-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LALHaOdy1NhdnkHGQ9jyiwRtHKUEIkx77QjxgQuXEBb+XkRkQ27v1ScOBpv0hI7L 7QgwW8Fjo33rTBY/GapRwA== 0000950144-01-004346.txt : 20010402 0000950144-01-004346.hdr.sgml : 20010402 ACCESSION NUMBER: 0000950144-01-004346 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ST ASSEMBLY TEST SERVICES LTD CENTRAL INDEX KEY: 0001101873 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F SEC ACT: SEC FILE NUMBER: 333-93661 FILM NUMBER: 1585545 BUSINESS ADDRESS: STREET 1: 5 YISHUN ST 23 CITY: SINGAPORE STATE: U0 ZIP: 768442 BUSINESS PHONE: 657555885 MAIL ADDRESS: STREET 1: 5 YISHUN ST 23 CITY: SINGAPORE STATE: U0 ZIP: 768442 20-F 1 u91719e20-f.txt ST ASSEMBLY TEST SERVICES, LTD. 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- FORM 20-F (Mark One) [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 333-93661 ST ASSEMBLY TEST SERVICES LTD (Exact Name of Registrant as Specified in Its Charter) REPUBLIC OF SINGAPORE 5 YISHUN STREET 23, SINGAPORE 768442 (Jurisdiction of Incorporation (Address of Principal Executive Offices) or Organization)
Securities registered or to be registered pursuant to Section 12(b) of the Act: NONE Securities registered or to be registered pursuant to Section 12(g) of the Act: ORDINARY SHARES, PAR VALUE S$0.25 PER SHARE, INCLUDING ORDINARY SHARES REPRESENTED BY AMERICAN DEPOSITARY SHARES (Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NONE 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. 986,171,915 ORDINARY SHARES (PAR VALUE S$0.25 PER ORDINARY SHARE) OF REGISTRANT OUTSTANDING AS OF DECEMBER 31, 2000. Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 [ ] Item 18 [X] =============================================================================== 2
PART I Item 1. Identity of Directors, Senior Management and Advisers 1 Item 2. Offer Statistics and Expected Timetable 1 Item 3. Key Information 1 Item 4. Information on our Company 11 Item 5. Operating and Financial Review and Prospects 27 Item 6. Directors, Senior Management and Employees 37 Item 7. Major Shareholders and Related Party Transactions 46 Item 8. Financial Information 48 Item 9. The Offer and Listing 49 Item 10. Additional Information 50 Item 11. Quantitative and Qualitative Disclosures about Market Risk 57 Item 12. Description of Securities Other than Equity Securities 58 PART II 58 Item 13. Defaults, Dividend Arrearages and Delinquencies 58 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 59 PART III 59 Item 15. Not applicable 59 Item 16. Not applicable 59 PART IV 59 Item 17. Financial Statements 59 Item 18. Financial Statements 59 Item 19. Exhibits 60 SIGNATURES 61
When we refer to "Singapore dollars" and "S$" in this Annual Report, we are referring to Singapore dollars, the legal currency of Singapore. When we refer to "U.S. dollars," "dollars," "$" and "US$" in this Annual Report, we are referring to United States dollars, the legal currency of the United States. For your convenience, the noon buying rate in the City of New York on December 29, 2000 for cable transfers in Singapore dollars as certified for customs purposes by the Federal Reserve Bank of New York was S$1.73 per $1.00. No representation is made that the Singapore dollar or U.S. dollar amounts shown in this Annual Report could have been or could be converted at such rate or at any other rate. i 3 PART I Certain of the statements in this Annual Report on Form 20-F are forward-looking statements that involve a number of risks and uncertainties which could cause actual results to differ materially. Factors that could cause actual results to differ include: general business and economic conditions and the state of the semiconductor industry; demand for end-use applications products such as communication equipment and personal computers; decisions by customers to discontinue outsourcing of test and assembly services; changes in customer order patterns; rescheduling or cancellation of customer orders; changes in product mix; capacity utilization; level of competition; pricing pressures; continued success in technological innovation; delays in acquiring or installing new equipment; litigation and other risks described in "Item 3. Key Information -- D. Risk Factors". 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 consolidated financial data in conjunction with our consolidated financial statements and the related notes, and "Item 5. Operating and Financial Review and Prospects" included elsewhere in this Annual Report. The selected consolidated financial data are derived from our consolidated financial statements. Our consolidated financial statements for the fiscal years ended December 31, 1998, 1999 and 2000, which have been audited by KPMG, independent auditors, are included in "Item 18. Financial Statements". The selected consolidated financial data as of December 31, 1996, 1997 and 1998 and for the fiscal years ended December 31, 1996 and 1997 are derived from our audited consolidated financial statements. However, we have not included our audited consolidated financial statements for these periods in this Annual Report. Our consolidated financial statements are prepared in accordance with U.S. GAAP. We have never declared or paid any cash dividends on our ordinary shares. 1 4
YEAR ENDED DECEMBER 31 -------------------------------------------------------------- 1996 1997 1998(1) 1999 2000 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER ORDINARY SHARE AND PER ADS DATA) INCOME STATEMENT DATA: Net revenues $ 32,185 $ 88,373 $113,920 $201,098 $331,271 Cost of revenues 34,061 67,848 87,066 132,889 231,944 -------- -------- ------- -------- -------- Gross profit (loss) (1,876) 20,525 26,854 68,209 99,327 -------- -------- ------- -------- -------- Operating expenses: Selling, general and administrative 6,062 13,858 16,772 28,437 40,798 Research and development -- 2,157 3,482 7,283 14,636 Stock-based compensation -- -- 384 25,327 448 Other general expenses (income), net (139) 17 (582) 37 (22) -------- -------- ------- -------- -------- Total operating expenses 5,923 16,032 20,056 61,084 55,860 -------- -------- ------- -------- -------- Operating income (loss) (7,799) 4,493 6,798 7,125 43,467 Other income (expense): Interest expense, net (401) (3,307) (8,244) (5,534) 8,214 Foreign currency exchange gain (loss) 604 (1,258) 857 1,385 2,018 Other non-operating income (expense), net 41 62 2,103 2,379 3,525 -------- -------- ------- -------- -------- Total other income (expense) 244 (4,503) (5,284) (1,770) 13,757 -------- -------- ------- -------- -------- Income (loss) before income taxes (7,555) (10) 1,514 5,355 57,224 Income tax expense -- (159) (390) (500) (2,865) -------- -------- ------- -------- -------- Net income (loss) $ (7,555) $ (169) $ 1,124 $ 4,855 54,359 Net income (loss) per ordinary share: Basic $ (0.02) $ -- $ -- $ 0.01 $ 0.06 Diluted $ (0.02) $ -- $ -- $ 0.01 $ 0.06 Net income (loss) per ADS: Basic $ (0.21) $ -- $ 0.02 $ 0.06 $ 0.56 Diluted $ (0.21) $ -- $ 0.02 $ 0.06 $ 0.56 Ordinary shares (in thousands) used in per Ordinary share calculation: Basic 352,032 368,000 669,671 770,259 962,828 Diluted 352,032 368,000 670,976 786,725 970,631 ADSs (in thousands) used in per ADS calculation: Basic 35,203 36,800 66,967 77,026 96,283 Diluted 35,203 36,800 67,098 78,672 97,063
YEAR ENDED DECEMBER 31 -------------------------------------------------------------- 1996 1997 1998(1) 1999 2000 -------- --------- -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA: Cash and cash equivalents $ 2,422 $ 1,051 $ 12,692 $ 16,568 $141,733 Working capital (deficit) (43,726) (140,474) (24,606) (74,030) 188,521 Total assets 114,372 225,477 236,720 351,965 711,758 Short-term debt and current installments of long-term debt 37,071 130,165 50,000 67,420 14,799 Long-term debt -- -- 54,282 46,360 29,599 Shareholders' equity 54,714 45,706 108,038 141,184 585,197 Share capital 64,900 64,900 129,042 129,827 159,461 Ordinary shares outstanding 92,000 92,000 780,174 785,428 986,172
- ------------ (1) Effective July 1, 1998, we changed our functional currency from the Singapore dollar to the U.S. dollar. See Note 2(d) to the "Notes to the Consolidated Financial Statements" filed as part of this Annual Report in "Item 18. Financial Statements". 2 5 B. CAPITALIZATION AND INDEBTEDNESS Not applicable C. REASONS FOR THE OFFER AND USE OF PROCEEDS Not applicable D. RISK FACTORS In addition to the other information and risks described elsewhere in this Annual Report, our business is subject to the following risks: OUR RESULTS FLUCTUATE FROM QUARTER TO QUARTER. Our operating results have fluctuated and may continue to fluctuate substantially from quarter to quarter due to a wide variety of factors, including: - - general economic conditions in the semiconductor industry; - - a shift by integrated device manufacturers or IDMs between internal and outsourced test and assembly services; - - general economic conditions in the markets addressed by end-users of semiconductors; - - the seasonality of the semiconductor industry; - - the short-term nature of our customers' commitments; - - the rescheduling or cancellation of large orders; - - the timing and volume of orders relative to our capacity; - - changes in capacity utilization; - - the rapid erosion of the selling prices of packages; - - changes in our product mix; - - the timing of expenditures in anticipation of future orders; - - possible disruptions caused by the installation of new equipment; - - the inability to obtain adequate equipment on a timely basis; - - any exposure to currency and interest rate fluctuations that may not be adequately covered under our hedging policy; and - - weakness in the supply of wafers. 3 6 As a result of all of these factors, we believe that period-to-period comparisons of our operating results are not meaningful, and you should not rely on such comparisons to predict our future performance. Unfavorable changes in any of the above factors may adversely affect our business, financial condition and results of operations. In addition, such unfavorable changes could cause volatility in the price of our ordinary shares and American Depositary Shares or ADSs. For example, during the second quarter of 1998, the average selling prices of many of our test and assembly services decreased because of an excess of worldwide capacity relative to demand which resulted in intense competition among independent test and assembly service providers. In the fourth quarter of 2000, the over capacity situation recurred due to excessive inventory worldwide. This resulted in decreased demand for our test and assembly services which adversely impacted our financial results. We expect intense competitive conditions to continue. If we cannot offset declines in selling prices by reducing our costs of delivering those services, increasing the number of units tested or assembled, or shifting our focus to higher margin test and assembly services, our business, financial condition and results of operations could be adversely affected. See "Item 5. Operating and Financial Review and Prospects -- Quarterly Results". DOWNTURNS IN THE SEMICONDUCTOR INDUSTRY WILL ADVERSELY AFFECT OUR OPERATING RESULTS. Our profits are affected significantly by conditions in the semiconductor industry. The market for semiconductors is characterized by: - - rapid technological change; - - evolving industry standards; - - intense competition; and - - fluctuations in end-user demand. In addition, the semiconductor industry is cyclical and, at various times, has experienced significant downturns because of production overcapacity and reduced unit demand. The industry began experiencing such a downturn in the fourth quarter of 2000 which adversely affected our financial results for that quarter. Based on current visibility, we expect the weakness in customers' demand to continue into the first quarter of 2001 with expected revenues for the first quarter of 2001 to decline substantially from revenue of the fourth quarter of 2000. If this continues or if there is any future downturn in the semiconductor industry, our business, financial condition and results of operations is likely to be adversely affected. OUR PROFITABILITY IS AFFECTED BY CAPACITY UTILIZATION RATES. As a result of the capital intensive nature of our business, our operations are characterized by high fixed costs. Consequently, insufficient utilization of installed capacity can have a material adverse effect on our profitability. Therefore, our ability to maintain or increase our profitability will continue to be dependent, in large part, upon our ability to maintain high capacity utilization rates. Capacity utilization rates may be affected by a number of factors and circumstances, including: - - installation of new equipment in anticipation of future business; - - overall industry conditions; - - the level of customer orders; - - operating efficiencies; 4 7 - - mechanical failure; - - disruption of operations due to expansion of operations, introduction of new packages or relocation of equipment; - - disruption in supply of raw materials; - - changes in product mix; and - - fire or other natural disasters. For example, in 1998 and again in the fourth quarter of 2000, our capacity utilization rates were negatively affected by a decrease in demand for our test and assembly services resulting from a downturn in the overall semiconductor industry. We cannot assure you that our capacity utilization rates will not be materially adversely affected by future declines in the semiconductor industry, declines in industries that purchase semiconductors or other factors. Any inability on our part to maintain or increase capacity utilization rates could have a material adverse effect on our business, financial condition and results of operations. DECISIONS BY OUR INTEGRATED DEVICE MANUFACTURER OR IDM CUSTOMERS TO CURTAIL OUTSOURCING MAY ADVERSELY AFFECT OUR COMPANY. Historically, we have been dependent on the trend in outsourcing of test and assembly services by IDMs. Our IDM customers continually evaluate our services against their own in-house test and assembly services. As a result, at any time, IDMs may decide to shift some or all of their outsourced test and assembly services to internally sourced capacity. Any such shift or a slowdown in this trend is likely to adversely affect our business, financial condition and results of operations. WE DEPEND ON A SMALL NUMBER OF CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUES. We are dependent on a small group of customers for almost all of our net revenues. Our ten largest customers accounted for almost all of our net revenues in 1998, 1999 and 2000. In the year ended December 31, 2000, our two largest customers, Analog Devices and Broadcom, each represented in excess of 10% of our net revenues. Our affiliate, Chartered Semiconductor accounted for 20.9%, 16.4% and 7.3% of our net revenues in 1998, 1999 and 2000, respectively. Also, in 1998, 1999 and 2000, 73.5%, 76.0% and 78.0% of our net revenues came from customers based in the United States. We anticipate that for the forseeable future our ten largest customers will continue to account for most of our net revenues and that we will continue to be significantly dependent on net revenues from customers based in the United States. Our ability to retain these customers, as well as other customers, and to add new customers is important to the ongoing success of our company. The loss of one or more of our key customers, or reduced orders from any of our key customers, could have a material adverse effect on our business, financial condition and results of operations. See "Item 4. Information on the Company -- Customers". A DECREASE IN DEMAND FOR COMMUNICATION EQUIPMENT AND PERSONAL COMPUTERS MAY SIGNIFICANTLY DECREASE THE DEMAND OF OUR SERVICES. A significant percentage of our net revenues is derived from customers who use our test or assembly services for semiconductors used in communication equipment and personal computers. Any significant decrease in the demand for communication equipment or personal computers may decrease the demand for our services and could seriously harm our company. In addition, the declining average selling price of communication equipment and personal computers places significant pressure on the prices of the components that are used in these equipment. If the average selling prices of communication equipment and personal computers continue to decrease, the pricing 5 8 pressure on services provided by us may reduce our net revenues and therefore significantly reduce our gross profit margin. OUR CUSTOMERS ARE NOT CONTRACTUALLY OBLIGATED TO BUY OUR SERVICES OR PRODUCTS AND WOULD ALSO NOT PLACE ORDERS IN ADVANCE. WE DO NOT HAVE SIGNIFICANT BACKLOG. Almost all of our customers are not obligated, pursuant to any contractual commitment or otherwise, to purchase any minimum amount of our test or assembly services or to place orders far in advance or to provide us with binding forecasts for any period. As a result, we have no significant backlog. The lack of significant backlog makes it difficult for us to forecast our net revenues for any future period. We expect that in the future, net revenues in any quarter will continue to be substantially dependent on orders placed within that quarter. Moreover, all of our customers operate in the cyclical semiconductor industry and have varied and may continue to vary order levels significantly from period to period. However, our customers are generally not responsible for any unused raw materials that result from a forecast exceeding actual orders. Accordingly, we cannot assure you that any of our customers will continue to place orders with us in the future at the same levels as they had in prior periods. WE MAY BE UNABLE TO OBTAIN TESTING OR ASSEMBLY EQUIPMENT WHEN WE REQUIRE IT. The semiconductor test and assembly business is capital intensive and requires investment in expensive capital equipment manufactured by a limited number of suppliers, which are located principally in the United States, Europe and Japan. The market for capital equipment used in semiconductor testing is characterized, from time to time, by intense demand, limited supply and long delivery cycles. Our operations and expansion plans are highly dependent upon our ability to obtain a significant amount of such capital equipment from a limited number of suppliers. If we are unable to obtain