, in the same ratio as the equity holding. Instead, each party is entitled to the gross profits from sales to the customers that it directs to SMP after deducting its share of the overhead costs of SMP. Accordingly, the equity in income (loss) of SMP and the share of retained post-formation gain (loss) that is included in the Company’s consolidated statements of operations and consolidated balance sheets are different than the amount that would be obtained by applying a 49% ownership percentage. The difference in the equity income of SMP recorded as compared to a 49% ratio is an increase of $17,417, $5,758 and $18,380 for the years ended December 31, 2004, 2005 and 2006. The share of retained post-formation results recorded was a deficit of $20,681 as compared to a surplus of $17,363 using the 49% ratio and a surplus recorded of $15,359 as compared to a surplus of $35,023 using the 49% ratio as of December 31, 2005 and 2006, respectively.

Singapore law allows dividends to be paid only out of profits of a company. The Company and Agere have agreed that dividends will be paid out of the profits of SMP determined on a year-to-year basis rather than a cumulative basis.

The Company and Agere have entered into an assured supply and demand agreement with SMP under which the intention was to ensure that all of the fixed costs of SMP are recovered by allocating all of its wafer capacity to the Company and Agere in accordance with the respective parties’ equity interest in SMP and each party will bear the fixed costs attributable to its allocated capacity. These billings, if any, do not change the equity in income (loss) of SMP that the Company recognizes in its consolidated statements of operations. No amounts were payable by the Company under this agreement for 2004, 2005 and 2006, respectively.

In 2004, the Company and Agere entered into an agreement pursuant to which the Company and Agere agreed to annually reimburse any losses suffered by SMP that are attributable to the respective parties. SMP did not suffer any loss that was attributable to the Company in 2004, 2005 and 2006 and accordingly no reimbursements were payable by the Company to SMP under this agreement for these years.

During 2005, SMP’s shareholders agreed to a reduction in wafer prices for Agere, related to the wafer capacity allocated to Agere, to the minimum price allowed under the assured supply and demand agreement. As each shareholder is entitled to the gross profits from sales to the customers that it directs to SMP, the wafer price reduction did not affect the equity in income (loss) of SMP and the share of retained post-formation gain (loss) that is included in the Company’s consolidated statements of operations and consolidated balance sheets.

The Company purchased $1,641, $218 and $75 of processed wafers from SMP for the years ended December 31, 2004, 2005 and 2006, respectively.

The Company provides management and corporate support services including accounting, financial, sales and marketing services to SMP and allocates a portion of its related costs to SMP. Such charges to SMP amounted to $9,622, $8,811 and $9,480 in the years ended December 31, 2004, 2005 and 2006, respectively.

The Company bought plant and equipment of $Nil, $11 and $Nil from SMP during 2004, 2005 and 2006, respectively. The Company also sold plant and equipment of $505, $53 and $Nil to SMP during 2004, 2005 and 2006, respectively.

SMP leases its fab from the Company under a long-term lease agreement that expires in 2008. The rental income from SMP for the years ended December 31, 2004, 2005 and 2006 was $15,307, $15,662 and $15,958, respectively.

F-21

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

Included in receivables from related parties and payables to related parties are amounts due from or to SMP:

	December 31,
	2005		2006
Amounts due from SMP	$	7,694	$	8,724
Amounts due to SMP	$	94	$	819

The balances with SMP are unsecured, interest free and repayable within 12 months.

Investment in SMP	December 31,
	2005			2006
Cost (net of return of capital)	$	104,668		$	88,324
Share of retained post-formation (losses) gains		(20,681	)		15,359
Share of accumulated other comprehensive losses		(10	)		(1	)
Dividends received		(29,460	)		(67,638	)
	$	54,517		$	36,044

In August 2005, SMP’s board of directors approved a change to SMP’s fiscal year end from December 31 to September 30 so as to coincide with the fiscal year end of Agere. The change in SMP’s fiscal year end does not affect how the Company accounts for its share of SMP’s net results.

In October 2005, SMP reorganized its paid-up share capital and authorized a return of a portion to its shareholders in the form of cash, the Company’s entitlement being $20,424, in a capital reduction sanctioned by the High Court of Singapore. In 2005, the Company received $17,300 arising from the return of capital approved in 2005. In October 2006, the board of directors of SMP approved a second capital reduction which was subsequently approved by the High Court of Singapore and filed with the Accounting and Corporate Regulatory Authority of Singapore in November 2006. The Company’s entitlement arising from the second return of capital from SMP was $19,061. In 2006, the Company received an additional $16,913 arising from both the first and the second return of capital from SMP.

Shown below is summarized financial information for SMP:

	December 31,
	2005			2006
Current assets	$	71,101		$	72,063
Property, plant and equipment		55,758			21,972
Other assets		34			55
Current liabilities		(31,311	)		(40,616	)
Other liabilities		(8	)		(19	)
Shareholders’ deficit	$	95,574		$	53,455

	2004		2005		2006
Net revenue	$	303,570	$	201,345	$	197,932
Gross profit		34,827		4,875		38,010
Operating income		30,070		449		34,885
Net income		20,706		1,486		36,040

F-22

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

3. Cash and Cash Equivalents and Restricted Cash

	December 31,
	2005		2006
Cash at banks, money market funds and cash on hand	$	393,083	$	362,120
Short-term deposits with banks		426,773		356,862
	$	819,856	$	718,982

Short-term deposits with banks consist of fixed deposits with original maturities of 90 days or less.

Under the terms of the Exim Guaranteed Loan agreement which is described in Note 14, the Company is required to maintain on deposit with the lender a compensating balance, restricted as to use, equal to the amount of principal, interest and commitment fees payable at the next repayment date. At December 31, 2005 and 2006, restricted cash amounted to $2,832 and $43,063 respectively, and consists of interest-bearing money market funds.

4. Marketable Securities

At December 31, 2005

			Unrealized		Unrealized
	Cost		Gains		(Losses)			Fair Value
Current
Available-for-sale securities:
Equity securities	$	10,196	$	—	$	(2,729	)	$	7,467

At December 31, 2006

			Unrealized		Unrealized
	Cost		Gains		(Losses)			Fair Value
Current
Available-for-sale securities:
Equity securities	$	2,673	$	—	$	(390	)	$	2,283

No realized gains or losses were recorded for the years ended December 31, 2004 and 2005. Proceeds from sale of available-for-sale securities were $5,990 in 2006. Gross realized gains from sale of available-for-sale securities were $348 in 2006. The Company also recorded losses amounting to $2,698 as a result of an other-than-temporary impairment assessment in 2006.

F-23

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

The following table shows the fair value and gross unrealized losses recorded in accumulated other comprehensive income (loss) of the Company’s available-for-sale equity securities, aggregated by the length of time the securities have been in a continuous unrealized loss position.

At December 31,	Less than 12 months					Greater than 12 months					Total
2005
			Unrealized					Unrealized					Unrealized
	Fair Value		(Losses)			Fair Value		(Losses)			Fair Value		(Losses)
Available-for-sale securities:
Equity securities	$	1,123	$	(115	)	$	6,344	$	(2,614	)	$	7,467	$	(2,729	)

At December 31,	Less than 12 months					Greater than 12 months				Total
2006
			Unrealized					Unrealized				Unrealized
	Fair Value		(Losses)			Fair Value		(Losses)		Fair Value		(Losses)
Available-for-sale securities:
Equity securities	$	2,283	$	(390	)	$	—	$	—	$	2,283	$	(390	)

The Company’s investments in available-for-sale equity securities at December 31, 2005 and 2006 consist of investments in the common stock of two companies in the semiconductor industry, both of which are in an unrealized loss position as at the respective balance sheet dates. The fair value of the investments was based on quoted share prices at the balance sheet date. When determining whether the investments were other-than-temporarily impaired, the Company considered industry analyst reports on the outlook of the semiconductor industry and the two companies, the length of time that market value has been less than cost, the financial condition and near term prospects of the issuers and the Company’s ability and intent to hold the investments for a reasonable period of time sufficient for this forecasted recovery of the fair value. Based on this evaluation, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2005 and 2006.

5.

Receivables, net

	December 31,
	2005			2006
Trade receivables	$	181,079		$	230,590
Allowance for doubtful accounts		(991	)		(1,149	)
Allowance for sales credits and returns		(13,901	)		(6,827	)
Trade receivables, net of allowances		166,187			222,614
Receivables from related parties		7,911			8,732
Other receivables		6,666			12,015
	$	180,764		$	243,361

F-24

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

Movement in the allowance for doubtful accounts is as follows:

	2004			2005			2006
Beginning	$	1,083		$	1,178		$	991
Utilized in year		(38	)		—			(4	)
Charge for the year		1,106			420			466
Reversal of specific allowances due to collection		(973	)		(607	)		(304	)
Ending	$	1,178		$	991		$	1,149

Movement in the allowance for sales credits and returns is as follows:

	2004			2005			2006
Beginning	$	9,556		$	6,537		$	13,901
Utilized in year		(7,769	)		(10,940	)		(13,353	)
Charge for the year		4,750			18,304			6,279
Ending	$	6,537		$	13,901		$	6,827

6. Inventories

	December 31,
	2005		2006
Raw materials	$	6,895	$	13,306
Work-in-progress		121,871		137,214
Consumable supplies and spares		5,474		6,527
	$	134,240	$	157,047

7.	Other Current Assets
	As of December 31, 2005, the Company had a refundable deposit placed with a vendor of $109,581 to secure wafer capacity. The deposit was fully refunded during 2006.

8. Technology Licenses, net

							Weighted average
							amortization
							period (years)
	December 31,						December 31,
	2005			2006			2005		2006
Technology licenses, at cost	$	168,787		$	178,043			6		6
Accumulated amortization		(62,175	)		(93,052	)
Technology licenses, net	$	106,612		$	84,991

F-25

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

Amortization amounted to $16,263, $24,616 and $30,877 for 2004, 2005 and 2006, respectively. Estimated amortization for future periods is as follows:

2007	$	31,563
2008		30,950
2009		16,369
2010		5,834
2011		240
Thereafter		35
	$	84,991

9. Property, Plant and Equipment, net

	December 31,
	2005		2006
Cost
Buildings	$	269,276	$	265,324
Mechanical and electrical installations		612,340		636,796
Equipment and machinery		3,893,041		4,131,234
Office and computer equipment		144,834		163,787
Assets under installation and construction		140,733		519,584
Total cost	$	5,060,224	$	5,716,725
Accumulated depreciation and amortization	$	3,010,529	$	3,443,606
Property, plant and equipment, net	$	2,049,695	$	2,273,119

Depreciation amounted to $420,217, $481,874 and $471,617 for the years ended December 31, 2004, 2005 and 2006, respectively.

Capitalized interest relating to property, plant and equipment amounted to $15,177, $19,032 and $12,062 in the years ended December 31, 2004, 2005 and 2006, respectively.

For assets under capital leases, total cost was $45,933 and $77,930 at December 31, 2005 and 2006 respectively and accumulated amortization was $2,886 and $7,500 at December 31, 2005 and 2006 respectively. Amortization of assets under capital leases, included in depreciation expense, was $Nil, $2,886 and $4,614 for the years ended December 31, 2004, 2005 and 2006 respectively.

10.

Other Non-current Assets

As of December 31, 2006, the Company had a refundable deposit placed with a vendor of $9,533 to secure wafer capacity. The deposit is refundable according to the utilization of such allocated capacity or at the end of the agreed period of such allocated capacity. The deposit is initially recorded at the net present value of payments due pursuant to its contractual terms. The related discount, which is offset by an equal amount of deferred expense, is amortized to interest income using the effective interest rate method. Deferred expense is amortized to cost of revenue over the term of the deposit using the straight-line method. The deposit is classified based on maturity, except that the amounts are considered current if it is probable that the deposits will be refunded within one year.

F-26

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

11. Payables

	December 31,
	2005		2006
Trade and accrued purchases	$	106,299	$	104,680
Purchases of property, plant and equipment		52,280		193,742
Payables to related parties		8,102		3,582
	$	166,681	$	302,004

12. Other Current Liabilities

	December 31,
	2005		2006
Accrued employee related expenses and bonuses	$	24,619	$	43,350
Customer capacity guarantee deposits		58,410		33,137
Accrued interest		41,612		30,494
Customer prepayment		30,889		19,247
Other accrued expenses		5,857		4,136
Other current liabilities		55,058		20,217
	$	216,445	$	150,581

The Company enters into capacity guarantee agreements with certain of its customers under which the customers are required to maintain non-interest bearing deposits with the Company to secure guaranteed access to wafer capacity. Such deposits are generally for periods exceeding one year and are refundable at the end of the agreed period of such guaranteed capacity, or in certain cases based on the cumulative wafers purchased from the Company. Such deposits are initially recorded at the net present value of payments due pursuant to their contractual terms. The related discount, which is offset by an equal amount of deferred revenue, is amortized to interest expense using the effective interest rate method. Deferred revenue is amortized to earnings over the term of the deposits using the straight-line method. Deposits are classified based on maturity, except that the amounts are considered current if it is probable that the deposits will be refunded within one year.

The Company received a prepayment from a customer for future purchases which also secures access to wafer capacity. This amount will be used to off-set trade receivables from that customer. The receipt was recorded as operating cash flows in the consolidated statements of cash flows.

13.	Income Taxes
	The Company has been granted pioneer status under the Economic Expansion Incentives (Relief from Income Tax) Act (Chapter 86) (“EEIA”) of Singapore for:

• the manufacture of integrated circuits using submicron technology at Fab 2 for a ten-year period beginning July 1, 1996. The pioneer status expired on June 30, 2006;

• the manufacture of integrated circuits using submicron technology at Fab 3 for a ten-year period beginning July 1, 1999;

• the wafer fabrication of Application Specific Integrated Circuits (ASIC) and other advanced semiconductor devices at Fab 6 for a ten-year period beginning September 1, 2003; and

• the wafer fabrication of integrated circuits at Fab 7 for a fifteen-year period beginning October 1, 2005.

F-27

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

Under the EEIA, the Company has also been granted:

• post-pioneer enterprise status for the manufacture of integrated circuits using submicron technology at Fab 2 for a five-year period beginning July 1, 2006;

• development and expansion incentive status for the manufacture of integrated circuits using submicron technology at Fab 3 for a five-year period beginning July 1, 2009; and

• development and expansion incentive status for the wafer fabrication of ASICs and other advanced semiconductor devices at Fab 6 for a five-year period beginning September 1, 2013.

During the period in which pioneer status is effective, subject to compliance with certain conditions, income arising from the pioneer trade is exempt from Singapore income tax. During the period in which post-pioneer status or development and expansion incentive status is effective, subject to compliance with certain conditions, income arising from the incentive activities is taxed at a concessionary rate of 10%. Income arising from activities not covered under any of the abovementioned incentives (hereinafter referred to as non-qualifying income) is taxed at the normal Singapore corporate tax rate, which was 20% for the years ended December 31, 2004, 2005 and 2006. Thus, the income tax expenses for the years ended December 31, 2004, 2005 and 2006 are primarily on non-qualifying income, such as interest income, rental income and income from the sale of wafers manufactured by technologies that are not granted preferential tax treatment. Based on these tax incentives, income tax is assessed at the individual fab level.

The Company was granted development and expansion incentive status for wafer fabrication of integrated circuits at Fab 1 for a five-year period beginning January 1, 2001, subject to compliance with certain conditions during that period. In February 2003, the Company announced its plan to consolidate the business of Fab 1 into Fab 2, and close down Fab 1 during 2004. This closure would result in non-compliance with the conditions of the development and expansion incentive status, and accordingly at that time the Company accrued additional taxes payable for the period subsequent to January 1, 2001 at the normal corporate tax rate. During 2004, the relevant authority agreed to deem the Company as having complied with all the conditions and continued the grant of the development and expansion incentive status until December 31, 2004. Accordingly, the Company revised its accruals based on the concessionary tax rate of 10% and reduced its tax provision by $9,784 for the year ended December 31, 2004.

Under Singapore tax law, loss carryforwards and tax depreciation of property, plant and equipment (hereinafter referred to as wear and tear allowances), which are determined at the fab level, are deductible to the extent of income before loss carryforwards and wear and tear allowances. Unutilized losses and wear and tear allowances can be carried forward indefinitely to set off against income in future tax years, subject to compliance with certain conditions. As of December 31, 2005 and 2006, the Company has unutilized wear and tear allowance carryforwards of approximately $1,583,000 and $1,742,000 respectively. The Company does not have any loss carryforwards as of December 31, 2005 and 2006.

Income (loss) before income taxes consists of the following:

	2004		2005			2006
Singapore	$	9,942	$	(147,595	)	$	89,024
Foreign		1,403		994			1,654
Total	$	11,345	$	(146,601	)	$	90,678

F-28

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

Income tax expense consists of the following:

	2004			2005			2006
Current expense (benefit) — Singapore	$	5,798		$	13,848		$	22,011
— Foreign		292			(17	)		573
Deferred expense (benefit) — Singapore		(1,428	)		(800	)		1,502
— Foreign		112			(34	)		(162	)
	$	4,774		$	12,997		$	23,924

A reconciliation of the expected tax expense (benefit) computed by applying the Singapore statutory tax rate of 20% for 2004, 2005 and 2006 to income (loss) before income taxes to income tax expense is as follows:

	2004			2005			2006
Income tax expense (benefit) computed at the Singapore statutory tax rate	$	2,269		$	(29,320	)	$	18,136
Non-deductible research and development expenses		898			473			16,726
Non-deductible pre-pioneer operating losses		5,412			13,084			—
Other non-deductible expenses		6,272			3,721			7,137
Effect of pioneer status, including losses and allowances not recognized as deferred tax benefit		6,263			27,561			(4,502	)
Effect of post-pioneer status		(2,263	)		—			(6,833	)
Non-taxable decrease in equity method investment		(5,512	)		(1,332	)		(7,208	)
Effect of change in concessionary tax status		(6,884	)		—			—
All other items, net		(1,681	)		(1,190	)		468
Income tax expense	$	4,774		$	12,997		$	23,924

For the years ended December 31, 2004 and 2006, the pioneer status had the effect of increasing (decreasing) basic and diluted net earnings per ordinary share by $(0.00) and $0.00 and basic and diluted net earnings per ADS by $(0.02) and $0.02, respectively.

For the year ended December 31, 2005, the pioneer status had the effect of (increasing) decreasing basic and diluted net (loss) per ordinary share by $(0.01) and basic and diluted net (loss) per ADS by $(0.11).

Deferred tax assets and deferred tax liabilities, which are substantially non-current and relate to Singapore, consist of the following:

	December 31,
	2005			2006
Deferred tax liabilities
Property, plant and equipment	$	(802	)	$	(2,105	)
Intangible assets		(1,000	)		(662	)
Unremitted offshore income		—			(2,554	)
	$	(1,802	)	$	(5,321	)
Deferred tax assets
Unutilized wear and tear allowances	$	316,550		$	263,437
Property, plant and equipment		7,112			11,598
Other accrued expenses		8,191			12,545
		331,853			287,580
Valuation allowance		(322,413	)		(273,814	)
	$	9,440		$	13,766
Net deferred tax assets	$	7,638		$	8,445

F-29

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of net deferred tax assets is dependent on the availability of future taxable income during the periods in which those assets will be reversed. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The valuation allowance is established for deferred tax assets that cannot be objectively supported as more likely than not to be realized by the Company.

Based on the historical level of taxable income specific to certain fabs, management has concluded that it could not objectively support that sufficient future taxable income will be realized and that therefore it is more likely than not that deferred tax assets will not be realizable. As a result of the assessment a valuation allowance of $322,413 and $273,814 for these fabs’ net deferred tax assets has been recorded as at December 31, 2005 and 2006, respectively. The Company expects to continue to maintain valuation allowances on future tax benefits for such fabs until objective positive evidence is sufficient to support reversal of the valuation allowance based upon current and preceding years’ results of operations and anticipated future taxable income levels. Management has, however, concluded that a valuation allowance on $7,638 and $8,445 of net deferred tax assets arising from other operations as at December 31, 2005 and 2006 respectively, was not required. This is because it is more likely than not that these operations will generate sufficient future taxable income to realize the related net deferred tax assets.

The net change in the valuation allowance during the year ended December 31, 2006 was a decrease of $48,599. The decrease is due to the derecognition of deferred tax assets for temporary differences that are now expected to reverse during the tax-exempt pioneer period rather than the taxable post-pioneer period.

The Company recorded an increase in deferred tax assets and valuation allowance in the amounts of $3,993 and $1,846, respectively, as a result of the cumulative effect adjustment under SAB108 (see Note 1(c)).

14.	Long-term Debt and Obligations under Capital Leases
	Long-term debt consists of:

	December 31,
	2005			2006
Floating rate loans:
CSP Syndicated Loan	$	214,533		$	—
SMBC/OCBC Term Loan		300,000			—
Exim Guaranteed Loan		122,124			324,277
Bank of America Term Loan		50,000			50,000
2.5% senior convertible notes due 2006		97,155			—
5.75% senior notes due 2010		371,161			371,904
6.00% amortizing bonds due 2010		46,703			38,433
6.25% senior notes due 2013		—			297,405
6.375% senior notes due 2015		246,540			246,805
Other		(324	)		2,836
		1,447,892			1,331,660
Less: Current installments of long-term debt		(319,634	)		(123,629	)
Long-term debt, excluding current installments	$	1,128,258		$	1,208,031

Obligations under capital leases:

	2005			2006
Minimum future lease payments	$	63,931		$	124,194
Amount representing interest at rates of 6.2% to 7.8%		(20,336	)		(47,255	)
Present value of minimum future lease payments		43,595			76,939
Less: Current installments		(2,819	)		(3,998	)
Obligations under capital leases, excluding current installments	$	40,776		$	72,941

F-30

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

	2005		2006
Current installments of:
Long-term debt	$	319,634	$	123,629
Obligations under capital leases		2,819		3,998
	$	322,453	$	127,627
Non-current portion, excluding current installments:
Long-term debt	$	1,128,258	$	1,208,031
Obligations under capital leases		40,776		72,941
	$	1,169,034	$	1,280,972

	Weighted Average
	Interest Rates As of
	December 31,
	2005			2006
Debt obligations at floating rates		5.11	%		5.80	%
Debt obligations at fixed rates		5.91	%		6.08	%
Obligations under capital leases		6.50	%		7.08	%

CSP’s U.S. dollar syndicated floating rate loan was arranged by ABN Amro Bank N.V., Singapore branch, Citibank, N.A., Singapore, Overseas Union Bank Limited (now known as United Overseas Bank Limited), Sumitomo Mitsui Banking Corporation Ltd, Danske Bank A/S, Industrial and Commercial Bank of China, Singapore branch and Commerzbank Aktiengesellschaft, Singapore branch for an amount of $820,000 which was fully drawn down. The loan bore interest at 0.60% to 0.85% above the London Interbank Offering Rate (“LIBOR”) rates for U.S. dollars deposits quoted by specified banks to the lender (depending on certain criteria relating to wafer starts and debt/equity ratio). Interest was payable semi-annually and principal was payable in six semi-annual installments which commenced in March 2004. The loan matured and was fully repaid during 2006.

The SMBC/OCBC Term Loan was with Sumitomo Mitsui Banking Corporation, Oversea-Chinese Banking Corporation, ABN AMRO Bank, United Overseas Bank, and Deutsche Bank for a maximum of $300,000, which was fully drawn down in 2005. The loan bore interest at LIBOR plus 1.75% and was payable semi-annually. The loan was fully repaid in April 2006 using the proceeds from the issuance of the 6.25% senior notes due in 2013.

The Exim Guaranteed Loan is from J.P. Morgan, guaranteed by the Export-Import Bank of the United States, for a maximum of $653,131. The loan is divided into two tranches, of which one tranche of $324,277 had been fully drawn down as of December 31, 2006. Principal repayment of the first tranche is payable semi-annually over five years, beginning on January 16, 2007. The availability period for the other tranche is until December 15, 2008. It may only be used to finance the purchase of Fab 7 equipment from U.S. vendors and is drawn down in accordance with the equipment purchases per the ramp schedule. The loan bears interest at LIBOR plus 0.125%. Interest is payable semi-annually and each tranche is payable semi-annually over five years.

The Bank of America Term Loan is for a maximum of $50,000, which was fully drawn down in 2005. The loan bears interest at LIBOR plus 0.80%. Interest is payable semi-annually and principal is repayable in full at maturity in 2007.

The senior unsecured convertible notes (“Convertible Notes”) bore a coupon rate of 2.50% per annum and had a yield to maturity of 5.25% per annum. In September 2005, pursuant to a cash tender offer (“Tender Offer”) for any and all of its $575,000 original principal amount of the Convertible Notes outstanding, $477,845 original principal amount of the Convertible Notes, representing approximately 83.1% of the Convertible Notes, were purchased. The remaining Convertible Notes matured and were fully redeemed on April 2, 2006.

F-31

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

The senior notes due 2010 (“Senior Notes due 2010”) with face value of $375,000 were issued at a price of 98.896% of the principal amount. The senior notes due 2015 (“Senior Notes due 2015”) with face value of $250,000 were issued at a price of 98.573% of the principal amount. Interest on the Senior Notes due 2010 is payable at the rate of 5.75% per annum and interest on the Senior Notes due 2015 is payable at the rate of 6.375% per annum, in each case on February 3 and August 3 of each year beginning on February 3, 2006. The Senior Notes due 2010 mature on August 3, 2010 and the Senior Notes due 2015 mature on August 3, 2015. The Senior Notes due 2010 and Senior Notes due 2015 constitute senior, unsecured obligations of the Company.

Convertible redeemable preference shares (refer to Note 15) and 6% amortizing bonds due 2010 (“Amortizing Bonds”) have an aggregate issue price of $300,000. The initial principal amount assigned to the Amortizing Bonds was $46,703. Interest on the Amortizing Bonds is payable at the rate of 6.0% per annum on the outstanding principal amount. The Amortizing Bonds pay semi-annual cash payments of $5,475 per payment, as a combination of principal and interest, on February 17 and August 17 of each year, beginning on February 17, 2006, and amortize to zero at maturity on August 17, 2010. The Amortizing Bonds constitute senior, unsecured obligations of the Company.

In 2006, the Company issued senior notes due 2013 (“Senior Notes due 2013”) with a face value of $300,000 at a price of 99.053% of the principal amount. Interest is payable at the rate of 6.25% per annum on April 4 and October 4 of each year, beginning on October 4, 2006. The Senior Notes due 2013 mature on April 4, 2013, and constitute senior, unsecured obligations of the Company.

As of December 31, 2006, other long-term debt represents the cumulative fair value change of the Senior Notes due 2013 due to changes in interest rates commencing on the date the Company designated an interest rate swap transaction as a fair value hedge of this debt.

The Senior Notes and Amortizing Bonds include a company call option and an investor put option. If the Company were to exercise the call option, investors would receive an amount equal to the outstanding principal amount, plus any accrued and unpaid interest through the call/redemption date. If the investors were to exercise the put option, they would receive an amount equal to 101% of the outstanding principal amount, plus any accrued and unpaid interest to the put/repayment date. Therefore, the sum of the amounts received by the investors in the event of exercise of the call or put options would not significantly differ from the recorded value.

The Company evaluated the call and put options included in the Senior Notes and Amortizing Bond in accordance with SFAS No. 133 and Derivatives Implementation Group (“DIG”) Issue B16 “Embedded Derivatives: Calls and Puts in Debt Instruments” (“DIG Issue B16”). Based on its evaluation, the Company determined that the call and put options are clearly and closely related to the debt instrument. Therefore these embedded derivatives have not been bifurcated.

Annual maturities of long-term debt as of December 31, 2006 are as follows:

Payable in year ending December 31,
2007	$	123,629
2008		74,164
2009		74,730
2010		450,332
2011		64,855
Thereafter		550,000
	$	1,337,710

These amounts represent the expected repayments in each of the periods indicated and do not include the unamortized debt discount relating to the senior notes, which are reported as a direct reduction to the face amounts of the senior notes.

F-32

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

The Company has total unutilized banking facilities of $591,763 and $591,400 for short-term advances, term loans and bankers’ guarantees as of December 31, 2005 and 2006, respectively. Facilities as of December 31, 2006 include $200,000 that will expire on March 30, 2007.

The Company’s loans and available credit facilities contain various financial, shareholding and other restrictive covenants. Under the financial covenants, the Company is required to maintain certain financial conditions and ratios such as consolidated net worth, total debt to net worth ratio, and historical debt service coverage ratio. The Company is also required to ensure that its consolidated net worth is not at any time less than $1,000,000 and its total debt does not at any time exceed 180% of its total net worth. Under the shareholding covenants, Temasek is required to own, directly or indirectly, a certain percentage of the Company’s outstanding shares or is required to be the Company’s single largest shareholder. In addition, some of the loans and available credit facilities also impose other restrictive covenants such as restrictions on incurring further indebtedness, creating security interests over assets, payment of dividends, disposal of assets and mergers and corporate restructuring.

The obligations under capital leases include contracts for supply of gases used by the Company’s fabrication facilities. The Company has assessed that such supply contracts contain a lease pursuant to the consensus reached in EITF Issue 01-8, “Determining Whether An Arrangement Contains A Lease”, and are accounted for as capital leases.

Minimum future lease payments under capital leases for equipment and machinery as of December 31, 2006 are as follows:

Payable in year ending December 31,
2007	$	9,323
2008		9,323
2009		9,323
2010		9,323
2011		9,323
Thereafter		77,579
Total minimum lease payments	$	124,194

15.	Convertible Redeemable Preference Shares
	The holders of the convertible redeemable preference shares (“Preference Shares”) are not entitled to receive any dividends, regardless of whether dividends are paid to the holders of the Company’s ordinary shares (“Ordinary Shares”). Holders of the Preference Shares may convert the Preference Shares into new Ordinary Shares or, subject to certain limitations, ADSs at a conversion price of $0.8719 per Ordinary Share at any time before the close of business on the 7th business day prior to maturity or early redemption.
	Unless previously redeemed, converted or purchased and cancelled, the Company will redeem, out of funds legally available for such payment, each Preference Share at maturity on August 17, 2010 at a redemption price equal to $10,000 per Preference Share.
	Prior to maturity, the Company may redeem the Preference Shares at the early redemption price:

• at any time, if at least 95% of the Preference Shares originally issued have been converted, redeemed or purchased and cancelled;

• at any time after 2 years after the date of issuance of the Preference Shares, if the closing sale price of the Ordinary Shares for any 20 trading days in a specified 45 consecutive calendar day period is at least 125% of the conversion price per Ordinary Share; or

• at any time the Company is required to pay additional amounts as a result of any change in or amendment to the laws or regulations of Singapore or for certain other events.

F-33

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

If certain events occur before the close of business on the 7^th business day prior to maturity or early redemption, holders of the Preference Shares may under certain circumstances require the Company to redeem all or any of the Preference Shares at the early redemption price.

In the event of early redemption, each Preference Share will be redeemed for cash at the accreted amount approximating its carrying value, which is the original allocated issue price of $8,443.24 per Preference Share accreted to its present value using the effective interest rate method calculation as follows:

	Elapsed days
	1,800
Allocated value * ($10,000/allocated value)

The Preference Shares rank, with respect to rights upon liquidation, winding up or dissolution:

• junior to all the Company’s existing and future debt obligations;

• junior to each class of the Company’s shares the terms of which provide that such class will rank senior to the Preference Shares;

• on a parity with any class of the Company’s shares that has terms which provide that such class will rank on a parity with the Preference Shares; and

• senior to the Company’s Ordinary Shares (including those represented by ADSs) and to any class of the Company’s shares that has terms which provide that such class will rank junior to the Preference Shares.

The initial carrying amounts of the Preference Shares were stated at their fair values as of the date of issuance, net of the associated issuance costs. The carrying amounts of the Preference Shares are accreted to their redemption values over the remaining period until the maturity date on August 17, 2010 using the effective interest rate method. Such accretion adjusts net income (loss) available to ordinary shareholders. Accretion charge for the years ended December 31, 2005 and 2006 was $3,196 and $9,476, respectively.

During 2006, 2 Preference Shares were converted and 18,924 of ordinary shares were issued as a result of the conversion.

The Preference Shares include call and put options, which the Company has evaluated under the provisions of SFAS No. 133 and DIG Issue B16. For purposes of assessing if the puts and calls are closely related to the Preference Shares, the Company has referred to DIG Issue B16 as the Preference Shares are akin to a debt instrument because they have a mandatory redemption feature at maturity and holders are not entitled to vote at the Company’s general meetings nor are they entitled to receive dividends or otherwise participate in earnings. The Preference Shares do not embody any claim to residual interest of the Company. Upon exercise of the call or put options, investors would receive an amount equal to the accreted value of their shares and does not constitute an accelerated repayment of the redemption principal amount of $10,000 per Preference Share. The call and put options are considered to be clearly and closely related to the Preference Shares. Therefore these embedded derivatives have not been bifurcated.

F-34

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

16.	Shareholders’ Equity
	Ordinary Share Capital
	In August 2004, the Company entered into a bilateral option transaction with Goldman Sachs International as counter-party. Under the transaction, the Company had a choice of physical or cash settlement. The counter-party could purchase 214,800 of the Company’s ordinary shares at $0.93 per share (approximately S$1.60 per share, based on an exchange rate of $1.00 = S$1.71) and the Company would receive approximately $200,000. The number of ordinary shares under the option transaction was equal to the number of shares that were originally planned for issuance under the Convertible Notes. The option transaction, which was contractually separate from the Convertible Notes, was exercisable by the counter-party from January 2, 2005 and expired on April 2, 2006, matching the maturity date of the Convertible Notes. Goldman Sachs International did not exercise its rights under the option transaction.
	Accumulated Deficit
	Singapore law allows dividends to be paid only out of the Company’s net profits for the year or retained earnings. 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 and net profits after deduction of tax at the concessionary rate from post pioneer or development and expansion activities. Some of the Company’s loan agreements restrict the ability of the Company to pay dividends without prior approval from the lender.
	Distributions of profits from non-pioneer activities which have been subject to tax at the normal corporate tax rate are paid with a franking tax credit which Singapore tax-resident shareholders can apply as a prepayment of income tax on the dividend. Shareholders who are not tax-residents in Singapore are not liable for further Singapore income tax.
	Under the one-tier system with effect from January 1, 2003, tax payable by the Company on its non-qualifying chargeable income constitutes a final tax. Companies that have moved to the one-tier system can henceforth pay dividends that are exempted from Singapore income tax in the hands of their shareholders.
	During the transitional period, the Company has up to December 31, 2007 to utilize any available franking tax credit balance under the old imputation system to pay a franked dividend to its shareholders. The Company has approximately $54,000 and $52,400 of available balances under the old imputation system as of December 31, 2005 and 2006, respectively.
	Accumulated deficit includes $(20,681) and $15,359 of post-formation (losses) gains of SMP as of December 31, 2005 and 2006, respectively.
	Accumulated Other Comprehensive Loss
	Accumulated other comprehensive loss consists of the following:

	December 31,
	2005		2006
Cumulative foreign currency translation loss	$	52,659	$	52,091
Net unrealized cash flow hedging losses		2,036		1,350
Net unrealized losses on available-for-sale securities		2,729		390
	$	57,424	$	53,831

The foreign currency translation loss, net unrealized losses on available-for-sale securities and net unrealized cash flow hedging losses are not adjusted for income taxes because such losses are generally not tax deductible.

17. Share Options and Incentive Plans

(a) 1999 Option Plan

Effective March 1999, the Company adopted the Chartered Semiconductor Manufacturing Ltd Share Option Plan 1999 (the “1999 Option Plan”) which provided for a maximum of 107,160 shares (subject to adjustment under the plan) to be reserved for option grants. This amount was increased to 197,160 shares in May 2002. As a result of the Company’s rights offering in October 2002, the shares available for future grants increased by 30,488 shares. The total shares provided under the 1999 Option Plan are hence 227,648 shares. 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 Company issues new shares upon exercise of options. The remaining shares available for future grants are 90,521 and 81,727 as of December 31, 2005 and 2006, respectively.

The plan is administered by a committee appointed by the Directors. Employees, outside directors and consultants are eligible for the grant of options subject to certain exceptions as provided in the 1999 Option Plan.

F-35

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

The contractual term of options does not exceed 10 years from the date of grant. Upon leaving employment of the Company, employees are given a specified period to exercise outstanding options. The exercise price of an incentive stock option is generally 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.