certain equipment, including testers and wire bonders, in a timely manner, we may be unable to fulfill our customers' orders which would negatively impact our business, financial condition and results of operations. Generally, we have no binding supply agreements with any of our suppliers and we acquire our equipment on a purchase order basis, which exposes us to substantial risks. For example, increased levels of demand for the type of capital equipment required in our business may cause an increase in the price of such equipment and may lengthen delivery cycles, which could have a material adverse effect on our business, financial condition and results of operations. In addition, adverse fluctuations in foreign currency exchange rates, particularly the Japanese yen, could result in increased prices for certain equipment purchased by us, which could have a material adverse effect on our business, financial condition and results of operations. OUR PROFITABILITY IS AFFECTED BY AVERAGE SELLING PRICES WHICH TEND TO DECLINE. Decreases in the average selling prices of our test and assembly services can have a material adverse effect on our profitability. The average selling prices of test and assembly services have declined historically, with assembly services in particular experiencing severe pricing pressure. This pricing pressure for test and assembly services is likely to continue. Our ability to maintain or increase our profitability will continue to be dependent, in large part, upon our ability to offset decreases in average selling prices by improving production efficiency, increasing unit volumes tested or assembled, or by shifting to higher margin test and assembly services. If we are unable to do so, our business, financial condition and results of operations could be materially and adversely affected. THE TESTING PROCESS IS COMPLEX AND THEREFORE MORE PRONE TO "BUGS" AND OPERATOR ERROR. Semiconductor testing is a complex process involving sophisticated testing equipment and computer software. We develop computer software which is used to test our customers' semiconductors. We also develop conversion software programs which enable us to test semiconductors on different types of testers. Similar to most software programs, these software programs are complex and may contain programming errors or "bugs". In addition, the testing process is subject to operator error by our employees who operate our testing equipment and related software. Any significant defect in our testing or conversion software, malfunction in our testing equipment or 6 9 operator error could reduce our production yields, damage our customer relationships and materially harm our business. WE MAY NOT BE ABLE TO DEVELOP OR ACCESS LEADING TECHNOLOGY WHICH MAY AFFECT OUR ABILITY TO COMPETE EFFECTIVELY. The semiconductor test and assembly market is characterized by rapid technological change. We must be able to offer our customers test and assembly services based upon the most advanced technology. This requirement could result in significant capital expenditures in the future. Advances in technology typically lead to rapid and significant price declines and decreased margins for older package types and may also affect demand for test services. Technology advances could also cause our test or assembly capabilities to be less competitive with new technologies and, in certain cases, to be obsolete. If we fail to develop advanced test and assembly services or to access those developed by others in a timely manner, we could lose existing customers or miss potential customers demanding these advanced services. Also, we would miss the opportunity to benefit from the higher average selling prices which are derived from newer and emerging test and assembly services. In addition, the choice of test equipment is important to us because obtaining the wrong test equipment or failing to understand market requirements will make us less competitive and will lower our asset utilization. In order to remain competitive, we must be able to upgrade or migrate our test equipment to respond to changing technological requirements. THE ASSEMBLY PROCESS IS COMPLEX AND OUR PRODUCTION YIELDS MAY SUFFER FROM DEFECTIVE PACKAGES AND THE INTRODUCTION OF NEW PACKAGES. The assembly process is complex and involves a number of precise steps. Defective packages primarily result from: - - contaminants in the manufacturing environment; - - human error; - - equipment malfunction; - - defective raw materials; or - - defective plating services. These and other factors have, from time to time, contributed to lower production yields. They may do so in the future, particularly as we expand our capacity or change our processing steps. In addition, to be competitive, we must continue to expand our offering of packages. Our production yields on new packages typically are significantly lower than our production yields on our more established packages. Our failure to maintain high standards or acceptable production yields, if significant and prolonged, could result in lost customers, increased costs of production, delays, substantial amounts of returned goods and claims by customers relating thereto. Any of these problems could have a material adverse effect on our business, financial condition and results of operations. WE NEED A CLEAN ROOM ENVIRONMENT FOR OUR OPERATIONS. Our testing and assembly operations take place in areas where air purity, temperature and humidity are controlled. If we are unable to control our testing or assembly environment, our test or assembly equipment may become nonfunctional or the semiconductors we test and assemble may be defective. See "Item 4. Information on the Company -- B. Business Overview -- Quality Control". If we experience prolonged interruption in our operations 7 10 due to problems in the clean room environment, this could have a material adverse effect on our business, financial condition and results of operations. WE EXPECT TO INCUR SIGNIFICANT CAPITAL EXPENDITURES IN THE FUTURE AND THEREFORE MAY REQUIRE ADDITIONAL FINANCING IN THE FUTURE. To grow our business, we intend to increase our test and assembly capacity. This will require substantial capital expenditures for additional equipment. We will also be required to recruit and train new employees. These expenditures will likely be made in advance of increased sales. We cannot assure you that our net revenues will increase after these expenditures. Our failure to increase our net revenues after these expenditures could have a material adverse effect on our business, financial condition and results of operations. In addition, we may need to obtain additional debt or equity financing to fund our capital expenditures. Additional equity financing may result in dilution to the holders of ADSs and ordinary shares. Additional debt financing may be required which, if obtained, may: - - limit our ability to pay dividends or require us to seek consents for the payment of dividends; - - increase our vulnerability to general adverse economic and industry conditions; - - limit our ability to pursue our growth plan; - - require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability - - of our cash flow to fund capital expenditures, working capital and other general corporate purposes; and - - limit our flexibility in planning for, or reacting to, changes in our business and our industry. We cannot assure you that we will be able to obtain the additional financing on terms that are acceptable to us or at all. WE ARE DEPENDENT ON RAW MATERIAL SUPPLIERS AND DO NOT HAVE ANY LONG-TERM SUPPLY CONTRACTS WITH THEM. We obtain the materials we need for our assembly services from outside suppliers. We purchase all of our materials on a purchase order basis. We have no long-term contracts with any of our suppliers. If we cannot obtain sufficient quantities of materials at reasonable prices or if we are not able to pass on higher materials costs to our customers, this could have a material adverse effect on our business, financial condition and results of operations. WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN OUR INDUSTRY. The independent semiconductor test and assembly service industry is very competitive and diverse and requires us to be capable of testing increasingly complex semiconductors as well as bringing the most technologically advanced packages to market as quickly as our competitors. The industry is comprised of both large multi-national companies and small niche market competitors. We face substantial competition from a number of competitors that are much larger in size than us. These competitors include Advanced Semiconductor Engineering, Inc., Amkor Technology, Inc., ASE Test Limited, ASAT Holdings Limited, ChipPAC Incorporated and Siliconware Precision Industries Co., Ltd. Their facilities are primarily located in Asia. Each of these companies has significant manufacturing capacity, financial resources, research and development operations, marketing and other capabilities and has been in operation for some time. Such companies have also established relationships with many of our current or potential customers. Some of our competitors have established testing facilities in North America and may commence independent testing operations in Asia. These activities would compete directly with us. 8 11 We also face competition from the internal capabilities and capacity of many of our current and potential IDM customers. Many IDMs have greater financial and other resources than we do and may rely on internal sources for test and assembly services due to: - - their desire to realise higher utilization of their existing test and assembly capacity; - - their unwillingness to disclose proprietary technology; - - their possession of more advanced testing or assembly technologies; and - - the guaranteed availability of their own test and assembly capacity. We cannot assure you that we will be able to compete successfully in the future against our existing or potential competitors or that our business, financial condition and results of operations will not be adversely affected by increased competition. OUR INTELLECTUAL PROPERTY IS IMPORTANT TO OUR ABILITY TO SUCCEED IN OUR BUSINESS BUT MAY BE DIFFICULT TO PROTECT. Our ability to compete successfully and achieve future growth in net revenues will depend, in part, on our ability to protect our intellectual property and 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 currently have four issued patents and we have applied for 26 additional patents in the United States and certain other countries. We cannot assure you that any of our filed applications for patents will be granted, or, if granted, will not be challenged, invalidated or circumvented or will offer us any meaningful protection. Further, we cannot assure you that the Asian countries in which we market our products, such as Taiwan and China, will protect our intellectual property rights to the same extent as the United States. Additionally, we cannot assure you that our competitors will not develop, patent or gain access to similar know-how and technology, or reverse engineer our assembly services, or that any confidentiality and non-disclosure agreements upon which we rely to protect our trade secrets and other proprietary information will be adequate protection. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations. WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY RIGHTS DISPUTES. Our ability to compete successfully will depend, in part, on our ability to operate without infringing the proprietary rights of others. We have established procedures designed to help prevent us from infringing the technology of our competitors or other parties. When we are aware of intellectual property of others that may pertain to or affect our business, we will attempt to either avoid such processes, cross-license, or otherwise obtain certain process or package technologies that we feel are required. However, we have no means of ascertaining what patent applications have been filed in the United States until they are granted. In addition, we may not be aware of the intellectual property rights of others or familiar with the laws governing such rights in certain countries in which our products are or may be sold. As the number of patents, copyrights and other intellectual property rights in our industry increases, and as the coverage of these rights increases, we believe that companies in our industry will face more frequent patent infringement claims. On February 20, 2001, a lawsuit was filed by Amkor Technology, Inc. against us and our subsidiary, ST Assembly Test Services, Inc., alleging patent infringement in respect of certain integrated circuit packages. We believe that the lawsuit is without merit but in the event that this claim succeeds or any other valid claim is made against us, we could be required to: - - stop using certain processes; - - cease manufacturing, using, importing or selling infringing packages; - - pay substantial damages; 9 12 - - develop non-infringing technologies; or - - attempt to acquire licenses to use the infringed technology. Although we may seek licenses from or enter into agreements with third parties covering the intellectual property that we are allegedly infringing, we cannot guarantee that any such licenses could be obtained on acceptable terms, if at all. We may also have to commence lawsuits against companies who infringe our intellectual property rights. Such claims could result in substantial costs and diversion of our resources. Should any of the disputes described above occur, our business, financial condition and results of operations could be materially and adversely affected. SINGAPORE TECHNOLOGIES PTE LTD CONTROLS OUR COMPANY AND THEREBY MAY DELAY, DETER OR PREVENT ACTS THAT WOULD RESULT IN A CHANGE OF CONTROL. As of February 28, 2001, Singapore Technologies Pte Ltd beneficially owned approximately 72.1% of our ordinary shares. Singapore Technologies Pte Ltd, is wholly-owned by Temasek Holdings (Private) Limited, the principal holding company through which the corporate investments of the Government of Singapore are held. As a result, Singapore Technologies Pte Ltd is able to exercise direct or indirect control over matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. Matters that typically require shareholder approval include, among other things: - - the election of directors; - - our merger or consolidation with any other entity; - - any sale of all or substantially all of our assets; and - - the timing and payment of dividends. This concentration of ownership may delay, deter or prevent acts that would result in a change of control, which may be against the interests of holders of our ADSs and ordinary shares. WE MAY HAVE CONFLICTS OF INTEREST WITH OUR AFFILIATES. In the past, a substantial portion of our financing, as well as our net revenues, have come from our affiliates, and we have paid a management fee to Singapore Technologies Pte Ltd for certain services. We will continue to have certain contractual and other business relationships and may engage in material transactions with the Government of Singapore, companies within the Singapore Technologies Group (including Chartered Semiconductor which is one of our key customers) and EDB Investments Pte Ltd or EDBI. Sales to our affiliate, Chartered Semiconductor, in 1998, 1999 and 2000 were approximately 20.9%, 16.4% and 7.3%, respectively, of our net revenues. Although any new material related party transaction requires the approval of a majority of our Board of Directors and separate approval by the Audit Committee, circumstances may arise in which the interests of our affiliates may conflict with the interests of our other shareholders. In addition, both EDBI and Singapore Technologies Pte Ltd make investments in various companies. They have invested in the past, and may invest in the future, in entities that compete with us. For example, affiliates of Singapore Technologies Pte Ltd have investments in United Test Assembly Center (S) Pte Ltd, a Singapore-based provider of semiconductor assembly and testing services for semiconductor logic/ASIC and memory products. In the context of negotiating commercial arrangements with affiliates, conflicts of interest have arisen in the past and may arise, in this or other contexts, in the future. We cannot assure you that conflicts of interest will be resolved in our favor. See "Item 7. Major Shareholders and Related Party Transactions". 10 13 WE DEPEND ON CERTAIN KEY EMPLOYEES, LOSS OF CERTAIN OF THEM COULD ADVERSELY AFFECT OUR BUSINESS. Our future performance will largely depend on our ability to attract and retain key technical, customer support, sales and management personnel. The loss of certain of such persons could have a material adverse effect on our business, financial condition and results of operations. We do not maintain "key man" life insurance. A FIRE OR OTHER CALAMITY AT ONE OF OUR FACILITIES COULD ADVERSELY AFFECT OUR COMPANY. We conduct our testing and assembly operations at a limited number of facilities. A fire or other calamity resulting in significant damage at any of these facilities would have a material adverse effect on our business, financial conditions and results of operations. While we maintain insurance policies covering losses, including losses due to fire, which we consider to be adequate, we cannot assure you that it would be sufficient to cover all of our potential losses. Our insurance policies cover our buildings, machinery and equipment. ITEM 4. INFORMATION ON OUR COMPANY A. HISTORY AND DEVELOPMENT OF OUR COMPANY We were incorporated in Singapore as a limited liability company on October 31, 1994 and began operations in January, 1995. In February, 2000, we completed our initial public offering. We are listed on the Singapore Exchange Securities Trading Limited or SGX-ST (SGX: ST Assembly) and our ADSs are quoted on the Nasdaq National Market or Nasdaq (NASDAQ: STTS). Our registered office is at No. 5, Yishun Street 23, Singapore 768442, Republic of Singapore, Telephone: (65) 755 5885, Fascimile: (65) 755 9006, Website: www.stats.com.sg, and our agent for service in the United States is the President, ST Assembly Test Services, Inc., 1450, McCandless Drive, Milpitas, CA95035, United States of America, Telephone: (1 408) 941 1500, Fascimile: (1 408) 941 1501. Our principal place of operations is in Singapore and our global operations are mainly carried out in the United States, United Kingdom, Japan and Taiwan. We are part of the Singapore Technologies Group. The Singapore Technologies Group is a leading technology-based multi-national conglomerate based in Singapore. The Singapore Technologies Group provides a full array of multi-displinary capabilities, ranging from research and development, design and engineering, precision and high value-added manufacturing, major infrastructure development and management in the following five core business groups: Engineering, Technology, Infrastructure, Financial Services and Property. Other companies in the Singapore Technologies Group include Chartered Semiconductor. Temasek Holdings (Private) Limited is the principal holding company through which the corporate investments of the Government of Singapore are held. Temasek Holdings (Private) Limited directly owns 78.6% of Singapore Technologies Pte Ltd. The remaining 21.4% is owned by Singapore Technologies Holdings Pte Ltd, which is in turn 100% owned by Temasek Holdings (Private) Limited. As of February 28, 2001, our company is 72.1% owned by Singapore Technologies Pte Ltd and its affiliates. B. BUSINESS OVERVIEW We are a leading independent provider of a full range of semiconductor test and assembly services, including: - - testing, including final testing and wafer probe, on a diverse selection of test platforms, as well as additional test related services such as burn-in process support, reliability testing, thermal and electrical characterization, dry pack and tape and reel; - - assembly of leaded and laminate packages, as well as additional assembly related services such as package design and leadframe and substrate design; 11 14 - - pre-production services, such as package development, supply chain management and test software and related hardware development; and - - drop shipment services. We provide these test and assembly services to semiconductor companies which do not have their own manufacturing facilities (fabless companies), vertically integrated device manufacturers (IDMs), and independent semiconductor wafer foundries (foundries). While we provide our customers with a broad range of test and assembly services for most types of semiconductors,including high performance digital semiconductors, we have developed a particular expertise in testing mixed-signal semiconductors. We provide test and assembly services at our facility in Singapore. Singapore is a politically and economically stable nation with laws that protect our customers' proprietary technology. We also have assembly design centers in Arizona and California in the United States and a test development center in California. We plan to open a third test development center in Surrey, UK, in the second quarter of 2001. INDUSTRY BACKGROUND GENERAL Semiconductors are critical components used in an increasingly wide variety of applications such as computer systems, communications equipment and systems, automobiles, consumer products and industrial automation and control systems. As performance has increased and size and cost have decreased, the use of semiconductors in these applications has grown significantly. According to the Semiconductor Industry Association, or SIA, worldwide semiconductor device market revenue reached $204.0 billion in 2000, a new industry record. The revenue of $204.0 billion in 2000 represented a 37% growth rate for the industry over the previous year. The industry also witnessed across the board growth in all markets, and product demand was strong in every region of the world. However, SIA in its February 2001 report announced that its previous forecast of 22% year-on-year growth for 2001 is unlikely to be achieved due to the present inventory overhang going into 2001. MANUFACTURING PROCESS The production of a semiconductor is a complex process that requires increasingly sophisticated engineering and manufacturing expertise. The production process can be broadly divided into three primary stages: - - wafer fabrication, including wafer probe; - - assembly of bare semiconductors, or die, into finished semiconductors (referred to as "assembly" or "packaging"); and - - final testing of assembled semiconductors. Wafer Fabrication. The wafer fabrication process begins with the generation of a mask that defines the circuit patterns for the transistors and interconnect layers that will be formed on the raw silicon wafer. The transistors and other circuit elements are formed by repeating a series of process steps where photosensitive material is deposited onto the wafer. The material is then exposed to light through the mask in a photolithography process and the unwanted material is removed through an etching process, leaving only the desired circuit pattern on the wafer. Wafer Probe. Wafer probe is a process whereby each individual die on the wafer is electrically tested in order to identify the operable semiconductors for assembly. Assembly. Assembly protects the semiconductor, facilitates its integration into electronic systems and enables the dissipation of heat. In the assembly process, the wafer is diced into individual die that are then attached to a 12 15 substrate with an epoxy adhesive. Leads on the substrate typically are then connected by extremely fine gold wires to the input/output, or I/O, terminals on the die through the use of automated equipment known as "wire bonders". Each die is then encapsulated in a molding compound, thus forming the package. Final Testing. Final testing is the last step in semiconductor production. It is a highly complex process that uses sophisticated testing equipment and customized software programs to electrically test a number of attributes of assembled semiconductors, including functionality, speed, predicted endurance, power consumption and electrical characteristics. After final testing, the semiconductors are shipped as directed by the customer for integration into the end-products. TRENDS TOWARD OUTSOURCING Historically, IDMs conducted the majority of the semiconductor manufacturing process in their own facilities, outsourcing only the lower-technology aspects of the process and keeping what was at the time regarded as advanced or proprietary technology in-house. Fabless companies, which concentrated their efforts and resources on the design, marketing and sale of semiconductors, emerged in the mid-1980s. Fabless companies outsource virtually every step of the semiconductor production process, allowing them to utilize the latest test and assembly technology without committing significant amounts of capital and other resources to manufacturing their products. In response to competition from fabless companies, IDMs began utilizing outsourcing as a means of cost-effective access to state-of-the-art technology, faster time to market and lower unit costs. Increasingly, IDMs have overcome their reluctance to the outsourcing of advanced or proprietary technology and have come to increasingly depend on independent test and assembly providers for manufacturing support and advances in such technology. Given the IDMs' significant market share in the semiconductor market, they present a significant opportunity for independent test and assembly providers. There are several benefits that can be derived from the use of outsourced test and assembly services which are driving the continued growth of the industry: Technological sophistication and complexity. The increasing technological complexity of semiconductors, including systems-level semiconductors which integrate multiple functions onto a single semiconductor, has driven the need for increasingly complex test and assembly services able to support these devices. More sophisticated semiconductors require an increasing number of I/Os, higher operating speed, higher thermal dissipation and smaller form-factors. As a result of these requirements, semiconductor testing and assembly is increasingly being seen as an enabling technology critical to the advancement of semiconductor designs. Independent providers of test and assembly services have developed sophisticated expertise in semiconductor testing and assembly and have dedicated substantial resources toward further technological innovation. As independent providers are able to spread the cost of these development efforts over a broader range of customers and products, they are able to offer access to leading technologies at price points below the internal costs of IDMs. However, since it is difficult to keep pace with technological developments in test and assembly technology while maintaining a leading position in the development of increasingly sophisticated semiconductors, IDMs are increasingly relying on independent test and assembly service providers for technological development and innovation in, and as a strategic source of, test and assembly services. Time to market. As the semiconductor market becomes increasingly competitive and product life cycles continue to decrease, semiconductor companies are seeking to shorten their time to market for new products. In particular, these companies seek to shorten the test and assembly stages of the production process to gain a competitive advantage in bringing products to market quickly. As testing and assembly needs are identified for a specific product, semiconductor companies frequently do not have the time to develop the necessary capabilities to meet these needs nor the expertise to implement these solutions in the necessary volumes for rapid product rollouts. As a result, semiconductor companies are increasingly leveraging the resources and capabilities of independent test and assembly service providers to quickly deliver new products to the market. In addition, in order to further accelerate their time to market, semiconductor companies are increasingly requiring the test and assembly functions to be performed at the same location. 13 16 Asset utilization. The testing and assembly of semiconductors is a complex process that requires substantial capital investment in specialized equipment and facilities. Semiconductor companies, trying to maximize allocation of limited resources, reduce capital expenditures and control research and development costs, are increasingly turning to the outsourcing of test and assembly services. In addition, semiconductor companies are facing shorter product life cycles and more frequent new product introductions that cause greater fluctuations in product volumes, lower production runs and increased volatility in capacity requirements. As a result, it is becoming more difficult for these companies to sustain high levels of capacity utilization of their test and assembly equipment. Independent test and assembly services companies can allocate their fixed cost investments across a wider portfolio of customers and products to maximize capacity utilization and extend the useful life of equipment. Additionally, independent providers are able to reach improved price points through the realization of economies of scale in their purchasing activities. SERVICES We are in the semiconductors backend outsource business. We offer full turnkey services from wafer probe to final test and drop ship. The services we offer are customized to the needs of our individual customers. In 2000, 45.9% of our net revenues were from test services and 54.1% of our net revenues were from assembly services. TEST SERVICES We offer wafer probe and final testing on 15 different platforms, covering all the major test platforms in the industry. In addition, we offer test related services such as burn-in process support, reliability testing, thermal and electrical characterization, dry pack,and tape and reel. TESTING Testing includes both final testing and wafer probe. Final testing is the last stage in semiconductor production which involves using sophisticated test equipment and customized software programs to electronically test a number of attributes of packaged semiconductors for functionality. Wafer probe is the step immediately prior to the assembly of semiconductors and involves inspection of the processed wafer for defects. Wafer probe services require similar expertise and testing equipment to that used in final testing, and several of our testers (with the substitution of different handlers or probers) are used for wafer probe services. To date, substantially all wafer probe has been performed for customers whose wafers are then assembled by us. In 1999 and 2000, 80.2% and 49.5%, respectively, of wafer probe revenues were from sales to our affiliate, Chartered Semiconductor. We have invested in state-of-the-art testing equipment that allows us to test a broad variety of semiconductors, especially mixed-signal and high performance digital devices. Mixed-signal Testing. We test a variety of mixed-signal semiconductors, including those used in communications applications such as network routers, switches and interface cards; broadband products such as cable set-top boxes; and wireless telecommunications products such as cellular phones, base stations and Bluetooth(TM) devices. Bluetooth(TM) is a new technology that enables short range wireless communication between different electronic appliances. We are a member of the Bluetooth(TM) Special Interest Group (SIG) and, as such, we are regularly updated on the developments relating to Bluetooth(TM) technology. In addition to communications semiconductors, we test mixed-signal semiconductors for personal computer components, such as graphics, CD-ROM and hard disk drive controllers. Mixed-signal semiconductors require a large number of functions to be tested which can only be done using specialized testing equipment. Digital Testing. We test a variety of digital semiconductors, including high performance semiconductors used in PCs, disk drives, modems and networking systems. Specific digital semiconductors tested include digital signal processors, or DSPs, field programmable gate arrays, or FPGAs, microcontrollers, central processing units, bus 14 17 interfaces, and digital application specific integrated circuits, or ASICs, and application specific standard products, or ASSPs. The following table sets forth, for the periods indicated, the percentage of our net revenues from testing services by type of semiconductor.
YEAR ENDED DECEMBER 31 ------------------------------------------------- 1998 1999 2000 ----- ----- ----- Mixed-signal 67.1% 72.4% 76.0% Digital 30.6 26.8 23.5 Memory 2.3 0.8 0.5 ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== =====
ADDITIONAL TEST-RELATED SERVICES We offer a variety of additional test-related services, including: - - "Burn-in process support". Burn-in is the process of electrically stressing semiconductors, usually at high temperature and voltage, for a period of time long enough to cause the failure of marginal semiconductors. During burn-in process support, we perform an analysis of burn-in rejects in order to determine the cause of failure. - - "Reliability testing". Reliability testing is the process of testing a semiconductor to evaluate its life span. It is performed on a sample of devices that have passed final testing. - - "Thermal and electrical characterization". Thermal and electrical characterization is the process of testing a semiconductor for performance consistency under thermal and electrical stress. - - "Dry pack". Dry pack is the process of baking the semiconductors in order to remove moisture before packing and shipment to customers. - - "Tape and reel". Tape and reel is the process of transferring semiconductors from tray or tube into a tape-like carrier on reel format for shipment to customers. Tape and reel is desired for high throughput pick and placement of components. ASSEMBLY SERVICES Our assembly services are inclusive of a broad range of array and leaded packages. Packaging serves to protect the die and facilitate electrical connection and heat dissipation. As part of customer support on assembly services, we also offer complete package design, electrical and thermal simulation, measurement and design of leadframes and substrates. PACKAGING We offer a broad range of advanced package formats designed to provide customers with a full range of packaging solutions and full turnkey backend services. We have successfully ramped up high volume production of array products including Plastic Ball Grid Array or PBGA, thermally enhanced Ball Grid Array or BGA and chip-scale BGA. Our investment is in line with our packaging development focus which has primarily been on high-pin count surface mount technology, or SMT, packages. SMT packages typically incorporate leads or interconnects which are soldered to the surface of the printed circuit board rather than inserted into holes, as is the case in older plated- 15 18 through-hole, or PTH, technology packages. SMT packages accommodate a substantially higher number of leads than PTH packages, enabling greater package integration, and a reduction in the area dimensions of the printed circuit board. Because SMT enables higher pin counts on a semiconductor device, SMT is typically the preferred technology for most advanced semiconductors. Our SMT package configurations include a range of formats for leaded packages including quad flat packages, or QFPs, and high pin-count plastic leaded chip carriers, or PLCCs, in addition to BGA packages. Our SMT packages are divided into three families: standard leadframe, enhanced leadframe and laminate. The differentiating characteristics of our packages include the size of the package, the number of electrical connections or interconnects the package can support, the means of connection to the printed circuit board and the thermal and electrical characteristics of the package. Standard Leadframe Packages. Standard leadframe packages, which are the most widely recognized package types, are characterized by a semiconductor die encapsulated in a plastic mold compound with metal leads surrounding the perimeter of the package. The semiconductor die is connected to the metal leads by extremely fine gold wires in a process known as wire bonding. We focus on higher pin count standard leadframe packages, including QFPs and PLCCs. Our standard leadframe packages are used in a variety of applications, including mobile phones, notebook computers and networking systems. The following table summarizes our standard leadframe packages.