The weighted-average grant-date fair value of share options granted, the total intrinsic value of share options exercised and the total fair value of share options vested during the years ended December 31, 2004, 2005 and 2006 were as follows:

	2004		2005		2006
Weighted-average grant-date fair value of share options granted	$	0.63	$	0.47	$	0.43
Total intrinsic value of share options exercised	$	557	$	249	$	320
Total fair value of share options vested	$	25,561	$	26,717	$	14,495

Stock option activity for all outstanding options and the corresponding price information for the years ended December 31, 2004, 2005 and 2006 were as follows:

				Weighted
				Average
	Number			Exercise
	of options			Price
Outstanding at January 1, 2004		104,223		$	2.67
Granted		20,905		$	0.93
Expired		(919	)	$	1.65
Exercised		(1,074	)	$	0.46
Forfeited		(10,481	)	$	2.89
Outstanding at December 31, 2004		112,654		$	2.36
Granted		15,542		$	0.69
Expired		(2,695	)	$	6.90
Exercised		(1,798	)	$	0.54
Forfeited		(10,223	)	$	2.41
Outstanding at December 31, 2005		113,480		$	2.04
Granted		16,666		$	0.77
Expired		(1,958	)	$	2.30
Exercised		(2,432	)	$	0.55
Forfeited		(5,913	)	$	2.01
Outstanding at December 31, 2006		119,843		$	1.89
Exercisable at end of year		76,720		$	2.51

Changes in the number of unvested share options during the year ended December 31, 2006, together with the corresponding weighted-average grant date fair values and the status of unvested options at December 31, 2006, were as follows:

				Weighted
				Average
	Number			grant date
	of options			fair value
Unvested at January 1, 2006		48,214		$	0.66
Granted		16,666		$	0.43
Vested		(18,885	)	$	0.77
Forfeited		(2,872	)	$	0.57
Unvested at December 31, 2006		43,123		$	0.52

F-36

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

Information regarding outstanding and exercisable share options as of December 31, 2006, was as follows:

			Options outstanding
			Weighted
			average	Weighted
			remaining	average
	Number of		contractual	exercise		Intrinsic
Range of exercise prices	options		term	price		value
$0.39 to $1.00		68,671	7.4 years	$	0.73	$	1,891
$1.06 to $1.95		20,466	4.7 years	$	1.41	$	2,618
$2.14 to $2.44		13,815	4.4 years	$	2.32	$	477
$5.81		9,781	3.8 years	$	5.81	$	—
$8.31		7,110	3.3 years	$	8.31	$	—
		119,843				$	4,986

			Options exercisable
			Weighted
			average	Weighted
			remaining	average
	Number of		contractual	exercise		Intrinsic
Range of exercise prices	options		term	price		value
$0.39 to $1.00		28,760	6.4 years	$	0.70	$	1,583
$1.06 to $1.95		17,272	4.5 years	$	1.42	$	2,168
$2.14 to $2.44		13,797	4.4 years	$	2.32	$	477
$5.81		9,781	3.8 years	$	5.81	$	—
$8.31		7,110	3.3 years	$	8.31	$	—
		76,720				$	4,228

The options vest over one to five years and expire on dates ranging from February 2007 to October 2016.

Income from continuing operations, income before income taxes and net income for the year ended December 31, 2006 were reduced by $7,376 as a result of the adoption of SFAS No. 123(R). Total share-based compensation expense recognized for the year ended December 31, 2006 was:

	2006
Cost of revenue	$	2,565
Research and development		712
Sales and marketing		1,031
General and administrative		3,068
Total share-based compensation expense	$	7,376

	Per
	ordinary
	share		Per ADS
Net share-based compensation expense
Basic	$	0.00	$	0.03
Diluted	$	0.00	$	0.03

F-37

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

As of December 31, 2006, there was $8,498 of total unrecognized compensation costs related to share options scheduled to be recognized over a weighted average period of 3 years.

Cash proceeds of $1,456 were received from option exercises during the year ended December 31, 2006.

As share-based compensation cost is not tax deductible in Singapore, the recognition of the share-based compensation expense did not result in income tax benefits.

The fair values of the option grants awarded during the years ended December 31, 2004, 2005 and 2006 were estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions.

		2004		2005		2006
Risk free interest rate	2.97% to 4.14%		4.06% to 4.64%		4.59% to 5.22%
Expected volatility	61.94% to 65.04%		58.75% to 61.04%		40.45% to 57.86%
Expected term		5 to 8 years		5 to 9 years		3 to 6.25 years
Dividend yield		0.00%		0.00%		0.00%

Expected volatilities are based on historical volatility rates of the Company’s ordinary shares. For options awarded during the years ended December 31, 2004 and 2005, the expected term is based on the contractual term of the grant, vesting periods, and past exercise and post-vesting forfeiture behavior. For options awarded during the year ended December 31, 2006, the expected term is determined using the simplified approach as permitted by Staff Accounting Bulletin No. 107 (“SAB 107”). The risk-free rate for periods within the contractual term of the award is based upon observed interest rates appropriate for the term of the Company’s employee stock options.

Share-based compensation expense recognized in the consolidated statements of operations for the year ended December 31, 2006 was based on awards ultimately expected to vest after adjusting for estimated future pre-vesting forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent reporting periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be between approximately 1% to 21% for the year ended December 31, 2006 based on historical pre-vesting forfeitures. In the Company’s pro forma information disclosures required under SFAS No. 123 for the periods prior to fiscal year 2006, the Company accounted for forfeitures as they occurred.

Options to purchase 595, 406 and 390 shares of the Company were granted to employees of SMP in 2004, 2005 and 2006, respectively. SMP bears the share-based compensation expense in respect of these options.

(b) 2001 Share Purchase Plans

As approved by the shareholders in May 2001, the Company adopted the Chartered Semiconductor Manufacturing Ltd Employee Share Purchase Plan 2001 (the “Chartered Purchase Plan”) and the Share Purchase Plan 2001 for Employees of Silicon Manufacturing Partners Pte Ltd (the “SMP Purchase Plan”), collectively “the 2001 Plans”, which provided for the issuance of a maximum of 10,000 shares (subject to adjustment under the Plans). The amount was subsequently revised to 11,722 shares as a result of the Company’s rights offering which was completed in October 2002.

F-38

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

The 2001 Plans permitted eligible employees to purchase shares through payroll deductions of between 1 percent to 10 percent of an employee’s compensation, including salaries, wages, bonuses, incentive compensations, commissions, overtime pay and shift premiums. The offering periods consisted of the six-month periods commencing on each March 1 and September 1. The purchase price for each share purchased at the close of an offering period was the lower of 85% of the fair market value of the share on the last trading day in such offering period or last trading day before the commencement of such offering period. The 2001 Plans were intended to qualify under Section 423 of the United States Tax Code.

The 2001 Plans were administered by a committee appointed by the Directors. Approximately 2,700 shares were purchased at $0.56 (S$0.94) in 2004 under the 2001 Plans. As of February 2004, all shares available under the 2001 Plans had been issued and allotted and as a result, the 2001 Plans were terminated.

(c) 2004 Share Purchase Plans

As approved by the shareholders in April 2004, the Company has adopted the Chartered Semiconductor Manufacturing Ltd Employee Purchase Plan 2004 (“Chartered ESPP 2004”) and a new share purchase plan for the employees of Silicon Manufacturing Partners Pte Ltd (“SMP ESPP 2004”), collectively “ESPP 2004 Plans”. The ESPP 2004 Plans provide for the issuance of a maximum of 30,000 shares (subject to adjustment under the Plans).

The terms of the ESPP 2004 Plans and the 2001 Plans are similar except for the following significant differences:

(i)

the ESPP 2004 Plans give the committee appointed by the Directors to administer the plans (“Committee”) the right to stipulate that the purchase price for each Ordinary Share purchased at the close of an offering period be determined by an alternative method, which is to be prescribed by the Committee, if the Committee determines that the existing method of determining the purchase price would cause the Company to incur any stock-based compensation expense; and

(ii)

the ESPP 2004 Plans impose a limit of 3,000 Ordinary Shares per calendar year (and a limit of 1,500 Ordinary Shares per offering period) on the number of Ordinary Shares available for purchase by participants in the ESPP 2004 Plans. The ESPP 2004 Plans continue to provide for two offering periods in a calendar year commencing on each March 1 and September 1.

The 2004 Plans are administered by a committee appointed by the Directors. 2,348 and 1,156 shares were issued at prices from $0.56 to $0.63 (S$0.92 to S$1.06) and $0.77 to $0.79 (S$1.22 to S$1.28) during the years ended 2005 and 2006, respectively.

The ESPP 2004 Plans are non-compensatory as the purchase price is 95% of the fair market value of the ordinary shares applied to the Company’s average ordinary share price on the last trading day of the offer period. Therefore, the Company does not recognize compensation expense related to shares sold under the ESPP 2004 Plans.

F-39

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

18. Commitments and Contingencies

(a) Commitments

The Company has the following capital commitments:

	December 31,
	2005		2006
Contracts for capital expenditures	$	205,689	$	525,200

Minimum future rental payments on non-cancellable operating leases, excluding amounts payable to related parties disclosed in Note 2, as at December 31, 2006, are as follows:

Payable in year ending December 31,
2007	$	3,811
2008		2,157
2009		947
2010		739
2011		527
Thereafter		827
	$	9,008

Rental expense, excluding amounts payable to related parties disclosed in Note 2, for the years ended December 31, 2004, 2005 and 2006 was $5,473, $5,660 and $5,687 respectively.

The Company has a patent license agreement with Agere under which the parties grant to one another a license to use certain of each other’s patents. Under the terms of the patent license agreement, the Company may provide wafer capacity in lieu of payment for royalties. Such royalties under the patent license agreement are waived until such time as the interest of Agere in SMP falls below 49%. In exchange the Company has waived capacity shortfall obligations from Agere. The patent license agreement continues for as long as the joint venture agreement between the parties remains.

The Company has entered into agreements to purchase technology licenses, jointly perform research and development, and swap capacity commitments. The future payment obligations under these agreements at December 31, 2005 and 2006 are $200,000 and $335,000 respectively.

F-40

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

(b) Contingencies

The Company may from time to time be a party to claims that arise in the normal course of business. These claims include allegations of infringement of intellectual property rights of others as well as other claims of liability. In addition, the Company, on a case-by-case basis, includes intellectual property indemnification provisions in the terms of sale and technology licenses with third parties. The Company is also subject to various taxes in the different jurisdictions in which it operates. These include taxes on income, property, goods and services, and other taxes. The Company accrues costs associated with these matters when they become probable and reasonably estimable. The Company does not believe it is probable that losses associated with these matters beyond those already recognized will be incurred in amounts that would be material to its financial position or consolidated statements of operations.

The Company submits tax returns and claims with government tax authorities which are subject to agreement and audit by those tax authorities. Actual taxes to be paid could vary due to the outcome of audits completed by the tax authorities. The Company records tax contingencies as tax payable for certain positions which may be challenged by the tax authorities and which the Company may not ultimately prevail in defending. The income tax contingencies mainly relate to transfer pricing positions and gains which may be taxable. As of December 31, 2005 and 2006, the income tax contingencies recorded as tax payable amounted to $5,070 and $6,759, respectively. The amounts recorded are determined based upon the Company’s best estimate of possible assessments by the tax authorities and are adjusted, from time to time, based upon changing facts and circumstances.

Effective January 1, 2003, the Company measures its obligations associated with its retirement of tangible long-lived assets in accordance with the provisions of SFAS No. 143, “Accounting for Asset Retirement Obligations”. As at December 31, 2006, the liability related to the requirements in the Company’s lease agreements for the potential return of buildings to tenantable condition and the potential return of land on which fabs have been built to its original condition amounted to $17,909.

19.	Derivative Instruments
	At December 31, 2006

Derivative Instrument	Notional Amount	Average Rate/Price	Maturity
Forward Contracts
— Yen Forward Contracts	6,102,865	114.43/USD	2007
— Euro Forward Contracts	9,137	1.31/Euro	2007
— SGD Forward Contracts	13,871	1.54/USD	2007
Interest rate swap	300,000	LIBOR + 0.93%	2013
2006 Option (shares)	214,800	S$1.60/S$2.15	2011

In March 2006, the Company entered into a call option transaction (“2006 Option”) with Goldman Sachs International (“GS”) to replace the call option transaction that the Company had previously entered into with GS in August 2004 (“2004 Option”) that expired on April 2, 2006. Under the 2006 Option, GS may purchase up to 214,800 of the Company’s ordinary shares at a price of S$1.60 per share in the first year and S$2.15 per share thereafter. If the 2006 Option is exercised in full and physically settled the Company will receive approximately $300,000 (based on an exchange rate of $1.00 = S$1.54). If the 2006 Option is exercised in full and physically settled in the first year, the Company will receive approximately $222,911 (based on an exchange rate $1.00 = S$1.54).

Under the terms of the 2006 Option, if the option is exercised the Company has the right either to issue new shares to GS or to settle the transaction in cash. If the 2006 Option is not exercised or terminated earlier, it will expire on March 29, 2011.

F-41

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

In the first year of the 2006 Option, the Company has the right to terminate the 2006 Option early in whole or in part upon the first time that the closing price of the ordinary shares equals or exceeds S$1.75 on each of any 20 business days in a consecutive 30 business day period. If the Company elects to do so and elects to settle by delivering shares, GS will have the right but not the obligation to buy from the Company from time to time during the following 30 business days such number of the ordinary shares up to the amount terminated at S$1.60 per share. As of December 31, 2006, the Company’s right to terminate the 2006 Option had not been triggered.

From the second year of the 2006 Option, the Company has the right to terminate the 2006 Option early in whole or in part if the closing price of the ordinary shares is equal to or exceeds S$2.6875 on each of any 20 business days in any consecutive 30 business day period. If the Company elects to exercise this right of termination, GS will be required to buy from the Company such number of the ordinary shares relating to the terminated portion of the 2006 Option at S$2.15 per share.

The 2006 Option is a derivative instrument that is dual indexed to the Company’s own stock and the Singapore Dollar currency exchange rate. As a result, the 2006 Option is not eligible for the scope exception of paragraph 11(a) of SFAS No. 133 and is accounted for as a derivative in accordance with SFAS No. 133, with changes in its fair value recorded in earnings.

The fair value of the 2006 Option at issuance was approximately $6,040 and has been recorded as a liability. In subsequent periods, changes in the fair value of the 2006 Option have been recorded in earnings as other income (loss).

To protect against volatility of future cash flows caused by changes in exchange rates, the Company may use forward exchange contracts, currency options and currency swap instruments for forecasted transactions such as operating expenses and capital purchases. To manage interest rate risk, the Company may utilize interest rate derivative instruments to modify the interest characteristics of its outstanding debts.

Most of the Company’s derivatives are formally designated as foreign currency cash flow and fair value hedges except for certain foreign currency forward contracts and the 2006 Option. These certain foreign currency forward contracts relate to groups of forecasted foreign currency denominated payments. While the Company expects these derivatives to be effective in hedging the variability in cash flows resulting from changes in foreign exchange rates, it does not believe it is practicable to formally document the hedging relationship and link the derivatives to specific forecasted transactions. Gains and losses on these instruments are included in foreign exchange gain (loss).

The Company uses derivative instruments to manage identified foreign currency risks resulting from its Singapore dollar denominated debt and its foreign currency denominated purchase commitments which are denominated principally in Japanese yen and Euro. The maximum tenure for these transactions is 18 months. The Company uses foreign currency forward contracts to manage these risks and designates them as foreign currency cash-flow hedges. The Company uses foreign currency forward contracts, which match the terms of the individual foreign currency exposures, and as a result, any ineffectiveness of the Company’s hedges is negligible. For the year ended December 31, 2006, the ineffective amount reclassified from other comprehensive income into earnings was a loss of $269 and was included in foreign exchange gain (loss). Amounts included in other comprehensive income (loss) related to hedges of foreign currency purchase commitments are reclassified into earnings (foreign exchange gain (loss)) when depreciation commences for the asset related to the purchase commitment.

In August 2004, the Company entered into two interest rate cap contracts in respect of the floating rate obligations associated with $100,000 of the CSP Syndicated Loan, with the effect of placing an upper limit on the cash flow and earnings exposure due to market interest rate changes. In March 2005, the Company entered into two additional interest rate cap contracts related to the floating rate obligations associated with $200,000 of the above mentioned US dollar loan. The amount relating to time value, which is excluded from the assessment of hedge effectiveness, was $(989) in the year ended December 31, 2006. For the year ended December 31, 2006, the ineffective amount reclassified into earnings (Other income (loss), net) was a gain of $806. The interest rate cap contracts matured following the maturity of the loan.

F-42

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

The Company entered into interest rate swap contracts to hedge fixed-rate interest obligations associated with Convertible Notes issued in April 2001, with the effect of swapping the fixed-rate interest obligations to floating-rate obligations based on LIBOR rates. The Company designated these interest rate swap contracts as fair-value hedges. The interest rate swaps were terminated following the completion of the tender offer for the Convertible Notes in September 2005.

For the fair-value hedge transactions, changes in fair value of the derivative and changes in the fair value of the item being hedged are both recorded in earnings as interest expense. Net recognized gains (losses) arising from ineffectiveness of these fair value hedges were $(1,771), $(5,246) and $Nil in the years ended December 31, 2004, 2005 and 2006, respectively.

In 2006, the Company issued $300,000 Senior Notes due 2013 with semi-annual interest payments. The Company entered into an interest rate swap (“IRS”) contract to hedge the fixed-rate interest obligations of 6.25% per annum associated with the Senior Notes due 2013 with the effect of swapping the fixed-rate interest obligations to a floating-rate obligation based on US LIBOR rates. In August 2006, the Company designated the IRS as a fair-value hedge of changes in the fair value of the Senior Notes due 2013 attributable to changes in the benchmark interest rate, which is US dollar six-month LIBOR. From that date, changes in the fair value of the derivative and changes in the fair value of the item being hedged are recorded in earnings (other income (loss), net). Net recognized gain arising from ineffectiveness of fair value hedges was $574 in the year ended December 31, 2006.

The estimated net amount of existing losses from cash flow hedges expected to be reclassified into earnings within the next year is $(156). Net realized losses recognized from cash flow hedges were $(469) and $(133) for the years ended December 31, 2005 and 2006, respectively.

The components of other comprehensive income (loss) related to derivative and hedging activities consist of the following:

	December 31,
	2005			2006
Beginning	$	(2,634	)	$	(2,036	)
Cumulative effect adjustment on adoption of SAB 108		—			1,906
Reclassification of cash flow hedging losses into earnings		469			133
Share of cash flow hedging activity gains of SMP		17			9
Net unrealized gains (losses) on change in cash flow hedging derivative fair values		112			(1,362	)
Ending	$	(2,036	)	$	(1,350	)

The Company exposes itself to credit risk and market risk by using derivative instruments to hedge exposures of changes in foreign currency rates and interest rates. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it does not possess credit risk. The Company anticipates, however, that counterparties will be able to fully satisfy their obligations under the contracts. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but monitors the credit standing of counterparties. The maximum amount of loss due to credit risk associated with these financial instruments is their respective fair values as stated in Note 20.

Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates or currency exchange rates. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. The Company assesses interest rate cash flow risk and currency exchange cash flow risk by identifying and monitoring changes in interest rate or currency exchange rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

F-43

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

20. Fair Values of Financial Instruments

				December 31,
	2005						2006
	Carrying			Estimated			Carrying			Estimated fair
	amount			fair value			amount			value
Asset/(Liability)	$			$			$			$
Long term debt		(1,447,892	)		(1,466,425	)		(1,331,660	)		(1,336,045	)
Forward foreign exchange contracts		29			29			91			91
Forward foreign exchange contracts		(344	)		(344	)		(1,724	)		(1,724	)
Embedded foreign currency derivatives in purchase contracts		—			—			297			297
Interest rate swap		—			—			3,109			3,109
Interest rate cap		1,394			1,394			—			—
2006 Option		—			—			(7,466	)		(7,466	)

Cash and cash equivalents, related party receivables and payables, accounts receivable and accounts payable. The carrying amounts approximate fair value in view of the short term nature of these balances.

Marketable securities. Marketable securities are recorded at fair value (see Note 4). The fair value of term deposits is estimated by obtaining quotes from brokers. The fair value of equity securities is based on market prices quoted on the last business day of the fiscal year.

Long-term debt. The fair value is based on current interest rates available to the Company for issuance of debt with similar terms and remaining maturities, or by obtaining quotes from brokers.

Forward foreign exchange contracts. The fair value is estimated by reference to market quotations for forward contracts with similar terms, adjusted where necessary for maturity differences.

Embedded foreign currency derivatives in purchase contracts. The fair value is estimated by reference to movements in exchange rates between contract date and balance sheet date.

Interest rate swap. The fair value is estimated using market quotations for interest rate swaps with similar terms, adjusted where necessary for maturity differences.

Interest rate cap. The fair value is estimated by obtaining quotes from brokers.

2006 Option. The fair value is based on an external market value quotation. Such market value quotation is derived using equity option pricing variables including Chartered’s ordinary share price, 2006 Option strike price, 2006 Option date of expiration, prevailing market interest rate, Chartered’s underlying share price volatility; adjusted for the availability of stock borrow, market liquidity of Chartered’s traded instruments and early termination features.

Limitations. Fair value estimates are made at a specific point in time, and are based on relevant market information and information about the financial instruments. 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.

F-44

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

21. Operating Segment, Geographic and Major Customer Information

Operating segments, as defined under SFAS No. 131 “Disclosure About Segments of an Enterprise and Related Information”, are components of an enterprise: (1) that engage in business activities from which they may earn revenue and incur expenses, (2) has discrete financial information, and (3) whose operating results are regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Management has determined that it does not have any operating segments because the chief operation decision maker, which the Company has identified as the Chief Executive Officer, does not regularly review financial operating results on a disaggregated basis for purposes of assessing performance and allocating resources. All of the Company’s products are manufactured in Singapore.

The following table presents a summary of revenues by country of domicile of customers and long-lived assets by geographic region. The Company geographically categorizes a sale based on the country in which the customer is headquartered.

	Years ended December 31,
	2004		2005		2006
Revenues
USA	$	618,743	$	743,431	$	1,079,187
Taiwan		161,420		112,089		122,881
Japan		33,258		33,496		23,861
Singapore		3,392		8,995		37,716
Others		115,318		134,723		150,880
	$	932,131	$	1,032,734	$	1,414,525

	December 31,
	2005		2006
Property, Plant and Equipment, net
Singapore	$	2,048,913	$	2,271,012
Others		782		2,107
	$	2,049,695	$	2,273,119

	Years ended December 31,
	2004			2005			2006
Revenue by Major Customer:
Customer A		20.7	%		22.3	%		24.0	%
Customer B		—			19.3			18.9
Customer C		—			—			10.3
Customer D		13.4			*			*
Customer E		10.1			*			*

* less than 10% of net revenue for the year

F-45

CHARTERED SEMICONDUCTOR MANUFACTURING LTD AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — in US Dollars
In thousands (except per share data)

22. Other Operating Expenses, net

Other operating expenses, net primarily consists of:

A gain of $15,257 in 2004 associated with the resolution of a goods and services tax matter amounting to $4,900 and a gain of $10,357 resulting from an equipment disposition with CSMC Technologies Corporation.

An impairment charge of $1,705 in 2004 resulting from the migration to an enhanced manufacturing system.

A restructuring charge of $4,558, $Nil and $Nil in December 31, 2004, 2005 and 2006 respectively, relating to the closing of the Company’s Fab 1, in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. In February 2003, the Company announced that as a result of continuing under-utilization of its fabs resulting from the deep and continuing semiconductor industry downturn, it would close Fab 1 and consolidate that business into Fab 2. The production in Fab 1 ceased at the end of March 2004. A summary of estimated and actual costs incurred is shown below. These amounts do not include gain on disposition of fixed assets. Plant closure, customer assistance and related expenses mainly relate to product qualification, prototyping, reticles, unhook and decommissioning of equipment and other activities to be carried out for consolidating the Fab 1 business into Fab 2.

			Cumulative
			expense
	Total estimated costs		to date
Employee termination benefits	$	8,000	$	7,673
Plant closure, customer assistance and related expenses		9,000 to 12,000		9,306
Total	$	17,000 to 20,000	$	16,979

An impairment charge of $3,938 recorded in 2005 on certain plant and equipment which were initially classified as held for sale during the period ended June 30, 2004. These assets were written down to $3,878, which was their fair value less costs to sell at June 30, 2005. These assets were expected to be sold on the open market within twelve months of classification as held for sale. However, during this period, the market conditions that existed at June 30, 2004 deteriorated and as a result, these assets remained unsold. During that period, the Company actively solicited offers to purchase the assets but did not receive any offers it considered reasonable. The assets were actively marketed at a price that management considered reasonable given the change in market conditions, and the criteria under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” were otherwise met. Accordingly, as the assets remained unsold at the end of the initial twelve-month period, the assets continued to be classified as held for sale. The sale was completed in January 2006 for a total consideration of $6,500. A gain on this sale of $2,611 was recorded in 2006.

A foreign exchange gain (loss) of $1,320, $(356) and $(6,125) for the years ended December 31, 2004, 2005 and 2006 respectively.

23. Other Income (loss), net

In 2004, other income (loss), net included the recognition of a gain of $14,330 from the sale of technology to CSMC Technologies Corporation.

In 2005, other income (loss), net included costs of $6,995 related to the termination of hedging transactions and other costs as a result of the Tender Offer for and repurchase of the Convertible Notes.

In 2006, other income (loss), net included an other-than-temporary impairment loss of $2,698 on available-for-sale securities.

F-46

EX-2.2

Exhibit 2.2

(Incorporated in the Republic of Singapore under the Companies Act, Chapter 50)
Registered Office: 60 Woodlands Industrial Park D Street 2,Singapore 738406

COMPANY REGISTRATION NO. 198703584K

THE AMOUNT PAID ON THE ORDINARY SHARES IS S$		No. of Shares
PER ORDINARY SHARE
		Certificate No.
		Account No.
This is to certify that	THE CENTRAL DEPOSITORY (PTE) LTD 4 SHENTON WAY #02-01 SGX CENTRE 2 SINGAPORE 068807
is/are the Registered Shareholder(s) of

Ordinary Shares of S$0.26 each, fully paid, in CHARTERED SEMICONDUCTOR MANUFACTURING LTD subject to the provisions of the Memorandum and Articles of Association of the Company.

Given under the Share Seal of the Company on

Note : No transfer of/any portion of shares comprised in this Certificate will be registered unless this Certificate is delivered to the Registrar, M & C Services Private Limited, 138 Robinson Road #17-00 The Corporate Office, Singapore 068906

EX-2.3

Exhibit 2.3

(Incorporated in the Republic of Singapore under the Companies Act, Chapter 50)
Registered Office: 60 Woodlands Industrial Park D Street 2,Singapore 738406

COMPANY REGISTRATION NO. 198703584K

THE AMOUNT PAID ON THE ORDINARY SHARES COMPRISED IN THIS SHARE CERTIFICATE IS RECORDED IN THE RETURN(S) OF ALLOTMENT		No. of Shares
LODGED PURSUANT TO SECTION 63 OF THE COMPANIES ACT, CHAPTER 50 OR THE CORRESPONDING SECTION IN ANY PREVIOUS LAW RELATING		Certificate No.
TO COMPANIES		Account No.
This is to certify that	THE CENTRAL DEPOSITORY (PTE) LTD 4 SHENTON WAY #02-01 SGX CENTRE 2 SINGAPORE 068807
is/are the Registered Shareholder(s) of

Ordinary Shares of S$0.26 each, fully paid, in CHARTERED SEMICONDUCTOR MANUFACTURING LTD subject to the provisions of the Memorandum and Articles of Association of the Company.

Given under the Share Seal of the Company on

Note : No transfer of/any portion of shares comprised in this Certificate will be registered unless this Certificate is delivered to the Registrar, M & C Services Private Limited, 138 Robinson Road #17-00 The Corporate Office, Singapore 068906

EX-4.11.8

Exhibit 4.11.8

Confidential Treatment Requested

The portions of this document marked by “XXXXXX” have been omitted pursuant to a request for confidential
treatment and have been filed separately with the Securities and Exchange Commission

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

This Third Amended and Restated Amendment No. 3 (“Amended and Restated Amendment No. 3”) , effective as of November 17, 2006 (“Effective Date”), replaces and restates the Second Amended and Restated Amendment No. 3 of 3 June 2005 to the “SF Process Development and Cost Sharing Agreement” of November 26, 2002 (hereinafter referred to as the “2-Way Agreement”), as previously amended, and is made by and between International Business Machines Corporation (“IBM”), incorporated under the laws of the State of New York, U.S.A. and having an office for the transaction of business at 2070 Route 52, Hopewell Junction, NY 12533, U.S.A., and Chartered Semiconductor Manufacturing Ltd. (“Chartered”), incorporated under the laws of Singapore and having an office for the transaction of business at 60 Woodlands Industrial Park D, Street 2, Singapore 738406. IBM and Chartered may be individually referred to herein as a “Party”, or collectively as the “Parties.”

WHEREAS, the Parties mutually desire to work together to facilitate the creation of certain design kit models for the 300mm Wafer 90nm Bulk CMOS Process Development Project under the 2-Way Agreement, as well as to establish a basis for coordinating other related activities, to expand the 90nm design enablement information to be developed, and to exchange information on an ongoing basis regarding such information; and

WHEREAS, the Parties have entered into the following agreements as of June 3, 2005, under which they will be working with one another to develop 65nm design enablement:

— “65nm Enablement Technology Development and Cost Sharing Agreement,” along with Samsung Electric Co. Ltd., (hereinafter “3-Way Enablement Agreement”), and

— “2-Way Enablement Agreement”.

WHEREAS, the Parties wish for Chartered to contribute additional Background Know to be used by the Parties to create certain design kit models for the 300mm or 200mm Wafer 90nm Bulk CMOS Process Development Project; and

WHEREAS, in consideration for such additional Chartered Background Know How contributions, IBM is willing to accept the current shortfall in the Chartered headcount obligation contained in the 2 Way Enablement Agreement.

NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, as well as for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1. The Parties acknowledge that as of 5 November 2004, IBM has partially developed XXXXXX (collectively, “Design Kit Models”) for the base 300mm Wafer 90nm Bulk CMOS process (“CMOS 9SF”), as well as the low power version (“CMOS 9SF-LP”) of such process, that the Parties are developing together pursuant to the 300mm Wafer 90nm Bulk CMOS Process Development Project.

2. The Parties agree to treat the Design Kit Models as they exist on 5 November, 2004 as Background Know-How for the 300mm Wafer 90nm Bulk CMOS Process Development Project, pursuant to Section 3.4 of the 2-Way Agreement.

3. The Parties agree that any and all future changes or enhancements to the Design Kit Models that they develop together pursuant to Attachment A — Statement of Work of this Amended and Restated Amendment No. 3 shall be considered part of the Specific Results of the 300mm Wafer 90nm Bulk CMOS Process Development Project; provided, however, that the specific staffing, objectives, and other requirements for the development of the Design Kit Models shall be as set forth in Attachment A —

IBM/Chartered Confidential 1

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

Statement of Work, and shall not be considered part of the staffing and other aspects of the 300mm Wafer 90nm Bulk CMOS Process Development Project as set forth in the various Exhibits to the 2-Way Agreement.

a. The purposes of this Amended and Restated Amendment No. 3 are to (i) complete the development set forth in Attachment A hereto; (ii) work together to develop certain other 90nm design enablement as set forth in Section 2 of Attachment B — Statement of Work (hereinafter “Auxiliary 90nm Enablement”) hereto; (iii) exchange information regarding the developed Design Kit Models and Auxiliary 90nm Enablement as set forth in Section 3 of Attachment B.

b. An additional objective of this Amended and Restated Amendment No. 3 is to enable Chartered or IBM to manufacture certain products (i) designed by the other Party’s customers utilizing all or a portion of the Design Kit Models, and/or all or a portion of the Auxiliary 90nm Enablement, and/or (ii) XXXXXX utilizing one or more of the Foundry DFM Tools (as set forth in this Section 3b below):

b1. In this Section 3b the following definitions shall apply:

— “DFM Royalty Products” shall mean Semiconductor Products manufactured from designs which have been prepared and/or analyzed using one or more of the Foundry DFM Tools.

— “Foundry DFM Tools” shall mean IBM’s 90nm CMOS 9SF XXXXXX specifically designated as such and covered by specific IBM agreement(s) to applicable foundry customers and used per description in the definition of DFM Royalty Products.

“Royalty Commencement Date” shall mean the date of the first Sale of a DFM Royalty Product.

“Sale” or “Sold” shall mean the sale or other transfer by Chartered or Chartered’s Wholly Owned Subsidiaries, directly or indirectly, to a third party (including Chartered’s Subsidiaries) of Semiconductor Products, but excluding sales and transfers of Semiconductor Products (i) that are provided and used as samples or prototypes without charge, or (ii) that are returned by such third party on the grounds related to arising from or in connection with the usage of the Foundry DFM Tools, or (iii) to a Chartered Subsidiary, provided that no such Semiconductor Products are subsequently sold or transferred to another party other than a Chartered Subsidiary.

“Semiconductor Product” means (a) an integral unit formed on a semiconductor substrate including a plurality of active and/or passive circuit elements formed at least in part of semiconductor material, which may be in wafer or chip form, or (b) a component that contains an integrated circuit on a single or multichip module that incorporates a means of connecting those integrated circuits with other electronic elements (active or passive) and/or means to make external electrical connections to such elements, which is in module form, but which excludes any means for a user to operate the functions therein (e.g., buttons, switches, sensors).

b2. In consideration for the waivers under Section 3b3 below and its Sales of DFM Royalty Products, Chartered shall pay royalties to IBM on the following basis:

i)	for each Sale of a DFM Royalty Product in the XXXXXX after the Royalty Commencement Date, XXXXXX per wafer;
ii)	for each Sale of a DFM Royalty Product in the XXXXXX after the Royalty Commencement Date, XXXXXX per wafer;
iii)	for each Sale of a DFM Royalty Product in the XXXXXX after the Royalty Commencement Date, XXXXXX per wafer; and

IBM/Chartered Confidential 2

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

iv) for each Sale of a DFM Royalty Product beyond the XXXXX after the Royalty Commencement Date, XXXXXX per wafer.

Notwithstanding the preceding Section 3b2, IBM waives XXXXXX of the royalty due on Sales of part number XXXXXX until the aggregate royalty calculated on account of XXXXXX pursuant to Section 3b2 (without giving effect to this sentence) exceeds XXXXXX; thereafter, Chartered shall pay XXXXXX of the royalty due on all Sales of XXXXXX. For the avoidance of doubt, the Parties intend that XXXXXX, not Chartered, may secure access to the Foundry DFM Tools. Nothing in this Agreement shall serve as an express or implied obligation for IBM to provide or Chartered to receive the Foundry DFM Tools. For the avoidance of doubt, Chartered is not required to provide any customer support of Foundry DFM Tools and such support, if any, shall be discussed between XXXXXX and IBM.

Chartered shall pay to IBM all royalties accrued under this Section 3b2 within forty five (45) days after the end of each calendar quarter in which such royalties accrued. Chartered shall report to IBM the Royalty Commencement Date within thirty forty five (45) days after its occurrence. Chartered shall provide IBM with a written report explaining how the amount of the payment was calculated, including the number of units of DFM Royalty Products Sold during the quarter, per product, and the aggregate amount of all royalties due. Such written report shall be sent to the Director of Licensing. Overdue amounts shall be subject to an interest charge of the lesser of eighteen percent (18%) of the total amount due, or the maximum percentage rate allowable by applicable law.

For three (3) years after the associated royalties owed per Section 3b2 herein are due to be paid to IBM, Chartered shall maintain a complete, clear and accurate record of the number and type of DFM Royalty Products to determine whether Chartered is paying the correct royalty amount hereunder. To ensure compliance with Section 3b2 herein, IBM shall have the right to inspect and audit periodically the relevant accounting and sales books and records of Chartered. The time period that is audited by IBM will not be subject to subsequent audits. The audit will be conducted by an independent audit firm mutually acceptable to the Parties, and shall be conducted following reasonable prior written notice during regular business hours at Chartered’s offices and in such a manner as not to interfere with Chartered’s normal business activities. As a condition of such audit, Chartered may, at its sole discretion, (i) require the auditor to sign a reasonable confidentiality agreement to protect the confidential information of Chartered, (ii) limit the auditor to providing IBM with a written report of the audit results, not any other Chartered confidential information, and (iii) require the auditor to provide Chartered with a copy of such auditor’s report promptly. In no event shall audits be made hereunder more frequently than twice every twelve (12) months, unless an audit reveals an issue, in which case such audits may be more frequent. If any audit should disclose any underpayment, Chartered shall promptly (but in any event within forty five (45) days pay the difference. The independent audit firm’s fee will be paid by IBM unless the report of the audit firm determines that Chartered has underpaid royalties during the period of the audit in an amount exceeding five percent (5%) of the royalties owed. In the event such an underpayment is reported, IBM shall provide an original invoice to Chartered, and Chartered shall pay the audit firm’s fee within forty-five (45) days of the receipt of such original invoice. In the event an overpayment is reported, IBM shall provide Chartered with a credit within forty five (45) days in the amount of such overpayment to be applied against Chartered’s future royalty obligations.

b3. IBM shall, to the extent it will not breach any third party agreement, use commercially reasonable efforts to, provide XXXXXX with a written waiver of the confidentiality and use restrictions IBM imposed upon XXXXXX with respect to the specific 90nm Bulk CMOS designs created utilizing all or a portion of the Design Kit Models, all or a portion of the Auxiliary 90nm Enablement, and one or more Foundry DFM Tools; such waiver enabling the manufacture of

IBM/Chartered Confidential 3

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

Semiconductor Products by Chartered and/or its Wholly Owned Subsidiaries, subject to the remainder of this Section 3b. Such waiver shall not pertain to designs made with other IBM tools, kits or utilities other than those set forth above. Chartered shall be solely responsible for negotiating its own business arrangements, if any, with XXXXXX. Chartered shall promptly advise IBM on a design (i.e. part number) by design basis as it contracts to manufacture Semiconductor Products for XXXXXX using designs covered by such IBM waiver.