NUMBER PACKAGE FORMAT OF LEADS DESCRIPTION TYPICAL APPLICATIONS - -------------- -------- ----------- -------------------- Thin Shrink Small Outline 14-38 Traditional leadframe package with Mobile phone, mass storage, Package or TSSOP thickness below 1.0mm designed for multimedia and PDA logic, analog and memory devices, such as Flash, SRAM, EPROM, EEPROM, and DRAM Thin Quad Flat Package 32-128 Advanced QFP with thickness of 1.0mm Mobile phone, mass storage or TQFP for use in low profile, space and multimedia constrained applications Low Quad Flat Package 32-208 Advanced QFP with thickness of 1.4mm Mobile phone, mass storage or LQFP for use in low profile, space and multimedia constrained applications Metric Quad Flat Package or 64-240 Traditional QFP designed for ASICs, Access/LAN equipment, MQFP FPGAs and DSPs multimedia and mass storage Plastic Leaded Chip Carrier 44-84 Traditional leadframe package designed PC, access equipment and or PLCC for applications that do not have multimedia space constraints and do not require a high number of interconnects
16 19 Enhanced Leadframe Packages. Our enhanced leadframe packages are similar in design to our standard leadframe packages but are generally thinner and smaller and have advanced thermal and electrical characteristics which are necessary for many of the leading-edge semiconductors designed for communications applications. The following table summarizes our enhanced leadframe packages.
NUMBER PACKAGE FORMAT OF LEADS DESCRIPTION TYPICAL APPLICATIONS - -------------- -------- ----------- -------------------- Quad Leadless Package or QLP 8-100 Lead frame based near chip scale Mobile phone, PDA, GPS and package multimedia Exposed Pad Quad Flat Package 48-208 Thermally enhanced QFP with 30% Access/WAN/LAN equipment and or EPQFP greater thermal dissipation than MQFP PC/graphics Exposed Drop-in Heat Sink 44-208 Thermally enhanced QFP with 60% Access/WAN/LAN equipment and Quad Flat Package or EDQFP greater thermal dissipation than MQFP PC/graphics Drop-in Heat Sink Quad Flat 64-208 Thermally enhanced QFP with 30% Access/WAN/LAN equipment and Package or DQFP greater thermal dissipation than MQFP PC/graphics Die Pad Heat Sink Quad Flat 100-208 Thermally enhanced QFP with 60% Mass storage and multimedia Package or DPHQFP greater thermal dissipation than MQFP Heat Sink Quad Flat Package 100-240 Thermally enhanced QFP with 80% greater Base station, PC/graphics and or HQFP thermal dissipation than MQFP multimedia
Laminate Packages. Our laminate packages include BGA packages which employ leads, also known as interconnects, on the bottom of the package in the form of small bumps, or balls, in a matrix or array pattern. These BGA packages utilize a plastic laminate or film tape based substrate rather than a leadframe substrate. The BGA format enables a higher density of interconnects within a smaller surface area. BGA packaging was designed to address the need for higher lead counts and smaller package size required by advanced semiconductors used in applications such as portable computers and wireless telecommunications. As the required number of leads on the peripheral sides of the package increased, the lead pitch (which is the distance between leads) decreased. The nearness of one lead to another at very fine pitches resulted in potential electrical shorting problems during the SMT process. This necessitated the development of sophisticated and expensive techniques for producing circuit boards to accommodate the high number of leads at fine pitches. The BGA format solved this problem by employing lead terminals on the bottom of the package in the form of small bumps or balls. These balls can be evenly distributed across the entire bottom surface of the package, allowing greater distance between the individual leads. For the highest lead count devices, the BGA format can be manufactured less expensively and requires less delicate handling. Our BGA packages are typically used in semiconductors that require enhanced performance, including DSPs, microprocessors and microcontrollers, ASICs, FPGAs, memory and PC chip sets. Our BGA packages typically have between 16 and 600 balls. 17 20 Our BGA packages are described below:
NUMBER PACKAGE FORMAT OF BALLS DESCRIPTION TYPICAL APPLICATIONS - -------------- -------- ----------- -------------------- Flip Chip Small Thin Plastic 49-256 Flip chip BGA characterized by fine Mobile phone, PDA, GPS and BGA or FC-STPBGA pitch small term factor applications multimedia requiring both enhanced electricals and small size Tape Chip Scale Package 100-280 CSP BGA characterized by flex-tape Mobile phone, PDA and BGA or TCSP substrate for high density circuits multimedia Stacked Die BGA or SDPBGA 80-160 Compact multiple die designed for Mobile phone, PDA and space constrained applications multimedia Flexible Enhanced Plastic 256-600 BGA characterized by a flex-tape WAN/LAN equipment and base BGA or TBGA substrate replacing the laminate station substrate Enhanced BGA or EBGA 256-600 High pin count,thermally enhanced BGA WAN/LAN equipment and base package suitable for high power station applications which utilize heat sinks for thermal dissipation Small Thin Plastic BGA 6-256 Smaller and thinner BGA designed for Mobile phone, PDA, GPS and or STPBGA applications which are space multimedia constrained and require electrical performance Plastic Ball Grid Array 208-492 Electrically enhanced BGA package Access/LAN equipment, or PBGA designed for QLP high I/O replacement PC/graphics and base station
RECENT DEVELOPMENTS In response to industry trends toward environmentally friendly products, our assembly operations introduced a green molding compound and set up a dedicated lead-free line. This line processes lead-free packaging for our leaded packages using a pure tin solder alternative. We plan to introduce lead-free array packaging in 2001. A waste treatment system that detoxifies waste materials is now in place to support the grinding and sawing of gallium arsenide or GaAs wafers. This is an important development as it demonstrates our commitment to develop packages and services in response to the specialized needs of our customers. We believe GaAs semiconductors currently play and will continue to play an important role in high-speed networking and high-speed transmission equipment with data rates exceeding 10 Gbps or OC192. We have also established complete handling and packaging processes for gallium arsenide semiconductors. PACKAGES UNDER DEVELOPMENT We have a number of advanced packages under development to support our customers' need for high performance packages as well as chip scale packages or CSPs. 18 21 Our development roadmap includes build-up substrate and wafer bumping as an integral part of our flip chip technology. Flip chip technology can be used in both low pin count as well as high pin count packages. It is a particularly ideal solution for devices that require more than 1,000 interconnects in a relatively small package. Build-up substrates deliver even higher interconnect density without compromising thermal and electrical performance. We believe flip chip packages will find increasing application in high-end communications equipment such as switches, routers as well as high-end PCs. We also have next generation chip scale packages both under development and in qualification which incorporate lead-frame, laminate and tape technologies. The emphasis in the development of such packages is on low-profile, small footprint and light weight characteristics. These packages are used particularly in hand-held wireless communications equipment. These products are extremely useful for all hand-held devices including signal processors, mobile station modems, base-band circuits and memories. We are also developing new materials and processes to support our customers' future flip chip requirements. See "Research and Development -- Assembly Services". In addition, we continue to increase our support functions for thermal, electrical, stress and package to board level reliability characterization. We offer a full range of thermal simulation and actual testing for all of our existing packages and packages under development. We have a full service reliability laboratory that can stress test assembled semiconductors. In conjunction with local institutes and laboratories, we can also perform board level reliability testing of surface mount assembled packages. PRE-PRODUCTION SERVICES We have developed pre-production services to address the growing needs of our customers. Our pre-production services for assembly include package development and supply chain management, and for testing include software and hardware development. We offer these services in both Singapore and our facilities in California, U.S. Package Development. Our package development group interacts with customers early in the design process to optimize package design and manufacturability. For each project, our engineers create a design strategy in consultation with our customer to address the customer's requirements, package attributes, design guidelines and previous experience with similar products. After a design is finished, we provide quick-turn prototype services. By offering package design and prototype development, we can reduce our customer's development costs, accelerate time-to-volume production and ensure that new designs can be properly packaged at a reasonable cost. Supply Chain Management. We provide a full range of materials procurement and management services and work in partnership with key raw material and equipment suppliers to ensure reliable production readiness at reasonable cost. We manage inventory with automated materials handling processes using integrated Oracle software systems. Test Software and Hardware Development. We work closely with our customers to provide sophisticated software engineering services, including test program development, conversion and optimization. Generally, testing requires customized software to be developed for each particular semiconductor. Software is typically provided by the customer and may be converted by us for use on one or more of our tester platforms. Once a conversion test program has been developed, we perform trial tests to correlate the test software. Customer feedback on the test results enables us to adjust the conversion test programs prior to actual production testing. We assist our customers in collecting and analyzing the test results and develop engineering solutions to improve their design and production process. We also provide customers with test development services where we will develop the test software program based on test specifications provided by the customer. 19 22 DROP SHIPMENT SERVICES We provide drop shipment services including the delivery of final tested semiconductors to our customers' end-customers in any part of the world. We directly bill our customers for the cost of drop shipment. We believe that our ability to offer drop shipment services is an important factor in maintaining existing customers as well as attracting new customers. RESEARCH AND DEVELOPMENT Our research and development efforts are focused on developing test and assembly services required by our existing customers and that are necessary to attract new customers. We spent approximately $3.5 million, $7.3 million and $14.6 million in 1998, 1999 and 2000 on research and development. We currently employ 121 dedicated professionals for packaging and test development. We expect to continue to invest significant resources in research and development. TEST SERVICES We focus on developing new technologies, software and processes to enhance efficiency and reliability and to shorten test times. These include multi-site testing, test program optimization and hardware improvements designed to permit improved utilization of existing test equipment. When necessary we also design and build specialized equipment that is not available from outside vendors. In 2000, we received a patent in the USA and Singapore for certain enhancements to the test handler that increase the setup time within the test chamber. TEST DEVELOPMENT CENTERS In addition to the research and development work being done at our facilities in Singapore and USA, California, we plan to open a third test development center in our UK facility located in Surrey in the second quarter of 2001. This will enhance our global network and help our existing and potential European customers reduce their time to market. Specifically, the new test development center is expected to develop and debug test software prior to production, complete test software conversions for customers and offer our European customers, in conjunction with our Singapore and U.S. facilities, continuous access to our development capabilities. ASSEMBLY SERVICES We have established a dedicated group of engineers whose primary focus is the development of new, advanced packages. Because we typically offer our assembly services to our existing test customers, we are in a position to better understand their packaging needs. As a result, we focus our assembly research and development efforts in part on developing packages tailored to their individual needs. In addition, we are a member of the Singapore Institute of Microelectronics, or IME, that is dedicated to developing emerging technologies. Working with IME gives us access to technical libraries, high technology analytical laboratories and equipment, and design resources without extensive capital investment by us. IME is a non-profit government sponsored development center with the main goal of increasing the technical expertise, knowledge base and capability of Singapore. SALES AND MARKETING Our marketing strategy is to target potential customers who are industry leaders in technology development, require mixed-signal or high performance digital testing capabilities or require high-end assembly packages and 20 23 present significant volume growth opportunities. In addition, we target new fabless start-up companies participating in fast-growing market segments. We believe our customers place great value on our willingness to offer them the test and assembly services they request without the obligation of purchasing other services we offer. Our customers can also take advantage of our services on a "back-end turnkey" basis which includes wafer probe, assembly, final test and drop shipment services. In addition to the services we provide our customers directly, in conjunction with other foundries, we can offer our customers services on a "full turnkey" basis, which includes wafer fabrication. Our close working relationship with multiple foundries allows our customers one-stop services. Customers can take the advantage of full turnkey services from wafer fabrication to drop shipment. We see the Singapore government's long term plan of making Singapore a foundries hub as an added advantage to our full turnkey strategy. We market our services through direct sales forces strategically located in Singapore, Taiwan, Japan, France, UK and in the U.S. Our sales forces are well supported by a customer-focused structure. Each customer is serviced by a local account manager, factory account and customer service personnel as well as technical program manager. PRICING POLICY We price our test services principally on the length of tester CPU time used, typically referred to as test time on per-second basis. The price of test time is a function of tester platform and hardware configuration. These two are usually determined by our customers based on the function and complexity of a particular semiconductor device. In general, the test time for a complex semiconductor devices will be longer than a less complex semiconductor device. Wafer probing pricing is determined by similar factors. Any reduction in test time by optimization of test program or optimum hardware configuration will mean savings for our customer and potentially higher margins for us. Assembly services are priced competitively against the market and vary depending on such factors as material cost and depreciation expense. Design costs are not material but when incurred are charged to a customer separately or built into the unit price. CUSTOMERS We provide test and assembly services to a growing number of customers worldwide consisting primarily of fabless companies, IDMs and foundries. Our ten largest customers accounted for almost all of our net revenues in 1998, 1999 and 2000. In 1999, our four largest customers, Analog Devices, Broadcom, Chartered Manufacturing and Level One Communications, Inc., each represented in excess of 8% of our net revenues and in aggregate represented 66.8% of our net revenues. In 2000, our four largest customers, Alcatel, Analog Devices, Broadcom and Chartered Semiconductor, each represented in excess of 7% of our net revenues and in the aggregate represented 64.5% of our net revenues. Our two largest customers, Analog Devices and Broadcom, each represented in excess of 10% of our net revenues. Our affiliate, Chartered Semiconductor accounted for 16.4% and 7.3% of our net revenues in 1999 and 2000, respectively. We anticipate that our ten largest customers will continue to account for a high percentage of our net revenues for the forseeable future. In 1998, 1999 and 2000, 24.5%, 16.4% and 7.3% of our net revenues were derived from sales of test or assembly services to our affiliates, principally Chartered Semiconductor. 21 24 The following table sets forth for the periods indicated the percentage of our net revenues derived from testing and assembly of semiconductors used in communications, personal computers and other applications.
YEAR ENDED DECEMBER 31 --------------------------------------------------- 1998 1999 2000 ----- ----- ----- Communications 38.6% 60.9% 62.7% Personal Computers 49.7 32.1 30.2 Other 11.7 7.0 7.1 ----- ----- ----- Total 100.0% 100.0% 100.0% ===== ===== =====
We characterize a sale geographically based on the country in which the customer is headquartered. The following table sets forth the geographical distribution, by percentage, of our net revenues for the periods indicated.
YEAR ENDED DECEMBER 31 --------------------------------------------------- GEOGRAPHICAL AREA 1998 1999 2000 - ----------------- ----- ----- ----- United States 73.5% 76.0% 78.0% Europe 1.8 7.0 14.1 Singapore 24.6 16.8 7.3 Rest of Asia 0.1 0.2 0.6 ----- ----- ----- Total 100.0% 100.0 100.0% ===== ===== =====
Our customers generally do not place their purchase orders far in advance. As a result, we do not typically operate with any significant backlog. CUSTOMER SERVICE We place strong emphasis on quality customer service which we believe is a significant factor in our customer's selection of us for their test and assembly services. Our broad service offerings, dedicated customer account teams and commitment to finding solutions to our customers' needs and problems have enabled us to develop important relationships with many of our customers. We have received numerous awards in the area of customer service from our customers, including Broadcom, Cirrus Logic, Agilent (Hewlett Packard), Intel Sacramento and TDK Corporation. Our objective is to work very closely with our customers so that they consider us an integral, strategic partner in their business. For example, we work closely with our customers during the pre-production period by providing technical input and guidance to assist in the development of test programs and packages. Our computer software enables customers to obtain information regarding work in process via the Internet. To enable us to work more closely with a large number of our customers who are located in the United States, we have also located our assembly design centers in Arizona and California and a test development center in California. In the second quarter of 2001, we plan to open a third test development centre in our UK facility in Surrey to work more closely with our European customers. QUALITY CONTROL Customers require that our facilities and procedures undergo a stringent vendor qualification process. The qualification process typically takes from two to six weeks but can take longer depending on the requirements of the customer. For test qualification, a process known as correlation is first undertaken. During this correlation process, which typically takes from two days to two weeks, the customer provides us with sample semiconductors to be tested and either provides us with the test program or requests that we develop a conversion program. 22 25 We maintain a quality control staff comprised of engineers, technicians and other employees whose responsibility is to monitor our test and assembly processes to ensure they meet our quality standards. Our in-house laboratory is equipped with advanced analytical tools and provides the necessary equipment and resources for our research and development and engineering staff to continuously enhance product quality and process improvement. Our test and assembly operations are undertaken in clean rooms where air purity, temperature and humidity are controlled. To ensure stability and integrity of our operations, we maintain clean rooms at our facilities that meet U.S. federal 209E class 10,000 and 100,000 standards. We may in the future experience production interruptions due to technical problems in the clean room environment. Any interruption in our operations could have a material adverse effect on our results of operations. Our test and assembly operations in Singapore are ISO 9001, 9002 and 14001 certified. All three standards are issued and certified by the International Standards Organization. ISO 14001 is an international standard on environmental management system, to support environmental protection and prevention of pollution in balance with socio-economic needs. ISO 9002 standards set forth what is required to ensure production of quality products and services. ISO 9001 standards set forth a quality management system and address design, development, production, installation and servicing. The ISO certification process involves periodically subjecting production processes and quality management systems to stringent third party review and verification. ISO certification is required for sales of products to certain customers that look to an ISO certification as a threshold indication of our quality control standards. We are also OHSMS 18001 certified. OHSMS is the standard for the implementation of an occupation health and safety management system (OHSMS), and was developed to be compatible with the ISO 9001 and ISO 14001 management system standards to facilitate the integration of quality, environmental and occupational health and safety management systems by organizations. In addition, we are one of the few semiconductor companies that have both Level 1 Semiconductor Assembly Council, or SAC, and QS9000 certification. SAC certification is one of the most prestigious certifications in the semiconductor manufacturing industry and QS9000, based on ISO9001, is a comprehensive certification of a company's total quality management system. COMPETITION The independent semiconductor test and assembly service industry is very competitive and diverse. In order to compete, we must offer state-of-the-art testing services and bring the most technologically advanced packages to market as quickly as our competitors and at comparable prices. Test and assembly services are provided by both large multi-national companies and small niche market competitors. We face substantial competition from a number of competitors, some of whom are much larger in size. These competitors' facilities are primarily located in Asia. Some of these companies include Advanced Semiconductor Engineering, Inc., Amkor Technology, Inc., ASE Test Limited, ASAT Holdings Limited, ChipPAC Incorporated and Siliconware Precision Industries Co., Ltd. These companies have significant manufacturing capacity, financial resources, research and development, operations, marketing and other capabilities and have been in operation for some time. Such companies have also established relationships with many of our current or potential customers. We also face competition from the internal capabilities and capacity of many of our current and potential IDM customers. Many IDMs have greater financial and other resources than we do and may rely on internal sources for test and assembly services due to: - - their desire to realize higher utilization of their existing test or assembly capacity; - - their unwillingness to disclose proprietary technology; - - their possession of more advanced testing or assembly technologies; and - - the guaranteed availability of their own test or assembly capacity. 23 26 The principal elements of competition in the independent semiconductor assembly industry include variety of packages offered, price, location, available capacity, cycle time, engineering capability, technical competence, customer service and flexibility. If our competitors are able to bring their new packages to market faster or at lower prices than we can, our net revenues may be affected. In the area of test services, we compete on the basis of quality, cycle time, pricing, location, available capacity, software development, engineering capability, technical competence, customer service and flexibility. Our competitors in the independent testing market are both those listed above as well as smaller niche companies, offering limited services, which compete principally on the basis of engineering capability, location and available capacity. While we believe that we compete favorably with our principal competitors, we cannot assure you that we will be able to compete successfully in the future against our existing or potential competitors or that our operating results will not be adversely affected by increased price competition. See "Item 3. Key Information -- D. Risk Factors -- We may not be able to compete successfully in our industry". INTELLECTUAL PROPERTY Our operational success will depend in part on the ability to develop and protect our intellectual property. We currently have four issued patents and we have applied for 26 additional patents in the United States related to various aspects of our semiconductor test and assembly. We have also applied for patents in certain other countries where appropriate. If the patents are granted, we may seek to cross-license or share our intellectual property portfolio at a future time if it is advantageous for us to do so. We expect to file patent applications primarily in the United States, Singapore, Taiwan and the European Union, but may also file in other countries to protect our proprietary technologies, where appropriate. We have licensed patent rights from Motorola, Inc. to use technology in manufacturing BGA packages under an agreement which will expire in 2002 and is subject to renewal. Under this agreement, we are required to pay Motorola a royalty based upon the number of pads on each BGA package. When we are aware of intellectual property of others that may pertain to or affect our business, we attempt to either avoid processes protected by existing patents, cross-license or otherwise obtain certain process or package technologies. In addition, we execute confidentiality and non-disclosure agreements with our customers and consultants and limit access to and distribution of our proprietary information. Our continued success will rely in part on the technological skills and innovation of our personnel and our ability to develop and maintain proprietary technologies. The departure of any of our management or technical personnel and the breach of their confidentiality and non-disclosure obligations or our failure to achieve our intellectual property objectives could have a material adverse effect on our business, financial condition and results of operations. Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect our proprietary technology and the proprietary technology of our customers entrusted to us by our customers during the testing process and to avoid infringement of existing and future intellectual property of others. We cannot assure you that patents will be issued for pending or future applications or that, if patents are issued, they will not be challenged, invalidated or avoided, or that rights granted thereunder will provide adequate protection or other commercial value to us. The laws of certain countries in which our services are or may be sold may not protect our packages and our intellectual property rights to the same extent as the laws of the United States or other countries where our intellectual property may be filed or registered. In addition, certain countries in which our services are or may be sold could have rights or laws governing intellectual property about which we are unaware. 24 27 In the event that any valid claim is made against us, we would be required to: - - stop using certain processes; - - cease manufacturing, using, importing or selling infringing packages; - - pay substantial damages; - - develop non-infringing technologies; or - - attempt to acquire licenses to use the infringed technology. As the number of patents, copyrights and other intellectual property rights in our industry increases, and as the coverage of these rights and the functionality of the packages in the market further overlap, we believe that companies in our industry may face more frequent patent infringement claims such as the recent lawsuit filed by Amkor Technologies, Inc. alleging patent infringement in respect of certain integrated circuit packages. See "Item 3. Key Information -- D. Risk Factors -- We may be subject to intellectual property rights disputes". We may face additional litigation or patent infringement claims in the future. We may also have to commence lawsuits against companies who infringe our intellectual property rights. Such claims could result in substantial costs and diversion of our resources. A third party claiming infringement may also obtain an injunction or other equitable relief, which could effectively block the distribution or sale of allegedly infringing packages. Although we may seek licenses from third parties covering the intellectual property that we are allegedly infringing, we cannot guarantee that any such licenses could be obtained on acceptable terms, if at all. ENVIRONMENTAL MATTERS AND COMPLIANCE Our test and assembly operations do not generate significant pollutants. Our operations are subject to regulatory requirements and potential liabilities arising under Singapore laws and regulations governing among other things, air, emissions, waste water discharge, waste storage, treatment and disposal, and remediation of releases of hazardous materials. We have implemented an environmental monitoring system. We send samples of our air emissions, treated water and sludge to third party accredited laboratories for testing to ensure our compliance with the environmental laws and regulations that apply to us. We believe that we are in compliance with all applicable environmental laws and regulations. Expenditures on environmental compliance currently represent an insignificant portion of our operating expenses. We are certified ISO 14001 by the Productivity and Standards Board (Singapore) and the Japan Audit Compliance Organization. C. ORGANIZATIONAL STRUCTURE We are part of the Singapore Technologies Group. The Singapore Technologies Group is a leading technology-based multi-national conglomerate based in Singapore. The Singapore Technologies Group provides a full array of multi-disciplinary capabilities, ranging from research and development, design and engineering, precision and high value-added manufacturing, major infrastructure development and management in the following five core business groups: Engineering, Technology, Infrastructure, Financial Services and Property. Other companies in the Singapore Technologies Group include Chartered Semiconductor, one of our major customers. Temasek Holdings (Private) Limited is the principal holding company through which the corporate investments of the Government of Singapore are held. As of February 28, 2001, Temasek Holdings (Private) Limited directly owns 78.6% of Singapore Technologies Pte Ltd. The remaining 21.4% is owned by Singapore Technologies Holdings Pte Ltd, which is in turn 100% owned by Temasek Holdings (Private) Limited. We have a wholly owned subsidiary, ST Assembly Test Services, Inc. or STATS Inc. (previously known as Singapore Technologies Assembly and Test Services, Inc.) incorporated in the United States in the State of 25 28 Delaware. STATS Inc. undertakes marketing, design support and research and development through its various facilities in the United States. We also have sales offices in UK, France, Japan and Taiwan to support our customers in those respective regions. D. PROPERTY, PLANTS AND EQUIPMENT We presently operate from a 580,000 square foot facility in Singapore which opened in November 1997. In addition to our test and assembly operations, this facility houses our corporate executive, administrative, sales and marketing and finance offices. We constructed this facility on land leased from the Housing Development Board, a statutory board of the Government of Singapore, for a 30-year term expiring March 2026 with an option for renewal. The facility is designed to accommodate: - - 300,000 square feet of test space; - - 120,000 square feet of assembly space; - - 500 testers; - - 720 wire bonders; and - - 72 mold systems. In addition to our headquarters in Singapore, we also have assembly design centers in Arizona and California in the United States and a test development center in California. EQUIPMENT Our operations and expansion plans depend on us being able to obtain an adequate supply of test and assembly equipment on a timely basis. We work closely with our major equipment suppliers to ensure that equipment is delivered on time and such equipment meets our stringent performance specifications. Equipment commodity teams comprising employees from each of engineering, maintenance and purchasing have been formed to manage and procure equipment that meet our customers' current and future needs. The teams conduct a regular review of future technology roadmaps, cost performance targets, which include cost of spares, uptime and speed, as well as upgradability and flexibility. The teams' activities also include regular benchmarking, setting expectations and design requirements for future generations of equipment and beta-site testing of equipment. These activities provide a basis for us to determine our ongoing equipment needs. With the exception of a few key suppliers that provide reserved equipment delivery slots and price discount structures, we have no binding supply agreements with any of our suppliers. A reserved equipment delivery slot is one which allows us to obtain an accelerated delivery of the equipment over and above the delivery schedule previously committed by the supplier. Typically, price discounts are offered for volume purchases. We acquire our test and assembly equipment on a purchase order basis, which exposes us to substantial risks. The unavailability of new test or assembly equipment, the failure of such equipment or other equipment acquired by us to operate in accordance with our specifications or requirements or delays in the delivery of such equipment, could delay implementation of our expansion plans and could materially and adversely affect our results of operations or financial condition. See "Item 3. Key Information -- D. Risk Factors -- We may be unable to obtain testing and assembly equipment when we require it". TESTING EQUIPMENT Testing equipment is one of the most critical components of the testing process. We generally seek to maintain testers from different vendors with similar functionality and the ability to test a variety of different semiconductors. In general, certain semiconductors can only be tested on a limited number of specially configured 26 29 testers. As part of the qualification process, customers will specify the equipment on which their semiconductors