The points of contact for the handling of requests under this Section 3b3 shall be:

For IBM:

Fram Akiki
e-mail: fram@us.ibm.com

For CHARTERED:

Choo Swee Hong
e-mail: shchoo@charteredsemi.com

4. The Parties agree that any and all changes or extensions to their activities as set forth in Attachment A — Statement of Work or Attachment B — Statement of Work of this Amended and Restated Amendment No. 3 shall be agreed to by the Parties in writing. The Parties agree that such matters shall be discussed by the IBM and Chartered Project Leaders at the quarterly meetings of the Management Committee for the 300mm Wafer 90nm Bulk CMOS Enablement Development Project as set forth in the 3-Way Agreement.

5. For the Design Kit Models, the term of confidentiality as specified in Section 7.3 of the 2 Way Agreement shall instead run from the date of disclosure by the disclosing party to the receiving party to January 1, 2007, or for two (2) years from the date of such disclosure, whichever is longer, and the term of confidentiality for Auxiliary 90nm Enablement shall be five (5) years from the date of disclosure.

6. For the avoidance of doubt, the Parties agree that solely in the case of Design Kit Models:

a. the Design Kit Models shall be deemed aspects of Specific Results and Background Know-How that Chartered may disclose to third parties pursuant to and in furtherance of the purposes set forth in Section 7.8 of the 2-Way Agreement; provided, however, that notwithstanding anything to the contrary in Section 7.8 of the 2-Way Agreement or any other part of the Agreement, in the case of disclosure of Design Kit Models to an EDA vendor pursuant to Section 7.8 of the 2-Way Agreement, XXXXXX and

b. the provisions of Section 7.10.1 - 7.10.3 of the 2-Way Agreement, inclusive, shall not apply to the Design Kit Models; and

c. the provisions of Sections 6.1 and 6.2 shall apply as if the work to be performed pursuant to Attachment A — Statement of Work of this Amended and Restated Amendment No. 3 is a Process Development Project, and the objectives and projected schedule set forth in Attachment A — Statement of Work of this Amended and Restated Amendment No. 3 were the Strategic Technology Objectives and Development Schedule, respectively.

6.1 The Parties agree the following shall apply solely in the case of Auxiliary 90nm Enablement:

IBM/Chartered Confidential 4

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

a. Notwithstanding anything to the contrary in the 2-Way Agreement, as amended, the Parties agree that the terms and conditions of the 3-Way Enablement Agreement and the 2-Way Enablement Agreement governing Specific Results and Background Know How (including, without limitation, the ownership, licensing and disclosure provisions of the 3-Way Agreement) shall apply to the equivalent information of the Auxiliary 90 nm Enablement.

b. The provisions of Section 7.10.1 - 7.10.3 of the 2-Way Agreement, inclusive, shall not apply to the Auxiliary 90nm Enablement.

7. (a) Notwithstanding anything to the contrary in Section 5 or any other provision of the 2-Way Agreement as amended, save for Section 16, Chartered shall make cost share payments to IBM for the joint development of such Design Kit Models pursuant to Attachment A — Statement of Work of this Amended and Restated Amendment No. 3, in the amount of US XXXXXX

     (b) In addition, the Parties acknowledge and agree that Chartered’s cost share payments to IBM for continuation of the joint development of such Design Kit Models, as well as development of the 90nm Auxiliary Enablement, are included in the payments set forth in the 2-Way Enablement Agreement.

8. The term of this Amended and Restated Amendment No. 3 shall commence on the Effective Date and shall end upon the earlier of the following: (a) XXXXXX (b) the termination of the 300mm 65nm Enablement Development Project under the 3-Way Agreement, or (c) termination of the 2-Way Enablement Agreement.

9. The Parties agree that any and all future changes or enhancements to the Design Kit Models that they develop together pursuant to Attachment C — Statement of Work of this Amended and Restated Amendment No. 3 shall be considered part of the Specific Results of the 300mm Wafer 90nm Bulk CMOS Process Development Project. As an additional requirement of this Amended and Restated Amendment No. 3, Chartered shall deliver to IBM the additional Background Know-How and timely perform the activities, all as identified on Attachment C. Chartered shall transfer to IBM all Background Know-How, together with all relevant supporting documentation (e.g. GDS), that exists as of the Effective Date in a one (1) day workshop via teleconference on or before Dec 1, 2006. In consideration of Chartered’s timely completion of the foregoing, IBM shall deem satisfied the shortfall in the Chartered headcount obligation contained in the 2 Way Enablement Agreement. The Parties will jointly develop the XXXXXX in accordance with the terms of this Amended and Restated Amendment No. 3, the 2 Way Enablement Agreement, and the schedule in Attachment C hereto.

10. The Parties agree to add the following to the end of Section 7.7 of the 2-Way Agreement:

“In addition to the other rights under this Section 7.7, IBM has no objection if Chartered permits its customers, who rightfully received certain aspects of Specific Results and/or Background Know-How pursuant to this Section 7.7, to further disclose the following portions of the foregoing

IBM/Chartered Confidential 5

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

(i) the 90nm design manual, SPICE models (object code only), DRC, LVS and PEX decks (excluding the input files of such decks) directly to contractor(s) who are retained to provide Integrated Circuit design services for such Chartered customer. Although Chartered is not required to enter into a direct written agreement with each such customer contractor, Chartered shall (a) require approval and approve each customer disclosure that is proposed pursuant to the preceding sentence; and (b) require that such disclosures cannot be made without a written agreement between Chartered’s customer and such customer’s contractor that, at a minimum, requires (i) a term of confidentiality consistent with that set forth herein, and (ii) limits such contractor’s use of such information in accordance with terms and conditions consistent with those set forth herein.

The remainder of the 2-Way Agreement, as amended, shall remain unchanged.

IBM/Chartered Confidential 6

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

IN WITNESS WHEREOF, the Parties hereto have caused this Amended and Restated Amendment No. 3 to be executed by their duly authorized representatives as of the Effective Date.

Chartered Semiconductor Manufacturing Ltd	International Business Machines Corporation
By: /s/ Chia Song Hwee Name: Chia Song Hwee Title: President and CEO	By: /s/ Bernard Meyerson Name: Bernard Meyerson Title: Vice President, Strategic Alliances, IBM Systems & Technology Group
Date: 20/11/2006	Date: Nov 20, 2006

Enc:  Attachment A, Statement of Work — 90nm 300mm CMOS 9SF Design Kit Models
Attachment B, Statement of Work — Exchange of Improvements
Attachment C, Statement of Work — Chartered Background Know How

IBM/Chartered Confidential 7

REDACTED  CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

Attachment A

Statement of Work — XXXXXX

Under this SOW, the Parties will work together to develop software models for mutually agreed-to foundry macros, cores, and other circuit blocks targeted for use by customers to augment their designs for manufacture in CMOS 9SF and CMOS 9SF-LP, for the following tools according to the following projected schedule:

XXXXXX

IBM/Chartered Confidential 8

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

Attachment B

Statement of Work — Exchange of Improvements

Under this SOW, for the term of this Amended and Restated Amendment 3 as set forth in Section 8 above, the Parties will work together to exchange information regarding Design Kit Models and Auxiliary 90nm Enablement, pursuant to the methodology for addressing enablement issues set forth below:

1. Design Kit Models (90nm)

• DRC Runsets (Hercules and Calibre)

• Post cheese and fill DRC Runset as available (Hercules and/or Calibre) — to be developed pursuant to a schedule as agreed by the Technical Coordinators

• LVS Runsets (Hercules and Calibre)

• PEX Runsets (Star RCXT and Calibre XRC)

2. Auxiliary 90nm Enablement

• PEX Input Files

• Regression Tests & Validation software for DRC

• Regression Tests for Post Cheese and Fill DRC ) — to be developed pursuant to a schedule as agreed by the Technical Coordinators

• Regression Tests & Validation software for LVS

• Regression Tests & Validation software for PEX

• ESD Documentation Kit (GDS2 and documentation)

• eFuse Documentation Kit (GDS2 and documentation)

• Chip Kit (GDS2 for Guard ring & Alphanumerics)

• Dual-Port SRAM cells and associated cells: GDS2 Layouts and models

• Single-Port normal and dense SRAM cells and associated cells: GDS2 Layouts and models (as defined in the SF Process Development and Cost Sharing Agreement)

• Cadence Tech Files

• Technology Design Manuals

IBM/Chartered Confidential 9

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

• Model Reference Guides

• Spice models (Hspice and Spectre)

3. Method of Addressing Enablement Issues

(A): Method of Addressing Technical Issues:

An “Issue Tracking” database and a “Notes Teamroom” method of submission will be established to track all technical issues submitted by JDE parties. The JDE Party Coordinator is responsible to establish and maintain such a database and provide JDE parties access to the JDE Teamroom. If an issue is submitted by a party, the Party Coordinator is responsible to promptly notify the appropriate Discipline Manager of the submission. The Discipline Manager is then responsible for addressing any technical issue the JDE parties have relating to the deliverables, clarifying/ recognizing the issue, setting the priority, and sizing the effort to fix it. If the issue involves technology redefinition or a change in content, the issue will be referred to the 65nm Design Manual Review Board (DMRB) for resolution. Note: the DMRB has representatives from all JDA companies.

Deliverable	Discipline Manager
DRC Runsets & Regressions	DRC Manager
LVS Runsets & Regressions	LVS Manager
PEX Runsets & Regressions	PEX Manager
E-Fuse Kit	E-Fuse Manager
Chip Kit & Cadence Tech Files	Library Manager
Memory Cells	SRAM Manager
Device Models & Model Reference Guide	Base & LP Model Managers
Technology Design Manual	Design Manual Manager

If the Discipline Manager is unable to resolve the conflict, the IBM Project Leader is responsible to gather with other Co-Project Leaders to resolve. The IBM Project Leader will report quarterly on issue status.

It is also the responsibility of the IBM Project Leader to coordinate with the Partner Co-Leaders, and define a priority scheme that the development team should follow when an issue is raised by a partner.

(For clarity, an example: if a DRC issue is raised by a party, it should be assigned a priority level by the party, the necessary information should be supplied to the development team for a detailed understanding, and within a specified time, an acceptance or rejection, with explanation, should be reached by the development team. If accepted, an agreed to priority is then assigned. According to the priority level, the issue should be appropriately scheduled for resolution. Each priority should have a certain development expectation associated with it and that expectation should be defined by the IBM Project Leader with agreement from all of the Co-Leaders.)

IBM/Chartered Confidential 10

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

(B): Special Technical Case: DRC Interpretation Issue:

During DRC development, any conflicts in design rule interpretation will be handled thru the development process defined in the diagram below. Once the Runset is released for distribution to customers and parties, any further interpretation issues will be resolved by the DRC Manager in a similar manner, involving the appropriate personnel to accurately resolve the interpretation issue in a timely manner and, if needed, determine a priority and schedule for Runset correction.

C: Addressing Schedule Issues:

It is the responsibility of the IBM Project Leader to clearly state forward looking schedules to the MCM and resolve any schedule/resource conflicts in achieving those stated goals. If, for some reason, a re-adjustment of schedule is warranted, the IBM Project Leader will meet with JDE Co-Leaders to resolve or achieve an acceptable alternate schedule.

D: Resources. The total employee resource to be provided by the parties for the foregoing activities shall be included in such resources as are set forth in the 3-Way Enablement Agreement and the 2-Way Enablement Agreement.

Neither Party will be responsible for model fixes or any other support regarding the results of this SOW to the other Party at any time after the activities under this SOW are completed, and in no

IBM/Chartered Confidential 11

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

event shall either Party have any support obligations of any kind to the other Party’s customers. Chartered is responsible to establish a Lotus Notes Team Room to enable IBM and Chartered developers in sharing knowledge relating to the above activity. IBM is responsible to maintain the ICC file sharing tool and allow appropriate Chartered engineers access to that system. On a quarterly basis while conducting the development set forth in this SOW, Chartered and IBM will jointly review model updates and synchronize models appropriately.

Chartered will be responsible for obtaining EDA tool licenses for the DRC, LVS, and extraction tools, as well as any other third party tools as it may choose to utilize with or in conjunction with the Design Kit Models.

This SOW does not include any licenses from either Party as to any EDA tools or other software other than the tools set forth above.

IBM/Chartered Confidential 12

REDACTED  CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

Third Amended and Restated Amendment No. 3
November 17, 2006 Execution Copy

Attachment C

Statement of Work — XXXXXX

     XXXXXX

IBM/Chartered Confidential 13

EX-4.11.13

Exhibit 4.11.13

Confidential Treatment Requested : The portions of this agreement marked by XXXXX
have been omitted pursuant to a request for confidential treatment and have been filed
separately with the Securities and Exchange Commission.

MASTER IBM JOINT DEVELOPMENT TERMS AND CONDITIONS —
DECEMBER 15, 2006 VERSION

MASTER IBM JOINT DEVELOPMENT TERMS AND CONDITIONS —
DECEMBER 15, 2006 VERSION

FOR JOINT DEVELOPMENT PROJECTS

WITH

INTERNATIONAL BUSINESS MACHINES CORP.

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TABLE OF CONTENTS:

SECTION 1 — DEFINITIONS	3
SECTION 2 — IBM DEVELOPMENT FACILITIES; AGREEMENT STRUCTURE	9
SECTION 3 — SCOPE OF DEVELOPMENT PROJECTS; PARTICIPATING PARTIES	10
SECTION 4 — MANAGEMENT AND STAFFING OF THE DEVELOPMENT PROJECTS	12
SECTION 5 — FUNDING CONTRIBUTIONS, COST SHARING, AND OTHER PAYMENTS	16
SECTION 6 — INSURANCE, RESPONSIBILITY FOR RESULTS AND WARRANTIES	16
SECTION 7 — INFORMATION TRANSFERS	17
SECTION 8 — LICENSES TO BACKGROUND KNOW-HOW	20
SECTION 9 — LICENSE TO RESIDUALS AND PROPRIETARY TOOLS	22
SECTION 10 — OWNERSHIP OF SPECIFIC RESULTS	23
SECTION 11 — OWNERSHIP OF DESIGNATED INVENTIONS	23
SECTION 12 — TERM AND TERMINATION	24
SECTION 13 — NOTICES AND OTHER COMMUNICATIONS	27
SECTION 14 — TERMS OF NEGOTIATION	27
SECTION 15 — FORCE MAJEURE	27
SECTION 16 — TAXES	28
SECTION 17 — LIMITATION OF LIABILITY	28
SECTION 18 — GENERAL	29

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PREAMBLE

These Master IBM Joint Development Terms and Conditions (“Master Terms”) provide the terms and conditions governing semiconductor technology joint development projects initiated by or conducted in conjunction with International Business Machines Corporation (“IBM”). These Master Terms become operative once incorporated by reference for a particular joint development project.

These Master Terms represent one of the three (3) elements in the contract structure for an IBM joint development project. In addition to these Master Terms, the details of a particular technology development project are set forth in a “Joint Development Project Agreement” which (a) provides the terms and conditions unique to the subject development project (e.g. the strategic technology objectives, development schedule, and duration of the development project), and (b) incorporates these Master Terms by reference.

Lastly, each party will sign a two-way supplement (referred to as a “Participation Agreement”) with IBM which (a) provides certain additional terms and conditions unique to such party (e.g. financial contribution amounts, staffing commitments, and participation period), and (b) obligates such party to one or more unsigned Joint Development Project Agreements (including these Master Terms) with respect to IBM and all other parties. A party’s execution of the Participation Agreement (i) creates a broad and direct contractual relationship with IBM and with all parties who have agreed to (or subsequently agree to) participate in each of the subject development projects, and (ii) triggers the use of the common Joint Development Project Agreement (including the referenced Master Terms) to govern such multi-party contractual relationship for each of the development projects.

Updates to these Master Terms will be reflected on the cover page of such document (e.g. Master IBM Joint Development Terms and Conditions — xx, 20xx Version), but such updated version shall only apply to joint development projects incorporating such updated version by reference.

SECTION 1 —DEFINITIONS

Unless expressly defined and used with an initial capital letter in these Master Terms, words shall have their normally accepted meanings. If there is a conflict between a definition in these Master Terms, the Project Agreement, and/or the Participation Agreement, the order of precedence provided in Section 18.16 of these Master Terms governs. The headings contained in these Master Terms or the remaining portion of the Agreement (as defined below) or in any exhibit, attachment or appendix hereto or thereto are for reference purposes only and shall not affect in any way the meaning or interpretation of these Master Terms or the rest of the Agreement. The word “shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, and the singular includes the plural. The following terms shall have the described meanings if and when used in the Agreement:

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“Agreement” means, with respect to the Development Project, (i) these Master Terms, and (ii) the Project Agreement, together with any exhibits, attachments, and appendices to each of the foregoing. As between IBM and each Participating Party only, the term “Agreement” is also deemed to include the Participation Agreement between IBM and such Participating Party for the Development Project.

“Background Know-How” means, with respect to the Development Project, the methods, techniques, designs, structures, software, and specifications developed or acquired by a Party outside the performance of the Development Project, which such Party contributes or discloses to the other Parties for use in the Development Project. Without limiting the foregoing, Background Know How is deemed to exclude the “Background Know-How Exclusions” specified in the Project Agreement.

“Background Know-How Exclusions” is defined, with respect to the Development Project, in the Project Agreement.

“Chip Design(s)” is defined in the Project Agreement, as applicable.

“Confidentiality Period” means, with respect to the Development Project, the period of time identified as such in the Project Agreement.

“Designated Executive” means, with respect to the Development Project, the senior executive appointed by a Party for the Development Project.

“Development Schedule” is defined in Section 3.1 with respect to the Development Project.

“Designated Invention” means, with respect to the Development Project, an Invention for which a patent application has been filed by one or more of the Parties pursuant to Sections 11.1 or 11.2.

“Derivative Technology” means, with respect to the Development Project, technologies which use, modify, or otherwise derive from the Specific Results, the Background Know-How, both, or any portion of the foregoing.

“Development Facilities” means the (i) IBM Development Facilities and (ii) any other facilities of a Participating Party and/or a Third Party as set forth in a Project Agreement.

“Development Project” means the technology development project and any sub-projects identified in the Project Agreement.

“Documentation” means, with respect to the Development Project, the documentation required by the Project Agreement.

“Embedded DRAM” or “eDRAM” means a device that either (i) primarily carries out logic functions, and includes one or more dynamic random access memory (DRAM) cells embedded within logic circuitry on the same semiconductor substrate, or (ii) primarily carries out memory

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functions, and includes one or more DRAM cells in combination with a static random access memory (SRAM) array on the same semiconductor substrate (including an array of SRAM cells linked with bit lines, word lines, sense amplifiers, and decoders).

“IBM Development Facilities” means the (i) IBM 200mm or 300mm wafer process development facility, (ii) the IBM Thomas J. Watson Research Center, and (iii) any other IBM facilities identified in the Project Agreement.

“IBM Project Leader” means, with respect to the Development Project, the individual appointed by IBM pursuant to Section 4.5.

“Integrated Circuit” means an integral unit formed on a semiconductor substrate including a plurality of active and/or passive circuit elements formed at least, in part, of semiconductor material. For clarity, “Integrated Circuit” includes charge-coupled devices (“CCDs”).

“Invention” means, with respect to the Development Project, each invention, discovery, design, and improvement, conceived or first actually reduced to practice solely or jointly by one or more Representatives of one or more of the Parties or their respective contractors during the Project Term and in the performance of the Development Project.

“Licensed Patents” means, with respect to the Development Project, those patents, patent applications, and utility models, licensable by the granting Party and/or its Subsidiaries without the payment of royalties or other consideration to a Third Party other than an employee of the granting Party, that have claims directed to semiconductor fabrication processes and have effective filing dates any time prior to two (2) years after the expiration or earlier termination of the Project Agreement, as the case may be; and all continuations-in-part, reissues, reexaminations, and counterparts of same.

“Licensed Product” means, with respect to the Development Project, Integrated Circuits and/or Semiconductor Products.

“Limitation Amount” means the amount identified as such in the Project Agreement for purposes of Section 17 (Limitation of Liability) of these Master Terms.

“Lithography” means those aspects of Background Know-How and Specific Results directed to (i) process technology-dependent ground rules or process technology-dependent special rules for shapes replication as developed by the Parties for the generation of photomasks used for development and qualification of a semiconductor process technology in the Development Project, (ii) resolution enhancement techniques specifically created pursuant to the Development Project to generate mask build data, (iii) such photomasks themselves and the data files used therefor as are used in the Development Project, (iv) lithography process sequence as utilized in the Development Project, and (v) mask data generation sequence as utilized in the Development Project.

“Management Committee” with respect to the Development Project, is defined in Section 4.1.

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“Mask Fabrication and Photoresist Technology” means any process, procedure, Proprietary Tools, Third Party tools, or hardware tool used in the fabrication of photomasks, as well as the photomasks themselves, and/or the formulation and/or manufacture of photoresist; provided, however, that “Mask Fabrication and Photoresist Technology” shall not include Lithography.

“Memory” means Chip Designs and fabrication processes related to read only memory (ROM), dynamic random access memory (DRAM), programmable ROMs, magnetic RAM (MRAM), ferroelectric RAM, Embedded DRAM, and other stand-alone memory. For the avoidance of doubt, “Memory” shall not include embedded static RAM (SRAM) cell designs and process technology or the SRAM or ROM used in the Development Projects as test vehicles.

“Module” or “Process Module” means a stand alone sequence of process steps which is a portion of a CMOS process technology.

“Notice Address” means, with respect to the Development Project, the address designated for a Party on the Project Database.

“Packaging Technology” means any process, procedure, software, or hardware tools used in the packaging of integrated circuit products into single-chip packages, multi-chip packages, or any other higher levels of assembly, including but not limited to IBM’s collapsible chip carrier connection (“C4”) interconnect technology; provided, however, “Packaging Technology” does not include the formation of layers on a wafer up to and including the final via layer (referred to as LV, TV, or FV level) or chip-package-interaction (“CPI”) and related characterization methods and modeling but shall include any process, procedure, or practice subsequent to such step.

“Participation Agreement” means the agreement a Participating Party signs with IBM, that among other things, obligates the Participating Party to participate in the Development Project. Each Participating Party will sign its own Participation Agreement with IBM. For clarity, a Participation Agreement may govern multiple Development Projects.

“Partial Participating Party” means a Participating Party that participates in all or a portion of the Development Project and is fully obligated as a Participating Party to all other Parties pursuant to the Master Terms and the Project Agreement, but receives lesser rights than the other Participating Parties receive pursuant to the Master Terms and the Project Agreement, as such rights are defined in such Participating Party’s Participation Agreement with IBM.

“Participating Party” means, with respect to the Development Project, each company who now or in the future agrees to participate in the Development Project by signing a Participation Agreement with IBM that binds such company to the Project Agreement and these Master Terms. For clarity, IBM is not a Participating Party.

“Participating Party Notification” means, with respect to the Development Project, a written notification that a Participating Party provides to the other Participating Parties signifying its entry into the Development Project.

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“Parties” means, with respect to the Development Project, IBM and all Participating Parties.

“Party Project Leader” means, with respect to the Development Project, the individual appointed by a Participating Party pursuant to Section 4.5.

“Patent-Participating Party” means, with respect to the Development Project, a Participating Party who is granting patent licenses to and receiving patent licenses from the other Patent- Participating Parties with respect to such Development Project, all in accordance with the terms in Section 8.6(a). For the avoidance of doubt, IBM is not a Patent-Participating Party.

“Project Agreement” means the specific “Joint Development Project Agreement for xxxx” incorporating these Master Terms.

“Project Database” means the database for the Development Project that identifies each Participating Party and identifies certain information about each Participating Party such as its Notice Address, Party Project Leader, Technical Coordinators and Designated Executive.

“Project Leaders” means, with respect to the Development Project, the IBM Project Leader and the Party Project Leaders for all Participating Parties.

“Project Term” for the Development Project is defined in the Project Agreement.

“Proprietary Tools” means software (in source code form or in object code form), models and/or data, and other instrumentalities that are not commercially available and are either owned by a Party or under which a Party has the right to grant royalty-free licenses, and that are used in the Development Project. For clarity, “Proprietary Tools” does not include data input to software applications or the results of such applications.

“Representative(s)” means a Party’s employees and employees of a Party’s Wholly Owned Subsidiaries.

“Semiconductor Product” means a component that contains an Integrated Circuit on a single or multichip module that incorporates a means of connecting those Integrated Circuits with other electronic elements (active or passive) and/or means to make external electrical connections to such elements.

“Specific Results” means, with respect to the Development Project, information and items, (other than the “Specific Results Exclusions” specified in the Project Agreement) developed and/or contributed to the Development Project by the Parties pursuant to the development work of the Development Project as follows:

(a)      Documentation;

(b)      All Inventions, know-how, materials, information, and items resulting from the Development Project, including but not limited to methods, techniques, unit processes, process flows, structures in silicon, test software, and specifications for equipment,

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chemicals, masks, and consumables, and all derivative works or improvements created or developed by or for a Party solely or jointly during and in the performance of the Development Project;

(c)      For avoidance of doubt, the Parties acknowledge that Specific Results do not include Background Know-How.

“Specific Results Exclusions” is defined, with respect to the Development Project, in the Project Agreement.

“Subsidiary” means a corporation, company or other entity:

(a)	more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by a Party, or
(b)	which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, but more than fifty percent (50%) of whose ownership interest representing the right to make the decisions for such corporation, company or other entity is now or hereafter, owned or controlled, directly or indirectly, by a Party,

provided that in either case such entity shall be considered a Subsidiary, and shall be entitled to retain the licenses and other benefits provided by the Agreement to Subsidiaries, only so long as such ownership or control exists.

“Technical Coordinators” means, with respect to the Development Project, the individuals referred to in Section 4.7, below.

“Test Site” means a device or circuit evaluation site on a wafer.

“Third Party” or “Third Parties” means, with respect to the Development Project, an entity or entities other than the Parties or their Wholly Owned Subsidiaries.

“Wholly Owned Subsidiary” shall mean 1) a corporation, company or other entity:

(a)      one hundred percent (100%) of whose outstanding shares or securities (such shares or securities representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by one or more Parties; or

(b)      which does not have outstanding shares or securities, as may be the case in a partnership, joint venture, or unincorporated association, or other entity but one hundred percent (100%) of whose ownership interest representing the right to (i) make the decisions for such corporation, company, or other entity, or (ii) vote for, designate, or otherwise select members of the highest governing decision making body, managing

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body, or authority for such partnership, joint venture, unincorporated association or other entity is, now or hereafter, owned or controlled, directly or indirectly, by one or more Parties;

provided that in either case (a) or (b) such entity shall be considered a Wholly Owned Subsidiary, and shall be entitled to retain the licenses and other benefits provided by the Agreement to Wholly Owned Subsidiaries, only so long as such ownership or control exists; or

2) a corporation, company or other entity:

(c)      at least seventy five percent (75%) of whose outstanding shares or securities (such shares or securities representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by one or more Parties; or

(d)      which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, or other entity but at least seventy five percent (75%) of whose ownership interest representing the right to (i) make the decisions for such corporation, company, or other entity, or (ii) vote for, designate, or otherwise select members of the highest governing decision making body, managing body, or authority for such partnership, joint venture, unincorporated association, or other entity is, now or hereafter, owned or controlled, directly or indirectly, by one or more Parties;

provided, that in either case (c) or (d) above, (i) all of the remaining such ownership interest is solely owned or controlled, directly or indirectly, by one or more corporations, companies or other entities which are purely financial investors who are not engaged in the design, development, manufacture, marketing, or sale of Semiconductor Products, and (ii) such entity shall be considered a Wholly Owned Subsidiary, and shall be entitled to retain the licenses and other benefits provided by the Agreement to Wholly Owned Subsidiaries, only so long as such ownership or control exists.

SECTION 2 — IBM DEVELOPMENT FACILITIES; AGREEMENT STRUCTURE

2.1

The Project Agreement identifies the IBM Development Facilities and any other Development Facilities that the Parties will utilize for the Development Project.

2.2

IBM shall be responsible for the operations of the IBM Development Facilities, including, but not limited to, capacity, staffing, and capital purchases. If the Project Agreement designates a Development Facility other than an IBM Development Facility, then the Project Agreement will establish each Party’s obligations with respect to such Development Facility and identify any additional terms and conditions a Party must agree to in order to participate in the Development Project at such Development Facility.

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2.3

The terms and conditions of these Master Terms and of the Project Agreement govern the Parties’ performance of the Development Project. In addition, the Participation Agreement between IBM and each Participating Party provides supplemental terms and conditions that govern only between IBM and each respective Participating Party. It is the Parties’ intention that a Party’s respective ownership, disclosure, and/or license rights as to the Specific Results and Background Know-How of the Agreement be set forth in that Party’s Participation Agreement, the Project Agreement, and these Master Terms.

2.4

If a company executes a Participation Agreement and executes and delivers a Participating Party Notification, then (i) such company joins the Development Project as a Participating Party, (ii) such company and the other Participating Parties are each directly contracted to IBM and to each other based upon the terms and conditions of the Project Agreement (including these Master Terms), without the need for any additional documentation or signatures by any Party, and (iii) such company is estopped from contesting its direct privity of contract with the other Participating Parties and with IBM on such referenced terms and conditions.

SECTION 3 — SCOPE OF DEVELOPMENT PROJECTS; PARTICIPATING PARTIES.

3.1	As detailed below, the Parties shall jointly develop technology that meets the requirements set forth as “Strategic Technology Objectives” in the Project Agreement (the “Strategic Technology Objectives”) and shall do so in accordance with the schedule set forth in the Project Agreement (the “Development Schedule”). Any modification to such Strategic Technology Objectives or Development Schedule requires the mutual agreement of the Parties pursuant to Section 18.15.
3.2	The Project Agreement may also set forth the potential technology implementation options for the Development Project, and if so, the Parties shall work together to evaluate the various options available. The goal of such evaluation is to agree on an integrated technology that meets the Strategic Technology Objectives. If the Project Leaders are unable to agree on a particular option to be developed, or should they disagree as to the continued development of an option that was previously selected, the option preferred by IBM shall be pursued in the Development Project. In the event that a Party proposes an option that is presented to the other Parties, but is not selected by the Parties after escalation, then such Party shall have the right, subject to the other terms and conditions of the Agreement, to proceed with such development outside the performance of the Development Project. If it is reasonably expected that any Background Know-How or Specific Results contains or may contain technical information or software that is or may be controlled as a defense article or technology under the applicable export laws, regulations, or ordinances, then the Parties shall, pursuant to this Section 3.2, also evaluate the various technology modification options to maintain broad commercial availability of the technology and associated articles.
3.3	For information other than that developed by the Parties in the Development Project to be considered Background Know-How it must be either deliberately provided to the Development Project by the owner of such information or be evaluated by all of the

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Project Leaders for possible use in the Development Project. In the event such item of information is provided, and the Party owning such information notifies the Project Leaders within thirty (30) days after such owning Party’s disclosure or the initiation of such evaluation that such information should be withdrawn, such owning Party may withdraw such information from use in the Development Project and all such information in tangible form associated therewith shall be returned to such owning Party and such tangible information shall not become Background Know-How. In the event of such withdrawal, any non-tangible information related to such information retained in the minds of the non-owning Parties’ employees shall be treated in accordance with Section 9.1. Absent such notice and withdrawal within thirty (30) days, all information deliberately provided by the owner of such information or evaluated by the Project Leaders shall be treated as Background Know-How.

3.3.1 Any issue as to whether information was deliberately provided to the Development Project shall be resolved by the Project Leaders based on either of the following criteria:

3.3.1.1	whether the information was deliberately exposed to the other Parties by a Representative of the owner of such information; or
3.3.1.2	whether the evaluation of the information by the Representatives was validly considered for incorporation into the Development Project.

If the Project Leaders cannot agree, such issue shall be resolved by the Management Committee in accordance with the criteria in Sections 3.3.1.1 and 3.3.1.2.

3.3.2 Each Party shall be responsible for instructing its Representatives on methods of proper introduction of information into the Development Project, and the consequences under Section 7.10, below, of information that is inadvertently obtained.

3.4

Intentionally Omitted.

3.5

During a Party’s participation in the Development Project, such Party shall have access to all Specific Results and Background Know-How of the Development Project and shall be solely responsible, including the cost therefor, for the transfer of Specific Results and Background Know-How to its own facilities. As part of the Development Project, the Project Leaders shall coordinate the completion of the Documentation for the Development Project and each Party shall have access to all such Documentation during such Party’s participation in the Development Project. Each Party shall be solely responsible for obtaining any and all regulatory approvals as may be required to utilize Specific Results and Background Know-How at its facilities, and shall be solely responsible for the cost of equipment and consumables as may be required to utilize the Specific Results and Background Know-How at its facilities.

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3.6	Without liability to the other Parties for breach of the Agreement, to the extent known by a Party disclosing information for use in the Development Project, prior to such disclosure, such disclosing Party agrees to promptly notify the other Parties of any limitations on the uses of such information (including applicable regulatory limitations) and whether such use would violate or whether such information is protected by any copyright or mask work or similar right of any Third Party. Upon such notification, the Parties may agree to accept such information into the Development Project subject to such limitations. Upon the failure to make such notification, or if any such limitation arises after disclosure by the disclosing Party, then the Parties shall attempt to work together to find a unanimously agreeable solution. Each Party further agrees to use reasonable efforts to ensure that it will not design or develop the Development Project in such a way that requires the use of any Third Party confidential information or any other material which is not available to the other Parties for their use as provided in the Agreement as part of the Background Know-How and/or Specific Results. Each Party further agrees to use reasonable efforts to ensure that it will not disclose to the other Parties any information considered confidential by it or by any Third Party which information does not relate to the Development Project.
3.7	Intentionally Omitted.
3.8	IBM reserves the right, in its sole discretion, to (i) add companies as Participating Parties (including as Partial Participating Parties) for the Development Project, (ii) remove Participating Parties from the Development Project in accordance with the terms and conditions of the Agreement (including, for clarity, the Participation Agreement between IBM and such Participating Party), and (iii) amend its Participation Agreement with a Participating Party following IBM’s agreement with such Participating Party. IBM shall promptly notify or cause the notification of the other Participating Parties after the addition, removal, or withdrawal of a Participating Party.

SECTION 4 — MANAGEMENT AND STAFFING OF THE DEVELOPMENT PROJECTS

4.1 The Development Project shall have a Management Committee with equal representation from each Party. The responsibilities of the Management Committee are set forth in Exhibit A. All decisions of the Management Committee shall be by unanimous consent. Each Party shall appoint a Management Committee representative promptly after such Party joins the Development Project. Any Party may change its member of the Management Committee by written notice to the IBM Designated Executive. The Management Committee will conduct regular meetings on dates and at locations determined by the Management Committee. Meetings of the Management Committee may be held in person, by teleconference, or by videoconference.

4.1.1 The Management Committee shall establish a regular review process with the appropriate senior business executives of each of the Parties of at least the level of Vice President or other comparable level. Such review shall include review of an overall progress report to be prepared by the Project Leaders. In addition, any additional responsibilities of the Management Committee shall be provided in the

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Project Agreement, including the Management Committee’s right to establish additional subcommittees for the oversight of individual Development Project elements.

4.1.2

If any Party (i) reasonably determines that the technology to be developed under a Development Project is no longer meeting the Strategic Technology Objectives or the Development Schedule, or (ii) brings forth empirical evidence of changes in the competitive marketplace for the technology such that the Strategic Technology Objectives and/or the Development Schedule are no longer competitive; then such Party may present such concerns to the Management Committee for discussion. If the Management Committee, after the exercise of reasonable efforts in the conduct of such discussions, fails to reach a unanimous agreement resolving such Party’s concerns, then any Party may refer such concerns to the Designated Executives for the Participating Parties who shall discuss and meet in person, if necessary, in order to attempt to resolve such Party’s concerns. If such Designated Executives are unable to resolve such Party’s concern, then the Designated Executives agree to instruct the Management Committee to negotiate a unanimously agreeable reasonable wind-down plan to terminate the development relationship set forth in the Project Agreement, with a goal of doing so within thirty (30) days (which period of wind down shall not exceed ninety (90) days and which plan shall include, among other things, and a final set of deliverables to transfer Specific Results and/or Background Know-How previously undisclosed, if any) to terminate the development relationship set forth in the Agreement. For clarity, the termination of a development relationship in one Project Agreement pursuant to this Section 4.1.2 does not, in and of itself, affect development relationships contained in different Project Agreements. Such wind-down shall not be considered a breach of the Agreement by any Party, and the survival terms of Section 12.2 shall apply.