may be tested and we will then develop test program conversion software that enable us to test these semiconductors on multiple equipment platforms. This portability between testers enables us to allocate semiconductors tested across our available test capability and thereby improve the capacity utilization rates. We purchase testing equipment from major international manufacturers, including Advantest Corporation, Credence Systems Corporation, Agilent Technologies, LTX Corporation and Teradyne Inc. We operate 230 testers, comprising 164 mixed-signal testers, 55 digital testers and 11 memory testers. In certain cases where a customer has specified testing equipment that is not widely applicable to other products that we test, we have required the customer to provide the equipment on a consignment basis. Presently 25 of the aggregate 230 testers we operate are on consignment and 22 of the 25 are used for mixed-signal testing. In addition to testing equipment, we maintain a variety of other types of equipment, such as automated handlers and probers (with special handlers for wafer probing) scanners, reformers and PC workstations for use in software development. ASSEMBLY EQUIPMENT The primary equipment used in assembly includes wire bonders and mold systems. We own and operate approximately 532 wire bonders and approximately 66 mold systems. Certain of our wire bonders allow for interchangeability between lead frame and laminate packages. We purchase wire bonders from major international manufacturers, including Kulicke & Soffa Industries, Inc. and ESEC S.A. We purchase mold systems from major international manufacturers, including Apic Yamada Corporation, Dai-Ichi Seiko Co Ltd and Han-Mi Co Ltd. We have also purchased gallium arsenide wafer saw and backgrind equipment. RAW MATERIALS Our assembly operations depend on obtaining an adequate supply of raw materials on a timely basis. The principal raw materials used in assembly are leadframe or laminate substrates, gold wire and molding compound. We generally purchase raw materials based on the non-binding forecasts provided to us by our customers. However, our customers are generally not responsible for any unused raw materials that result from a forecast exceeding actual orders. We work closely with our primary suppliers, providing them with a six-month rolling forecast and weekly requirement schedules. Accordingly, our suppliers are better able to supply us with raw materials. We are not dependent on any one supplier for a substantial portion of our raw material requirements. The unavailability of an adequate supply of raw materials could materially and adversely affect our business, financial condition and results of operations. See "Item 3. Key Information -- D. Risk Factors -- We are dependent on raw material suppliers and do not have any long-term supply contracts with them". ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion of our business, financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth under "Item 3. Key Information -- D. Risk Factors" and elsewhere in this Annual Report. Our consolidated financial statements are reported in U.S. dollars and have been prepared in accordance with U.S. GAAP. Certain items in the comparative figures have been reclassified to conform with the current year's presentation. 27 30 OVERVIEW We derive revenues from test services and assembly of array and leaded packages. Net revenue represents the invoiced value of services rendered, excluding goods and services tax, net of returns, trade discounts and allowances. We recognize revenue upon shipment of semiconductors for which we have provided services. The semiconductor industry is characterized by price erosion which can impact our revenue and gross margin, unless we improve our capacity utilization and reduce costs. Prices of our products of a given level of technology decline over the product life cycle, commanding a premium in the earlier stages and declining towards the end of the cycle. We have to continue to develop and offer increasingly complex test and assembly services that meet the requirements of our customers. From 1996 to 2000, our net revenues grew from $32.2 million to $331.3 million. From 1996 to 1998, almost all of our net revenues were derived from test services and assembly of leaded packages. We derived revenues from assembly of laminate packages for the first time in October 1998. We provide a full range of test services and have developed substantial expertise in testing mixed-signal and high performance digital semiconductors. We have been successful in attracting new customers with these testing capabilities and then expanding our relationship with such customers to include assembly services tailored to their needs. We intend to continue to expand our test and assembly operations in order to position ourselves to meet increased demand for outsourced test and assembly services. Our results of operations are generally affected by the capital-intensive nature of our business. Most of our costs are fixed as our variable costs are limited to the costs of materials, operating supplies and payroll. Our primary fixed costs are for test and assembly equipment. Testers typically cost between $1.5 million and $3.0 million each, compared with wire bonders which typically cost $100,000 each. Increases or decreases in capacity utilization rates can have a significant effect on gross profit margins since the unit cost of test and assembly services generally decreases as fixed charges, such as depreciation expense for the equipment, are allocated over a larger number of units. Depreciation expense including leasing costs as a percentage of revenues was 35.6% in 1998, 24.5% in 1999 and 25.5% in 2000. Our results of operations are also affected by declines over time in the average selling prices for packages. In the past, we have been able in most instances to offset, at least in part, the effect of such declines on our gross profit margins by successfully developing and marketing new higher margin packages, such as advanced leadframe and array packages, and by taking advantage of economies of scale and higher productivity resulting from higher volumes. However, we cannot assure you that we will be successful at offsetting any such declines in the future. Our operating expenses consist principally of selling, general and administrative expenses which include payroll-related expenses for administrative staff, facilities-related expenses, management fees to our parent Singapore Technologies Pte Ltd, marketing expenses and provisions for bad debts on accounts receivable. Our operating expenses also include research and development expenditures which have been focused in two areas: - - the development of new test equipment, software and processes to enhance efficiency and reliability and to shorten test time of semiconductors; and - - the development of new, advanced packages to meet the customized needs of our existing customers. We are a part of the Singapore Technologies Group which provides us with certain direct and indirect benefits. We have benefited from our close working relationship with Chartered Semiconductor, which is also majority owned by Singapore Technologies Pte Ltd and one of our major customers. Singapore Technologies Pte Ltd and its affiliates have previously provided us with debt and equity financing. Also, Singapore Technologies Pte Ltd provides us with certain management services, including corporate secretarial, internal audit, training, executive resources and treasury services. We pay Singapore Technologies Pte Ltd an annual management fee for these services. Prior to December 1999, this fee was based on certain percentages of capital employed, sales, manpower and payroll. The new service agreement into which we entered in December 1999 is a formula and service based fee arrangement. 28 31 Certain general and administrative expenses of STATS Inc., our subsidiary, are borne and recharged to us by Chartered Semiconductor Manufacturing, Inc., a United States incorporated affiliate of Singapore Technologies Pte Ltd. In 2000, as a result of substantial growth in our business, STATS Inc. expanded its in house capabilities and resources and replaced the administrative support services previously provided by Chartered Semiconductor Manufacturing, Inc. Hence, with effect from year 2000, Chartered Semiconductor Manufacturing, Inc. ceased to provide such administrative support services. The expenses billed for years 1998 and 1999 amounted to $0.7 million and $0.9 million respectively. Chartered Semiconductor Manufacturing, Inc. however, continues to bear and recharge STATS Inc. for office rent expense which amounted to $0.3 million in 1998, $0.4 million in 1999 and $0.6 million in 2000. We recognize stock-based compensation expense for options granted under the Share Option Plan in accordance with fixed plan accounting. Reported stock-based compensation expense represents the difference between the exercise price of employee share option grants and the fair value of our ordinary shares at the date of the grant, amortized over the vesting period of the applicable options. The fair market value of our ordinary shares prior to our initial public offering was computed based on calculating the fair market value of our total invested capital less interest-bearing debt, assuming the exercise of the outstanding options at each valuation date and adding the expected cash proceeds from the exercise of those options. The fair market value of our total invested capital was estimated using the income approach and the market approach, on a closely-held minority interest basis. We have been granted pioneer enterprise status under The Economic Expansion Incentives (Relief from Income Tax) Act, Chapter 86 of Singapore, for "Subcontract Assembly And Testing Of Integrated Circuits Including Wafer Probing Services" since January 1, 1996. During the pioneer enterprise status period, income from subcontract assembly and testing of integrated circuits, including wafer probe services, is exempt from Singapore income tax, subject to compliance with the conditions stated in the pioneer certificate. Income from any other sources is taxed at prevailing Singapore corporate tax rates. The pioneer enterprise status period ends on December 31, 2003. Until June 30, 1998, our functional currency was Singapore dollar. Effective July 1, 1998, we changed our functional currency to the United States dollar. Assets and liabilities denominated in other currencies are converted into the functional currency at the rates prevailing at the balance sheet date. Income and expenses in other currencies are converted into the functional currency at the rates of exchange at the transaction date. We experience foreign currency exchange gains and losses arising from transactions in currencies other than our functional currency. Our currency gains and losses arise principally from the fluctuation of the U.S. dollar against the Singapore dollar and the Japanese yen from transactions denominated in these currencies. Towards the end of 2000, we experienced a sharp decrease in customers' demand. We believe that the decrease in customers' demand was the result of excessive inventory in the worldwide semiconductor industry and a decrease in demand for our customers' products and services by end users. Based on current visibility, we expect the weakness in customers' demand to continue into the first quarter of 2001 with expected revenues for the first quarter of 2001 to decline substantially from revenue of the fourth quarter of 2000. Despite the near term cautious outlook, we believe the longer-term prospects of our business are optimistic. 29 32 RESULTS OF OPERATIONS The following table sets forth certain operating data as a percentage of net revenues for the periods indicated:
YEAR ENDED DECEMBER 31 -------------------------------------------------- 1998 1999 2000 ----- ----- ----- Net revenues 100.0% 100.0% 100.0% Cost of revenues 70.0 76.4 66.1 ----- ----- ----- Gross profit 23.6 33.9 30.0 ----- ----- ----- Operating expenses: Selling, general and administrative 14.7 14.1 12.3 Research and development 3.1 3.6 4.4 Stock-based compensation 0.4 12.6 0.1 Other general expenses (income), net (0.5) -- -- ----- ----- ----- Total operating expenses 17.7 30.3 16.8 ----- ----- ----- Operating income (loss) 5.9 3.6 13.2 Other income (expense): Interest income (expense), net (7.2) (2.8) 2.4 Foreign currency exchange gain 0.7 0.7 0.6 Other non-operating income, net 1.9 1.2 1.1 ----- ----- ----- Total other income (expense) (4.6) (0.9) 4.1 ----- ----- ----- Income before income taxes 1.3 2.7 17.3 Income tax expense (0.3) (0.2) (0.9) ----- ----- ----- Net income 1.0% 2.5% 16.4% ----- ----- -----
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 2000 Net revenues. Net revenues increased 64.7% from $201.1 million in 1999 to $331.3 million in 2000. This increase was primarily due to the increase in unit volumes for test and assembly services. Net revenues from test services increased 64.0% from $92.6 million in 1999 to $151.9 million in 2000. The increase in test services net revenues was attributable primarily to growth in test volumes reflecting increased demand and expanded capacity. Revenues from assembly increased 65.3% from $108.5 million in 1999 to $179.4 million in 2000. This increase was primarily due to greater demand for leadframe and array packages. Cost of revenues and gross profit margin. Cost of revenues increased 74.5% from $132.9 million in 1999 to $231.9 million in 2000, primarily due to higher depreciation expense and leasing costs as a result of placing into service additional test and assembly equipment and costs associated with increased test and assembly unit volumes. Depreciation expense increased from $46.7 million in 1999 to $66.4 million in 2000 and cost of leasing testers increased from $2.6 million in 1999 to $18.0 million in 2000. Gross profit margin decreased from 33.9% in 1999 to 30.0% in 2000. The decrease in gross profit margin was due principally to a higher proportion of array business in 2000 which has lower gross margin and also due to lower capacity utilization. Selling, general and administrative expenses. Selling, general and administrative expenses increased by 43.5% from $28.4 million, or 14.1% of net revenues, in 1999 to $40.8 million, or 12.3% of net revenues, in 2000. The increase was due primarily to higher administrative headcount to support increased operating activities in 2000 which resulted in higher payroll and staff related expenses. Research and development expenses. Research and development expenses increased by 101.0% from $7.3 million, or 3.6% of net revenues, in 1999 to $14.6 million, or 4.4% of net revenues, in 2000. The increased expenses were for additional investments (employees, equipment and operating supplies) primarily in advanced packaging technologies in support of our strategy of offering complete backend turnkey services to our customers. 30 33 Stock-based compensation expense. Stock-based compensation expense decreased by 98.4% from $25.3 million, or 12.6% of net revenues, in 1999 to $0.4 million, or 0.1% of net revenues, in 2000. The high charge in 1999 arose as a result of the termination of the Employees' Share Ownership Scheme. Net interest income (expense). Net interest income (expense) increased substantially from a net interest expense of $5.5 million in 1999 to a net interest income of $8.2 million in 2000. The increase was due to interest earned on cash proceeds from our initial public offering in February 2000, the uninvested proceeds of which were invested generally in marketable debt securities and fixed term-time deposits with financial institutions, and from the repayment of our loans of $67.5 million. Foreign currency exchange gain. Exchange gain of $1.4 million was recognized in 1999 and of $2.0 million in 2000. The exchange gain was due primarily to currency fluctuations of the U.S. dollar against Singapore dollar and Japanese yen. Other non operating income. Other non operating income increased by 48.2% from $2.4 million in 1999 to $3.5 million in 2000. The increased income was mainly due to sale of scrap materials, increase in government grants for the purchase of equipment, and training subsidies used for research and development activities. The higher income in year 2000, however, was partially reduced by $0.5 million rental income received in 1999 but ceased in 2000. Income tax expense. Income tax expense in 1999 was $0.5 million compared to $2.9 million in 2000. The higher tax expense was due to a substantial increase in interest income earned in 2000. YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Net revenues. Net revenues increased 76.5% from $113.9 million in 1998 to $201.1 million in 1999. This increase was primarily due to the increase in unit volumes for test and assembly services. Net revenues from test services increased 63.3% from $56.7 million in 1998 to $92.6 million in 1999. The increase in test services net revenues was attributable primarily to growth in test volumes reflecting increased demand and expanded capacity. Revenues from assembly increased 89.7% from $57.2 million in 1998 to $108.5 million in 1999. This increase was primarily due to greater demand for leadframe packages and to a lesser extent the introduction of laminate packages in October 1998. Cost of revenues and gross profit margin. Cost of revenues increased 52.6% from $87.1 million in 1998 to $132.9 million in 1999, primarily due to higher depreciation expense and leasing costs as a result of placing into service additional test and assembly equipment and costs associated with increased test and assembly unit volumes. Depreciation expense increased from $39.5 million in 1998 to $46.7 million in 1999 and cost of leasing testers increased from $1.0 million in 1998 to $2.6 million in 1999. Gross profit margin increased from 23.6% in 1998 to 33.9% in 1999. The increase in gross profit margin was attributable primarily to improved utilization of test and assembly equipment. Selling, general and administrative expenses. Selling, general and administrative expenses increased 69.0% from $16.8 million, or 14.7% of net revenues, in 1998 to $28.4 million, or 14.1% of net revenues, in 1999. The increase was mainly due to increase in manpower resources, particularly in the United States, including the addition of 12 employees in sales and marketing positions to Singapore Technologies Assembly and Test Services, Inc. Research and development expenses. Research and development expenses increased 108.6% from $3.5 million, or 3.1% of net revenues, in 1998 to $7.3 million, or 3.6% of net revenues, in 1999. The increase was attributable to higher hardware and software depreciation ($1.5 million), supplies ($2.3 million) and salaries and benefits ($3.5 million), in part relating to the establishment of the test development center in California. Stock-based compensation expense. Stock-based compensation expense increased by 6,225.0% from $0.4 million in 1998 to $25.3 million in 1999. The increase was primarily due to the effect of terminating the old employee share ownership scheme in 1999. 31 34 Net interest expense. Net interest expense decreased from $8.2 million in 1998 to $5.5 million in 1999 as borrowings were reduced by $62.5 million from the proceeds of the issuance of new shares to Singapore Technologies Pte Ltd and EDBI in March 1998 and also the replacement of borrowings with a lower interest rate loan of S$90.0 million. Foreign currency exchange gain (loss). Exchange gain of $0.9 million was recognized in 1998 and gain of $1.4 million in 1999. The exchange gain was due primarily to currency fluctuations of the U.S. dollar against the Singapore dollar and Japanese yen. Other non-operating income. Other non-operating income increased from $2.1 million in 1998 to $2.4 million in 1999. The increased income was mainly due to receipt of government grants for the purchase of equipment, and training subsidies used for research and development activities and higher sale proceeds from sale of scrap materials in 1999. The higher income in year 1999, however, was partially offset by higher rental income in 1998. Income tax expense. Income tax expense remains about the same at $0.4 million in 1998 and $0.5 million in 1999. The current income tax expense for both periods is due to Singapore tax on rental and interest income and U.S. tax on income generated by STATS Inc. in the United States. QUARTERLY RESULTS The following table sets forth our unaudited results of operations, including as a percentage of net revenue, for the eight fiscal quarters ended December 31, 2000. We believe that all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly the selected quarterly information when read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report. Our results of operations have varied and may continue to vary significantly from quarter to quarter and are not necessarily indicative of the results of any future periods. In addition, particularly in light of our recent growth, we believe that the period to period comparisons should not be relied upon as an indication of our future performance. 32 35
QUARTER ENDED ------------------------------------------------------------------------------ MAR-99 JUN-99 SEP-99 DEC-99 MAR-00 JUN-00 SEP-00 DEC-00 ------ ------ ------ ------ ------ ------ ------ ------ (IN THOUSANDS) Net revenues 36,677 45,616 53,688 65,117 72,176 75,759 90,538 92,798 Cost of revenues 28,435 30,455 34,692 39,307 45,054 50,412 63,202 73,276 ------ ------ ------ ------ ------ ------ ------ ------ Gross profit 8,242 15,161 18,996 25,810 27,122 25,347 27,336 19,522 ====== ====== ====== ====== ====== ====== ====== ====== Operating expenses: Selling, general and administrative 5,456 6,515 7,223 9,243 9,586 9,747 10,151 11,314 Research and development 1,230 1,536 2,359 2,158 2,618 4,276 4,078 3,664 Stock-based compensation 899 858 6,699 16,871 247 99 17 85 Other general expenses (income), net (2) 0 25 14 (6) (227) 41 170 ------ ------ ------ ------ ------ ------ ------ ------ Total operating expenses 7,583 8,909 16,306 28,286 12,445 13,895 14,287 15,233 ====== ====== ====== ====== ====== ====== ====== ====== Operating income (loss) 659 6,252 2,690 (2,476) 14,677 11,452 13,049 4,289 Other income (expense): Interest income (expense), net (1,398) (1,458) (1,262) (1,416) 152 2,920 2,684 2,458 Foreign currency exchange gain (loss) 2,157 222 (506) (488) 860 (398) 606 950 Other non-operating income, net 193 941 656 589 598 1,175 967 784 ------ ------ ------ ------ ------ ------ ------ ------ Total other income (expense) 952 (295) (1,112) (1,315) 1,610 3,697 4,257 4,192 ====== ====== ====== ====== ====== ====== ====== ====== Income (loss) before income taxes 1,611 5,957 1,578 (3,791) 16,287 15,149 17,306 8,481 Income tax (expense) benefit (239) (273) (148) 160 (489) (1,050) (851) (475) ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) 1,372 5,684 1,430 (3,631) 15,798 14,099 16,455 8,006 ====== ====== ====== ====== ====== ====== ====== ======
AS A PERCENTAGE OF NET REVENUE ------------------------------------------------------------------------------ MAR-99 JUN-99 SEP-99 DEC-99 MAR-00 JUN-00 SEP-00 DEC-00 ------ ------ ------ ------ ------ ------ ------ ------ Net revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of revenues 77.5% 66.8% 64.6% 60.4% 62.4% 66.5% 69.8% 79.0% ------ ------ ------ ------ ------ ------ ------ ------ Gross profit 22.5% 33.2% 35.4% 39.6% 37.6% 33.5% 30.2% 21.0% ====== ====== ====== ====== ====== ====== ====== ====== Operating expenses: Selling, general and administrative 14.9% 14.3% 13.5% 14.2% 13.3% 12.9% 11.2% 12.2% Research and development 3.4% 3.4% 4.4% 3.3% 3.6% 5.6% 4.5% 3.9% Stock-based compensation 2.5 1.9% 12.5% 25.9% 0.3% 0.1% 0.0% 0.1% Other general expenses (income), net 0.0% 0.0% 0.0% 0.0% (0.0)% (0.3)% 0.0% 0.2% ------ ------ ------ ------ ------ ------ ------ ------ Total operating expenses 20.8% 19.6% 30.4% 43.4% 17.2% 18.3% 15.7% 16.4% ====== ====== ====== ====== ====== ====== ====== ====== Operating income (loss) 1.7% 13.6% 5.0% (3.8)% 20.4% 15.2% 14.5% 4.6% Other income (expense): Interest income (expense), net (3.8)% (3.2)% (2.4)% (2.2)% 0.2% 3.9% 3.0% 2.6% Foreign currency exchange gain (loss) 5.9% 0.5% (0.9)% (0.7)% 1.2% (0.5)% 0.7% 1.0% Other non-operating income, net 0.5% 2.1% 1.2% 0.9% 0.8% 1.6% 1.1% 0.8% ------ ------ ------ ------ ------ ------ ------ ------ Total other income (expense) 2.6% (0.6)% (2.1)% (2.0)% 2.2% 5.0% 4.8% 4.4% ====== ====== ====== ====== ====== ====== ====== ====== Income (loss) before income taxes 4.3% 13.0% 2.9% (5.8)% 22.6% 20.2% 19.3% 9.0% Income tax (expense) benefit (0.6)% (0.6)% (0.3)% 0.2% (0.7)% (1.4)% (0.9)% (0.5)% ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) 3.7% 12.4% 2.6% (5.6)% 21.9% 18.8% 18.4% 8.5% ====== ====== ====== ====== ====== ====== ====== ======
33 36 The worldwide semiconductor industry suffered from reduced demand for most of year 1998 due to excess inventories and market conditions began to improve only from the fourth quarter of 1998. In 1999, demand from our customers for our test and assembly services increased quarter-on-quarter gradually but steadily resulting in improved net revenues and net income for the year. The improved market conditions persisted and improved significantly in 2000 resulting in a remarkable year for us in terms of revenue growth, profitability and expansion of our production capacity. Notwithstanding the revenue growth, our customers continue to face significant price pressure from their customers and this in turn has resulted in continuous price pressure on us to lower prices for both test services and traditional leadframe packages. The lower average selling prices have given rise to gradual gross profit margin declines in each quarter from 1999 and through 2000. Further erosion of gross profit margin in the latter part of 2000 was largely attributable to higher proportion of array business which has lower gross margin and also to overall lower capacity utilization. Demand in the fourth quarter of 2000 has weakened significantly and the trend is expected to continue into 2001 due largely to increased inventories in the worldwide semiconductor industry. We expect that this will result in a decline in revenues and gross profit margin in the near-term. A significant component of our cost of revenues is depreciation expense, which is largely related to our test and assembly equipment. We begin depreciating our equipment when it is ready for its intended use. Often, there is a gap between when our equipment is ready for use and when it achieves high levels of utilization. As a result, new equipment which are ready for use can cause our gross profit margins to vary significantly from quarter to quarter. Selling, general and administrative expenses increased quarter-on-quarter consistently from March 1999 to December 2000. The increase was due primarily to higher administrative headcount to support increasing operating activities quarter-on-quarter in line with our growth in net revenues. As a percentage of net revenue, however, selling, general and administrative expenses decreased consistently from 14.9% in March 1999 to 12.2% in December 2000. Research and development expenses were generally between 3.3% and 5.6% of net revenues from the first quarter of 1999 to the fourth quarter of 2000 and were expended primarily to support the development of our BGA package technology and our strategy of offering complete backend turnkey services to our customers. Our quarterly operating results may vary significantly. Unfavorable changes may adversely affect our business, financial condition and results of operations. In addition, we intend to increase the level of operating expenses and investments in manufacturing capacity in anticipation of future growth in net revenues. To the extent our net revenues do not grow as anticipated, our financial condition and operating results may be materially and adversely affected due to the fixed nature of most of these expenses. LIQUIDITY AND CAPITAL RESOURCES LIQUIDITY As of December 31, 2000, we have $141.7 million in cash and cash equivalents; $10.0 million in fixed deposit placed with a related party and a $20.0 million unutilized banking and credit facilities consisting of short-term advances and bank guarantees. Net cash provided by operating activities was $73.2 million in 1999 and $130.1 million in 2000. For both 1999 and 2000, the cash generated was primarily attributable to operating income before the effects of depreciation and amortization ($79.0 million in 1999; $126.8 million in 2000). Net cash used in investing activities totalled $82.3 million in 1999 and $326.1 million in 2000. The net cash used in investing activities consisted mainly of amounts paid for property, plant and equipment of $84.3 million in 1999 and $299.6 million in 2000, purchase of marketable securities of $21.9 million in 2000 only and placement of surplus funds in medium term time deposits of $10.0 million in 2000 only. The total investment was reduced by cash proceeds from sale of equipment of $2.0 million in 1999 and $5.4 million in 2000. The capital expenditure consisted mainly of acquisition of test and assembly equipment and peripherals and equipment upgrades to meet 34 37 the increased demand for test and assembly services. We have budgeted capital expenditure in 2001 of $100 million in light of our anticipation of the softening of the market for test and assembly services. We expect to incur capital expenditure primarily for the acquisition of test and assembly equipment and equipment upgrades. In addition, from time to time, we may acquire or make investments in additional businesses, products and technologies or establish joint ventures or strategic partnerships that we believe will complement our current and future business. Some of these acquisitions or investments could be material. However, we have no specific agreements or understandings with respect to any material acquisition or investment at this time. Net cash provided by financing activities was $13.0 million in 1999 and $321.7 million in 2000. In 1999, our net cash provided by financing activities was primarily due to borrowings of $10.0 million under a short-term loan entered into in December 1999 and proceeds of $3.1 million from the issuance of new shares and from the full payment on previously partly-paid shares. In 2000, the net cash generated from financing activities consisted mainly of proceeds from our initial public offering in February 2000 and issuance of shares from the exercise of share options of $389.2 million reduced by the repayment of loans totaling $67.5 million. CAPITAL RESOURCES As of December 31, 2000, we had borrowings totaling $44.4 million comprising of the balance outstanding on a loan from the Economic Development Board (EDB), a related party. The long term loan agreement was entered into with EDB on June 5, 1998 for a sum of S$90.0 million ($54.3 million). The loan is denominated in Singapore dollars and bears interest at 1% over the prevailing rate per annum declared by the Central Provident Fund Board, a statutory board of the Singapore Government. The prevailing rate at December 31, 1999 and 2000 was 2.5%. Interest is payable semi-annually commencing September 1, 1998. Principal is payable in seven semi-annual, equal installments which commenced September 1, 2000. This loan matures on September 1, 2003 and is guaranteed by Singapore Technologies Pte Ltd. The loan agreement restricts us from paying dividends, from incurring further indebtedness and from undertaking any form of reconstruction, including amalgamation with another company, which would result in a change in the control of our company, in each case without prior lender consent. We completed our initial public offering in February 2000. Our net proceeds from the initial public offering were approximately $387.0 million, of which $67.5 million had been used to repay loans amounting to $25.0 million from ST Treasury Services Ltd, a related party, and $35.0 million from Den Danske Bank and $7.5 million had been used toward settlement of the first instalment due on the EDB loan described above. In 1997, we obtained a grant of S$23.2 million for the funding of certain research and development projects from the Economic Development Board under its Research Incentive Scheme for Companies. The grant is being disbursed to us over a maximum of five years ending December 31, 2001, in the form of reimbursement of a specified percentage of amounts actually spent by us on manpower, research and development equipment, materials, training and technology licensing fees. The grant does not require repayment. Recognition of this grant income is included in the "Consolidated Statement of Operations and Comprehensive Income/(Loss)" filed as part of this Annual Report in "Item 18 -- Financial Statements". The grant is disbursed based on the amount of expenditures incurred. There are no conditions attached to the grant other than completing the project to which the grant relates and the certification of the costs incurred. We have an existing agreement with Citibank, N.A. for a working capital facility of $20.0 million. Interest on borrowings under this facility are charged at the bank's prevailing rate. The facility was not utilized as of December 31, 2000. We believe that our cash on hand, existing credit facilities and credit terms with our equipment vendors will be sufficient to meet our present requirements. SPECIAL TAX STATUS We have been granted pioneer status under The Economic Expansion Incentives (Relief from Income Tax) Act, Chapter 86 of Singapore, for "Subcontract Assembly And Testing Of Integrated Circuits Including Wafer Probing Services" from January 1, 1996 to December 31, 2003. 35 38 During the period for which our pioneer status is effective, income from our pioneer trade (test and assembly services including wafer probing) is exempt from Singapore income tax. The income from tax exempt profits arising from the pioneer trade may be distributed as tax-exempt dividends and holders of ordinary shares are not subject to Singapore income tax on such dividends. Losses accumulated during the pioneer status period may be carried forward and may be offset against profits from the same pioneer trade arising after the expiration of the pioneer status period, subject to our compliance with certain conditions. Profits arising during the pioneer status period maybe offset against any accumulated pioneer loss carried forward balance. Without this exemption from income tax, our profits would be subject to income tax at the applicable corporate income tax rate which was 26% for income earned through 1999 and which is 25.5% for income earned in 2000 and 24.5% in 2001. The pioneer status exemption does not apply to interest income earned during the pioneer status period and such interest income is subject to tax at the applicable corporate income tax rate. FOREIGN CURRENCY EXCHANGE EXPOSURE We have adopted a hedging policy that we believe adequately covers any material exposure to our non-U.S. dollar assets and liabilities. To minimize foreign currency exchange risk, we selectively hedge our foreign currency exposure through forward foreign currency swap contracts and options. However we cannot assure you that sudden or rapid movement in exchange or interest rates will not have a material adverse effect on our business, financial condition or results of operations. RESEARCH AND DEVELOPMENT See "Item 4. Information on our Company -- B. Business Overview -- Research & Development". RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133, as recently amended, is effective for fiscal years beginning after June 15, 2000. This statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The adoption of SFAS 133 by us on January 1, 2001, does not have a material effect on our financial position or results of operations. 36 39 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. DIRECTORS AND SENIOR MANAGEMENT The following table sets forth, the name, age and position of each director and senior management:
NAME AGE POSITION - ---- --- -------- BOARD OF DIRECTORS Tan Bock Seng 57 Chairman of the Board of Directors & Chief Executive Officer Lim Ming Seong(1)(2) 53 Deputy Chairman of the Board of Directors Steven Hugh Hamblin(3) 52 Director Koh Beng Seng(4) 50 Director Liow Voon Kheong 49 Director Premod Paul Thomas(3) 43 Director Charles Richard Wofford(2)(5) 67 Director Teng Cheong Kwee(5)(7) 47 Director Gan Chee Yen(6) 41 Alternate Director to Mr. Premod Paul Thomas Lai Yeow Hin(6) 36 Alternate Director to Mr. Liow Voon Kheong SENIOR MANAGEMENT Tan Lay Koon 42 Chief Financial Officer Han Byung Joon 41 Chief Technology Officer June Chia Lihan 47 Executive Vice President Chan Kok Yong 48 Executive Vice President John McCarvel 44 President, ST Assembly Test Services, Inc.