4.2	Intentionally Omitted.
4.3	Intentionally Omitted.
4.4	Intentionally Omitted.
4.5	Each Party shall appoint a Project Leader for each Development Project promptly after the Party joins the Development Project. It is the intent of the Parties that Project Leaders are assigned to the Development Project for at least a term equal to the lesser of two (2) years and the Project Term. The IBM Project Leader shall be in charge of the day-to-day management of the Development Project. A Party may replace its Project Leader by giving written notice to the IBM Designated Executive of such replacement. The responsibilities of the IBM Project Leader and the other Project Leaders are set forth in Exhibits B and C, respectively.
4.6	The Participation Agreement between IBM and each Participating Party establishes the minimum number of Representatives that such Participating Party has committed to IBM

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	to work on the Development Project. The work assignment and any reassignment of such Representatives shall be unanimously agreed to by the IBM Project Leader and the Project Leader responsible for such Representatives. For the avoidance of doubt, each Participating Party’s staffing obligation to IBM under its Participation Agreement is not a material term of the Agreement to any other Participating Party. It is the intent of the Parties that such Representatives be assigned to the Development Project for at least a term equal to the lesser of two (2) years and the Project Term. Each Party shall ensure its Representatives possess appropriate skills and experience to accomplish the Strategic Technology Objectives.
4.7	Each Party shall appoint a Technical Coordinator promptly after joining the Development Project. The Technical Coordinators shall be responsible for supervising exchanges of information among the Parties pursuant to Section 7.2. A Project Leader for a Party may replace the Technical Coordinator for such Party by giving written notice to the IBM Designated Executive of such replacement.
4.8	Each Party shall ensure its Representatives comply in all material respects with all personnel, human resources, security and safety rules, procedures, and guidelines and regulatory requirements applicable to contractors resident at or visiting a Development Facility while such Representatives are at that Development Facility for the Development Project, including those IBM Development Facility Visitation Guidelines for Representatives set forth in Exhibit D. In particular, each Participating Party agrees to abide by security requirements as may apply to its Representatives while at the applicable Development Facilities. Each Party shall provide to the other Parties in advance a set of documents setting forth all such rules, procedures, and guidelines, including any updated versions thereof, for the Development Facility of each such Party.
4.9	Each Party shall be responsible for the selection of its Representatives who will be assigned to work in the Development Facilities on the Development Project. Personnel supplied by each Party who are Representatives of the supplying Party shall not for any purpose be considered employees or agents of any other Party. Each Party shall be responsible for the supervision, direction and control, payment of salary (including withholding of taxes), travel and living expenses (if any), worker’s compensation insurance, disability benefits and the like of its own Representatives. Upon request, the operator of a Development Facility shall use good faith efforts to cooperate with a Party, enabling such Party’s Representatives to work at the Development Facility (e.g. by providing a letter of invitation). In addition, each Party may reassign any of its employees as Representatives as such Party deems necessary with appropriate notice to the IBM Project Leader; provided, however, each Participating Party is subject to the terms of its Participation Agreement with IBM.
4.10	If any Party (the “Notifying Party”) should become aware of the existence of any hazardous conditions, property, or equipment which are under the control of another Party (the “Controlling Party”), then the Notifying Party shall promptly advise the Controlling Party; however, it shall remain the Notifying Party’s responsibility to take all necessary precautions against injury to persons or damage to property from such hazards,

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	property, or equipment until corrected by the Controlling Party. Each Party agrees to comply with the Occupational Safety and Health Act (“OSHA”), applicable OSHA standards, applicable safety and health laws and regulations, any applicable municipal ordinances, and applicable facility safety rules of which the Party has notice, regarding the Representatives it assigns to the Development Project.
4.11	The Parties agree that the Parties and any Subsidiaries shall refrain from making any payment or gift of any value to any Representatives of any other Party assigned to the Development Facilities without the employing Party’s prior written approval. No Party (or any of its Subsidiaries) may make any representation that might cause a Representative of another Party to believe that an employment relationship exists between such Representative and another Party.
4.12	No Party assumes any liability to the other Parties for any injury (including death) to persons or damage to or loss of property suffered on or about the Development Facilities unless caused by the gross misconduct or gross negligence of such Party, its Representatives, or invitees.
4.13	To the extent permitted by law, during the term of the Agreement, each Party agrees to not, without the prior written permission of another Party, directly or indirectly solicit for employment purposes the Representatives of the other Party engaged in the design, research, development, or manufacture of Semiconductor Products or Integrated Circuits, or in the research or development directed at creating processes for the manufacture thereof at the Development Facilities or other Representatives working on the Development Project until at least one (1) year has passed between the date such Representative stopped being engaged in such activities and the date of solicitation. However, the foregoing does not preclude general (i.e., non-targeted) recruitment advertising. In addition, to the extent permitted by law, during the term of the Agreement, each Party agrees that its units, divisions, lines of business or other comparable organizational structures, involved in such foregoing activities shall not hire Representatives of any other Party engaged in the Development Project, without the prior written permission of such other Party.
4.14	IBM shall maintain the Project Database for the Development Project and use commercially reasonable efforts to make it accessible to the Participating Parties and to promptly update the Project Database to reflect, among other things, the following information received by the IBM Designated Executive: (i) the identity and other relevant information for new Participating Parties (e.g. Project Leader, Notice Address, and Designated Executive), (ii) the withdrawal/removal of a Participating Party, (iii) modifications to a Participating Party’s contact and address information. Each Participating Party shall use commercially reasonable efforts to provide the IBM Designated Executive with written notice of any errors and any proposed changes to the information listed for such Participating Party on the Project Database. No proposed correction or change is effective for purposes of the Agreement until it is reflected on the Project Database. IBM assumes no liability to the other Parties for any injury or damage

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as a result of IBM maintaining the Project Database, unless caused by the gross misconduct or gross negligence of IBM or its Representatives.

SECTION 5 — FUNDING CONTRIBUTIONS, COST SHARING, AND OTHER PAYMENTS

Each Party’s Participation Agreement sets forth such Participating Party’s payment and cost sharing obligations to IBM for its participation in the Development Project(s). For the avoidance of doubt, each Participating Party’s payment and cost sharing obligations to IBM under such Participation Agreement are a material term of the Agreement between that Participating Party and IBM only; and a breach by such Participating Party of such obligations shall be considered a breach by only that Party and only to IBM. Except for payments due IBM pursuant to the Participation Agreement, each Party shall bear all its own expenses incurred in the performance of the Agreement, and no Party is entitled to any payment, cost reimbursement, or other compensation from the other Parties for services, deliverables, and rights granted to the other Parties under the Agreement.

SECTION 6 — INSURANCE, RESPONSIBILITY FOR RESULTS AND WARRANTIES

6.1

Each Party shall use commercially reasonable efforts to pursue the Development Project in accordance with the Agreement and shall perform all assigned tasks in a workmanlike manner. However, the Parties acknowledge that the results of the development work to be performed and the timing of such results are uncertain and cannot be guaranteed by any Party. The risk of success or failure of the Development Project is shared by all the Parties. If a Party has exerted such foregoing efforts in the performance of its responsibilities under the Development Project, the failure to achieve the Strategic Technology Objectives or the Development Schedule shall not constitute a breach of the Agreement or a basis to extend the Project Term.

6.2

Except as otherwise expressly set forth in Section 6.1above, no Party makes any representation or warranty with respect to another Party, and all items furnished by a Party to the Development Project will be produced or provided by said Party in the same manner as it produces or provides such items for its own use and will be furnished on an “AS IS” BASIS WITHOUT WARRANTY OF ANY KIND, INCLUDING, WITHOUT LIMITATION, i) ANY WARRANTY THAT THE SPECIFIC RESULTS OR BACKGROUND KNOW-HOW WILL BE FREE OF THIRD PARTY CLAIMS OF INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADE SECRETS OR MASK WORK RIGHTS and ii) ANY IMPLIED WARRANTIES OR TERMS OF MERCHANTABILITY AND FITNESS OR USE FOR A PARTICULAR PURPOSE. FURTHER, IBM MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND RELATIVE TO THE IDENTITY OR NUMBER OF PARTICIPATING PARTIES OR THE TERM OF EACH OF THEIR PARTICIPATION IN THE DEVELOPMENT PROJECT.

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6.3 Each Party shall maintain for the benefit of each of the others, comprehensive general liability insurance of not less than eight million dollars ($8,000,000) per occurrence which covers bodily injury (including death) and property damage, and which applies to any such liability the Party may have under the Agreement. The foregoing obligation can be met with a combination of comprehensive liability insurance augmented by umbrella liability insurance. Purchase and maintenance of such insurance shall in no way be interpreted as relieving any Party of any of its responsibilities hereunder, and each Party may carry, at its expense, such additional insurance amounts and coverage as it deems necessary. In no event shall any such insurance be cancelled without prior written notice by the insured Party’s insurance carrier to IBM and the Participating Parties.

SECTION 7 — INFORMATION TRANSFERS

7.1

The Parties recognize that each of them has patent license arrangements with Third Parties and that it is the individual responsibility of each Party to secure any rights under the patents of Third Parties which may be needed to enable it to manufacture and/or market the product (including products manufactured using the technology to be developed under the Development Project) at such time as it determines in its sole judgement that such action is required.

7.2

Any confidential information disclosed by one Party or more Parties in performance of the Development Project shall be designated with an appropriate and conspicuously obvious legend, such as (a) “IBM Confidential”, or (b) “XYZ Confidential”, where “XYZ” is replaced with the name of the disclosing Participating Party, or (c) “IBM-QRS Confidential”, where the information was jointly developed by IBM and QRS pursuant to a separate development project, as the case may be. Such legends shall clearly indicate to a person viewing or otherwise accessing such information that it is of a confidential nature to the disclosing Party/Parties. Any such disclosure that is made orally shall be confirmed in writing under a like designation within thirty (30) days after the date of such disclosure. The Technical Coordinators shall monitor and keep records of all such disclosures of confidential information and shall ensure that it is properly marked as confidential, and record the date of receipt. Specific Results generated pursuant to the Development Project and any confidential information that is included in Specific Results shall be clearly designated by the Technical Coordinators with an appropriate legend, such as “IBM-ABC Confidential”, where IBM and ABC represent all of the Parties. Further, in the event that a Representative of any Party obtains information relating to the Development Project in tangible form which is not designated as confidential in accordance with this Section 7.2, but which from its nature appears likely to be confidential, such Representative will notify the Technical Coordinator(s) of the other Party(ies) who then will decide whether or not such information can and should be thereafter treated as confidential. The Technical Coordinators of the Parties shall either unanimously agree that such information is non-confidential or have all copies of such information in tangible form promptly marked with the appropriate legend identifying its confidentiality.

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7.3 Except as otherwise provided in the Agreement, with respect to Specific Results and Background Know-How and any other information of any Party, which is identified as confidential information pursuant to Section 7.2 above, each Party receiving such information shall use the same efforts to avoid its publication or dissemination to Third Parties as it employs with respect to information of its own which it does not desire to be published or disseminated. For clarity, a Participating Party is authorized to disclose such confidential information only to the entities identified in Section 7.5 of these Master Terms and such other authorized recipients identified in the Project Agreement and that Participating Party’s Participation Agreement. For Specific Results and Background Know-How, the obligations of confidentiality shall terminate at the end of the Confidentiality Period; and for all other confidential information this obligation of confidentiality shall terminate five (5) years after its disclosure by the disclosing Party. This obligation of confidentiality shall not, however, apply to any information that is:

7.3.1	already in or comes into the possession of the receiving Party or its Subsidiaries without obligation of confidence;
7.3.2	now, or hereafter becomes, publicly available without breach of the Agreement;
7.3.3	intentionally disclosed to Third Parties by the disclosing Party without obligation of confidence or rightfully received from Third Parties without obligation of confidence;
7.3.4	independently developed by the receiving Party or its Subsidiaries;
7.3.5	approved for release by written agreement of the disclosing Party; or
7.3.6	inherently disclosed in the use, lease, sale, or other distribution of any available product or service or publicly available supporting documentation therefor by the receiving Party or any of its Subsidiaries.

7.4 The receiving Party’s obligation with respect to Specific Results and Background Know-How or any other confidential information of the disclosing Party as specified in Section 7.3 above shall not apply to any disclosure that is:

7.4.1

in response to a valid order of a court or other governmental body of any country or group of countries or any political subdivision thereof; provided, however, that the receiving Party shall first have notified the disclosing Party and made a good faith effort to obtain a protective order requiring that the information and/or documents so disclosed be used only for the purposes for which the order was issued;

7.4.2

otherwise required by law or securities regulations to which the receiving Party is subject; or

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7.4.3 reasonably necessary in order to establish the receiving Party’s rights, provided that such receiving Party shall provide the disclosing Party with prior written notice, except notice shall not be required where the receiving Party is attempting to establish rights in a lawsuit under the Agreement against the disclosing Party or is filing a patent application under Section 11 of these Master Terms.

7.5	Each Party shall have the right to disclose Specific Results and Background Know-How to any of its Wholly Owned Subsidiaries at any time; provided, however, that such Wholly Owned Subsidiaries shall agree to be bound by substantially the same terms as are applicable to said Party in Sections 7.2, 7.3, and 7.4 and the survival of same pursuant to Section 12. Further, each Party may authorize its Wholly Owned Subsidiaries to whom such Party has disclosed Specific Results or Background Know-How pursuant to this Section 7.5 to exercise some or all of its rights to disclose Specific Results or Background Know-How under and in accordance with the Agreement.
7.6	Intentionally Omitted.
7.7	Intentionally Omitted.
7.8	Notwithstanding any other provision of the Agreement, a Participating Party shall not be prevented from furnishing or disclosing to any Third Party the technical information developed solely by such Participating Party outside of the Development Project, or jointly developed by such Participating Party and Third Parties outside of the Development Project, whether or not such technical information is also included in Specific Results and/or Background Know-How. Further, disclosure of such technical information shall not be prevented even if a minor portion of Specific Results and/or Background Know-How is commingled with and constitutes an inseparable element of such technical information. If any dispute arises with regard to the definition of a “minor portion”, then the Management Committee shall promptly resolve such dispute.
7.9	IBM shall have the right to disclose Specific Results, Background Know-How, or both to any Subsidiary or any Third Party, at any time and for any purpose, and such recipients shall have the same right to disclose the same to their Subsidiaries,, provided that such disclosures shall be subject to appropriate confidentiality terms and conditions that, at a minimum, shall have a term of confidentiality no shorter than the Agreement requires of IBM.
7.10	With respect to information that does not relate to the Development Project and which is considered confidential by any Party, it is not the intention of any Party to disclose to or obtain from the other Parties any such information. In particular, the Parties acknowledge that IBM has other development projects and relationships being conducted in the Development Facilities, and the Parties shall take reasonable precautions to limit the disclosure and receipt of information unrelated to the Development Project. In the event that a Representative of one Party obtains any such information of another Party or that is designated as confidential or which should from its nature be understood to be confidential, the Technical Coordinators of all Parties shall be informed, and any such

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	information in tangible form shall promptly be returned to said originating Party. Nothing in the Agreement shall convey any right to said Party to use said tangible information for any purpose. However, any non-tangible information related to said information which is retained in the minds of the Party’s employees will be treated pursuant to Section 9.1.
7.11	Notwithstanding any other terms of the Agreement, the Parties shall be permitted to disclose a summary of pertinent Sections of the Agreement as provided in Section 18.1.

SECTION 8 — LICENSES TO BACKGROUND KNOW-HOW

8.1	IBM hereby grants to each Participating Party, and each Participating Party hereby grants to all other Participating Parties, under their respective trade secret and know-how rights in and to Background Know-How, a XXXXX (subject to all the terms and conditions of the Agreement) license, to use such Background Know-How for the purpose of researching, developing, engineering, manufacturing, using, marketing, selling, servicing, and otherwise disposing of Licensed Products and to make derivatives of such information for such uses.
8.2	IBM hereby grants to each Participating Party and each Participating Party hereby grants to all other Participating Parties, under their respective copyright rights in and to Background Know-How a XXXXX (subject to all the terms and conditions of the Agreement) license to copy Documentation and other written expression, to make derivative works of such written expression, to distribute such documentation and derivatives as set forth elsewhere in the Agreement, and to execute, display, and perform to the extent consistent with the provisions of Section 7; provided, however, that each Participating Party shall make only such numbers of copies and create such derivative works as are reasonably necessary for them to carry out the license rights set forth in the Agreement.
8.3	IBM hereby grants to each Participating Party, and each Participating Party hereby grants to all other Participating Parties, under their respective mask work rights in and to Background Know-How, a XXXXX (subject to all the terms and conditions of the Agreement) license to use any process-related mask design information provided to a Development Project and create derivative works thereof, as reasonably necessary for the licensed Parties to carry out the license rights set forth in the Agreement. Unless otherwise authorized, this right shall not include any rights to utilize any product design information in such masks
8.4	Each Participating Party hereby grants to IBM, under such Participating Party’s trade secret and know how rights, copyright, and mask work rights in and to Background Know-How, a XXXXX (subject to all the terms and conditions of the Agreement), license to use such Background Know-How for the purpose of researching, developing, engineering, manufacturing, using, marketing, selling, servicing, and otherwise disposing of Integrated Circuits and/or Semiconductor Products and to make derivatives of such information for such uses. In the case of copyrights, such license is to copy

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	Documentation and other written expression, to make derivative works of such written expression, to distribute such Documentation and derivatives as set forth elsewhere in the Agreement, and execute, display, and perform to the extent consistent with the provisions of Section 7; provided, however, that IBM shall make only such numbers of copies and create such derivative works as are reasonably necessary for it to carry out the license rights set forth in the Agreement. In the case of mask work rights, such license is to use any process-related mask design information provided to a Development Project (e.g. kerf test structures) and create derivative works thereof, as reasonably necessary for IBM to carry out the license rights set forth in the Agreement. Unless otherwise authorized, this right shall not include any rights to utilize any product design information in such masks.
8.5	The licenses granted in Sections 8.1 through 8.4 shall include the right for each Party to sublicense consistent with its respective disclosure rights as set forth in Section 7 of the Master Terms and the rest of the Agreement, and subject to the terms and conditions set forth therein and as may be applicable pursuant to this Section 8. Each Party agrees to not unreasonably withhold the granting, upon request by a recipient to whom disclosure has been made pursuant to the Agreement, including Sections 7.5 and 7.9 of the Master Terms, of a XXXXX license under such Party’s patents, under reasonable and non-discriminatory terms and conditions, to the extent necessary for such recipient to utilize the disclosed information for the purposes set forth in the applicable clause of the Agreement, including Section 7 of the Master Terms, provided such recipient otherwise respects the intellectual property rights of the granting Party.
8.6	(a) Each Participating Party shall, upon joining the Development Project, designate whether it is a Patent Participating Party for such Development Project and such designation is applicable for the entire Project Term. Each Patent Participating Party hereby grants to one another and to their respective Wholly Owned Subsidiaries a XXXXX license under their Licensed Patents to make, have made, use, lease, sell, import, and offer for sale Integrated Circuits and Semiconductor Products, solely to the extent such Licensed Patents have claims that are necessarily infringed by the grantee utilizing all or any aspect of the Specific Results and Background Know-How of the Development Project to the extent otherwise licensed to do so elsewhere in this Section 8. For the avoidance of doubt, such patent license shall not extend to claims of patents that claim Specific Results Exclusions and/or Background Know-How Exclusions. For clarity, this Section 8.6(a) does not affect any patent license agreements between the Patent Participating Parties currently existing, but may confer rights on the Patent Participating Parties in addition to the rights they may have under such existing agreements.
	(b) No license or other right is granted in the Agreement by any Party to the other Parties, directly or indirectly, by implication, estoppel or otherwise, with respect to any trade secrets, know-how, copyrights, mask works, patents, patent applications, utility models, or design patents except as expressly set forth in the Agreement, and no such license or other right shall arise from the consummation of this Agreement or from any acts, statements or dealings leading to such consummation. All Parties, other than Patent Participating Parties, expressly understand and acknowledge that any patent license rights

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that may be required to carry out the licenses set forth in the Agreement are not set forth in the Agreement and may be set forth in separate patent cross-license agreements between them.

SECTION 9 — LICENSE TO RESIDUALS AND PROPRIETARY TOOLS

9.1

Notwithstanding any other provisions of the Agreement, to the extent that such use does not infringe the valid patents, patent applications, registered designs, or copyrights of another Party, and subject to the provisions of Section 7, each Party shall be free to use the residuals of Specific Results, another Party’s Background Know-How, Proprietary Tools, if any, and other confidential information received pursuant to Section 7.2, above, for any purpose, including use in the development, manufacture, marketing, and maintenance of any products and services. The term “residuals” means that information in non-tangible form which is mentally retained by those Representatives of a Party who have had access to Specific Results, the Background Know-How, and/or Proprietary Tools, if any, of another Party, pursuant to the Agreement. The Parties agree that the receipt of Specific Results, the Background Know-How, and/or Proprietary Tools, if any, of another Party shall not create any obligation in any way limiting or restricting the assignment and/or reassignment of a Party’s Representatives within that Party.

9.2

Each Party grants to the other Parties under the Proprietary Tools provided by that Party for use in the Development Project, an XXXXX license to use, execute, display, and perform such Proprietary Tools in the Development Facilities for the purpose of the Development Project. Any Proprietary Tools that are introduced into the Development Facilities for the purpose of the Development Project may not be transferred from the Development Facilities or used by a Party outside the Development Facilities without the express written consent of the Party introducing the Proprietary Tool(s). Any Party providing Proprietary Tools used in the Development Project that are not available from another source or for which there is no reasonable substitute, will, to the extent it has the right to do so, and on reasonable terms and conditions (including reasonable fees) to be negotiated, grant a XXXXX license to the other Parties to use such Proprietary Tools outside the Development Project in furtherance of their respective license rights set forth in Section 8.

SECTION 10 — OWNERSHIP OF SPECIFIC RESULTS

10.1 Except with respect to Designated Inventions, as set forth in Section 11 of these Master Terms, and except with respect to Background Know-How, Specific Results (whether developed solely by one Party or jointly by two or more Parties) shall be the property of all the Parties under the Project Agreement, and all such Parties shall own the mask works, copyright, trade secret, know-how, and similar rights in all such material jointly without accounting to the other Parties or obligation to obtain the consent of one another for the exploitation thereof or granting of licenses (including the right of licensees to grant sublicenses) with respect thereto consistent with its respective disclosure rights as set forth in Section 7 and the rest of the Agreement, and subject to the terms and

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conditions set forth therein and as may be applicable pursuant to Section 8. For the avoidance of doubt, only companies that have agreed to the Project Agreement are owners for purposes of this Section 10.1, and no other entity, including entities that participate in other development projects with one or more of the Parties, is granted any ownership in the Specific Results pursuant to the Project Agreement. For the further avoidance of doubt, such joint ownership shall include Inventions other than Designated Inventions. Moreover, for the avoidance of doubt, the Agreement shall constitute written consent of such joint owner(s) for the disclosing Party to make the disclosures set forth in the Agreement, to the extent such joint consent is required in a given jurisdiction; provided, however, that such assent is subject to the terms and conditions of the Agreement. Before applying to register or record in any country any of the rights or material to which this Section 10 relates, the Parties shall hold consultations and agree on whether this is appropriate and, if so, which of them shall make such application and in which countries. To the extent required to perfect the joint ownership rights of two or more Parties, each such Party hereby agrees to assign to the other such Parties an equal, undivided ownership of all right, title, and interest (including, without limitation, all intellectual property rights) in and to all Specific Results other than patent rights in and to Designated Inventions.

10.2 The joint ownership by the Parties of all copyright and similar rights in and to Specific Results shall be subject to information transfer and licensing provisions of the Agreement; the Parties understand and agree that their status as joint owners of Specific Results shall be subject to their respective disclosure rights as set forth in the Agreement.

SECTION 11 — OWNERSHIP OF DESIGNATED INVENTIONS

11.1

Each Designated Invention made solely by one or more Representatives or contractors of one Party, and title to all patent applications filed thereon and all patents issued thereon, shall be solely the property of the inventing Party, subject to a patent license granted in Section 11.3 below. It shall be in the sole discretion of the inventing Party to determine whether or not to file a patent application on an Invention, thereby creating a Designated Invention.

11.2

Designated Inventions made jointly by one or more Representatives or contractors of one Party with one or more Representatives or contractors of any other Party, and title to all patent applications filed thereon and all patents issued thereon, shall be jointly owned by the inventing Parties. Each inventing Party shall have the right to grant licenses (including the right of any licensee to grant sublicenses) to the inventing Party’s Subsidiaries and/or to Third Parties under any patent issued on such a joint Designated Invention without compensation to the other inventing Party(ies) and/or its or their Representatives or contractors, which hereby give any necessary consent for granting such licenses as may be required by the law of any country. All expenses, other than internal patent department expenses of the inventing Parties, incurred in obtaining and maintaining such patents shall be equally shared by the inventing Parties (except as provided hereinafter). Prior to filing any patent application in respect of any such joint Designated Inventions the inventing Parties shall hold consultations and agree on whether

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	this is appropriate and, if so, which of them shall file and prosecute such application and in which countries corresponding applications shall be filed and by whom. With respect to any joint Designated Invention, where one inventing Party elects not to seek or maintain such protection thereon in any particular country or not to share equally in the expenses thereof, the other inventing Parties shall have the right to seek or maintain such protection in said country at its or their own expense and shall have full control over the prosecution and maintenance thereof even though title to any patent issued thereon shall be joint.
11.3	With respect to Designated Inventions under Sections 11.1, the owning Party hereby grants the other Parties the same rights and obligations with respect to the relevant Specific Results provided for in the Agreement to carry out the activities set forth in the Agreement (including, but not limited to, Sections 7, 8, and 9 of these Master Terms). With respect to patents issued on said Designated Inventions, the license granted by the owning Party(ies) to the other Parties shall be an irrevocable (subject to the terms and conditions of the Agreement), worldwide, non-exclusive, royalty-free, paid-up license to make, have made, use, lease, sell, offer to sell, import and otherwise transfer any products and to practice and have practiced any process and shall include the right of such licensed Party to sublicense its Subsidiaries of the same or within the scope of the foregoing license.
11.4	With respect to Designated Inventions under Sections 11.2, each Party shall give the other Parties all reasonable assistance in connection with the preparation or prosecution of any patent application filed by said other Parties and shall cause to be executed all assignments and other instruments and documents as said other Parties may consider necessary or appropriate to carry out the intent of this Section 11.
11.5	Nothing in the Agreement shall affect any patent license agreements between one or more of the Parties, but may confer rights on one or more Parties in addition to the rights they may have under such existing agreements.
11.6	Intentionally Omitted.
11.7	The Project Leaders shall establish a procedure for reviewing Invention disclosures in order to determine which Inventions are subject to the provisions of Section 11.2 of these Master Terms relating to joint Inventions.

SECTION 12 — TERM AND TERMINATION

12.1	The Project Agreement provides the Project Term for the Development Project.
12.2	At expiration of the Project Agreement, the following Sections of these Master Terms survive and continue to bind the Parties and their legal representatives, successors, and assigns: 1; 4.9 — 4.13, inclusive; 6; 7.1, 7.4-7.10 inclusive; 8; 9; 10; 11; 12; 13; 15; 16; 17; and 18; provided, however, a Participating Party’s surviving license and disclosure

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	rights pursuant to the Agreement (including those contained in Sections 7, 8, 9, 10, and 11 of these Master Terms) only apply to confidential information, Background Know-How, Proprietary Tools, Specific Results, and Designated Inventions, as each existed at the end of such Participating Party’s participation in the Development Project. In addition, certain terms of the Project Agreement and the Participation Agreement survive such expiration, as detailed in such agreements, respectively. The Parties agree that failure to list any sections as surviving does not prejudice any Party’s remedies with respect thereto.
12.3	Any non-breaching Party shall have the right to immediately terminate the breaching Party’s participation in the Development Project by giving written notice of termination to the breaching Party, if such breaching Party 1) permanently ceases doing business; 2) is adjudged bankrupt or insolvent or files a petition for bankruptcy; or 3) goes into liquidation.
12.4	(a) If IBM fails to perform or violates any material obligation of the Agreement, then, upon thirty (30) days written notice to IBM specifying such failure or violation (the “Default Notice”), any Party who is not in breach of the Agreement shall have the right to immediately cease such Party’s participation in the Development Project without liability by giving written notice of such cessation to IBM, unless: (i) the failure or violation specified in the Default Notice has been cured within that thirty (30) day period; or (ii) the failure or violation reasonably requires more than thirty (30) days to correct (specifically excluding any failure to pay money), and IBM has begun substantial corrective action to remedy the failure or violation within such thirty (30) day period and diligently pursues such action, in which event, termination shall not be effective unless ninety (90) days has expired from the date of the Default Notice without such corrective action being completed and the failure or violation remedied.
	(b) If any Participating Party fails to perform or violates any material obligation of the Agreement, then, upon thirty (30) days written notice from any non-breaching Party (with a copy to IBM) to such Participating Party specifying such failure or violation (the “Default Notice”), then IBM shall have the sole and exclusive right to immediately terminate the breaching Party’s participation in the Development Project without liability, unless: (i) the failure or violation specified in the Default Notice has been cured within that thirty (30) day period; or (ii) the failure or violation reasonably requires more than thirty (30) days to correct (specifically excluding any failure to pay money), and such Party has begun substantial corrective action to remedy the failure or violation within such thirty (30) day period and diligently pursues such action, in which event, termination shall not be effective unless ninety (90) days have expired from the date of the Default Notice without such corrective action being completed and the failure or violation remedied. IBM may exercise or waive its rights pursuant to this Section 12.4(b) in IBM’s sole and absolute discretion, and IBM assumes no liability to the other Parties for any injury or damage as a result of this Section or IBM’s exercise or waiver of such rights.

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	(c) Notwithstanding Section 12.4(b), IBM shall, at the request of a non-breaching Party, exercise IBM’s termination right, if any, pursuant to Section 12.4(b) if such non-breaching Party provides IBM with a final, non-appealable judgment/decision (e.g. a declaratory judgment or permanent injunction) from a court of competent jurisdiction under Section 18.2, finding that the breaching Party breached the Agreement as described in the Default Notice.
	(d) Although IBM reserves the sole and exclusive right to terminate the breaching Party’s participation in the Development Project pursuant to Section 12.4(b), nothing in this Section 12 prevents a non-breaching Party from pursuing any other equitable and legal remedies it may have against the breaching party.
	(e) In addition to Section 12.4(d), any non-breaching Party may cease its participation in the Development Project upon sixty (60) days written notice to IBM if (i) IBM does not elect to, at the request of such non-breaching Party, terminate such breaching Party’s participation in the Development Project during such period; and (ii) the breaching Party (A) engaged in gross and/or willful misconduct that resulted in a material breach of the Agreement and such material breach resulted in substantial harm to such non-breaching Party, or (B) materially breached the confidentiality obligations of Section 7 with respect to the confidential information of such non-breaching Party. The survival terms of Section 12.2 shall apply to any such withdrawal by a non-breaching Party and such withdrawal shall not be considered a breach of this Agreement by the non-breaching Party.
12.5	Intentionally Omitted.
12.6	Notwithstanding any provision to the contrary elsewhere in the Agreement, each non-breaching Party shall have the right to terminate all licenses and disclosure rights it granted to the breaching Party pursuant to the Agreement, including those contained in Sections 7, 8, 9, 10, and 11 of these Master Terms, if the breaching Party’s participation in the Development Project is terminated pursuant to Sections 12.3, 12.4(b), or 12.4(c) of these Master Terms. If such licenses and disclosure rights are terminated, the breaching Party shall immediately return to the applicable non-breaching Party, or destroy, any documentation or materials embodying Specific Results and/or Background Know-How, and such return or destruction shall be certified to each applicable non-breaching Party, in writing, by an officer of the breaching Party. Other than any such termination of licenses and disclosure rights to the breaching Party, Sections 1; 4.9 — 4.13, inclusive; 6; 7.1, 7.3-7.10 inclusive; 8; 9; 10; 11; 12; 13; 15; 16; 17; and 18 shall survive and remain in full force and effect; provided, however, a breaching Party’s surviving license and disclosure rights pursuant to the Agreement (including those contained in Sections 7, 8, 9, 10, and 11 of these Master Terms) only apply to confidential information, Background Know-How, Proprietary Tools, Specific Results, and Designated Inventions, as each existed at the end of such Participating Party’s participation in the Development Project. In addition, the breaching Party shall continue to be bound by the limitations and obligations set forth in Sections: 1; 4.9 and 4.10; inclusive; 6; 7.1, 7.3, 7.4; 8.6; and 9.2.

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SECTION 13 — NOTICES AND OTHER COMMUNICATIONS

Any notice or other communication required or permitted to be given to a Party pursuant to the Agreement shall be sent to such Party by facsimile or electronic scan or by registered airmail, postage prepaid, addressed to the receiving Party’s Notice Address. Any such notice or other communication shall be effective on the date of receipt.

SECTION 14 — TERMS OF NEGOTIATION

If one or more of the Parties seek to expand the Development Project or seek to discuss additional development projects or licensing opportunities, then the following terms apply without the need for a separately signed letter of negotiation or the like: any Party may end such discussions at any time, and for any reason, and each Party remains free to negotiate or enter into similar relationships with others. Other than the rights and obligations of the Parties as specifically set forth in the Agreement, these discussions are entirely non-binding and do not establish any other rights and obligations as to any of the Parties. Such other rights and obligations, if any, would be set forth solely in one or more separate, definitive written agreements. None of the Parties will rely on the successful conclusion of any such definitive written agreements. Any business decision a Party makes in anticipation of such definitive written agreements is at such Party’s sole risk, even if another Party is or both other Parties are aware of, or indicated approval of, such decision. All information disclosed pursuant to such discussions, and not otherwise governed by a separate confidential disclosure agreement/supplement, is deemed “other confidential information” pursuant to Section 7.3.

SECTION 15 — FORCE MAJEURE

15.1 Each Party shall be excused from the fulfilment of any obligation related to the Development Project, except for payment obligations, under the Agreement for so long as such fulfilment may be hindered or prevented by any circumstances of force majeure such as, but not limited to, acts of God, war, riot, strike, lockout, labor unrest, fire, flood, other natural catastrophe, shortage of materials or transportation, national or local government regulations (including, but not limited to, export regulations, but only to the extent such export regulations do not allow for appropriate dual-use export licenses or such dual-use export licenses are not granted despite the affected Parties having exercised good faith efforts to obtain such export licenses) or any other circumstance outside its control, provided that the Party seeking to be excused shall make every reasonable effort to minimize the hindrance of such fulfilment; and provided further that, if such force majeure continues to prevent or delay performance of such Party for more than one-hundred eighty (180) days and has a material impact on the Development Project, then within one-hundred eighty (180) days thereafter, (i) IBM may immediately terminate the participation of the Participating Party who seeks to be excused, and (ii) each Participating Party may immediately cease its participation in the Development Project if IBM is seeking to be excused. Such actions do not constitute a termination for breach pursuant to the Agreement, and Section 12.2 applies to any such action.

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15.2 Upon the ending of such circumstance, without the other Party or Parties having terminated the Agreement with respect to the affected Party as provided in Section 15.1, the Party excused shall, without undue delay, resume the fulfilment of obligations affected.

SECTION 16 — TAXES

Each Party shall bear and pay all taxes (including, without limitation, sales and value added taxes but excluding income tax as specified below) applicable to such Party, including those imposed by its own national government and any political subdivision thereof, as the result of the existence of the Agreement or the exercise of rights hereunder. If any Party (“Payer”) is required by its national government to pay income tax in respect of the payments and/or royalties made by it to either or any of the other Parties, Payer shall pay such income tax on behalf of said other Party. Payer may deduct such income tax from said payments and/or royalties otherwise due and shall furnish said other Party, within a reasonable time after its receipt of tax certificates from the applicable government entity, such certificates and other evidence of deduction and payment thereof as said Party may properly require. Payer and IBM shall provide each other with reasonable assistance in seeking all exemptions, rebates, and similar reimbursements related to such income tax. In addition, each Party may independently pursue any applicable tax credit for its share of expenses related to the Development Project.

SECTION 17 — LIMITATION OF LIABILITY

17.1	In no event shall any Party (or its Subsidiaries) be liable to another Party for incidental damages, punitive damages, lost profits, lost savings, or any other such damages, including consequential damages, regardless of whether the claim is for breach of contract, breach of warranty, tort (including negligence), failure of a remedy to accomplish its purpose or otherwise, even if such Party (or any Subsidiary) has been advised of the possibility of such damages.
17.2	In no event shall any Party’s (or its respective Subsidiaries’) aggregate liability to another Party for actual direct damages in connection with any claim or claims relating to the Development Project exceed the Limitation Amount, regardless of the form of action, provided that this limitation will not apply to: i) any claim for payment of a sum or sums properly due under the Agreement for the Development Project (for which the maximum amount of liability shall not exceed the total amount of payments referenced in Section 5 plus interest on such payments); ii) breach of confidentiality or license; or iii) death, personal injury, or physical damage to real property or tangible personal property resulting from a Party’s own negligence, or that of its employees, agents, or subcontractors.
17.3	Nothing contained in the Agreement limits any Party’s right to seek a preliminary injunction, temporary restraining order, or any other equitable relief in order to avoid material harm to its property, rights, or other interests. The Parties agree that for breaches of confidentiality or license provisions the Party whose license grant or confidential information has been breached (“non-breaching Party”) may suffer

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	irreparable harm and that remedies at law may be insufficient; therefore, the non-breaching Party may seek any remedy at law or in equity, including but not limited to, preliminary injunction, injunction, and/or a temporary restraining order.
17.4	In no event shall any Party (or its respective Subsidiaries) be liable for any damages claimed by another Party based on any Third Party claim, except as specifically set forth in Section 17.2 (iii) above.

SECTION 18 — GENERAL

18.1	Nothing contained in the Agreement shall be construed as conferring any right to use in advertising, publicity, or other promotional activities any name, trade name, trademark, or other designation of any Party (including any contraction, abbreviation or simulation of any of the foregoing); and each Participating Party agrees not to disclose to other than its Subsidiaries the terms and conditions of the Agreement, except as may be required by law or government rule or regulation, having provided the other Party or Parties with prior written notice of such disclosure and having made a reasonable effort to limit such disclosure to the minimum required and obtaining a protective order requiring that the information and/or documents so disclosed be used only for the purposes for which such disclosure is required without the express written consent of the applicable Party. Notwithstanding the foregoing, 1) the Parties shall be permitted to disclose a summary of pertinent Sections of the Agreement that are reasonably necessary for disclosing and/or licensing under the Agreement, 2) each Party shall be permitted to disclose pertinent Sections of the Agreement to such Party’s independent accounting firm and outside attorneys, and 3) each Party shall be permitted to disclose pertinent Sections of the Agreement to such Party’s banks and financing sources and other similar business advisors and to appropriate regulatory authorities for purposes of seeking tax exemptions and applying for research grants; provided, however, that any such disclosure pursuant to the foregoing items 1), 2), or 3) is under a written agreement containing restrictions of confidentiality at least as stringent as those contained in these Master Terms
18.2	The Agreement shall be construed, and the legal relations created therein between the Parties shall be determined exclusively, in accordance with the laws of the United States of America and, specifically, the State of New York, without regard to conflicts of law, as if said Agreement were executed in, and fully performed within the State of New York. Any proceeding to enforce, or to resolve disputes relating to, the Agreement shall be brought before a court of competent jurisdiction in the State of New York, including a Federal District Court, sitting within New York State. The Parties hereby expressly waive any right to a jury trial and agree that any proceeding hereunder shall be tried by a judge without a jury. In any proceedings no Party shall assert that such court lacks jurisdiction over it or the subject matter of the proceeding or assert that the Agreement is not an enforceable contract between and among all Parties.
18.3	In the event of any dispute under the Agreement, and as a condition precedent to any Party filing suit, instituting a proceeding or seeking other judicial or governmental resolution in connection therewith, the Parties will attempt to resolve such dispute by

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negotiation in accordance with the following dispute resolution process. Excepting only that a Party may institute a proceeding seeking an order for payment of any sum properly due and unpaid, a preliminary injunction, temporary restraining order, or other equitable relief, if necessary in the opinion of that Party to avoid material harm to its property, rights, or other interests, before commencing or at any time during the course of, the dispute procedure in this Section 18.3.

18.3.1	Such negotiations shall first involve the individuals in the Management Committee. These individuals will exercise reasonable efforts to resolve such dispute.
18.3.2	If such negotiations do not result within thirty (30) calendar days of their receipt of a written referral to them in a resolution of the dispute, the dispute will be referred in writing to the Designated Executives which Designated Executives shall discuss and meet in person, if necessary, in order to attempt to negotiate a resolution to the dispute.
18.3.3	Except as set forth above, no Party shall file suit, institute a proceeding, or seek other judicial or governmental resolution of the dispute until at least sixty (60) calendar days after the first meeting between the Designated Executives.

18.4	In the event that any litigation occurs between or among the Parties pertaining to the Agreement and any technical issues arise in the course thereof, the Parties shall make good faith efforts to select one or more neutral mutually acceptable technical experts with expertise in the pertinent technical issues to assist the court in understanding and evaluating such issues.
18.5	Nothing contained in the Agreement shall be construed as conferring on any Party any license or other right to copy the exterior design of any product of another Party.
18.6	Intentionally Omitted.
18.7	No actions, regardless of form, arising out of the Agreement, except for intellectual property actions, may be brought by any Party more than two (2) years after the cause of action has arisen.
18.8	Each Party shall be responsible for compliance with all applicable laws, regulations and ordinances. In addition, no Party and none of its agents or employees acting on behalf of said Party will, unless authorized by applicable governmental license or regulation, directly or indirectly, export or re-export any technical information or software subject to the Agreement (including direct products of such technical information or software) to any prohibited destination or country (including release to nationals, wherever they may be located, of any prohibited country) as specified in such applicable export laws, regulations and ordinances. The Parties agree to consult with each other prior to both applying for an export license related to work under this Agreement and accepting government conditions on such export license. Parties shall provide each other with a

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copy of any such export license obtained by a Party or its agent. IBM shall not be required to accept any conditions in any such export license which IBM considers detrimental to its business interests.

18.9	All monetary amounts specified in the Agreement are in lawful money of the United States of America. Any action required by the Agreement to be taken by a specified calendar month shall be taken by the last day of said month, unless otherwise specified in the Agreement.
18.10	Neither the Agreement nor any activities thereunder shall impair any right of any Party to design, develop, manufacture, sell, market, service, or otherwise deal in, directly or indirectly, manufacturing processes, products, or services developed by such Party completely independently of the Agreement, including those which are competitive with those offered by any Party. Subject to the confidentiality and license limitations set forth in the Agreement, each Party may pursue activities independently with any Third Party even if similar to the activities under the Agreement.
18.11	Each Party is an independent contractor and not an agent, employee, or fiduciary of any other Party for any purpose whatsoever. No Party shall make any warranties or representations on any other’s behalf, nor shall it assume or create any other obligations on any other’s behalf. Nothing in the Agreement shall be taken to constitute a partnership or joint venture between or among the Parties hereto.
18.12	The Parties agree to explore the possibility of issuing press releases relating to the Development Project, the relationship established by a Project Agreement, and the subsequent addition of Participating Parties. The text of such press releases will be unanimously agreed to by the Parties, which agreement will not be unreasonably withheld. If all Parties are unable to agree upon a press release, then IBM and certain Participating Parties may elect to issue such press release without referencing the objecting Participating Party. Any other press releases and other like publicity or advertising relating to the Agreement and/or which mentions any other Party by name shall be agreed upon by IBM and the named Party, which agreement not to be unreasonably withheld.
18.13	If any section or subsection of the Agreement is found by competent judicial authority to be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of any such section or subsection in every other respect and the remainder of the terms of the Agreement shall continue in effect so long as the amended Agreement still expresses the intent of the Parties. If the intent of the Parties cannot be preserved, the Agreement shall be renegotiated with the Parties substituting for any invalid or unenforceable provision a valid or enforceable provision that achieves to the greatest extent possible the same effect as would have been achieved by the invalid or unenforceable provision.
18.14	Any waiver by a Party of any breach of, or failure to enforce at any time, any of the provisions of any of the Agreement, shall not be construed as or constitute a continuing

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	waiver of such provision, or a waiver of any other provision of the Agreement, nor shall it in any way affect the validity of any of the Agreement or any part thereof, or the right of any Party thereafter to enforce each and every provision of any of the Agreement, as provided in the Agreement.
18.15	The Agreement is binding upon each Participating Party with respect to the Development Project if and once that party executes with IBM a Participation Agreement referencing the Development Agreement and these Master Terms. Except for the Participation Agreement, which provides certain governing terms and conditions between IBM and that Participating Party only, these Master Terms, together with the Project Agreement, constitute the entire agreement between the Parties with respect to that Development Project and supersede all previous communications, representations, understandings, and agreements, whether oral or written, made in the course of discussions and/or negotiations between the Parties or any officer or representative thereof with respect to the Development Project. No Participating Parties are third party beneficiaries of a Participation Agreement between IBM and any other Participating Party. No amendment or modification of the Project Agreement shall be valid or binding upon the Parties unless made in writing and signed on behalf of such Parties by their respective representatives thereunto duly authorized. The requirement of written form may only be waived in writing. Notwithstanding anything in these Master Terms to the contrary (i) the addition or removal/withdrawal of one or more Participating Parties is not deemed an amendment or modification of the Project Agreement; (ii) the selection of one or more options in accordance with the requirements of Section 3.2 of these Master Terms is not deemed an amendment or modification of the Project Agreement; and (iii) if an updated Exhibit A (e.g. Strategic Technology Objectives) or Exhibit B (e.g. Development Schedule) to a Project Agreement circulated by IBM Project Leader following a Management Committee meeting and received by the other Management Committee Members without objection within thirty (30) business days of receipt, shall, provided such updated Exhibit reasonably reflects the agreement of the Management Committee as shown in the Management Committee meeting minutes, be deemed (a) a binding Management Committee change to such Exhibit, and (b) a written amendment to the Agreement that satisfies this Section 18.15 of these Master Terms. IBM shall update the Project Database to reflect such updated Exhibit.
18.16	If there is a conflict between these Master Terms and the Project Agreement (without these Master Terms incorporated), then the order of precedence between all Parties is as follows: (i) the Project Agreement (without these Master Terms incorporated), and (ii) these Master Terms. In addition, if there is a conflict between these Master Terms, the Project Agreement (without these Master Terms incorporated), and a Participation Agreement between IBM and a Participating Party, then the order of precedence between IBM and such Participating Party is as follows: (i) such Participation Agreement, (ii) the Project Agreement (without these Master Terms incorporated), and (ii) these Master Terms.
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EXHIBIT A: RESPONSIBILITIES OF THE MANAGEMENT COMMITTEE

EXHIBIT B: RESPONSIBILITIES OF THE IBM PROJECT LEADER

EXHIBIT C: RESPONSIBILITIES OF THE PROJECT LEADERS FOR PARTICIPATING PARTIES

EXHIBIT D: VISITATION GUIDELINES FOR REPRESENTATIVES

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EXHIBIT A

RESPONSIBILITIES OF THE MANAGEMENT COMMITTEE

— Approve changes in Strategic Technology Objectives as set forth in the Project Agreement*

— Approve changes of the Development Schedule for the Development Project provided in the Project Agreement*

— Establish a regular review process on no more than a quarterly basis with business executives of each of the Parties of at least the level of Vice President or other comparable level.

— Approve external communications about the goals of the Development Project and external publications*

— Resolve such other items as the Management Committee deems appropriate or as indicated elsewhere in the Project Agreement as requiring the agreement of the Management Committee.

* Items marked require unanimous approval of the Management Committee

All other responsibilities, including day-to-day management responsibility for the results to be achieved under the Agreement, shall reside with the IBM Project Leader with the help of the other Party Project Leaders.

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EXHIBIT B

RESPONSIBILITIES OF THE IBM PROJECT LEADER

Project organization and coordination

— Responsible for implementation of directives from the Management Committee (or other oversight committee established by the Management Committee) for the Development Project

— Responsible for identification and presentation to Management Committee (or other oversight committee established by the Management Committee) of those items which need such committee’s approval

— Responsible for Development Project reporting at Management Committee reviews

— Responsible for quarterly reports (technology status, milestones)

— Responsible for allocation of Development Project resources

— Responsible for review and approval of technical publications

— Responsible for determining the organizational structure of the Development Project team and appointing key technical leaders and project managers to execute the Development Project

— Responsible for managing the IBM infrastructure to support the Development Projects

— Responsible for Development Project schedule planning

— Responsible for management of IBM Representatives

— Responsible for completion of Documentation for the Development Project

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EXHIBIT C

RESPONSIBILITIES OF THE PROJECT LEADER FOR EACH PARTICIPATING PARTY

— Responsible for implementation of directives from the Management Committee (or other oversight committee established by the Management Committee) for the Development Project

— Responsible for identification and presentation to Management Committee (or other oversight committee established by the Management Committee) of those items which need Management Committee’s approval

— Responsible for Development Project reporting at Management Committee reviews

— Responsible for quarterly reports (technology status, milestones)

— Responsible for allocation of Development Project resources

— Responsible for review and approval of technical publications

— Responsible for Development Project schedule planning

— Responsible for management of respective Party’s Representatives

— Responsible for completion of Documentation for each Development Project

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EXHIBIT D

IBM DEVELOPMENT FACILITY VISITATION GUIDELINES FOR REPRESENATIVES

1.0	IBM shall issue security badges to Participating Party Representatives. Security badges must be returned by Representatives at the end of each assignment. Security badges must be visibly displayed at all times by Representatives while on IBM premises. If the security badge is lost or stolen, the IBM Technical Coordinator shall be immediately advised. Security badges shall not be loaned or interchanged.
2.0	Representatives shall only enter those buildings, departments, or areas which are specifically designated by the IBM Technical Coordinator and for which entry is required under the Agreement.
3.0	Representatives shall comply with all log-in/log-out requirements when entering or leaving IBM buildings and/or designated work areas.
4.0	Representatives shall comply with all security, safety and regulatory guidelines which are posted on IBM premises and/or are otherwise specified by IBM.
5.0	IBM copying equipment and/or other IBM equipment (such as data processing equipment and word processing equipment) shall not be used by Representatives except with prior approval of the IBM Technical Coordinator.
6.0	Representatives shall not disturb materials lying on IBM desks, mounted on easels or displayed on chalkboards.
7.0	Representatives shall promptly leave buildings and department areas after completing work assignments.
8.0	Representatives shall not leave IBM external doors propped open. No IBM materials shall be removed from buildings without prior written approval.
9.0	Alcoholic beverages, illegal drugs, guns and ammunition, cameras, and recording devices (excluding cellular phones with camera or recording features) are not permitted on IBM premises. Representatives are not permitted to use the camera or recording features of cellular phones on IBM premises.

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EX-4.11.14

Exhibit 4.11.14

Confidential Treatment Requested

The portions of this document marked by “XXXXXX” have been omitted pursuant to a request for confidential
treatment and have been filed separately with the Securities and Exchange Commission

EXECUTION VERSION IBM License Number: L065073

PARTICIPATION AGREEMENT

Between

INTERNATIONAL BUSINESS MACHINES CORP.

And

CHARTERED SEMICONDUCTOR MANUFACTURING LTD.

Dated

January 1, 2007

IBM — CHARTERED CONFIDENTIAL 1  IBM — Chartered Participation Agreement

EXECUTION VERSION IBM License Number: L065073

This Participation Agreement (“Participation Agreement”) is made effective as of the 1^st day of January, 2007 (hereinafter referred to as the “Participation Effective Date”) by and between International Business Machines Corporation (“IBM”), incorporated under the laws of the State of New York, U.S.A. and having an office for the transaction of business at 2070 Route 52, Hopewell Junction, NY 12533, U.S.A, and Chartered Semiconductor Manufacturing Ltd., (“Company”) incorporated under the laws of Singapore, and having an office for the transaction of business at 60 Woodlands Industrial Park D, Street 2, Singapore 738406 for the Development Projects referenced on Exhibit A attached hereto (collectively, the “Development Projects”).

WHEREAS, IBM, Company, Samsung Electronics Co., Ltd. (“Samsung”), and Infineon Technologies, AG (“IFX”) previously entered into the “SF 65/45nm Process Development and Cost Sharing Agreement” of March 2004 (“4-Way Bulk Process Agreement”), for the development of 65nm and 45nm Bulk CMOS process technology; and IBM and Company entered into the SF Process Development and Cost Sharing Agreement dated November 26, 2002, as amended (“2-Way 65nm/45nm Process Agreement”);

WHEREAS, IBM, Company, IFX and Samsung previously entered into the 45nm Enablement Technology and Cost Sharing Agreement on June 1, 2006 (hereinafter “4-Way 45nm Enablement Agreement”) to develop certain technologies for enabling a common design platform for manufacture; and IBM and Company entered a 2-Way 45nm Enablement Agreement on June 1, 2006 to address certain related matters between them (“2-Way 45nm Enablement Agreement”);

WHEREAS, IBM, Company, and Samsung previously entered into the 65nm Enablement Technology and Cost Sharing Agreement on June 3, 2005 (hereinafter “3-Way 65nm Enablement Agreement”) to develop certain technologies for enabling a common design platform for manufacture; and IBM and Company entered a 2-Way 65nm Enablement Agreement on June 3, 2005 to address certain related matters between them (“2-Way 65nm Enablement Agreement”);

WHEREAS, IBM and Company desire to, with the necessary consents of IFX and Samsung, terminate the 45nm Bulk CMOS and 45nm Bulk CMOS Enablement development in the following agreements before their scheduled expirations in order to continue such development work using a new contract model with additional parties: the 4-Way Bulk Process Agreement, the 2-Way 65nm/45nm Process Agreement, 4-Way 45nm Enablement Agreement, and 2-Way 45nm Enablement Agreement (collectively, the “Prior Agreements”);

WHEREAS, contemporaneously with this Participation Agreement, (i) IBM, Company, and Samsung are entering into an agreement entitled “Early Customer and Technology Support (65nm/45nm Bulk SF Process) Development and Cost Sharing Agreement (hereinafter referred to as the “3-Way ECTS Agreement”), and (ii) IBM and Company are entering into a 2-Way ECTS Agreement to address certain matters between them alone pertaining to the 3-Way ECTS Agreement;

IBM — CHARTERED CONFIDENTIAL 2  IBM — Chartered Participation Agreement

EXECUTION VERSION IBM License Number: L065073

WHEREAS, contemporaneously with this Participation Agreement, IBM and Company are entering into an agreement entitled “Semiconductor Manufacturing Equipment Evaluation Agreement”, together with its “Statement of Work No. 1” to enable IBM and Company to jointly evaluate third party semiconductor manufacturing equipment in support of each party’s individual purchases.

WHEREAS, IBM is pursuing or intends to pursue each of the Development Projects alone or in conjunction with one or more Participating Parties, as such Development Projects are more particularly described in the Project Agreements;

WHEREAS, Company seeks to participate as a Participating Party in each of the Development Projects with IBM and the other applicable Participating Parties; and

WHEREAS, IBM seeks to permit such participation in each of the Development Projects based upon the terms and conditions set forth in (i) the applicable Project Agreement (including the Master Terms), which governs matters between and among all Parties, and (ii) this Participation Agreement, which governs certain supplemental matters between IBM and Company.

NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, as well as for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, IBM and Company agree as follows.

1. Additional Definitions. Unless expressly defined and used with an initial capital letter in this Participation Agreement, the Project Agreement, or the Master Terms, words shall have their normally accepted meanings. Each of the following terms has the meaning ascribed to it below:

     “Annual Contribution Amount” is defined in Section 5(a).

     “Altis” means the IFX subsidiary known as Altis Semiconductor, with a principle place of business at 224, Boulevard John Kennedy, 91005 Corbeil-Essonnes Cedex, France, but only so long as it remains an IFX Subsidiary.

     “Bulk Project” means the 32nm Bulk Project or the 45nm Bulk Project.

     “32nm Bulk Project” means, collectively, the Development Projects contained in the “32nm Bulk-Industry Standard Process Technology Project Agreement dated as of December 15, 2006”, and “32nm Bulk-Industry Standard Enablement Technology Project Agreement dated as of December 15, 2006”.

     “45nm Bulk Project” means, collectively, the Development Projects contained in the “45nm Bulk-Industry Standard Process Technology Project Agreement dated as of December 15, 2006”, and “45nm Bulk-Industry Standard Enablement Technology Project Agreement dated as of December 15, 2006”.

IBM — CHARTERED CONFIDENTIAL 3  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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     “32nm Bulk Process Project” means the Development Project contained in the “32nm Bulk-Industry Standard Process Technology Project Agreement dated as of December 15, 2006”.

     “45nm Bulk Process Project” means the Development Project contained in the “45nm Bulk-Industry Standard Process Technology Project Agreement dated as of December 15, 2006”.

     XXXXXX

     XXXXXX

     “Change of Control” is deemed to have occurred if: (a) there shall be consummated (i) any consolidation or merger of Company in which such Company is not the continuing or surviving corporation, or pursuant to which shares of such Company’s common stock would be converted into cash, securities, or other property, other than a merger of the Company in which the holders of such Company’s common stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of substantially all of the assets of such Company, but only if such sale, lease, exchange, or transfer would, by its nature, include an assignment of the rights or obligations under the Agreement; or (b) the stockholders of such Company shall approve any plan or proposal for the liquidation or dissolution of such Company; or (c) any transaction (such as a merger, tender or exchange offer, open market purchases, privately negotiated purchases, or otherwise) as a result of which (i) any person (as such term is used in section 13(d) and 14(d) (2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities representing more than fifty (50%) of voting securities of such Company having the voting power of such Company’s then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, or (ii) any person (as such term is used in section 13(d) and 14(d) (2) of the Exchange Act) that is a person who, either directly or through its subsidiaries derives more than fifty percent (50%) of its revenue (as measured as of the end of the most recent fiscal year of such person) from the manufacture and/or sale of Semiconductor Products becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities representing more than thirty percent (30%) of voting securities having the voting power of Company’s then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, provided however, that such transaction would not constitute a Change of Control if Temasek Holdings Pte Ltd, directly or indirectly continues to hold forty percent (40%) or more of the securities of Company. And further provided that in the case of both (c) (i) and (c) (ii) the transaction would not constitute a Change of Control if such person (i) on the Participation Effective Date, was already the

IBM — CHARTERED CONFIDENTIAL 4  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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beneficial owner of securities representing more than twenty percent (20%) of the voting power of Company, (ii) is an employee benefit plan (or representative of multiple plans) sponsored by Company, or (iii) is a financial institution that acquires and holds such securities as part of an underwriting for the issuance or sale of such securities.

     “Chartered Jointly Owned Facility,” means a corporation, company or other entity where at least XXXXXX of whose outstanding shares or securities (such shares or securities representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by Company; or, if such entity does not have outstanding shares or securities, as may be the case in a partnership, joint venture, unincorporated association, or other entity, at least XXXXXX of whose ownership interest representing the right to (i) make the decisions for such partnership, joint venture, unincorporated association, or other entity, or (ii) vote for, designate, or otherwise select members of the highest governing decision-making body, managing body or authority for such partnership, joint venture, unincorporated association or other entity, is, now or hereafter, owned or controlled, directly or indirectly, by Company. Provided, that such entity shall be considered a Chartered Jointly Owned Facility, and shall be entitled to retain the licenses and other benefits provided by the Agreement to such Chartered Jointly Owned Facility, only so long as such ownership or control exists.

     “Chartered’s Fab 7 Facility” means Company’s 300mm fabrication facility situated in Chartered’s Woodlands campus in Singapore.

     “Company Participation Period(s)” is defined in Section 3.

     “Company Unique XXXXXX” is defined in Section 15(c).

     “Development Projects” mean those particular Development Projects identified on Exhibit A.

     “Development Schedule” means each of the Development Schedules identified in the Development Projects identified on Exhibit A.

     “DFM Checking Deck Technology” is as defined in the Joint Development Project Agreement for 45nm Bulk-Industry Standard Enablement dated December 15, 2006.

     “Enablement Agreements” means, collectively, the 32nm and 45nm Bulk-Industry Standard Enablement Technology Development Project Agreements referenced on Exhibit A.

     “Foundry Company” means XXXXXX

IBM — CHARTERED CONFIDENTIAL 5  IBM — Chartered Participation Agreement

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     “Foundry Product” means an Integrated Circuit wherein all the following conditions are met: (i) the design, or masks and/or mask build data, for such Integrated Circuit product are provided to the Foundry Company or Pure Play Foundry, whichever the case may be, by a third party; (ii) such Foundry Company or Pure Play Foundry, whichever the case may be, played no substantial role in any phase of the design of such product, however, such Foundry Company or Pure Play Foundry may provide standard primitive building blocks as part of their foundry offering (e.g., I/O, Embedded Memory, Bandgap, PLL, DLL, ADC, DAC, ESD elements, Embedded non-volatile devices, eFuse devices); and (iii) such Foundry Company or Pure Play Foundry, whichever the case may be is contractually bound to manufacture such product solely for, and to sell such product solely to, such third party or its distributor or other recipient solely for the benefit of such third party.

     “Future Technology” means, with respect to a Project Agreement, the primary CMOS semiconductor logic generations with ground rules of less than the logic generation covered by that Development Project.

     “Have-Made Manufacturer” means a Party or Third Party who receives Specific Results and/or Background Know-How solely for the purpose of having such manufacturer fabricate Semiconductor Products solely for the disclosing Party and its Subsidiaries.

     “IFX” means Infineon Technologies, AG, incorporated under the laws of Germany and having an office for the transaction of business at Am Campeon 85570 Neubiberg, Germany.

     “Joint Development Partner” means XXXXXX with whom a Participating Party has established a joint development relationship for the development of a Future Technology.

     “Joint Manufacturing Facility” means a Subsidiary of IFX that has as its primary business the manufacture of Bulk CMOS Integrated Circuits, XXXXXX

     “LP-RF Product” means (i) a Semiconductor Product or any other form (e.g. wafer or die) containing an Integrated Circuit(s), and (ii) that was manufactured using one or more technologies, namely analog, mixed signal and RF CMOS, developed pursuant to LP-RF CMOS Project.

     “LP-RF CMOS Project” means the 65nm LP-RF CMOS Project, the 45nm LP-RF CMOS Project, XXXXXX.

     “45nm LP-RF Process Project” means the Development Project contained in the 45nm LP-RF CMOS Process Technology Project Agreement dated as of December 15, 2006.

IBM — CHARTERED CONFIDENTIAL 6  IBM — Chartered Participation Agreement

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     “65nm LP-RF Process Project” means the Development Project contained in the 65nm LP-RF CMOS Process Technology Project Agreement dated as of December 15, 2006.

     “45nm LP-RF CMOS Project” means, collectively, the Development Projects contained in the “45nm LP-RF CMOS Semiconductor Process Technology Project Agreement dated as of December 15, 2006”, and “45nm LP-RF CMOS Enablement Technology Project Agreement dated as of December 15, 2006”.

     “65nm LP-RF CMOS Project” means, collectively, the Development Projects contained in the “65nm LP-RF CMOS Semiconductor Process Technology Project Agreement dated as of December 15, 2006” and “65nm LP-RF CMOS Enablement Technology Project Agreement dated as of December 15, 2006”.

     “Master Terms” means the Master IBM Joint Development Terms and Conditions — December 15, 2006 version that are incorporated by reference into the Project Agreements.

     “Net Selling Price” shall mean the gross consideration (whether in cash or kind) received from Sales of Semiconductor Products or any other form (e.g. wafer or die) containing an Integrated Circuit(s) less the following: (i) separately itemized normal and customary rebates, and cash and trade discounts actually taken, (ii) separately itemized sales, use and/or other excise taxes or duties actually paid, (iii) separately itemized cost of any packages and packaging, (iv) separately itemized insurance costs and outbound transportation charges prepaid or allowed, (v) separately itemized import and/or export duties actually paid, and (vi) separately itemized amounts allowed or credited due to returns. In addition, when a Semiconductor Products is Sold in a packaged or tested form, the gross consideration (whether in cash or kind) received by Chartered Jointly Owned Facility for the purposes of calculating Net Selling Price shall be less the costs of packaging and testing.

     “Participation Effective Date” means the date referenced as such in the preamble of this Participation Agreement.

     “Participation Agreement” means this Participation Agreement between International Business Machines Corporation and Chartered Semiconductor Manufacturing Ltd.

     “Prior Agreements” is defined in the recitals.

     “Project Agreement” means the Project Agreement governing the respective Development Project, as referenced on Exhibit A.

     “Pure Play Foundry” means an entity other than XXXXXX

IBM — CHARTERED CONFIDENTIAL 7  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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     “Quarterly Contribution” is defined in Section 5(a).

     “Restricted Period” means the period of XXXXXX.

     “Sale” or “Sold” shall mean the sale or other transfer of products, but excluding sales and transfers (i) that are provided and used as samples or prototypes (including prototypes containing multiple customer designs), without charge, or (ii) that are subsequently reversed for a refund/credit under a return material authorization, or (iii) to Company or a Company Subsidiary, provided that no such Semiconductor Products are subsequently sold or transferred to another party other than a Company Subsidiary.

     “Total Contribution Amount” is defined in Section 5(a).

2. Binding Contract.

(a) By executing this Participation Agreement and the respective “Participating Party Notification” attached as Exhibit C, (i) Company joins each of the Development Projects as a Participating Party, (ii) Company and the other Participating Parties are each directly contracted to IBM and to each other based upon the terms and conditions of the respective Project Agreement (including the Master Terms), without the need for any additional documentation or signatures by any Party, and (iii) Company is estopped from contesting its direct privity of contract with the other Participating Parties and with IBM on such referenced terms and conditions. Exhibit D provides a list of the Participating Parties in each of the Development Projects as of the Participation Effective Date. IBM will record updates to this list on the respective Project Database within seven (7) business days of receipt of such “Participating Party Notification”. IBM represents and warrants that each Participating Party who commits to participate in a Development Project is agreeing to the identical terms and conditions of the relevant Project Agreement and Master Terms that Company is agreeing to.

(b) IBM and Company agree that (A) the 45nm Bulk CMOS and 45nm Bulk CMOS Enablement development in the Prior Agreements (i) ends as of the Participation Effective Date, and (ii) the terms and conditions of the Prior Agreements with respect to such development are superceded and replaced by the terms and conditions of the following Project Agreements: 45nm Bulk-Industry Standard Semiconductor Process Technology and 45nm Bulk-Industry Standard Enablement Technology as of the first dates of such development; and (B) such 45nm Bulk CMOS and 45nm Bulk CMOS Enablement development shall, as of Participation Effective Date, recommence pursuant to such Project Agreements. Notwithstanding the preceding sentence, if IFX and Samsung do not execute the 45nm Bulk Project Agreements on or before March 31, 2007, then the first sentence of this Section 2(b) is void ab initio, the Prior Agreements shall remain in full force and effect, and the 45nm Bulk Project is deemed removed from this Participation Agreement, except that (i) Company shall continue to pay all cost-

IBM — CHARTERED CONFIDENTIAL 8  IBM — Chartered Participation Agreement

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sharing payments on account of the 45nm Bulk CMOS and 45nm Bulk CMOS Enablement pursuant to Section 5(a) of this Participation Agreement (for clarity, all other payments such as royalty payments remain payable under the Prior Agreements); and (ii) Company shall be released from any obligations to make further cost-sharing payments due after December 31, 2006 under the Prior Agreements (for clarity, all other payments such as royalty payments remain payable under the Prior Agreements).

3. Company Participation Periods; Term. Company shall participate and is only authorized to participate in the Development Project(s), commencing on the Participation Effective Date and continuing for the applicable periods detailed on Exhibit A attached hereto (“Company Participation Period(s)”), regardless of whether the applicable Project Term extends beyond a Company Participation Period for such Development Project. The term of this Participation Agreement shall commence on the Participation Effective Date and, unless terminated prior to expiration as set forth elsewhere in the Agreement, shall remain in force until XXXXXX.

4. Company Staffing. Company shall provide IBM with Representatives to work on the Development Projects in accordance with the minimum staffing levels detailed on Exhibit B attached hereto. If Company falls below such minimum staffing level, then Company shall, at IBM’s request, either (i) make a compensating payment to IBM at a rate of XXXXXX below the minimum staffing level set forth in Exhibit B, or (ii) develop another mutually agreeable resolution. In addition, Company shall be responsible for the specific tasks assigned on Exhibit H. Notwithstanding the preceding sentence, Company is excused from providing the minimum “Number of Representatives” for each of the Development Projects provided in Exhibit B to the extent and for so long as Company is unable to secure the necessary Work Visas or appropriate immigration related documents for such Representatives, despite its good faith efforts to secure the same. Company shall promptly advise IBM of any such anticipated problems with Work Visas or appropriate immigration related documents, together with the expected time-frame for the resolutions.

5. Company Contributions and Other Payments.

(a) Company shall pay IBM a total XXXXXX (the “Total Contribution Amount”) in consideration for Company’s right to participate in (i) the Development Projects commencing as of the Participation Effective Date, and (ii) the 3-Way ECTS Agreement commencing as of July 17, 2006. Both parties agree that Company’s participation in the cost sharing fee with respect for the 3-Way ECTS Agreement is for costs incurred on and after 1 October, 2006. Company shall pay the Total Contribution Amount to IBM according to the following schedule of “Annual Contribution Amounts”:

XXXXXX

IBM — CHARTERED CONFIDENTIAL 9  IBM — Chartered Participation Agreement

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Specifically, Company shall XXXXXX Company agrees to treat this Participation Agreement as an invoice from IBM for the Quarterly Contribution due on XXXXXX and all other amounts due under this Project Agreement.

(b) All such contributions are XXXXXX In the event there is a delay in the Development Schedule for the 45nm Bulk Process Project, the 32nm Bulk Process Project, 65nm LP-RF Process Project, or the 45nm LP-RF Process Project, then IBM and Company shall discuss in good faith and use good faith efforts to encourage the Management Committee for such Development Project to discuss a mutually agreeable and commercially reasonable recovery plan for such Development Project. XXXXXX shall be solely responsible for any additional cost incurred in executing the commercially reasonable recovery plan established by the Management Committee but, for clarity, only to the extent such recovery plan occurs during the then-current Project Term for the Project Agreement.

(c) All Company payments to IBM under this Participation Agreement shall be made by wire transfer to the IBM account listed below; shall be free of all banking charges; and shall be paid in U.S. dollars:

IBM Corporation
Director of Licensing
PNC BANK
500 First Avenue
Pittsburgh, PA 15219
Account No. 1017306369
ABA Routing No. 043000096
License Ref No. L065073

The following information shall be included in the wire detail:

Company Name
Reason for Payment
License Reference No. L065073

(d) Company shall be liable for interest on any overdue payment under this Participation Agreement commencing on the date such payment becomes due at an annual rate equal to XXXXXX. If such interest rate exceeds the maximum legal rate in the jurisdiction where a claim therefor is being asserted, the interest rate shall be reduced to such maximum legal rate.

(e) In further consideration for Company’s right to participate in (i) the Development Projects commencing as of the Participation Effective Date, and (ii) the 3-Way ECTS Agreement commencing as of July 17, 2006, Company shall XXXXXX

IBM — CHARTERED CONFIDENTIAL 10  IBM — Chartered Participation Agreement

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(f) Royalty Payments.

(i) Company shall, subject to the exceptions set forth below, pay IBM a royalty on each Sale of a LP-RF Product according to the tables below:

XXXXXX

(ii) Company shall pay to IBM all royalties accrued under this Section 5(f) within forty-five (45) days after the end of each calendar quarter in which such royalties accrued. In the event that Company is required to withhold taxes from the royalty payments due to IBM, Company shall be entitled to deduct such taxes from the payment due to IBM and to pay the same to the appropriate taxing authority. Company will provide IBM with documentation evidencing such payments with the applicable royalty payment. Company shall report to IBM the date of its first Sale of (i) an LP-RF Product within forty-five (45) days after its occurrence, and (ii) an LP-RF Qualified Product. Company shall provide IBM with a written report explaining how the amount of the payment was calculated, including the number of LP-RF Products Sold during the quarter, by customer, and by node and the aggregate amount of all royalties due; it being agreed that Company may mask the name of the individual companies. If Company is selling LP-RF Products other than in wafer form, Company shall also calculate and report the equivalent wafers based upon the chip size and the average yield (e.g. wafer final test and module final test) by customer, by product and by node. Company shall submit a written report to the IBM Director of Licensing at IBM Corporation, North Castle Drive, MD-NC119, Armonk, NY 10504-1785, USA; Facsimile: (914) 765-4380 setting forth the quantity of LP-RF Product Sold to Company’s customers during the previous calendar quarter. Overdue amounts shall be subject to an interest charge of the lesser of eighteen percent (18%) of the total amount due, or the maximum percentage rate allowable by applicable law.

For three (3) years after royalties are payable pursuant to Section 5(f), Company shall maintain a complete, clear and accurate record of the number of LP-RF Products and type of LP-RF Products Sold by customer to determine whether Company is paying the correct royalty amount hereunder. To ensure compliance with Section 5(f), IBM shall have the right to inspect and audit periodically the relevant accounting and sales books and records of Company. The time period that is audited by IBM will not be subject to subsequent audits. The audit will be conducted by an independent certified public accounting firm mutually acceptable to the Parties, and shall be conducted following reasonable prior written notice during regular business hours at Company’s offices and in such a manner as not to interfere with Company’s normal business activities. As a condition of such audit, Company may, at its sole discretion, (i) require the auditor to sign a reasonable confidentiality agreement to protect the confidential information of Company, (ii) limit the auditor to providing IBM with a written report of the audit results, not any other Company confidential information, and (iii) require the auditor to provide Company with a copy of such auditor’s report

IBM — CHARTERED CONFIDENTIAL 11  IBM — Chartered Participation Agreement

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promptly. In no event shall audits be made hereunder more frequently than once every twelve (12) months, unless an audit reveals an issue, in which case such audits may be more frequent. If any audit should disclose any underpayment, Company shall promptly (but in any event within forty five (45) days) pay the difference. The independent certified public accounting firm’s fee will be paid by IBM unless the report of the independent certified public accounting firm determines that Company has underpaid royalties during the period of the audit in an amount exceeding five percent (5%) of the royalties owed. In the event such an underpayment is reported, IBM shall provide an original invoice to Company, and Company shall pay the independent certified public accounting firm’s fee within forty-five (45) days of the receipt of such original invoice. In the event an overpayment is reported, IBM shall provide Company with a credit within forty-five (45) days in the amount of such overpayment to be applied against Company’s future royalty obligations.

6. Limitation Amount. Notwithstanding the Limitation Amount provided in each of the Project Agreements, the Limitation Amount as between IBM and Company for all Development Projects in the aggregate is a total of XXXXXX.

7. Confidentiality; Information Transfers; Licenses to Background Know-How.

(a) In addition to the disclosure rights of Company pursuant to Section 7 (Information Transfers) of the Master Terms and pursuant to the Project Agreement (including Section 4 of the Project Agreement), Company may disclose the Specific Results and Background Know-How from each of the Bulk Projects and LP-RF CMOS Projects as provided on Exhibit E.

(b) Notwithstanding anything contained in the Agreement, Company may not, without IBM’s prior written agreement, which agreement is not to be unreasonably withheld, use IBM’s Background Know-How for the Enablement Agreements relating to DFM Checking Deck Technology to aid in the creation of Foundry Products using any 90 nm Bulk CMOS process technology.

(c) Notwithstanding IBM’s disclosure rights pursuant to Section 7.9 of the Master Terms, IBM’s rights to disclose Specific Results and Background Know-How from the 32nm Bulk Process Project, and the 45nm Bulk Process Project to Foundry Companies and Pure Play Foundries are limited as set forth in Exhibit F; provided, however, such limitation does not preclude IBM from granting IFX the disclosure and use rights identified in Exhibit G. In addition and for clarification purposes, IBM’s disclosure rights under Section 7.9 of the Master Terms are subject to appropriate confidentiality terms that, at a minimum, have a term of confidentiality consistent with those imposed on IBM under the Agreement and that limit such Third Party’s use of such Specific Results and Background Know-How in accordance with the terms and conditions consistent with those in the Agreement.

IBM — CHARTERED CONFIDENTIAL 12  IBM — Chartered Participation Agreement

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(c) Notwithstanding IBM’s disclosure rights pursuant to Section 7.9 of the Master Terms, IBM shall not disclose the Company Unique XXXXXX without Company’s prior written consent.

(d) Company shall not disclose to any Third Party the identity of any other Participating Party unless and until IBM or such Participating Party grants Company permission to make such a disclosure.

8. Assignment. Neither IBM nor Company shall assign any of its rights or obligations under the Agreement without prior written consent of the other party. Notwithstanding the preceding sentence, IBM may assign or transfer its rights to receive payment under the Agreement to any party upon written notice to Company, and either IBM or Company may assign or transfer any of its rights and obligations to a Wholly Owned Subsidiary upon written notice to the other party, provided that (i) the assigning or transferring party agrees that such assignee or transferee will remain (and it does remain) a Wholly Owned Subsidiary of such party, (ii) such Wholly Owned Subsidiary is capable of performing, either directly or indirectly, all the obligations of the assigning party set forth in the Agreement, and (iii) the assigning party guarantees the performance of such Wholly Owned Subsidiary. Any attempted assignment in violation of this clause is null and void.

IBM — CHARTERED CONFIDENTIAL 13  IBM — Chartered Participation Agreement

EXECUTION VERSION IBM License Number: L065073

9. Termination. In addition to Section 12 of the Master Terms, the following termination terms and conditions apply as between IBM and Company:

(a) In the event IBM terminates Company’s participation in one or more of such Development Projects pursuant to Sections 12.3, 12.4(b) or 12.4(c) of the Master Terms, then this Participation Agreement shall automatically cease to apply vis-à-vis such terminated Development Projects and all references to such terminated Development Projects shall be rendered void as of such termination. For the avoidance of doubt, the provisions of this Participation Agreement shall continue to be valid and binding upon the parties vis-à-vis the Development Projects which have not been terminated.

(b) IBM may immediately terminate the Company’s right to participate in the Development Project(s) and terminate this Participation Agreement as to all Development Projects if Company suffers a Change of Control.

(c) The following Sections of this Participation Agreement shall survive and continue to bind IBM and Company and their legal representatives, successors and assigns after the expiration of this Participation Agreement: 1, 2, 5(c), 5(d), 5(e), 5(f), 6, 7, 9, 10, 11, 12; provided, however, a Company’s surviving license and disclosure rights pursuant to Section 7 only apply to the information as it existed at the end of its participation in the applicable Development Project. In addition, certain provisions of the Master Terms and Project Agreement survive, as detailed in each agreement, respectively. Notwithstanding the preceding sentence, if the Parties reach L2 (or the applicable Development Project completion) for a Development Project before the end of the applicable Project Term and the Parties agree to cease work on such Development Project and/or terminate the applicable Development Agreement, then Section 5(a) survives until Company pays IBM the Total Contribution Amount.

(d) Notwithstanding any provision in this Participation Agreement to the contrary, if IBM is authorized, pursuant to Section 12.6 of the Master Terms, to terminate all licenses and disclosure rights it granted to Company, then IBM is also authorized to terminate all license and disclosure rights granted to Company pursuant to Section 7 and the remainder of this Participation Agreement.

(e) Termination of this Participation Agreement terminates Company’s participation in all Development Projects covered by this Participation Agreement, but such termination does not, in and of itself, affect any other agreements between IBM and Company, including other development projects being pursued under other participation agreements.

10. Patent Licenses/No Patent Licenses. As contemplated in Section 8 of the Master Terms, Exhibit A sets forth whether Company is a Patent Participating Party for each of the respective Development Projects.

11. Company Information; Participating Parties. In connection with Company’s execution of this Participation Agreement, Company shall also complete and execute one (1) Participating Party Notification attached as Exhibit C for each Development Project.

IBM — CHARTERED CONFIDENTIAL 14  IBM — Chartered Participation Agreement

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IBM shall provide a copy of each such Participating Party Notification to the other respective Participation Parties in order to, among other things, demonstrate Company as a Participating Party in each such Development Project. Notwithstanding anything in the respective Agreement to the contrary, Company expressly permits IBM to share the following information with Third Parties who IBM believes may wish to participate in the subject Development Project(s): (i) the identity of the Company and (ii) whether Company is a Patent Participating Party for the applicable Development Project(s).

12. General.

(a) This Participation Agreement supplements the respective Project Agreement (including the Master Terms) and provides supplemental information as between IBM and the Company that was intentionally omitted from the respective Project Agreement. Therefore, this Participation Agreement is not a stand-alone agreement, but as between IBM and Company, merges with and becomes part of the terms and conditions of the Project Agreement. There are no intended third party beneficiaries to this Participation Agreement, including the other Participating Parties; provided, however, Company is executing and providing a Participating Party Notification for each Development Project, and such document is for the express benefit of all Participating Parties. Company agrees to execute and deliver to IBM after the Participation Effective Date such other documents and agreements and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Participation Agreement and the rest of the Agreement.

(b) This Participation Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but each of which together shall constitute one and the same agreement. Confirmed facsimile signatures shall have the same effect as original signatures for the purpose of executing or amending the Participation Agreement. Once signed by IBM and Company, any reproduction of this Participation Agreement by reliable means (e.g. a facsimile, electronic scanning, or photocopy) shall be considered an original.

XXXXXX

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IBM — CHARTERED CONFIDENTIAL 15  IBM — Chartered Participation Agreement

EXECUTION VERSION IBM License Number: L065073

IN WITNESS WHEREOF, IBM and Company have caused this Participation Agreement to be executed by their duly authorized representatives as of the Participation Effective Date.

CHARTERED SEMICONDUCTOR MANUFACTURING LTD.	INTERNATIONAL BUSINESS MACHINES CORPORATION
/s/ Chia Song Hwee By (Sign)	/s/ Adalio T. Sanchez By (Sign)
Chia Song Hwee	Adalio T. Sanchez
Name (Print)	Name (Print)
President and CEO	GM Technology Collaboration Solutions
Title 29 December 2006	Title 12/29/06
Date	Date

IBM — CHARTERED CONFIDENTIAL 16  IBM — Chartered Participation Agreement

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     EXHIBIT A — DEVELOPMENT PROJECTS

XXXXXX

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EXHIBIT B — COMPANY STAFFING

XXXXXX

IBM — CHARTERED CONFIDENTIAL 18  IBM — Chartered Participation Agreement

EXECUTION VERSION IBM License Number: L065073

EXHIBIT C — PARTICIPATING PARTY NOTIFICATION.

Re: Participating Party Notification — Joint Development Project Development Agreement for [___] (“Development Project”) dated as of [___].

To the Participating Parties (current and future) in the Development Project:

[___] (“Company”) represents and warrants to IBM and the Participating Parties (for clarity, current and future) in the above-referenced Development Project that: (i) [___] has joined the above-referenced Development Project as a Participating Party as of the date listed below by signing a Participation Agreement with IBM, and (ii) Company and the other Participating Parties are each directly contracted to IBM and to each other based upon the terms and conditions of the Project Agreement (including the Master Terms), without the need for any additional documentation or signatures by any Party, and (iii) Company is estopped from contesting its direct privity of contract between itself and the other Participating Parties, and between itself and IBM on such terms and conditions. All terms not defined herein are defined in the Project Agreement.

Below is specific information applicable to the Company for the above-referenced Development Project:

1.	Company Name and Address: [___].
2.	Company [is] [is not] a “Patent-Participating Party” for the above-referenced Development Project (See Section 8.6 of the Master Terms).
3.	“Notice Address” for the Company (See Section 13 of the Master Terms): [___]
4.	Company “Designated Executive” and contact information (See Section 18 of the Master Terms): [___]
5.	Company “Management Committee Member” and contact information (See Section 13 of the Master Terms): [___]
6.	Company “Project Leader” and contact information (See Section 13 of the Master Terms): [___]
7.	Company “Technical Coordinator” and contact information (See Section 13 of the Master Terms): [___]
8.	Company “Steering Committee Member” and contact information (See Section [___] of the Project Agreement): [___]

IBM — CHARTERED CONFIDENTIAL 19  IBM — Chartered Participation Agreement

EXECUTION VERSION IBM License Number: L065073

9. Company is currently scheduled to participate in the Development Project from ___ until ___, but the actual end date is subject to change without advance notice to the other Participating Parties.

Except for item 2 above, Company may update the representatives, contact, and notice information provided above. If Company elects to do so, it shall provide the revised information to the IBM Designated Executive for inclusion on the Project Database. No update is effective until reflected on the Project Database.

This document is non-confidential, and Company requests that IBM provide the above information to all Participating Parties and update the Project Database to reflect the above information.

[COMPANY NAME]

By:

Name:

Title:

Date:

IBM — CHARTERED CONFIDENTIAL 20  IBM — Chartered Participation Agreement

EXECUTION VERSION IBM License Number: L065073

EXHIBIT D — PARTICIPATING PARTIES (as of the Participation Effective Date)

Freescale Semiconductor, Inc.

IBM — CHARTERED CONFIDENTIAL 21  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

EXHIBIT E — ADDITIONAL CHARTERED DISCLOSURE RIGHTS RELATED TO THE BULK PROJECTS AND LP-RF CMOS PROJECTS.

1. Intentionally Omitted

2. Intentionally Omitted.

3. Intentionally Omitted.

4. Intentionally Omitted.

5. Intentionally Omitted.

6. Intentionally Omitted.

7.0 - 7.6 Intentionally Omitted.

7.7 In addition to Company’s right to disclose Specific Results and Background Know-How for each of the Bulk Projects and LP-RF CMOS Projects to its Wholly Owned Subsidiaries pursuant to Section 7.5 of the Master Terms, Company shall have the right to disclose the same to Chartered Jointly Owned Facilities, as set forth in this Section 7.7 of Exhibit E. Company may authorize Chartered Jointly Owned Facilities to whom it has disclosed such Specific Results and Background Know-How pursuant to this Section 7.7 of Exhibit E to exercise some or all of its rights to disclose Specific Results and Background Know-How under and in accordance with this Section 7.7 of this Exhibit E.

7.7.1	XXXXXX
7.7.2	XXXXXX
7.7.3	XXXXXX
7.7.4	IBM shall have the following audit rights. IBM shall nominate three (3) independent auditors, from which Company shall select one, to conduct, within five (5) working days for all Chartered Jointly Owned Facilities except those described in Section 7.7.5 of this Exhibit E, below, for which the time period shall be ten (10) working days prior notice to Company and no more frequently than semiannually for all Chartered Jointly Owned Facilities except those described in Section 7.7.5 of this Exhibit E, for which the frequency shall be no more than once per year (or, at IBM’s option, as frequently as once a quarter should an audit uncover a material noncompliance), an audit of the Chartered Jointly Owned Facility(ies) which have received Specific Results and/or Background Know-How from Chartered to assure compliance with this Section 7.7 of this Exhibit

IBM — CHARTERED CONFIDENTIAL 22  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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EXECUTION VERSION IBM License Number: L065073

	E. Such auditor shall enter into a confidentiality agreement with Company and/or with IBM (in which case the agreement would include a provision under which Company would be granted third party beneficiary status (or the equivalent under whatever law applies to the agreement) with an independent right to enforce the applicable provisions of such confidentiality agreement as they pertain to Company’s confidential information) sufficient to limit use and disclosure by such auditor solely to determine Company’s compliance with its obligations under this Section 7.7 of this Exhibit E and shall not disclose to IBM any Company confidential information other than that necessary to understand any noncompliance situation. In the absence of a finding of noncompliance such auditor shall not be present at such Chartered Jointly Owned Facility for more than five (5) working days.
7.7.5	In the case of Chartered Jointly Owned Facilities Fab 5 and Fab 6, information that would disclose detailed aspects of the Specific Results and Background Know-How shall only be disclosed to those Company employees and employees of such Chartered Jointly Owned Facility (including those who may have been employees of one of the other owners) that in Company’s opinion and sole discretion have a need to know for purposes of carrying out their duties in such Chartered Jointly Owned Facility. The foregoing information shall not be transferred to other owners(s) of such Chartered Jointly Owned Facilities, employees of such other owner(s) (except as set forth in the following sentence), or any other Third Party. Without limiting the foregoing, the Parties agree that incidental access to general aspects of Specific Results and Background Know-How (e.g. as part of normal operational briefings) by employees of such other owner(s) that are otherwise resident at or assigned to such Chartered Jointly Owned Facility shall not be considered a breach of this Section 7.7.5 of this Exhibit E.
7.7.6	In the case of Chartered Jointly Owned Facilities that are established after December 15, 2004 (including but not limited to Chartered’s Fab 7 Facility if it becomes a Chartered Jointly Owned Facility), the following shall apply:
7.7.6.1	Other than Company, XXXXXX (however, Company may add XXXXXX with the prior written consent of IBM, which consent shall not be unreasonably withheld) (none of which are XXXXXX) may be co-owners with Company in Chartered’s Fab 7 Facility and one other Chartered fabrication facility established after December 15, 2004.
	(a) Provided, however, that the foregoing restrictions shall apply only if employees of a XXXXXX are present and have access to or are

IBM — CHARTERED CONFIDENTIAL 23  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

	exposed to any portion of Specific Results or Background Know-How (except as otherwise permitted pursuant to this Section 7.6 of this Exhibit E) at such Chartered Jointly Owned Facility.
	(b) For purpose of this Section 7.7.6 of this Exhibit E, XXXXXX means a Third Party who has a XXXXXX percent or greater ownership interest or control, directly or indirectly, of XXXXXX provided, however, that XXXXXX does not include the following entities: XXXXXX or one or more Participating Parties under such Bulk Project and LP-RF CMOS Projects (provided that such Participating Party has a license to the applicable Bulk Project and LP-RF CMOS Project information at the time the Specific Results and Background Know-How from such Project are utilized in such facility), or a Third Party who is merely a financial investor in such Chartered Jointly Owned Facility, and the restrictions set forth in Sections 7.7.6.1, 7.7.6.2 and 7.7.6.4 of this Exhibit E shall not apply to any such parties. In addition, XXXXXX shall not include XXXXXX
7.7.6.2	Company agrees that the access or exposure provided to the XXXXXX employees described in Section 7.7.6.1 (a) of this Exhibit E, shall be limited to that necessary, in Company’s reasonable opinion in order to carry out their responsibilities in such Chartered Jointly Owned Facility. Such employees of XXXXXX shall have no right to take any portions of the Specific Results or Background Know-How (other than residuals as defined in Section 9.1 of the Master Terms, which shall still be considered confidential and subject to Section 7 of the Master Terms) outside the Chartered Jointly Owned Facility. In the event that such employees are present and regardless of the type and amount of such access by such employees as described in Section 7.7.6.1(a) of this Exhibit E, such Chartered Jointly Owned Facility shall pay a royalty of XXXXXX Such royalty shall be paid as follows:
(a)	such royalty shall be due and payable, as set forth in Section 7.7.6.2 (c) of this Exhibit E, upon shipment to the XXXXXX for all production wafers fabricated within XXXXXX from the date of the first production shipment with purchase order (excluding shipment of prototypes and design evaluation hardware) of wafers to the XXXXXX; and
(b)	if any Specific Results are utilized in a Chartered Jointly Owned Facility then such royalty shall apply for XXXXXX from the date of first production shipment of any wafers using the Bulk CMOS from the applicable Bulk Project and LP-RF CMOS Projects;

IBM — CHARTERED CONFIDENTIAL 24  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

(c)	all such royalties payable to IBM shall be payable directly from such Chartered Jointly Owned Facility within forty five (45) days after the end of each calendar quarter to the account identified by IBM. In addition, Company shall or shall cause such Chartered Jointly Owned Facility to submit to IBM and Company a report setting forth the quantity of Semiconductor Products Sold to the XXXXXX and total Net Selling Price for the previous quarter. Such report shall be submitted within forty five (45) days after the end of each calendar quarter to the Director of Licensing (in IBM’s case) and to the Chief Financial Officer (in Company’s case) at the address identified for each, whether or not any royalty is due for such quarter.
	Should a XXXXXX wish to receive (before such time as Company has the right to disclose directly to such XXXXXX pursuant to Section 7.11 of this Exhibit E or other provisions of the Agreement) the Specific Results and Background Know-How, other than as set forth above, it may request a license to do so from IBM. Should IBM grant such a license to one of the XXXXXX set forth in Section 7.7.6.1 of this Exhibit E (at any time before Company has the right to do so directly pursuant to Section 7.11 of this Exhibit E or the other provisions of the Agreement), which XXXXXX was referred to IBM by Company, IBM agrees to XXXXXX the license fee and royalty payments from such license with Company and Company’s share of such license fee and royalty payments shall be paid directly to Company by the licensee; provided, however, that such obligation to share such fees and royalties shall not apply to (a) any amounts for related services such as technology transfer, support, and maintenance, or any amounts for other arrangements such as revenue from the Sales of Semiconductor Products any other form (e.g. wafer or die) containing an Integrated Circuit(s); (b) any license or other arrangement with such Semico Owner entered into prior to the date it became an owner of such Chartered Jointly Owned facility, or any grant of license or other arrangement that does not include a license grant to the XXXXXX  for Specific Results and Background Know-How; or (c) any patent cross-license agreement between IBM and the XXXXXX. In addition, IBM shall include a provision in the license agreement requiring the licensee to submit to Company a report setting forth the fees and royalties for the previous quarter and the method of calculation therefor. Such report shall be submitted within thirty (30) days after the end of each calendar quarter to the person designated and at the address designated by the party, whether or not any fees or royalties are due for such quarter.
7.7.6.3	Other than as set forth in Section 7.7.6.2 of this Exhibit E, information that would disclose detailed aspects of the Specific Results and Background Know-How, including but not limited to process recipes, tool settings,

IBM — CHARTERED CONFIDENTIAL 25  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

specific process flows, or manufacturing process specifications, shall only be disclosed to those Company employees and employees of such Chartered Jointly Owned Facility (including those who may have been employees of one of the other owners) that in Company’s opinion and sole discretion have a need to know for purposes of carrying out their duties in such Chartered Jointly Owned Facility. The foregoing information shall not be transferred to other owners(s) of such Chartered Jointly Owned Facilities, employees of such other owner(s) (except as set forth in the following sentence), or any other Third Party. Without limiting the foregoing, the Parties agree that incidental access to general aspects of Specific Results and Background Know-How (e.g. as part of normal operational briefings) by employees of such other owner(s) that are otherwise resident at or assigned to such Chartered Jointly Owned Facility shall not be considered a breach of this Section 7.7.6.3 of this Exhibit E.

7.7.6.4

Company shall secure a written agreement with such XXXXXX that are co-owners pursuant to Section 7.7.6.1 of this Exhibit E, by which the other owner agrees that it will abide by the applicable provisions of this Section 7.7 of this Exhibit E.

7.7.7    Should a Chartered Jointly Owned Facility cease to retain the licenses and other benefits provided by the Agreement for any reason, including by virtue of a) a reduction in the ownership percentage of Company, or b) a failure to abide by the provisions of this Section 7.7 of this Exhibit E, such entity shall retain such licenses notwithstanding such license cessation for a period of time as may be required to enable such entity to fulfill any purchase orders or other legally binding commitments existing as of the date of such license cessation, but such period of time shall not exceed XXXXXX. As soon as reasonably practicable after such ownership change, such entity shall indicate in its web sites and other marketing communications channels that it shall no longer offer products made utilizing the rights licensed hereunder. After the date of such license cessation, such entity will not (unless otherwise authorized by IBM) enter into any new supply or other commitments that would require the exercise of rights granted to it by IBM under this Section 7.7 of this Exhibit E.

7.8-7.10 Intentionally Omitted.

7.11 If the Parties do not enter into an agreement by XXXXXX to jointly develop a Future Technology for 22nm Bulk CMOS, then Company shall have the right (in addition to its other rights under the Agreement) to disclose Specific Results and/or Background Know-How from the Bulk Projects and LP-RF CMOS Projects, to Chartered Joint Development Partners for the purpose of jointly developing Future Technologies for Bulk CMOS, under the following conditions:

IBM — CHARTERED CONFIDENTIAL 26  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

(a)	XXXXXX; and
(b)	the joint development relationship with the Company Joint Development Partner(s) must be set forth in a written agreement that includes

(i)	XXXXXX;
(ii)	XXXXXX;
(iii)	a period of confidentiality consistent with that set forth herein; and
(iv)	XXXXXX.

7.12 In addition to Company’s rights under Section 4 of the applicable Project Agreement, beginning XXXXXX, IBM has no objection if Company permits its customers who rightfully received certain aspects of Specific Results and/or Background Know-How pursuant to such Project Agreement, to further disclose the following portions of such Specific Results and/or Background Know-How directly to contractor(s) who are retained to provide Integrated Circuit design services for such Company customer: the applicable (design manual, SPICE models (object code only), DRC, LVS and PEX decks (excluding the input files of such decks). Although Company is not required to enter into a direct written agreement with each such customer contractor, Company shall (a) require approval and approve each customer disclosure that is proposed pursuant to the preceding sentence; and (b) require that such disclosures cannot be made without a written agreement between Company’s customer and such customer’s contractor that, at a minimum, requires: (I) a term of confidentiality consistent with that set forth in the Agreement, and (II) limits such contractor’s use of such information in accordance with terms and conditions consistent with those set forth in the Agreement.

IBM — CHARTERED CONFIDENTIAL 27  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

EXHIBIT F — LIMITATIONS ON AND CONDITIONS OF CERTAIN XXXXXX DISCLOSURES FROM THE 32NM BULK PROCESS PROJECT AND THE 45NM BULK PROCESS PROJECT TO XXXXXX

XXXXXX

IBM — CHARTERED CONFIDENTIAL 28  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

EXHIBIT G — ADDITIONAL IBM DISCLOSURE AND SUBLICENSE RIGHTS FOR THE BULK & ENABLEMENT TECHNOLOGIES.

1. Notwithstanding any limitations and conditions imposed upon IBM pursuant to Exhibit E, IBM retains the right to grant the disclosure and license rights specified below to IFX based upon the substantially similar terms and conditions. If IBM grants the rights contemplated by the below Section 7.5.1 for the 32nm Bulk CMOS and the 45nm Bulk CMOS, XXXXXX to Company hereunder shall, upon Company’s request, be certified in writing by an IBM senior executive. XXXXXX to the Company account identified in Exhibit F, Section.7.9.1(d).

7.5 Rights of IFX to Disclose to Joint Manufacturing Facilities and Third Parties.

7.5.1

IFX shall have the right to disclose Specific Results and Background Know-How from a Bulk Project to XXXXXX Joint Manufacturing Facilities, XXXXXX. Such disclosure of Specific Results and/or Background Know-How shall not occur prior to L1 of the applicable Bulk CMOS, and must be subject to a written agreement between IFX and such recipient Third Party that, at a minimum, shall have a term of confidentiality consistent with that set forth the Agreement, and that limits such recipient’s use of such information in accordance with terms and conditions consistent to those set forth in the Agreement.

(a) IFX on behalf of itself and its Subsidiaries hereby agrees to treat XXXXXX (the “ROFR Members”) as preferred suppliers for Semiconductor Products fabricated using such Specific Results and Background Know-How, which means that IFX and its Subsidiaries shall provide to each of the ROFR Members a rolling, long range capacity/production forecasts for such products. As part of such status as preferred suppliers, prior to any disclosure of such Specific Results and Background Know-How to such Joint Manufacturing Facility, IFX and its Subsidiaries shall offer to each of the ROFR Members the opportunity to fabricate the Semiconductor Products in question. IFX has to take reasonable steps in order to allow each of the ROFR Members a reasonable opportunity to manufacture Semiconductor Products for IFX that are based on such technology. IFX shall negotiate in good faith with each of the ROFR Members to establish a manufacturing agreement that specifies the necessary conditions to satisfy IFX’s manufacturing requirements, e.g., lead time sufficient to install and qualify the Semiconductor Products, commitment on volume, and yield plans. XXXXXX then IFX shall not carry out such disclosure to such Joint Manufacturing Facility.

IBM — CHARTERED CONFIDENTIAL 29  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

     (b) Information that would disclose detailed aspects of Specific Results and Background Know-How for a given Bulk Project, including but not limited to process recipes, tool settings, specific process flows, or manufacturing process specifications, shall be disclosed only to those IFX employees in such Joint Manufacturing Facility, and employees of such Joint Manufacturing Facility itself (including those who may have been employees of the other owner of such Joint Manufacturing Facility), that in IFX’s opinion and sole discretion have a need to know for purposes of carrying out their duties in such Joint Manufacturing Facility. The foregoing information shall not be transferred to the other owner of such Joint Manufacturing Facility, employees of such other owner(s) (except as set forth in the following sentence), or any other Third Party. Without limiting the foregoing, IBM and IFX agree that incidental access to general aspects of Specific Results and Background Know-How (e.g. as part of normal operational briefings) by employees of such other owner that are otherwise resident at or assigned to such Joint Manufacturing Facility shall not be considered a breach of this Section 7.5.1 of this Exhibit XX;

     (c) Such Joint Manufacturing Facility to which such Specific Results and Background Know-How have been disclosed shall pay a royalty of XXXXXX. Such royalty shall be due and payable upon shipment to the other owner for all production wafers fabricated utilizing any Process Module of the Specific Results and Background Know-How for a Bulk Project, within XXXXXX from the date of the first production shipment of such wafers fabricated utilizing such process. All such royalties shall be payable directly from such Joint Manufacturing Facility to IBM within thirty (30) days after the end of each calendar quarter, by electronic funds transfer to the respective IBM account identified in the Project Agreement for the applicable Bulk Project. In addition, the Joint Manufacturing Facility shall submit to IBM a report setting forth the quantity of such wafers sold to the other owner and total net selling price for the previous quarter. Such report shall be submitted within thirty (30) days after the end of each calendar quarter to the IBM Director of Licensing at the address set forth in the Project Agreement for the applicable Bulk Project, whether or not any royalty is due for such quarter; and

     (d) IBM shall have the right to appoint an independent, internationally recognized auditor, to audit, at a frequency of not more than once per year (or up to twice a year, for the 12 month period following an audit indicating a noncompliance), on thirty (30) days prior notice, the applicable records of such Joint Manufacturing Facility, to

IBM — CHARTERED CONFIDENTIAL 30  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

verify that it is abiding by the royalty obligations of Section 7.5.1(c) of this Exhibit XX. Such audits shall be carried out during the normal business hours of such Joint Manufacturing Facility. IBM shall bear the cost of such audit unless such audit indicates a noncompliance, in which case such Joint Manufacturing Facility shall bear the cost of such audit.

7.5.2	Intentionally Omitted.
7.5.3	Intentionally Omitted.
7.6	Interntionally Omitted.
7.6A	Intentionally Omitted.
7.7	Intentionally Omitted.
7.8	Intentionally Omitted.
7.9	Intentionally Omitted.
7.10	Intentionally Omitted.
7.10A	Intentionally Omitted.

7.11	IFX shall have the right (in addition to its other rights under this Section 7 of this Exhibit XX) to disclose the Specific Results and Background Know-How from a Bulk Project, as part of a license of substantially the entirety of IFX’s applicable Bulk CMOS as set forth in 7.11.1 and 7.11.2.
	7.11.1	XXXXXX. IFX shall not utilize the disclosure right set forth in this 7.11.1 of this Exhibit so as to circumvent IFX’s obligations, as set forth elsewhere in the Agreement, to source manufacturing capacity for the applicable Bulk CMOS at the ROFR Partners. XXXXXX
		Such disclosures cannot be made without a written agreement between IFX and the recipient Third Party that, at a minimum, shall have a term of confidentiality consistent with that set forth Agreement and that limits such recipient’s use of such information in accordance with terms and conditions consistent with those set forth Agreement.
		7.11.2	Intentionally Omitted.

IBM — CHARTERED CONFIDENTIAL 31  IBM — Chartered Participation Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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filed separately with the Securities and Exchange Commission.

EXECUTION VERSION IBM License Number: L065073

EXHIBIT H — COMPANY ASSIGNED TASKS

XXXXXX

IBM — CHARTERED CONFIDENTIAL 32  IBM — Chartered Participation Agreement

EX-4.11.15

Exhibit 4.11.15

Confidential Treatment Requested
The portions of this document marked by “XXXXXX” have been omitted pursuant to a request for confidential
treatment and have been filed separately with the Securities and Exchange Commission

Final 45nm Bulk-Industry Standard Semiconductor Process Technology

JOINT DEVELOPMENT PROJECT AGREEMENT

for

45nm BULK-INDUSTRY STANDARD SEMICONDUCTOR PROCESS TECHNOLOGY

with

INTERNATIONAL BUSINESS MACHINES CORP.

dated

DECEMBER 15, 2006

IBM CONFIDENTIAL 1 Joint Development Project Agreement

Final 45nm Bulk-Industry Standard Semiconductor Process Technology

This Joint Development Project Agreement for 45nm Bulk-Industry Standard Semiconductor Process Technology (“Project Agreement”) is made effective as of December 15, 2006 (the “Effective Date”) by and between International Business Machines Corporation (“IBM”), incorporated under the laws of the State of New York, U.S.A. and having an office for the transaction of business at 2070 Route 52, Hopewell Junction, NY 12533, U.S.A, and all Participating Parties.

WHEREAS, IBM has developed and continues to develop leading edge semiconductor manufacturing processes technology and wishes to continue and/or expand such technology development in conjunction with the Participating Parties;

WHEREAS, the Participating Parties seek to undertake such technology development with each other and with IBM based upon the terms and conditions provided in this Project Agreement (including the Master Terms);

WHEREAS, each Participating Party and IBM will also supplement this Project Agreement (including the Master Terms) by executing a Participation Agreement that provides certain supplemental terms and conditions that only govern between IBM and such Participating Party; and

WHEREAS, through the use of complementary skills and know-how the Parties desire to achieve resource efficiencies and cost savings, and reduce the technical risk associated with the development of the subject technology in order to complete development of and utilize leading edge technologies sooner than would be possible with any of the Parties acting independently.

NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, as well as for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows.

1. Additional Definitions. Unless expressly defined and used with an initial capital letter in the Master Terms (as defined below) or the rest of this Project Agreement, words shall have their normally accepted meanings. The following terms shall have the meanings ascribed to them:

“Background Know-How Exclusions” is defined in Section 4(b).

“Bulk CMOS” means CMOS semiconductor manufacturing technology carried out on a wafer that is not an SOI Wafer.

“Bulk CMOS Integrated Circuit” means an Integrated Circuit fabricated utilizing a Bulk CMOS manufacturing process.

“Chip Design(s)” means any design of one or more Integrated Circuits and/or Semiconductor Products, including (by way of example and not limitation) random access memory (RAM)s, read only memory (ROM)s, microprocessors, application specific Integrated Circuits (ASICs) and other logic designs, and analog circuitry; provided,

IBM CONFIDENTIAL 2 Joint Development Project Agreement

Final 45nm Bulk-Industry Standard Semiconductor Process Technology

however, that “Chip Designs” shall not include (i) alignment marks or test structures and associated layout and data used in the Development Projects for process development, (ii) process kerf test structures, layout, and data of the test chip(s) (including SRAM or ROM macro cells) as well as such test chips themselves used for the development work of the Development Projects unless any of the foregoing items are specifically excluded (for clarity, to “specifically exclude” such an item means it is included in the definition of Chip Design), or (iii) other product designs as mutually agreed by the Parties to be used as qualification vehicles in the Development Projects unless specifically excluded (for clarity, to “specifically exclude” a product design means it is included in the definition of Chip Design), or (iv) ESD protection devices as used in the project Test Sites and ESD groundrules and models as defined in the Documentation. For the avoidance of doubt, all of (i) through (iv) above shall be treated as Specific Results to the extent utilized in a Development Project.

“45nm Bulk CMOS” also known as “45nm Industry Standard CMOS” means the next major lithography generation Bulk CMOS logic fabrication process technology for 300mm wafers below 65nm, with the target objectives set forth in Exhibit A, attached hereto.

“Development Project” means the technology development project and any sub-projects identified in Exhibit A to this Project Agreement.

“Effective Date” means the date set forth in the preamble of this Project Agreement.

“L1” means yield, process and reliability demonstration on an integrated process Test Site (all JEDEC qualification tests & preliminary functional stress). Qualification criteria will be mutually reviewed for consistency with application requirements. Reliability stresses are as per industry standard criteria and specification.

“Mask Fabrication and Photoresist Technology” means any process, procedure, Proprietary Tools, Third Party tools, or hardware tool used in the fabrication of photomasks, as well as the photomasks themselves, and/or the formulation and/or manufacture of photoresist; provided, however, that “Mask Fabrication and Photoresist Technology” shall not include Lithography.

“Master Terms” means the Master IBM Joint Development Terms and Conditions December 15, 2006 version.

“Participating Party Qualification” also known as the “Participating Party L2” means the successful completion of foundry standard stress on a product and/or a product like vehicle with mixed signal, digital, and SRAM elements and with manufacturing process routing defined, in the Participating Party’s manufacturing facility for 300mm Wafers.

“Party” means IBM and each Participating Party in the Development Project.

“Project Agreement” means the terms and conditions of this Joint Development Project Agreement for 45nm Bulk-Industry Standard Semiconductor Process Technology dated

IBM CONFIDENTIAL 3 Joint Development Project Agreement

Final 45nm Bulk-Industry Standard Semiconductor Process Technology

December 15, 2006, together with (i) any exhibits, attachments and appendices hereto, and (ii) the “Participating Party Notification” for each Participating Party.

“Project Term” is defined in Section 6.

“Qualification” also known as “L2” and means the successful completion of foundry standard stress (i.e. a stress which is based upon industry standard criteria and specifications) on a product and/or a product like vehicle with mixed signal, digital, and SRAM elements and with manufacturing process routing defined, in the IBM manufacturing line for 300mm Wafers and consistent with the Strategic Technology Objectives as set forth in Exhibit A.

Silicon-Germanium Technology” or “SiGe Technology” means semiconductor fabrication processes and design techniques incorporating silicon and germanium layers, including those processes and design techniques for use in HEMTs, photodetectors, HBTs or any other applications of bipolar transistors, provided, however, “SiGe Technology” shall not include strained silicon channel MOSFET or any mobility enhancement techniques for FETs carried out on high performance Integrated Circuit wafers.

“Silicon-On-Insulator Wafer” or “SOI Wafer” means a single-crystal silicon wafer bearing a horizontally-disposed isolating silicon dioxide (SiO₂) layer, in turn bearing a single-crystal silicon layer or a polysilicon layer, which is separated from the underlying silicon by the silicon dioxide layer and in which one or more active or passive integrated circuit structures are formed.

“SOI Information” means any and all process methods, steps, and structures created on SOI Wafers and not on Bulk CMOS Integrated Circuits.

“Specific Results Exclusions” is defined in Section 3(a).

2. IBM Development Facilities; Agreement Structure; Relationship to Other Documents.

(a) The Parties shall primarily utilize the IBM Development Facilities for the Development Project.

(b) The terms and conditions of the Master Terms are incorporated into this Project Agreement by reference as if fully set forth herein.

(c) IBM shall promptly notify existing Participating Parties of the addition of a new Participating Party to and the withdrawal/removal of an existing Participating Party from the Development Project. In the case of a new Participating Party, IBM shall complete such notification by distributing copies of the signed “Participating Party Notification”, which provides certain details about the new Participating Party (e.g. the first day of its participation, Designated Executive, Project Leader and Notice Addresses), and

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memorializes the new Participating Party’s contractual privity with the other Participating Parties.

(d) The Party’s respective ownership, disclosure, and/or license rights as to the Specific Results and Background Know-How are set forth in that Party’s Participation Agreement and this Project Agreement (including the Master Terms).

(e) For the Development Project, the Parties will strive to utilize consumables (including, but not limited to, photoresist) in the Development Project that will be available to the Parties from commercial suppliers. However, if a consumable proposed by IBM is an IBM proprietary consumable, the IBM Project Leader will notify the Participating Parties of such proposed selection, specifying the respects in which the consumable is IBM proprietary. In addition, within thirty (30) days of such proposed selection IBM will inform the Third Party supplier of such IBM proprietary consumable that if such supplier is chosen by IBM, such supplier may provide such proprietary consumable to the Participating Parties irrespective of any IBM imposed restriction or proprietary rights that might otherwise exist. If such supplier refuses to sell the proprietary consumable to Participating Parties or IBM and Participating Parties reasonably believe that such supplier will not sell to Participating Parties, then IBM shall either enable Participating Parties to purchase such consumable from another source or select another consumable prior to the applicable Qualification.

3. Scope of Development Project.

(a) As part of the Development Project, the Parties shall jointly develop semiconductor manufacturing process technology based on an industry standard technology roadmap that meets the requirements set forth as “Strategic Technology Objectives” in Exhibit A in accordance with the schedule set forth on Exhibit B (the “Development Schedule”). The Parties shall create the Documentation identified on Exhibit C for the Development Project. For the avoidance of doubt, the Development Project shall not include the development of the following “Specific Results Exclusions”: i) Proprietary Tools, ii) Packaging Technology, iii) Mask Fabrication and Photoresist Technology, iv) Memory, v) SiGe Technology, vi) SOI Information, and vii) Chip Designs. The Parties are not obligated to exchange any updates to the Specific Results after the Project Term.

(b) The Parties agree that Exhibit A also sets forth the current, as of the Effective Date, technology implementation options for the Development Project. The Parties shall work together to evaluate the various options available, including individual Process Module feasibility, integration, characterization, and qualification. The goal of such evaluation is to agree on an integrated process technology that meets the Strategic Technology Objectives. If the Project Leaders are unable to agree on a particular Process Module to be developed, or should they disagree as to continued development of a Process Module that was previously selected, the Process Module preferred by IBM shall be pursued in the Development Project, provided it is consistent with foundry industry marketplace requirements and the standard baseline Bulk CMOS process for such fabrication process generation. Any Participating Party may escalate the failure to agree through the

IBM CONFIDENTIAL 5 Joint Development Project Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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Final 45nm Bulk-Industry Standard Semiconductor Process Technology

procedures set forth in Section 18.3 of the Master Terms. In the event that a Party proposes a Process Module or replacement Process Module that does not get selected after escalation, then such Party shall have the right, subject to the remaining terms and conditions of the Agreement, to proceed with such development outside the performance of the Development Projects.

4. Information Transfers.

(a) As referenced in Section 7.3 of the Master Terms, the “Confidentiality Period” is from the Effective Date until XXXXXX after the date set forth on Exhibit B (as of the Effective Date) for the applicable Qualification.

(b) As referenced in the Master Terms, the “Background Know How Exclusions” for purposes of the Development Project are: i) Proprietary Tools, ii) Packaging Technology, iii) Mask Fabrication and Photoresist Technology, iv) Memory, v) SiGe Technology, vi) SOI Information, and vii) Chip Designs.

(c) In addition to the disclosure rights of a Participating Party pursuant to Section 7 and license rights in Section 8 of the Master Terms, each Participating Party has the following rights to disclose portions of Specific Results and/or Background Know-How, solely for the purpose of exercising its rights under the Agreement:

1. To contractors, suppliers, and consultants (and, for clarity, Subsidiaries of such Participating Party acting in any of the foregoing capacities) as may be reasonably necessary for Participating Party to manufacture Integrated Circuits and Semiconductor Products. By way of example and not limitation, examples of the general types of information the Parties agree are “reasonably necessary” for disclosure to such contractors, suppliers, and consultants are as follows:

     XXXXXX

2. To customers (including companies providing design services to such customers), library/IP creators, Electronic Design Automation (“EDA”) vendors, consultants (such consultants including design service providers, integrated circuit designers, and external subcontractors), (and, for clarity, Subsidiaries of a Participating Party acting in any of the foregoing capacities) (collectively, “Customers/Designers”) as may be reasonably necessary to enable the design and sale of Integrated Circuits or Semiconductor Products to such customers by Participating Party. By way of example and not limitation, examples of the general types of information the Parties agree are “reasonably necessary” for disclosure to some or all Customers/Designers are as follows:

     XXXXXX

IBM CONFIDENTIAL 6 Joint Development Project Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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This Section 4(c)2 also includes the right to sublicense (as set forth in Section 8.5 of the Master Terms) to EDA vendors and circuit design or library providers where such sublicense is for the benefit of the Participating Party’s foundry business in connection with the manufacture and sale of wafers containing Integrated Circuits, acknowledging that such Third Parties may license for their own benefit the resultant EDA software and/or cores or IP blocks to Customers/Designers.

This Section 4(c)2 also includes the right to disclose to a Participating Party’s customers as may be reasonably necessary, solely for the purpose of enabling the Participating Party to develop Derivative Technology for the manufacture of Integrated Circuits or Semiconductor Products solely for such customer and to manufacture Integrated Circuits or Semiconductor Products for such customer. The resultant Derivative Technology may be used by the Participating Party to manufacture Integrated Circuits or Semiconductor Products for future customers, but such future customers will not get any access to any of the Specific Results and/or Background Know-How, except as otherwise set forth in this Section 4.

Disclosures pursuant to this Section 4(c) will not be made without a written agreement between the Participating Party and the recipient Third Party. Such written agreements shall be subject to the following:

(a)	such agreements must obligate the recipient to utilize the disclosed information solely for the benefit of the discloser and for no other purpose, and solely in furtherance of the purposes set forth in this Section 4; and
(b)	such disclosures shall be subject to confidentiality terms and conditions that are the same or substantially similar to those set forth in this Agreement, and at a minimum must have a confidentiality term that is no shorter than XXXXXX.

5. Intentionally Omitted.

6. Project Term and Termination.

(a) This Project Agreement is in effect from the Effective Date and, unless terminated as set forth in the Agreement (including Section 12 of the Master Terms), remains in force until XXXXXX (the “Project Term”); provided, however, the Management Committee may extend the Project Term until XXXXXX in accordance with Section 18.15 of the Master Terms without the need for the Parties to execute a written amendment to this Project Agreement. For clarity, a Participating Party may, as specified in its Participation Agreement, participate in the Development Project for all or a portion of the Project Term.

(b) The Project Term may only be extended beyond XXXXXX (i) as to all Parties, by the mutual agreement of all Parties, or (ii) as to certain Parties, by mutual agreement of

IBM CONFIDENTIAL 7 Joint Development Project Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
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such Parties. Each Party who agrees to extend the Project Term beyond XXXXXX shall memorialize its agreement to participate in such extensions by amending its Participation Agreement with IBM. IBM shall update the Project Database to reflect such Project Term extension.

(c) The following Sections of this Project Agreement survive and continue to bind the Parties and their legal representatives, successors and assigns after the expiration or termination of this Project Agreement: 1, 2(b), 2(d), 4, 6(c), 6(d) and 8. In addition, certain provisions of the Master Terms and a Participating Party’s Participation Agreement survive, as detailed in each agreement, respectively.

(d) Notwithstanding any provision in this Project Agreement to the contrary, if a non-breaching Party is authorized to terminate all licenses and disclosure rights granted to a breaching Party pursuant to Section 12.6 of the Master Terms, then such non-breaching Party is also authorized to terminate all license and disclosure rights it granted to that breaching party pursuant to Section 4 of this Project Agreement.

7. Management of the Development Project; Notice. Each Participating Party shall promptly provide a Management Committee Member, a Project Leader, a Technical Coordinator, a Designated Executive, and a Notice Address for the Development Project.

The IBM Management Committee Member, IBM Project Leader, IBM Technical Coordinator, Designated Executive, and the IBM Notice Address are as follows:

          XXXXXX

Any Party may change its respective appointments and addresses by written notice to the IBM Project Leader who will update the Project Database within seven (7) business days after notification. No such change is effective until reflected in the Project Database .

8. Limitation Amount. As referenced in Section 17 (Limitation of Liability) of the Master Terms, the Limitation Amount for this Development Project is XXXXXX.

IN WITNESS WHEREOF, IBM has caused this Project Agreement to be executed by its duly authorized representatives as of the Effective Date, signifying its agreement to this Project Agreement with all Participating Parties.

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International Business Machines Corporation

By:/s/ Adalio T. Sanchez
Name: Adalio T. Sanchez
Title: GM Technology Collaboration Solutions

Date:12/15/06

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EXHIBIT A: TECHNICAL OBJECTIVES

EXHIBIT B: DEVELOPMENT SCHEDULE

EXHIBIT C: DOCUMENTATION

IBM CONFIDENTIAL 10 Joint Development Project Agreement

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EXHIBIT A

TECHNICAL OBJECTIVES

     XXXXXX

IBM CONFIDENTIAL 11 Joint Development Project Agreement

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EXHIBIT B

DEVELOPMENT SCHEDULE

XXXXXX

IBM CONFIDENTIAL 12 Joint Development Project Agreement

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EXHIBIT C

DOCUMENTATION

XXXXXX

IBM CONFIDENTIAL 13 Joint Development Project Agreement

EX-4.11.16

Exhibit 4.11.16

Confidential Treatment Requested
The portions of this document marked by “XXXXXX” have been omitted pursuant to a request for confidential
treatment and have been filed separately with the Securities and Exchange Commission

Final 32nm Bulk-Industry Standard Semiconductor Process Technology

JOINT DEVELOPMENT PROJECT AGREEMENT

for

32nm BULK-INDUSTRY STANDARD SEMICONDUCTOR PROCESS TECHNOLOGY

with

INTERNATIONAL BUSINESS MACHINES CORP.

dated

DECEMBER 15, 2006

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This Joint Development Project Agreement for 32nm Bulk-Industry Standard Semiconductor Process Technology (“Project Agreement”) is made effective as of December 15, 2006 (the “Effective Date”) by and between International Business Machines Corporation (“IBM”), incorporated under the laws of the State of New York, U.S.A. and having an office for the transaction of business at 2070 Route 52, Hopewell Junction, NY 12533, U.S.A, and all Participating Parties.

WHEREAS, IBM has developed and continues to develop leading edge semiconductor manufacturing processes technology and wishes to continue and/or expand such technology development in conjunction with the Participating Parties;

WHEREAS, the Participating Parties seek to undertake such technology development with each other and with IBM based upon the terms and conditions provided in this Project Agreement (including the Master Terms);

WHEREAS, each Participating Party and IBM will also supplement this Project Agreement (including the Master Terms) by executing a Participation Agreement that provides certain supplemental terms and conditions that only govern between IBM and such Participating Party; and

WHEREAS, through the use of complementary skills and know-how the Parties desire to achieve resource efficiencies and cost savings, and reduce the technical risk associated with the development of the subject technology in order to complete development of and utilize leading edge technologies sooner than would be possible with any of the Parties acting independently.

NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, as well as for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows.

1. Additional Definitions. Unless expressly defined and used with an initial capital letter in the Master Terms (as defined below) or the rest of this Project Agreement, words shall have their normally accepted meanings. The following terms shall have the meanings ascribed to them:

“Background Know-How Exclusions” is defined in Section 4(b).

“Bulk CMOS” means CMOS semiconductor manufacturing technology carried out on a wafer that is not an SOI Wafer.

“Bulk CMOS Integrated Circuit” means an Integrated Circuit fabricated utilizing a Bulk CMOS manufacturing process.

“Chip Design(s)” means any design of one or more Integrated Circuits and/or Semiconductor Products, including (by way of example and not limitation) random access memory (RAM)s, read only memory (ROM)s, microprocessors, application specific Integrated Circuits (ASICs) and other logic designs, and analog circuitry; provided,

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however, that “Chip Designs” shall not include (i) alignment marks or test structures and associated layout and data used in the Development Projects for process development, (ii) process kerf test structures, layout, and data of the test chip(s) (including SRAM or ROM macro cells) as well as such test chips themselves used for the development work of the Development Projects unless any of the foregoing items are specifically excluded (for clarity, to “specifically exclude” such an item means it is included in the definition of Chip Design), or (iii) other product designs as mutually agreed by the Parties to be used as qualification vehicles in the Development Projects unless specifically excluded (for clarity, to “specifically exclude” a product design means it is included in the definition of Chip Design), or (iv) ESD protection devices as used in the project Test Sites and ESD groundrules and models as defined in the Documentation. For the avoidance of doubt, all of (i) through (iv) above shall be treated as Specific Results to the extent utilized in a Development Project.

“32nm Bulk CMOS” also known as “32nm Industry Standard CMOS” means the next major lithography generation Bulk CMOS logic fabrication process technology for 300mm wafers below 45nm, with the target objectives set forth in Exhibit A, attached hereto.

“Development Project” means the technology development project and any sub-projects identified in Exhibit A to this Project Agreement.

“Effective Date” means the date set forth in the preamble of this Project Agreement.

“L1” means yield, process and reliability demonstration on an integrated process Test Site (all JEDEC qualification tests & preliminary functional stress). Qualification criteria will be mutually reviewed for consistency with application requirements. Reliability stresses are as per industry standard criteria and specifications.

“Mask Fabrication and Photoresist Technology” means any process, procedure, Proprietary Tools, Third Party tools, or hardware tool used in the fabrication of photomasks, as well as the photomasks themselves, and/or the formulation and/or manufacture of photoresist; provided, however, that “Mask Fabrication and Photoresist Technology” shall not include Lithography.

“Master Terms” means the Master IBM Joint Development Terms and Conditions December 15, 2006 version.

“Manufacturing Apparatus” means semiconductor wafer fabrication equipment, flat-panel display fabrication equipment and wafer inspection equipment or components primarily designed for use in such equipment, including, without limitation, software, firmware, microcode or drivers used to cause such equipment to perform its intended function, whether or not such software, firmware, microcode, or drivers are shipped with such equipment or installed separately. “Participating Party Qualification” also known as the “Participating Party L2” means the successful completion of foundry standard stress on a product and/or a product like vehicle with mixed signal, digital, and SRAM elements

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and with manufacturing process routing defined, in the Participating Party’s manufacturing facility for 300mm Wafers.

“Party” means IBM and each Participating Party in the Development Project.

“Project Agreement” means the terms and conditions of this Joint Development Project Agreement for 32nm Bulk-Industry Standard Semiconductor Process Technology dated December 15, 2006, together with (i) any exhibits, attachments and appendices hereto, and (ii) the “Participating Party Notification” for each Participating Party.

“Project Term” is defined in Section 6.

“Qualification” also known as “L2” and means the successful completion of foundry standard stress (i.e. a stress which is based upon industry standard criteria and specifications) on a product and/or a product like vehicle with mixed signal, digital, and SRAM elements and with manufacturing process routing defined, in the IBM manufacturing line for 300mm Wafers and consistent with the Strategic Technology Objectives as set forth in Exhibit A.

“Silicon-Germanium Technology” or “SiGe Technology” means semiconductor fabrication processes and design techniques incorporating silicon and germanium layers, including those processes and design techniques for use in HEMTs, photodetectors, HBTs or any other applications of bipolar transistors, provided, however, “SiGe Technology” shall not include strained silicon channel MOSFET or any mobility enhancement techniques for FETs carried out on high performance Integrated Circuit wafers.

“Silicon-On-Insulator Wafer” or “SOI Wafer” means a single-crystal silicon wafer bearing a horizontally-disposed isolating silicon dioxide (SiO₂) layer, in turn bearing a single-crystal silicon layer or a polysilicon layer, which is separated from the underlying silicon by the silicon dioxide layer and in which one or more active or passive integrated circuit structures are formed.

“SOI Information” means any and all process methods, steps, and structures created on SOI Wafers and not on Bulk CMOS Integrated Circuits.

“Specific Results Exclusions” is defined in Section 3(a).

2. IBM Development Facilities; Agreement Structure; Relationship to Other Documents.

(a) The Parties shall primarily utilize the IBM Development Facilities for the Development Project.

(b) The terms and conditions of the Master Terms are incorporated into this Project Agreement by reference as if fully set forth herein.

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(c) IBM shall promptly notify existing Participating Parties of the addition of a new Participating Party to and the withdrawal/ removal of an existing Participating Party from the Development Project. In the case of a new Participating Party, IBM shall complete such notification by distributing copies of the signed “Participating Party Notification”, which provides certain details about the new Participating Party (e.g. the first day of its participation, Designated Executive, Project Leader and Notice Addresses), and memorializes the new Participating Party’s contractual privity with the other Participating Parties.

(d) The Party’s respective ownership, disclosure, and/or license rights as to the Specific Results and Background Know-How are set forth in that Party’s Participation Agreement and this Project Agreement (including the Master Terms).

(e) For the Development Project, the Parties will strive to utilize consumables (including, but not limited to, photoresist) in the Development Project that will be available to the Parties from commercial suppliers. However, if a consumable proposed by IBM is an IBM proprietary consumable, the IBM Project Leader will notify the Participating Parties of such proposed selection, specifying the respects in which the consumable is IBM proprietary. In addition, within thirty (30) days of such proposed selection IBM will inform the Third Party supplier of such IBM proprietary consumable that if such supplier is chosen by IBM, such supplier may provide such proprietary consumable to the Participating Parties irrespective of any IBM imposed restriction or proprietary rights that might otherwise exist. If such supplier refuses to sell the proprietary consumable to Participating Parties or IBM and the Participating Parties reasonably believe that such supplier will not sell to Participating Parties, then IBM shall either enable Participating Parties to purchase such consumable from another source or select another consumable prior to the applicable Qualification.

3. Scope of Development Project.

(a) As part of the Development Project, the Parties shall jointly develop semiconductor manufacturing process technology based on an industry standard technology roadmap that meets the requirements set forth as “Strategic Technology Objectives” in Exhibit A in accordance with the schedule set forth on Exhibit B (the “Development Schedule”). The Parties shall create the Documentation identified on Exhibit C for the Development Project. For the avoidance of doubt, the Development Project shall not include the development of the following “Specific Results Exclusions”: i) Proprietary Tools, ii) Packaging Technology, iii) Mask Fabrication and Photoresist Technology, iv) Memory, v) SiGe Technology, vi) SOI Information, and vii) Chip Designs. The Parties are not obligated to exchange any updates to the Specific Results after the Project Term.

(b) The Parties agree that Exhibit A also sets forth the current, as of the Effective Date, technology implementation options for the Development Project. The Parties shall work together to evaluate the various options available, including individual Process Module feasibility, integration, characterization, and qualification. The goal of such evaluation is to agree on an integrated process technology that meets the Strategic Technology

IBM CONFIDENTIAL 5 Joint Development Project Agreement

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Objectives. If the Project Leaders are unable to agree on a particular Process Module to be developed, or should they disagree as to continued development of a Process Module that was previously selected, the Process Module preferred by IBM shall be pursued in the Development Project, provided it is consistent with foundry industry marketplace requirements and the standard baseline Bulk CMOS process for such fabrication process generation. Any Participating Party may escalate the failure to agree through the procedures set forth in Section 18.3 of the Master Terms. In the event that a Party proposes a Process Module or replacement Process Module that does not get selected after escalation, then such Party shall have the right, subject to the remaining terms and conditions of the Agreement, to proceed with such development outside the performance of the Development Projects.

4. Information Transfers.

(a) As referenced in Section 7.3 of the Master Terms, the “Confidentiality Period” is from the Effective Date until XXXXXX after the date set forth on Exhibit B (as of the Effective Date) for the applicable Qualification.

(b) As referenced in the Master Terms, the “Background Know How Exclusions” for purposes of the Development Project are: i) Proprietary Tools, ii) Packaging Technology, iii) Mask Fabrication and Photoresist Technology, iv) Memory, v) SiGe Technology, vi) SOI Information, and vii) Chip Designs.

(c) In addition to the disclosure rights of a Participating Party pursuant to Section 7 and license rights in Section 8 of the Master Terms, each Participating Party has the following rights to disclose portions of Specific Results and/or Background Know-How, solely for the purpose of exercising its rights under the Agreement:

1. To contractors, suppliers, and consultants (and, for clarity, Subsidiaries of such Participating Party acting in any of the foregoing capacities) as may be reasonably necessary for Participating Party to manufacture Integrated Circuits and Semiconductor Products. By way of example and not limitation, examples of the general types of information the Parties agree are “reasonably necessary” for disclosure to such contractors, suppliers, and consultants are as follows:

          XXXXXX

2. To customers (including companies providing design services to such customers), library/IP creators, Electronic Design Automation (“EDA”) vendors, consultants (such consultants including design service providers, integrated circuit designers, and external subcontractors), (and, for clarity, Subsidiaries of a Participating Party acting in any of the foregoing capacities) (collectively, “Customers/Designers”) as may be reasonably necessary to enable the design and sale of Integrated Circuits or Semiconductor Products to such customers by Participating Party. By way of example and not limitation, examples of the general types of information the Parties

IBM CONFIDENTIAL 6 Joint Development Project Agreement

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agree are “reasonably necessary” for disclosure to some or all Customers/Designers are as follows:

          XXXXXX

This Section 4(c)2 also includes the right to sublicense (as set forth in Section 8.5 of the Master Terms) to EDA vendors and circuit design or library providers where such sublicense is for the benefit of the Participating Party’s foundry business in connection with the manufacture and sale of wafers containing Integrated Circuits, acknowledging that such Third Parties may license for their own benefit the resultant EDA software and/or cores or IP blocks to Customers/Designers.

This Section 4(c)2 also includes the right to disclose to a Participating Party’s customers as may be reasonably necessary, solely for the purpose of enabling the Participating Party to develop Derivative Technology for the manufacture of Integrated Circuits or Semiconductor Products solely for such customer and to manufacture Integrated Circuits or Semiconductor Products for such customer. The resultant Derivative Technology may be used by the Participating Party to manufacture Integrated Circuits or Semiconductor Products for future customers, but such future customers will not get any access to any of the Specific Results and/or Background Know-How, except as otherwise set forth in this Section 4.

Disclosures pursuant to this Section 4(c) will not be made without a written agreement between the Participating Party and the recipient Third Party. Such written agreements shall be subject to the following:

(a)	such agreements must obligate the recipient to utilize the disclosed information solely for the benefit of the discloser and for no other purpose, and solely in furtherance of the purposes set forth in this Section 4; and
(b)	such disclosures shall be subject to confidentiality terms and conditions that are the same or substantially similar to those set forth in this Agreement, and at a minimum must have a confidentiality term that is no shorter than XXXXXX.

5. Tool Vendor Confidential Information.

Notwithstanding anything to the contrary in Section 4 of this Project Agreement, Section 3.6 of the Master Terms or the rest of the Agreement, the Parties recognize that IBM is working with certain Third Party tool vendors to develop, among other things, Background Know-How which may include Third Party tool vendor confidential information (“Tool Vendor Confidential Information”), and agree that (a) IBM may elect to introduce certain Tool Vendor Confidential Information into the Development Project as Background Know-How, and (b) the Specific Results may include such Tool Vendor Confidential Information. If IBM elects to so introduce such Tool Vendor Confidential

IBM CONFIDENTIAL 7 Joint Development Project Agreement

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Information, IBM shall identify such information and the following terms apply to such information:

Each Participating Party is authorized to disclose or sublicense to any of its business units and/or Subsidiaries the Tool Vendor Confidential Information; provided, however, that such business unit and/or Subsidiary is not in a business, nor has announced plans to be in, or to acquire, a business that manufactures, sells, or distributes Manufacturing Apparatus. If Participating Party wishes to obtain additional license rights to such Tool Vendor Confidential Information, then Participating Party must negotiate additional rights with such Third Party tool vendor. The obligations of confidentiality with respect to any disclosure to a Participating Party pursuant to this Section 5 shall terminate ten (10) years after disclosure by IBM, unless otherwise agreed in writing between such Third Party and the Participating Party, with written notification to IBM. Participating Party shall require that each such business unit and/or Subsidiary agree to maintain such Tool Vendor Confidential Information confidential on terms at least as restrictive as contained in this Agreement including this Section 5.

6. Project Term and Termination.

(a) This Project Agreement is in effect from the Effective Date and, unless terminated as set forth in the Agreement (including Section 12 of the Master Terms), remains in force until XXXXXX (the “Project Term”); provided, however, the Management Committee may extend the Project Term until XXXXXX in accordance with Section 18.15 of the Master Terms without the need for the Parties to execute a written amendment to this Project Agreement. For clarity, a Participating Party may, as specified in its Participation Agreement, participate in the Development Project for all or a portion of the Project Term.

(b) The Project Term may only be extended beyond XXXXXX (i) as to all Parties, by the mutual agreement of all Parties, or (ii) as to certain Parties, by mutual agreement of such Parties. Each Party who agrees to extend the Project Term beyond XXXXXX shall memorialize its agreement to participate in such extensions by amending its Participation Agreement with IBM. IBM shall update the Project Database to reflect such Project Term extension.

(c) The following Sections of this Project Agreement survive and continue to bind the Parties and their legal representatives, successors and assigns after the expiration or termination of this Project Agreement: 1, 2(b), 2(d), 4, 5, 6(c), 6(d) and 8. In addition, certain provisions of the Master Terms and a Participating Party’s Participation Agreement survive, as detailed in each agreement, respectively.

(d) Notwithstanding any provision in this Project Agreement to the contrary, if a non-breaching Party is authorized to terminate all licenses and disclosure rights granted to a breaching Party pursuant to Section 12.6 of the Master Terms, then such non-breaching

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Party is also authorized to terminate all license and disclosure rights it granted to that breaching party pursuant to Section 4 of this Project Agreement.

7. Management of the Development Project; Notice. Each Participating Party shall promptly provide a Management Committee Member, a Project Leader, a Technical Coordinator, a Designated Executive, and a Notice Address for the Development Project.

The IBM Management Committee Member, IBM Project Leader, IBM Technical Coordinator, Designated Executive, and the Notice Address are as follows:

          XXXXXX

Any Party may change its respective appointments and addresses by written notice to the IBM Project Leader who will update the Project Database within seven (7) business days after notification. No such change is effective until reflected in the Project Database .

8. Limitation Amount. As referenced in Section 17 (Limitation of Liability) of the Master Terms, the Limitation Amount for this Development Project is XXXXXX.

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IBM CONFIDENTIAL 9 Joint Development Project Agreement

Final 32nm Bulk-Industry Standard Semiconductor Process Technology

IN WITNESS WHEREOF, IBM has caused this Project Agreement to be executed by its duly authorized representatives as of the Effective Date, signifying its agreement to this Project Agreement with all Participating Parties.

International Business Machines Corporation

By: /s/Adalio T. Sanchez
Name: Adalio T. Sanchez
Title: GM Technology Collaboration Solutions

Date:12/15/06

IBM CONFIDENTIAL 10 Joint Development Project Agreement

Final 32nm Bulk-Industry Standard Semiconductor Process Technology

EXHIBIT A: TECHNICAL OBJECTIVES

EXHIBIT B: DEVELOPMENT SCHEDULE

EXHIBIT C: DOCUMENTATION

IBM CONFIDENTIAL 11 Joint Development Project Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

Final 32nm Bulk-Industry Standard Semiconductor Process Technology

EXHIBIT A

TECHNICAL OBJECTIVES

XXXXXX

IBM CONFIDENTIAL 12 Joint Development Project Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

Final 32nm Bulk-Industry Standard Semiconductor Process Technology

EXHIBIT B

DEVELOPMENT SCHEDULE

XXXXXX

IBM CONFIDENTIAL 13 Joint Development Project Agreement

REDACTED CONFIDENTIAL TREATMENT REQUESTED
The portions of this document marked by “XXXXX” have been omitted and are
filed separately with the Securities and Exchange Commission.

Final 32nm Bulk-Industry Standard Semiconductor Process Technology

EXHIBIT C

DOCUMENTATION

XXXXXX

IBM CONFIDENTIAL 14 Joint Development Project Agreement

EX-4.16.3

Exhibit 4.16.3

Private Lot A12787(k)
(A1964508)

DATED THIS ON THE 3^RD DAY OF JANUARY 2007

BETWEEN

TERRA INVESTMENTS PTE LTD

(Company Registration No. 200413927M)

...of the one part

AND

CHARTERED SEMICONDUCTOR MANUFACTURING LTD

(Company Registration No. 198703584-K)

... of the other part

SUPPLEMENTAL AGREEMENT

in relation to
the Agreement for Sub-Licence and Sub-Lease
(Private Lot A12787(k) now known as A1964508)
dated 8 July 2005 entered into between STPL and Chartered
as amended and supplemented by
the Novation Agreement dated 8 July 2005
entered into between STPL, Chartered and Terra

THIS SUPPLEMENTAL AGREEMENT (the “Supplemental Agreement”) is made on the 3^rd day of January 2007.

BETWEEN :-

(1) TERRA INVESTMENTS PTE LTD, a company incorporated in Singapore and having its registered office at 60B Orchard Road #06-18 Tower 2 The Atrium @ Orchard Singapore 238891 (hereinafter called “Terra”);

AND

(2) CHARTERED SEMICONDUCTOR MANUFACTURING LTD, a company incorporated in Singapore and having its registered office at 60 Woodlands Industrial Park D, Street 2, Singapore 738406 (hereinafter called “Chartered”).

WHEREAS :-

(A) By an Agreement for Sub-Licence and Sub-Lease dated 8 July 2005 (the “Agreement”) made between Singapore Technologies Pte Ltd (“STPL”) and Chartered, STPL granted:

(a)	a sub-license to Chartered to enter upon the Property (as defined in the Agreement) for a period of 3 years (less 1 day) from the Commencement Date (as defined in the Agreement) for the construction of certain factory buildings thereon and installation of equipment, fixtures and fittings thereof; and
(b)	upon the completion of such construction and installation, a sub-lease of the Property for a term of 30 years (less 1 day) commencing from 16 May 2000,

	on the terms and subject to the conditions of the Agreement.
(B)	By a Novation Agreement dated 8 July 2005 entered into between STPL, Chartered and Terra, and with the consent of Chartered, STPL novated all its rights title interest and obligations under the Agreement to Terra as if Terra was a party to the Agreement in place of STPL.
(C)	At the request of Chartered, Terra has accepted the option offered by the head lessor of the Property, Jurong Town Corporation (“JTC”), to convert the 4% annual fixed rent increase scheme to a 5.5% annual rent increase cap scheme set out in a letter (“JTC Letter”) dated 26 January 2006 issued by JTC to Terra.
(D)	The parties to this Supplemental Agreement now desire to amend the Agreement as more particularly stated hereinafter.

NOW, THEREFORE, the parties agree as follows:-

1.	Amendment to the Annual Rent
1.1	In consideration of the above, the rental clause referred to in Section (F).1.1 of the Second Schedule of the Agreement which reflects the annual 4% fixed rent increase shall be amended accordingly with effect from 22 May 2006 (the “Effective Date”) to reflect the following:-

(a)	The yearly / annual rent payable on the Effective Date shall be revised to the rate based on the market rent then prevailing;
(b)	The yearly / annual rent shall, on 16 May 2007 and on the 16th day of May of every year thereafter, be revised at the rate based on the market rent then prevailing on each of these dates, so that any such increase in the yearly / annual rent shall not exceed 5.5% of the yearly / annual rent for each immediately preceding year; and
(c)	The market rent in this context shall mean the rent per square metre per annum of the Property (as defined in the Agreement) excluding the buildings and other structures erected thereon and shall be determined by Terra and/or JTC on or about the dates mentioned (and payable retrospectively with effect from the dates mentioned if determined after the dates mentioned) and the decision of Terra and/or JTC shall be final.

1.2 The clause on the option for a further term in the Agreement which reflects the annual 4% fixed rent increase for the further term (as defined in the Agreement) shall also be amended accordingly with effect from the Effective Date to reflect the following:-

(a)	the yearly / annual rent during the further term shall, on 16 May 2031 and on the 16th day of May of every year thereafter, be revised to the rate based on the market rent on each of the dates, so that any such increase in the yearly / annual rent shall not exceed 5.5% of the yearly / annual rent for each immediately preceding year; and
(b)	the market rent in this context shall mean the rent per square metre per annum of the Property excluding the buildings and other structures erected thereon and shall be determined by Terra and/or JTC on or about the dates mentioned (and payable retrospectively with effect from the dates mentioned if determined after the dates mentioned) and the decision of Terra and/or JTC shall be final.

2. Cost and Expenses

All cost and expenses payable to JTC relating to this Supplemental Agreement and the letter dated 26 January 2006 issued by JTC to Terra and the stamp duty payable on this Agreement shall be borne by Chartered.

3.	Indemnity
	Chartered shall indemnify and keep Terra indemnified against any proceeding, costs, expenses, claim, loss, damages, penalty and liability arising, directly or indirectly from the conversion from the current 4% fixed rent increased scheme to the 5.5% annual rent increase cap scheme and this Supplemental Agreement.

4.	Head Lease
	Chartered agree to observe and be bound by the provisions in the Head Lease (including the JTC Letter and any supplemental deed entered into by Terra with JTC for the conversion of annual rent increase scheme set out in the JTC Letter) and perform all the covenants and conditions contained therein.

5.	Contracts (Rights of Third Parties) Act
	A person (which reference includes a body corporate) who is not a party to this Supplemental Agreement shall have no right under the Contracts (Rights of Third Parties) Act, Chapter 53B of Singapore (as amended or revised from time to time) to enforce any of the covenants, terms or conditions of this Supplemental Agreement.

6.	Confirmation and Incorporation
6.1	Except to the extent expressly varied or amended by the provisions of this Supplemental Agreement, all the covenants, terms and conditions in the Agreement shall remain in full force and effect.
6.2	In the event that any of the provision in this Supplemental Agreement and the Agreement is inconsistent with one another, the provision of this Supplemental Agreement shall prevail.

IN WITNESS WHEREOF the Parties hereto have entered into this Supplementary Agreement on the day and year first above written.

SIGNED BY	)
YAP CHWEE MEIN	)	/s/ Yap Chwee Mein
For and on behalf of	)
Terra Investments Pte Ltd	)

	)
in the presence of :-	)	/s/ Lee Juat Eng
LEE JUAT ENG
SIGNED BY	)
Chia Song Hwee	)	/s/ Chia Song Hwee
For and on behalf of	)
Chartered Semiconductor Manufacturing Ltd	)
in the presence of :-	)
	)	/s/ Ang Tang Yong
Ang Tang Yong

EX-4.18.4

Exhibit 4.18.4

Private Lot A12787(e)
(A1964507)

DATED THIS ON THE 3^RD DAY OF JANUARY 2007

BETWEEN

TERRA INVESTMENTS PTE LTD
(Company Registration No. 200413927M)

...of the one part

AND

CHARTERED SEMICONDUCTOR MANUFACTURING LTD
(Company Registration No. 198703584-K)

... of the other part

SUPPLEMENTAL AGREEMENT

in relation to
the Agreement for Sub-Licence and Sub-Lease
(Private Lot A12787(e) now known as A1964507)
dated 30 July 2001 entered into between STPL and Chartered
as amended and supplemented by
the Novation Agreement dated 31 December 2004
entered into between STPL, Chartered and Terra

THIS SUPPLEMENTAL AGREEMENT (the “Supplemental Agreement”) is made on the 3^rd day of January 2007.

BETWEEN :-

(1) TERRA INVESTMENTS PTE LTD, a company incorporated in Singapore and having its registered office at 60B Orchard Road #06-18 Tower 2 The Atrium @ Orchard Singapore 238891 (hereinafter called “Terra”);

AND

(2) CHARTERED SEMICONDUCTOR MANUFACTURING LTD, a company incorporated in Singapore and having its registered office at 60 Woodlands Industrial Park D, Street 2, Singapore 738406 (hereinafter called “Chartered”).

WHEREAS :-

(A) By an Agreement for Sub-Licence and Sub-Lease dated 30^th July 2001 (the “Agreement”) made between Singapore Technologies Pte Ltd (“STPL”) and Chartered, STPL granted:

(i)	a sub-license to Chartered to enter upon the Property (as defined in the Agreement) for a period of 3 years (less 1 day) from the Commencement Date (as defined in the Agreement) for the construction of certain factory buildings thereon and installation of equipment, fixtures and fittings thereof; and
(ii)	upon the completion of such construction and installation, a sub-lease of the Property for a term of 30 years (less 1 day) commencing from 1 March 2000,

on the terms and subject to the conditions of the Agreement.

(B)	By a Novation Agreement dated 31 December 2004 entered into between STPL, Chartered and Terra, and with the consent of Chartered, STPL novated all its rights title interest and obligations under the Agreement to Terra as if Terra was a party to the Agreement in place of STPL.
(C)	At the request of Chartered, Terra has accepted the option offered by the head lessor of the Property, Jurong Town Corporation (“JTC”), to convert the 4% annual fixed rent increase scheme to a 5.5% annual rent increase cap scheme set out in a letter (“JTC Letter”) dated 26 January 2006 issued by JTC to Terra.
(D)	The parties to this Supplemental Agreement now desire to amend the Agreement as more particularly stated hereinafter.

NOW, THEREFORE, the parties agree as follows:-

1. Amendment to the Annual Rent

1.1 In consideration of the above, the rental clause referred to in Section (F).1 (a) of the Second Schedule of the Agreement which reflects the annual 4% fixed rent increase shall be amended accordingly with effect from 22 May 2006 (the “Effective Date”) to reflect the following:-

(a)	The yearly / annual rent payable on the Effective Date shall be revised to the rate based on the market rent then prevailing;
(b)	The yearly / annual rent shall, on 1 March 2007 and on the 1st day of March of every year thereafter, be revised at the rate based on the market rent then prevailing on each of these dates, so that any such increase in the yearly / annual rent shall not exceed 5.5% of the yearly / annual rent for each immediately preceding year; and
(c)	The market rent in this context shall mean the rent per square metre per annum of the Property (as defined in the Agreement) excluding the buildings and other structures erected thereon and shall be determined by Terra and/or JTC on or about the dates mentioned (and payable retrospectively with effect from the dates mentioned if determined after the dates mentioned) and the decision of Terra and/or JTC shall be final.

1.2 The clause on the option for a further term in the Agreement which reflects the annual 4% fixed rent increase for the further term (as defined in the Agreement) shall also be amended accordingly with effect from the Effective Date to reflect the following:-

(a)	the yearly / annual rent during the further term shall, on 1 March 2031 and on the 1st day of March of every year thereafter, be revised to the rate based on the market rent on each of the dates, so that any such increase in the yearly / annual rent shall not exceed 5.5% of the yearly / annual rent for each immediately preceding year; and
(b)	the market rent in this context shall mean the rent per square metre per annum of the Property excluding the buildings and other structures erected thereon and shall be determined by Terra and/or JTC on or about the dates mentioned (and payable retrospectively with effect from the dates mentioned if determined after the dates mentioned) and the decision of Terra and/or JTC shall be final.

2. Cost and Expenses

All cost and expenses payable to JTC relating to this Supplemental Agreement and the letter dated 26 January 2006 issued by JTC to Terra and the stamp duty payable on this Agreement shall be borne by Chartered.

3.	Indemnity
	Chartered shall indemnify and keep Terra indemnified against any proceeding, costs, expenses, claim, loss, damages, penalty and liability arising, directly or indirectly from the conversion from the current 4% fixed rent increased scheme to the 5.5% annual rent increase cap scheme and this Supplemental Agreement.

4.	Head Lease
	Chartered agree to observe and be bound by the provisions in the Head Lease (including the JTC Letter and any supplemental deed entered into by Terra with JTC for the conversion of annual rent increase scheme set out in the JTC Letter) and perform all the covenants and conditions contained therein.

5.	Contracts (Rights of Third Parties) Act
	A person (which reference includes a body corporate) who is not a party to this Supplemental Agreement shall have no right under the Contracts (Rights of Third Parties) Act, Chapter 53B of Singapore (as amended or revised from time to time) to enforce any of the covenants, terms or conditions of this Supplemental Agreement.

6.	Confirmation and Incorporation
6.1	Except to the extent expressly varied or amended by the provisions of this Supplemental Agreement, all the covenants, terms and conditions in the Agreement shall remain in full force and effect.
6.2	In the event that any of the provision in this Supplemental Agreement and the Agreement is inconsistent with one another, the provision of this Supplemental Agreement shall prevail.

IN WITNESS WHEREOF the Parties hereto have entered into this Supplementary Agreement on the day and year first above written.

SIGNED BY	)
YAP CHWEE MEIN	)	/s/ Yap Chwee Mein
For and on behalf of	)
Terra Investments Pte Ltd	)
in the presence of :-	)
LEE JUAT ENG	)	/s/ Lee Juat Eng

SIGNED BY	)
Chia Song Hwee	)	/s/ Chia Song Hwee
For and on behalf of	)
Chartered Semiconductor Manufacturing Ltd	)
in the presence of :-	)
	)	/s/ Ang Tang Yong
Ang Tang Yong

EX-4.19.1

Exhibit 4.19.1

JTC(L) 3729/9A

16 February 2006 [JTC’s Logo and its address]

Terra Investments Pte Ltd
Blk 750 “Oasis”, Chai Chee Road
Technopark@Chai Chee #01-01
Singapore 469000

Attention: Mr. Kenneth Tham

Dear Sirs

OFFER OF LEASE OF LAND KNOWN AS PRIVATE LOT A1964510
AT PLOT 6 WOODLANDS INDUSTRIAL PARK D IN WOODLANDS WAFER FAB PARK (“the Land”)

1 This Letter of Offer shall supersede the previous Letter of Offer dated 9 January 2006 and supplementary letter dated 27 January 2006. We refer to your application for the land adjoining Private Lots A1964504, A1964506 and A1964508, and are pleased to offer you a lease, subject to the approval of the relevant governmental and statutory authorities (“Authorities”) being obtained, and to the covenants, terms and conditions in the attached specimen Agreement for Lease (“Agreement for Lease”) and this letter, (collectively called “Offer”).

1.1	Location
	Government Survey Lot 99528A of Mukim 13, as shown on the plan attached to this offer.
	[Please note that our Survey Department will apply to the Chief Surveyor for a caveat lot number upon your acceptance of this offer. For further clarifications you may contact Ms Keu Kin Chor of our Survey Department direct at Tel: 6883 3153.]
1.2	Title
	A lease for 24 years with effect from 1 March 2006 (“the Commencement Date”).
1.3	Area
	The Land has an approximate area of 7,829.30 square metres, subject to survey.

1.4 Consideration

a. The Land Price:

a1)	You shall pay a premium for the Land for 24 years of $2,020,836 (“the Land Premium”).
a2)	You shall:
a2.1)	pay as part of the Mode of Due Acceptance of Offer in accordance with paragraph 2 below and the Payment Table attached —
	i) an initial down payment of $505,209.00 of the Land Premium;
	ii) the total GST on the whole of the Land Premium; and
a2.2)	pay the balance of the Land Premium by 3 equal quarterly instalments with the latest by the 01 December 2006.

b. You shall pay an annual rent of $12/- as follows:

i.	The annual rent is due and payable in advance on the first day of January in each year without demand.
ii.	However, as a condition of this offer, the annual rent and GST for the period from the Commencement Date to 28 February 2007 shall be paid at the time of acceptance of this offer in accordance with paragraph 2. Thereafter, your next annual rent payment for the period from 1 March 2007 to 28 February 2008 shall be paid in advance and is due on 1 March 2008.
iii.	However, the annual rent is temporarily waived until such a time as we may, in our absolute discretion, determine. But the Agreement for Lease will still contractually reflect the annual rent. You shall be notified in writing should we decide to cease the waiver of annual rent.

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1.5	Property Tax
	Starting from 01 March 2006, you will be responsible for the payment of property tax in respect of the land, including all improvements thereon. You are required, upon completion of your building and subsequently subject to our approval, upon rebuilding, enlarging, altering or improving your building, to inform the Comptroller of Property Tax within 15 days as required by the Property Tax Act.
1.6	Agreement for Lease

a.	You shall be required to enter into an Agreement for Lease (as per specimen attached).
b.	However, until such Agreement for Lease is executed and effective, it is to be taken as part of this offer and you shall, on acceptance of this offer, be deemed to have agreed to all the terms and conditions therein.

1.7 Mode of Payment

a.	Except for the payment to be made with your letter of acceptance pursuant to paragraph 2, which payment shall be by non-cash mode (eg cashier’s order, cheque etc),during the lease term you shall pay the annual rent, service charge and GST by Interbank GIRO or any other mode to be determined by us.
b.	However, pending the GIRO arrangement being finalised, you shall pay the annual rent, service charge and GST as they fall due by cheque/cash.

1.8	Permitted Use
	The Land shall be used only for Ancillary purposes to support Chartered Semiconductor’s business operations.
1.9	Approvals
	Our offer and your acceptance of the lease is subject to approvals being obtained from the relevant governmental and statutory authorities.
1.10	Survey of Site

a. Upon your acceptance of this offer, a preliminary survey will be carried out to determine the land area of the Land and a subsequent final survey may also be carried out. If the final survey area exceeds 5 square metres more, or less, than the preliminary survey area, then the Land Premium will be adjusted and shall be paid and payable or refunded as the case may be in respect of the full difference between the preliminary survey area and the final survey area with retrospective effect from the Commencement Date, without interest.

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b. You shall keep within the surveyed land area allocated to you during the period of your lease. In the event that you are found to have encroached outside the Land, you shall immediately, or within the time specified (if any), rectify the encroachment at your own cost and expense. However, if the encroachment can be regularised, and if you are allowed to retain the encroached area or any part thereof upon such terms and conditions as we may stipulate, you will be required to pay additional premium for the encroached area based on the market premium:

i.	prevailing on or about the date on which the encroachment commenced; and
ii.	for the full term of the lease to be granted for the Land in accordance with this offer,

as may be determined by us, and all survey fees, legal fees, amalgamation fees and all other costs and charges relating to the regularisation of the encroachment shall be borne by you.

1.11 Preparation and Submission of Plans

a.	You shall not erect or build any building, structure or installation on the Land or make or cause to be made any addition or alteration affecting the Land or any part thereof without our prior written consent and the approval of Building Control Unit (JTC) and the other relevant governmental and statutory authorities.
b.	If our consent is granted in accordance with paragraph 1.11(a) above, you shall be required to engage at your own cost and expense a Qualified Person to prepare and submit plans showing the layout and specifications of the buildings, structures and/or installations or any alterations and additions which you may wish to make. The Plan Submission Fact Sheet at Annex B is intended to assist the Qualified Person in preparing the plans. We make no representation as to the accuracy of its contents or otherwise and the Qualified Person shall make independent inquiries to verify the information. If the information in the Plan Submission Fact Sheet is inconsistent with the terms and conditions of this offer, then you are advised to seek clarifications from us. In any event, your contractual obligations will be determined by the terms and conditions of this offer and not the information in the Plan Submission Fact Sheet.
c.	Subject to paragraphs 1.11(a) and (b) above, we reserve the right as landowner to amend or reject plans which are found to be unsatisfactory from the points of view of, amongst others, layout, site utilisation, landscaping, materials for construction or facades, type, colour and appearance of buildings and other structures.

4

d. Subject to paragraphs 1.11(a), (b) and (c) above, plans which have been approved by us shall not be amended except with our prior written approval irrespective of whether written permission for the amendments has been granted by the relevant governmental or statutory authorities.

1.12 Fees, Costs and Expenses

a.	You shall pay stamp duty, survey fees and the cost for the preparation of legal documents.
b.	All terms, conditions, stipulations and obligations required under this offer to be performed or observed by you shall be done at your cost and expense.
c.	Originally, the Commissioner of Stamp Duties required the letter of acceptance to be submitted to the Stamp Duty Office for stamping within 14 days. However, with the Minister of Finance’s Off Budget Measures announcement on 29 June 1998, stamping may now be deferred until the Agreement for Lease is issued.

1.13 Electricity and Water Supply

a.	All electrical installations and connections shall be carried out by you and at your expense. No such installation may commence until you have submitted an electricity application to PowerGrid Ltd / Power Supply Ltd and obtained their written approval.
b.	You shall approach the Public Utilities Board for all your water supply requirements. You shall carry out all plumbing required for any additional water supply, including the installation of a water meter. You shall bear all costs and expenses that may arise.

1.14	Diversion of Existing Utility Services
	You shall consult PowerGrid Ltd, Power Gas Ltd, Water Department, Sewerage Department and other relevant governmental and statutory authorities to discover if there are any existing or proposed services over, underneath or through the Land. You shall be responsible for diversion of any existing utility services such as pipes, cables etc. running through the Land and shall bear the costs of any such diversions.
1.15	Original State and Condition
	You shall be deemed to have accepted our offer with full knowledge of the actual state and condition of the Land as regards to its building/s, ground levels, topography, soil conditions and in all other aspects. Any work to be done to the conditions of the Premises which you deem necessary will be carried out by you at your own expense.

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1.16	Slope Protection
	If there is any alteration or addition to the Land —
	a.     under clause 1(viii) of ML I/ 30809F contained in the First Schedule of the attached Specimen Agreement for Lease; or
	b.	as may be required by any governmental or statutory authority,
	you shall at your own cost take such steps and execute such works upon the Land as may be necessary or required by us or any governmental or statutory authority for the prevention of earthslip, erosion of soil and failure of any slope adjoining the Land to our satisfaction and to the satisfaction of the relevant governmental or statutory authorities.
1.17	Alteration of Master Plan
	The current zoning for the Land is Business 2. If you require a change of zoning (and therefore an alteration of the Master Plan) you shall:

a.	obtain prior written approval from us and the relevant governmental and statutory authorities; and
b.	pay fees charged by the Urban and Redevelopment Authority (currently $3,000/-, plus GST at prevailing rate) and any other charges imposed on or to us in connection with the Master Plan alteration.

1.18 Permanent Culvert and Related Construction and Reinstatement Activities

a.	You shall submit the plans of your proposed temporary crossing, wash bay, silt trap and the like to us for approval.
b.	You shall construct a proper temporary crossing, wash bay, silt trap and the like prior to the commencement of the construction works in accordance with the approval.
c.	You shall maintain the completed temporary crossing, wash bay, silt trap and the like in good condition at all times.
d.	You shall construct and complete your permanent culvert within 9 months from 01 February 2006 or within any extended period approved by us.
e.	You shall remove your temporary crossing within one month after the completion of your permanent culvert.

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f.	You shall reinstate, within one month after the date of completion of your permanent culvert, any damaged roads, roadside kerbs and sidetables, drains, turf, trees, services and the like, to the satisfaction of the Land Transport Authority and any other relevant governmental and statutory authorities and/or our satisfaction.
g.	You shall reinstate, within one month after the date of completion of all site development, any damage to the permanent culvert, roads, roadside kerbs and sidetables, drains, turf, trees, services and the like, to the satisfaction of the Land Transport Authority and any other relevant governmental and statutory authorities and/or our satisfaction.
h.	You shall be responsible for the construction of a permanent road access from the land to the main road to the satisfaction of the Land Transport Authority and any other relevant governmental and statutory authorities.
i.	You are not allowed to place your materials, equipment or any other thing on the roadside kerbs and sidetables and you shall be held responsible for any damage to roadside kerbs and sidetables.
j.	You are required to daily wash and clean up the stretch of road, box culverts, drains and inlet chambers fronting the land free of mud and silt and clear away all debris, litter and the like at the roadside kerbs and sidetables until completion of all site development.
k.	You shall take measures to prevent the stretch of road, box culverts, drains and inlet chambers fronting the land from being silted or littered with debris, litter and the like.
l.	You shall provide a vehicle wash bay on the land at all times until the completion of the construction of all the buildings and works thereon to ensure that every vehicle which leaves the land shall have been duly washed and cleaned of soil and dirt.
m.	You shall ensure that there is no spillage of any earth, soil, grease, construction material or debris on or at any part of surrounding estate and the public roads bordering the estate.

7

n.	You shall be held responsible for all damage to the footpaths, trees, road pavement, roadside kerbs and sidetables, box culverts and drains, fronting the land and all damage must be repaired immediately to our satisfaction.
o.	You shall confine your construction activities within the boundary of the land. In this respect, you shall erect approved, aesthetically pleasing and safe hoarding along the whole boundary of the land before commencing construction.
p.	You shall ensure that no unauthorised excavation works are carried out.
q.	You shall place with us a deposit of $5,000 (“Deposit”) as security against any breach of any of the above conditions and any deductions from or the forfeiture of the deposit shall be without prejudice to our rights and remedies as provided under the Agreement of Lease.
r.	The Deposit may be in the form of cash and/ or an acceptable Banker’s Guarantee in the form attached (effective from 01 February 2006 until 12 months after the Qualified Person’s certification) and/ or such other form of security as we may in our absolute discretion permit or accept.
s.	If any deductions are made from the Deposit or if it is forfeited, you shall immediately make good the deduction or the forfeiture so that the Deposit is at all times maintained at the sum of $5,000.
t.	At the expiry of the licence period or any extension thereof, the Deposit shall be repaid without interest or returned to you for cancellation, as the case may be, subject to appropriate deductions, forfeiture or payment to us for damages or other sums due to any breach of any of the above conditions (a) to (p).

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1.19	Restrictions on Assignment
	As set out in Clause 1(xi) of the form of Lease contained in the First Schedule of the attached Specimen Agreement of Lease.
1.20	Special Conditions

a.	Subject to paragraph 1.11 of this offer, you shall at your own cost comply with and observe any height restrictions (if any) on buildings and structures on the Land which may be imposed by any governmental or statutory authority.
b.	Subject to paragraph 1.11 of this offer, you shall not place, construct or erect or permit the placing, construction or erection of any building, structure or any equipment whatsoever on any buffers or sewer easements or other underground services which may exist on the Land. Kindly note that you must comply with the requirements as laid down by the relevant governmental and statutory authorities.
c.	You shall allow us, our workmen, agents and/or their contractors and sub-contractors and/or authorised lessees/tenants or licensees a right to enter and work upon the Land free of charge for the purpose of connecting sewer pipelines if required, into and/or within the Land at any time during the lease period. You shall not hold us liable for any claim, damages, costs, expenses or loss whatsoever which you or any other person may suffer demand, action, proceeding or inconvenience arising out of or in connection therewith.
d.	You shall not place nor permit the placing of any heavy objects on or above any man-hole at the turf area of the Land. Please note that the relevant governmental and statutory authorities shall have unrestricted access into the Land to service, repair or replace their cables or other items from time to time, and you shall comply with all directions and requirements of the relevant governmental and statutory authorities.
e.	i.     A copy of the Environmental Baseline Study (referred to as “the First Baseline Study” in the Agreement for Lease and the form of Lease in the First Schedule thereto) shall be submitted to us within four (4) months from 01 March 2006.

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	ii.     Please refer to Clause 8 of the attached Agreement for Lease and Clause 1(xvii) of the Lease set out in the First Schedule of the said Agreement for Lease on your obligations and our decontamination requirements, for your compliance.
f.	A person who is not a party to this agreement shall have no right under the Contracts (Rights of Third Parties) Act (as amended or revised from time to time) to enforce any of the covenants, terms or conditions of this agreement.

2	Mode of Acceptance
	This offer shall lapse if we do not receive all of the following by 23 January 2005:

a.	the original letter of acceptance;
b.	payment of the sum set out under paragraph 4; and
c.	duly completed GIRO authorisation form or a copy of your letter of authorisation to your Banker.

3

Clearance of Payments

Please note that payments made prior to your giving us the other items listed above may be cleared by and credited to us upon receipt. However, if the other items are not received within the time stipulated herein, this offer shall lapse and there shall be no contract between you and us arising hereunder. Any payments received shall then be refunded to you without interest and you shall have no claim of whatsoever nature against us.

10

4 Amount Payable

	AMOUNT		5% GST
Down-payment of Land Premium on 7,829.30 square metre (thereafter, the next quarterly payment of $507,625.50 is due on 01 May 2006)	$	505,209.00	$	25,260.45
GST on the balance of Land Premium of $1,522,876.50		n.a	$	75,781.35
Survey fee (subject to adjustment on completion of final survey if any).	$	4,254.00	$	212.70
URA processing fee (subject to adjustment on completion of final survey/ resurvey)	$	1,000.00	$	50.00
Singapore Land Authority fee (subject to adjustment on completion of final survey/ resurvey)	$	2,115.00	$	105.75
Cost for preparation of Agreement for Lease.	$	95.00	$	4.75
Deposit under paragraph 1.19	$	5,000		Nil
Cost for preparation of Lease.	$	150.00	$	7.50
Sub-Total Payable	$	517,823.00	$	101,422.50
Total payable inclusive of GST	$	619,245.50

5.	Notice of Mortgage
	Upon due acceptance of this Offer, you may mortgage your interest by giving us a Notice of Mortgage in accordance with our Practice Circular dated 30 October 1999 as amended by Practice Circulars of 1 June 2001, 24 April 2002 and 23 March 2004. A summary of the 4 Practice Circulars is attached at Annex D of this letter. Please note that —

(a)	Your lawyers may submit the Notice of Mortgage on your behalf.
(b)	The Practice Circulars may be retrieved from our website at http://krpyton.jtc.gov.sg under the icon “Policies & Procedures” and then clicking these icons in the following order: “Practice Circular”, “Correspondence/Annex A”.

11

(c) Should you have any queries concerning the Practice Circulars, you may contact any of these persons from our Legal Department at the following telephone numbers —

Ms Rani Hubert	—	6883 3181
Mr Albert Tan	—	6883 3193
Ms Tong Meow Hoon	—	6883 3196

6.	Full Terms and Conditions
	The above constitutes the full terms and conditions governing this offer and no terms or representation or otherwise, whether express or implied, shall form part of this offer other than what is contained herein. Any variation, modification, amendment, deletion, addition or other wise of the terms of this offer shall not be enforceable unless reduced in writing and signed by both parties.

Yours faithfully

/s/Sharon Wong
Assistant Manager (Marketing)
Wafer Fab Parks Development Department
Specialised Parks Development Group

Cc:
Mr. Desmond Chan
Chartered Semiconductor Industries Pte Ltd
60 Woodlands Industrial Park D Street 2
Singapore 738750

12

Letter of Acceptance
(Please use your firm/company’s letterhead)

Date:

Wafer Fab Parks Development Dept.
JTC Corporation
The JTC Summit
8 Jurong Town Hall Road
Singapore 609434
Attention : Ong Khian Heng

Dear Sirs

ACCEPTANCE OF OFFER RELATING TO PRIVATE LOT A1964510, WOODLANDS WAFER FAB PARK

1	We refer to your Letter of Offer and eStatement letter, both dated 19 September 2005 for the above Land and hereby confirm our acceptance of all the terms and conditions of the offer and the eStatement letter.
2	In accordance with your required mode of acceptance mentioned in paragraph 3 of your Offer Letter, we enclose the following*:

o A cheque for $619,245.50.

o **Our duly completed GIRO authorisation form/**A copy of our letter of authorisation to our banker.

o **A cheque of $614,245.50 and Banker’s Guarantee/**our cheque for the Deposit of $5,000.00.

3	We understand and agree that we will only be able to view our Statement of Accounts (SA) in Krypton and confirm that the following email address(es) are the authorized recipients to receive the email notification to view our SA or eStatement in Krypton. Email address 1 : *Email address 2 :
4	We have enclosed a completed application for EASY access code.

Yours faithfully

Name of Person In-Charge/Designation/Signature
(Company’s Stamp)

Encl.

*Please delete the boxes which are not applicable.
**Please delete whichever is not applicable.

13

PLAN SUBMISSION FACT SHEET

Lessee	:	TERRA INVESTMENTS PTE LTD
Address	:	PLOT 6 WOODLANDS INDUSTRIAL PARK D
Allocation No	:	Private Lot A1964510

FACT SHEET FOR THE NEW DEVELOPMENT OR ADDITIONS & ALTERATIONS (A&A) REQUIREMENTS

No	Items	Data/details (enter nil if not applicable)
1	Plot Descripion	Lot	:	99528A
		Mukim No.	:	MK13
		Pte Lot No.	:	A1964510
2	Building Construction Period (for new allocation & lease renewal)	n.a.
3	Plot Ratio (PR)	Max PR	:	1.40

4	60:40 rule	Min. 60% of built up area:
		Industrial and ancillary storage & warehousing activities
		Remaining built-up area (Max. 40% of built up area): Offices, showrooms, neutral area and communal facilities
5	Permitted usage	Ancillary purposes to support Chartered Semiconductor’s business operations only
6	Aesthetic and landscaping control (along certain major roads)	See attached
+7	Height control Primary control & Secondary control (glazing control)	See reverse page
+8	MRT line safety restriction/MRT corridor	Nil
9	Buffer & setback control (JTC)	Nil
+10	ENV’s health & safety buffer control	Nil
+11	Sewer & industrial water easement	See Schedule of Statutory Controls
+12	Vehicular access control from the road	See Schedule of Statutory Controls
+13	Road & drainage widening	Nil
14	Allocation plan attached Agreement plan attached Survey plan attached	Yes/No* Yes/No* Yes/No* (Preliminary/Final Survey)
15	Road/Drain/Sewer Line/Sewer Easement/ Manhole	The lessee is required to obtain service inforamtionf rom Sewerage/Drainage Department
16	Services	The lessee is required to obtain services plans from Power Grid, Power Gas, Sewerage Department, Drainage Dept, Water Dept, Singapore Telecom and relevant authorities to ensure that their proposal will not affect the existing services (if any) within site.
		There is cable running within the subject stie. Lessee to consult Power Grid.
17	Others (eg special requirements etc.)	See Letter of Offer dated

+

Requirements by the Authorities

The information in this fact sheet is intended to help you in your applications to the Authorities. Although we hope that it will be of some assistance, kindly note that we make no representation as to its accuracy. The information provided may be subject to change without prior notice. You are advised to make independent queries to verify that the information is correct. Please also check with the Authorities on whether any further information is required. 4 copies : Customer, Consultant, CTG/BU (JTC), PEU (JTC) pe_fact7.doc

14

Height Restriction :

For your information, our current records show that the following maximum height restriction/s¹ apply:

(a)	Ministry of Defence — 100 and 160 metres AMSL;
	All structures and fixtures above the rooftop such as TV antennas, water tanks, lift motor rooms, navigation lights, chimney, cranes and lightning conductors are also subject to the same height limit.
	MINDEF clearance is required if the proposed development height is > 60m AMSL or =< 15m.
	Your contractor is required to seek approval from HQ RSAF for the erection of cranes. RSAF’s clearance required for crane erection if crane height is > 40m AMSL
(b)	Civil Aviation Authority of Singapore — 153 metres AMSL;
	All structure and fixtures on the rooftop such as water tanks, lift motor rooms, TV antennas etc are subject to the same height limit. Please also note that the same height is applicable to construction equipment and temporary structures etc.
(c)	Infocomm Development Authority — 100 metres AMSL; and
(d)	Pollution Control Department, NEA — 67 metres AMSL (subject to NEA’s confirmation).
	The height constraint is applicable to naturally ventilated building only.
	Please note that height restrictions are subject to change at any time without prior notice by the Authorities.
	All height restriction plans furnished/to be furnished (if any) by us to you must at all times be held in confidence and shall not be shown, revealed or copied to or by any person, contractor, sub-contractor, watchman, employee, agent, representative or any other person except with our prior written consent.

SUMMARY OF JTC’S PRACTICE CIRCULARS DATED 30 OCTOBER 1999
AS AMENDED ON 1 JUNE 2001, 24 APRIL 2002 AND 23 MARCH 2004
ON NOTICE OF MORTGAGE/CHARGE

1	These Practice Circulars were sent to the Association of Banks in Singapore, the Finance Houses Association of Singapore, and The Law Society of Singapore.
2	The Circulars state that with effect from 15 November 1999, all mortgages and charges created or transferred in respect of our properties are governed by the Practice Circular. Under this process, our terms and conditions have been set out upfront to give greater transparency of our policies, and to assist our customers in obtaining funds quickly with minimum administrative inconvenience.
3	Consequently, notwithstanding the provisions in the Building Agreement/Agreement for Lease/Lease, our current policy is that in respect of all mortgages/charges created or transferred on or after 15 November 1999, we waive our contractual requirement that our prior written consent must be obtained for the creation/transfer of a mortgage/charge, subject to :

3.1	submission of a duly completed Notice of Mortgage/Charge, in the form set out in Annex A (of the 30 October Circular); and
3.2	the terms and conditions set out in Annex B (of the 30 October Circular).

4	The mortgagor/chargor (i.e., licensee/lessee) may authorise their solicitor to duly complete and submit the Notice on their behalf.
5	Under this process :

5.1	the Notice need only be sent to us each time a mortgage/charge is to be created or transferred;
5.2	parties need not inform us of any change in the amount of facilities secured;
5.3	our administrative fee has been waived;
5.4	the mortgage/charge documents do not have to be endorsed by us; and
5.5	copies of the mortgage/charge documents do not have to be sent to us.

6 The terms and conditions of the Practice Circular which the parties must, in particular, comply with are :

6.1	submit the Notice to us prior to the creation or transfer of any mortgage/charge;
6.2	notify us if the mortgage/charge has been discharged or is not proceeded with; and
6.3	ensure that the mortgagor’s/chargor’s solicitor gives the required certificate in the mortgage/charge documents.

A/L (Land)/ PREMIUM / Dec 2002/WCL/ZMY 16

7	Parties who use Annex A (of the 30 October Circular) must at all times ensure that the integrity of the Notice form is preserved and must not make any changes to it, except for the insertion of the particulars and signatures required by us.
8	We reserve the full right and liberty to terminate or change this process at any time in respect of subsequent mortgages and charges.
9	As we receive a large number of Notices every day, we regret that it is not possible for us to reply and confirm receipt. However, we have no objections to receiving Notices by post (ordinary/registered/LUM), courier or fax. If a fax copy is sent, it is not necessary for a confirmation copy to be sent by post. All Notices should be sent to :

The Legal Department
JTC Corporation
The JTC Summit
8 Jurong Town Hall Road
Singapore 609434
Fax : 6885 5884

10 Queries on estate management issues, such as outstanding building premium, investment criteria, and breaches (including whether a breach has been referred for legal action), may be directed to our Customer Services Group (CTG), whom you may contact as follows —

CUSTOMER SERVICES GROUP
JTC Corporation
The JTC Summit
8 Jurong Town Hall Road
Singapore 609434
Fax: 6885 5908 / 6885 5909
CONTACT CENTRE HOTLINE : 1800-568-7000

Our CTG officers will try to respond to queries as soon as possible. However, due to the volume and nature of the requests, some queries will take longer to attend to than others. To help minimise the time taken, please bear in mind the following points —

10.1	ordinarily, our licensees/lessees must consent to the disclosure of the information requested due to the sensitive nature of the queries (as such it is preferable that our licensee’s/lessee’s written consent to our disclosure is attached to a request for information);
10.2	if there is no requirement for the payment of building premium in the contract, then there is no necessity to obtain a confirmation from our CTG officer that there is no outstanding building premium; and
10.3	our CTG officer would have written to our licensee/lessee if audited accounts have been submitted and the investment criteria has been satisfied, and copies of such letters would be available directly from our licensee/lessee.

A/L (Land)/ PREMIUM / Dec 2002/WCL/ZMY 17

EX-4.19.2

Exhibit 4.19.2

[Chartered’s Logo and address]

Date: 21^st February 2006

Terra Investment Pte Ltd
Blk 750 Oasis, Chai Chee Road
Technopark @ Chai Chee #01-01
Singapore 499000

Attention: Mr Kenneth Tham

Dear Kenneth,

OFFER OF LEASE OF LAND KNOWN AS PRIVATE LOT A1964510 AT PLOT 6 WOODLANDS INDUSTIRAL PARK D IN WOODLANDS WAFER FAB PARK (“the Land”)

This letter serves to confirm that the terms and conditions set forth in JTC’s Offer Letter dated 16 February 2006 in respect to the subject matter are acceptable to us. Thus, please kindly proceed to accept the Offer Letter on Friday, 24^th February 2006.

At the same time, we will arrange for the payment in a total amount of $619,245.50 to be wire transferred to your bank account on Thursday, 23^rd February 2006 so that you could prepare the cheque in the same amount to JTC accordingly.

Thank you for your assistance.

Yours truly,

/s/ Ang Tang Yong
VP, Fab Support Operations
CHARTERED SEMICONDUCTOR MANUFACTURING LTD

EX-4.19.3

Exhibit 4.19.3

[Terra Investments Pte Ltd’s Letterhead]

Our Ref:

Your Ref:

Date: 24 February 2006

Wafer Fab Parks Development Department,
JTC Corporation,
The JTC Summit,
8 Jurong Town Hall Road
Singapore 609434

(Attention: Ms Sharon Wong)

Dear Sirs,

ACCEPTANCE OF OFFER RELATING TO PRIVATE LOT A1964510, WOODLANDS WAFER FAB PARK

We refer to your Letter of Offer and eStatement letter, both dated 16 February 2006 for the above-mentioned Land and hereby confirm our acceptance of all the terms and conditions of the Offer and the eStatement letter.

In accordance with your required mode of acceptance mentioned in paragraph 3 of your Offer letter, we enclose our cheque for S$619,245.50 in favour of JTC Corporation.

Yours faithfully,

/s/
                                        
Name:
For and on behalf of
Terra Investments Pte Ltd

cc: Chartered Semiconductor Manufacturing Limited: Mr Desmond Chan / Ms Janet Cun
cc: United PREMAS Limited: Kenneth Tham

Encl. Cheque for S$619,245.50

EX-12.1

Exhibit 12.1

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT

     I, Chia Song Hwee, certify that:

1.	I have reviewed this annual report on Form 20-F of Chartered Semiconductor Manufacturing Ltd.;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assistance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 15, 2007	/s/ Chia Song Hwee
	Chia Song Hwee
	President and Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT

     I, George Thomas, certify that:

1.	I have reviewed this annual report on Form 20-F of Chartered Semiconductor Manufacturing Ltd.;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 15, 2007	/s/ George Thomas
	George Thomas
	Senior Vice President and Chief Financial Officer

EX-13.1

Exhibit 13.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER UNDER SECTION 906 OF
THE SARBANES — OXLEY ACT

     Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Chartered Semiconductor Manufacturing Ltd. (the “Company”) hereby certifies, to such officer’s knowledge that:

     (i) the accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

     (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 15, 2007	/s/ Chia Song Hwee
	Chia Song Hwee
	President and Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference to any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-13.2

Exhibit 13.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER UNDER SECTION 906 OF
THE SARBANES — OXLEY ACT

     Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Chartered Semiconductor Manufacturing Ltd. (the “Company”) hereby certifies, to such officer’s knowledge that:

     (i) the accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

     (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated : March 15, 2007	/s/ Georqe Thomas
	George Thomas
	Senior Vice President and Chief Financial Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference to any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-15.1

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Chartered Semiconductor Manufacturing Ltd:

We consent to the incorporation by reference in the registration statement (No. 333-56878) on Form F-3 and the registration statements (No. 333-63814, No. 333-63816, No. 333-89849 and No. 333-116844) on Form S-8 of Chartered Semiconductor Manufacturing Ltd of our reports dated March 9, 2007, with respect to the consolidated balance sheets of Chartered Semiconductor Manufacturing Ltd as of December 31, 2005 and 2006, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2006, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006 Annual Report on Form 20-F of Chartered Semiconductor Manufacturing Ltd, and to the reference to our firm under the heading “Selected Financial Data” in the Annual Report.

Our report dated March 9, 2007, on the consolidated financial statements, contains an explanatory paragraph that states the Company adopted the fair value method of accounting for stock-based compensation as required by Statement of Financial Accounting Standards No. 123(R), Shared-Based Payment, effective January 1, 2006, and the Company also changed its method of quantifying errors in 2006.

KPMG

Singapore
March 12, 2007