- ------------ (1) Chairman of the Budget Committee. (2) Member of the Executive Resource & Compensation Committee. (3) Member of the Budget Committee. (4) Chairman of the Audit Committee. (5) Member of the Audit Committee. (6) Under Singapore companies law, a director appointed by a company may, if permitted by the Articles of Association of such company, appoint an alternate director to act in place of such director should the director be unable to perform his or her duties as director of such company for a period of time. (7) Appointed on January 1, 2001 to replace Mr. Sum Soon Lim who resigned effective January 1, 2001. The Board of Directors held four meetings in 2000. The average attendance by Directors at Board meetings they were scheduled to attend was over 94%. None of our Directors, Senior Management or substantial shareholders is related to each other. TAN BOCK SENG Tan Bock Seng has served as a Director since January 1995 and has been our Chairman and Chief Executive Officer since May 1998. He was a member of our Audit Committee from April 1999 to June 2000. Mr. Tan has 32 years of experience in the semiconductor industry and has held key positions in several multinational corporations, including Fairchild Singapore Pte Ltd and Texas Instruments Singapore Pte Ltd. He was President of Chartered Semiconductor Manufacturing Ltd from 1993 to 1998 and Managing Director of National Semiconductor, 37 40 Singapore, from 1988 to 1993. Mr. Tan received his Bachelor of Science in Mathematics from the University of Singapore. LIM MING SEONG Lim Ming Seong became our Deputy Chairman in June 1998 and was appointed Chairman of the Budget Committee in April 1999. He is a member of the Executive Resource & Compensation Committee. Mr. Lim is the Group Director of Singapore Technologies Pte Ltd, Deputy Chairman of the Board of Directors of Chartered Semiconductor Manufacturing Ltd and Chairman of CSE Systems & Engineering Ltd. After joining Singapore Technologies Pte Ltd in December 1986, Mr. Lim has held various senior positions in the Singapore Technologies Group. Prior to joining Singapore Technologies Pte Ltd, Mr. Lim was with the Ministry of Defence of Singapore. Mr. Lim received his Bachelor of Applied Science (Honors) in Mechanical Engineering from the University of Toronto and his Diploma in Business Administration from the University of Singapore. Mr. Lim also participated in the Advanced Management Programs at INSEAD and Harvard University. STEVEN HUGH HAMBLIN Steven Hugh Hamblin was appointed to our Board of Directors in June 1998 and became a member of the Budget Committee in April 1999. Mr. Hamblin was with Compaq Computer Corporation from 1984 to 1996 and held various positions including, Managing Director of Compaq Asia Manufacturing, Vice President Asia/Pacific Division, Vice President and Financial Controller for Corporate Operations, and Vice President of Systems Division Operations. He was with Texas Instruments for ten years before leaving as its Division Controller, Semiconductor Group, to join General Instrument, Microelectronics Division, New York in 1983 as its Group Financial Executive. Mr. Hamblin received his Bachelor of Science in Civil Engineering from the University of Missouri, Columbia and his Master of Science in Industrial Administration from Carnegie-Mellon University. KOH BENG SENG Koh Beng Seng was appointed to our Board of Directors in February 1999 and became a member of the Audit Committee in April 1999. He was appointed Chairman of the Audit Committee in January 2001. He is currently Deputy President, United Overseas Bank Ltd and an advisor to the International Monetary Fund. He is on the Board of Directors of Chartered Semiconductor Manufacturing Ltd. Mr. Koh is active in the financial services sector and was with the Monetary Authority of Singapore from 1973 to 1998, where he served as Deputy Managing Director from 1988 to 1998. Mr. Koh received his Bachelor of Commerce (First Class Honors) from Nanyang University and his MBA from Columbia University. Mr. Koh was awarded an Overseas Postgraduate Scholarship by the Monetary Authority of Singapore in 1978. In 1987, the President of the Republic of Singapore awarded him a Meritorious Service Medal. LIOW VOON KHEONG Liow Voon Kheong was appointed to our Board of Directors in October 1997. Mr. Liow is presently Assistant Managing Director (Operations) of the Economic Development Board, General Manager of EDB Investments Pte Ltd, Director/General Manager of EDB Ventures Pte Ltd and EDB Ventures 2 Pte Ltd and General Manager of PLE Investments Pte Ltd. Mr. Liow started his career with the Economic Development Board in 1976. He received his Bachelor of Engineering (Electrical & Electronics) and his Diploma in Business Administration from the University of Singapore. PREMOD PAUL THOMAS Premod Paul Thomas was appointed to our Board of Directors in March 1998 and became a member of the Budget Committee in April 1999. Mr. Thomas is Director (Finance) of Singapore Technologies Pte Ltd and is an Alternate Director on the Board of Directors of Chartered Semiconductor Manufacturing Ltd. Before joining Singapore Technologies Pte Ltd in February 1998, he was with Tirtamas Group, Jakarta, as Group Executive Advisor from 1995 to 1998 and with Bank of America from 1983 to 1995. Mr. Thomas received his Bachelor of Commerce (First Class Honors) from Loyola College, India in 1977. He is a Certified Associate of the Indian Institute of Bankers, Bombay, and has an MBA from the Indian Institute of Management, Ahmedabad. 38 41 CHARLES RICHARD WOFFORD Charles Richard Wofford was appointed to our Board of Directors in February 1998 and became a member of the Audit Committee and the Executive Resource & Compensation Committee in April and August 1999, respectively. Mr. Wofford is presently the Vice-Chairman of FSI International. Mr. Wofford was with Texas Instruments for 33 years before leaving as Senior Vice-President to join Farr Company in 1991. He was the Chairman, CEO and President of Farr Company from 1992 to 1995. He received his Bachelor of Arts in Mathematics and Psychology from Texas Western College. TENG CHEONG KWEE Teng Cheong Kwee was appointed to our Board of Directors and as a member of our Audit Committee in January 2001. Prior to this appointment, he was the Head of Risk Management & Regulatory Division of the Singapore Exchange Ltd. Mr. Teng has more than 20 years of experience in the finance industry. He is a member of the Committee of Corporate Governance, a private sector led committee established by the Singapore Government to study and recommend measures to raise the standard of corporate governance in Singapore. Mr. Teng received his Bachelor of Engineering (Industrial), 1st Class Honours and Bachelor of Commerce from the University of Newcastle, Australia. GAN CHEE YEN Gan Chee Yen was appointed Alternate Director to Premod Paul Thomas in July 1999. Mr. Gan has been in the finance accounting field for more than 16 years and is currently the Group Financial Controller of Singapore Technologies Pte Ltd. He was the Senior Manager of Singapore Technologies Marine Ltd before joining Singapore Technologies Pte Ltd in September 1996 as the Group Financial Controller. Mr. Gan received his Bachelor of Accountancy from the National University of Singapore. LAI YEOW HIN Lai Yeow Hin was appointed Alternate Director to Liow Voon Kheong in October 1997. Mr. Lai started his career with the Singapore Economic Development Board in the electronics industry in 1990. He is presently holding concurrent positions as Chief Information Officer and Deputy Director, Electronics (Industry Development Division), Economic Development Board. From December 1992 to January 1996, Mr. Lai was the Director of the Economic Development Board's office in Los Angeles. He was a Founding Director of the Singapore American Business Association of Southern California from 1994 to 1996. Currently, Mr Lai is a member of the management board of the Centre for Wireless Communications at the National University of Singapore and a member of the management board of the Centre for Signal Processing at the Nanyang Technological University. Mr. Lai received his Master of Science (Electrical Engineering) from the University of Illinois (Urbana-Champaign). TAN LAY KOON Tan Lay Koon joined our Company in May 2000 as the Chief Financial Officer. Prior to joining our company, Mr. Tan was an investment banker with Salomon Smith Barney, the global investment banking unit of Citigroup Inc. Before that, he held various positions with the Government of Singapore, Times Publishing Limited, and United Overseas Bank Limited in Singapore. Mr. Tan graduated with a Bachelor of Engineering (First Class Honors) from the University of Adelaide, Australia as a Colombo Plan scholar. He also has a Master of Business Administration (Distinction) degree from the Wharton School, University of Pennsylvania where he was elected a Palmer scholar. HAN BYUNG JOON Han Byung Joon joined our Company as the Chief Technology Officer in December 1999. Prior to joining our company, Dr. Han was Director of Product Development at Anam Semiconductor, Inc. and, before that, held various engineering positions with IBM and AT&T Bell Labs in Murray Hill, New Jersey. Dr. Han is credited with the invention of several wafer and chip scale semiconductor packaging technologies patented today. Dr. Han received his Doctorate in Chemical Engineering from Colombia University in 1988. JUNE CHIA LIHAN June Chia Lihan joined our Company in 1994 and became our Executive Vice President, Worldwide Sales & Marketing in April 1998. She is currently our Executive Vice President, Information 39 42 Technology/Planning/Industrial Engineering/Purchasing. From 1991 to 1994, Ms. Chia was with Nortel Australia and served as its Director of Manufacturing Operations from early 1993 to July 1994. Prior to joining Nortel, Ms. Chia worked in numerous assignments in Planning, Industrial Engineering and Purchasing in National Semiconductor, Fairchild and Texas Instruments. Ms. Chia received her Bachelor of Engineering (First Class Honors) from the University of Singapore and her Master of Business Administration from the National University of Singapore. JOHN MCCARVEL John McCarvel joined our Company in January 1999 and became President of ST Assembly Test Services, Inc. in July 1999. From 1996 to 1998, Mr. McCarvel served as Vice President of Strategic Business Development at Micron Custom Manufacturing Services, Inc. He was with Dovatron International from 1990 to 1996, in various key positions including President of Western Operations (USA); Vice President of Worldwide Sales (based in France); and Vice President of Pacific Rim Operations (based in Singapore). From 1985 to 1990, he served as Corporate Controller (San Jose) and Director of Operations (based in Singapore) for Adaptec. Mr. McCarvel received his Bachelor of Science from Carroll College in 1985 and his MBA from the University of California in 1990. CHAN KOK YONG Chan Kok Yong joined our Company in February 2001 as the Executive Vice President, Operations. Prior to joining our company, he was with Unitrode Electronics, a semiconductor test and assembly subsidiary of Texas Instruments where he was Managing Director. As the Managing Director, Mr. Chan had overall responsibility for the Asian operations. Before joining Unitrode Electronics, he spent nine years with Fairchild Singapore in various operational capacities including the Operations Manager of Fairchild Logic Division. Mr. Chan graduated with a Bachelor of Engineering with honors from the University of Singapore in 1977. He also has a Master of Business Administration from the National University of Singapore. B. COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT In 2000, the aggregate amount of compensation and bonus paid by our company to all our directors and senior management was approximately $2.9 million broken down as follows:
EXECUTIVE NON-EXECUTIVE DIRECTORS DIRECTORS TOTAL --------- ------------- --------- Tan Bock Seng $882,820 $ 882,820 Lim Ming Seong 40,420 40,420 Steven Hugh Hamblin 43,750 43,750 Koh Beng Seng 25,090 25,090 Premod Paul Thomas 23,750 23,750 Charles Richard Wofford 45,840 45,840 Liow Voon Kheong 5,762 5,762 Sum Soon Lim(1) 66,072 66,072 June Chia Lihan(2) 268,376 268,376 Lee Joon Chung(3) 438,028 438,028 Senior Management (excluding Executive Directors) as a Group 1,012,752 -------- ------ ---------- $2,852,660 ======== ====== ==========
- ------------ (1) Resigned as a Director on January 1, 2001. (2) Resigned as an Alternate Director on December 6, 2000. (3) Resigned as a Director and as Executive VP-Operations on December 6, 2000. 40 43 Our company does not have any pension, retirement or other similar post-retirement benefits. We have provided to our directors and officers customary director or officer insurance, as appropriate. Non-executive directors receive annual directors' fees except that directors' fees for those employed by Singapore Technologies Pte Ltd are paid to Singapore Technologies Pte Ltd and for those employed by EDB Investments Pte Ltd ("EDBI") are paid to EDBI. Those who are not employed by Singapore Technologies Pte Ltd or EDBI also receive compensation for attending meetings of the Board of Directors. Directors are reimbursed for reasonable expenses they incur in attending meetings of the Board and its committees. They may also receive compensation for performing additional or special duties at the request of the Board. Alternate Directors do not receive any compensation for serving or attending meetings of the Board. In 2000, Mr. Tan Bock Seng and Mr. Lee Joon Chung (who resigned on 6 December 2000), who were executive directors of our company, did not receive directors' fees. As at December 31, 2000, we have 10 directors (including 2 alternate directors) on the Board. In Singapore it is customary that directors are paid a fee for their contributions to the company. For the financial year ended December 31, 1999, we paid directors' fees totaling S$510,000. We are seeking approval at our annual general meeting in 2001 for the payment of directors' fees of US$233,000 (approximately S$409,000) for the financial year ended December 31, 2000 for their contributions to our company. Directors' fees for the financial year ended December 31, 2000 represent a decrease of 19.8% over directors' fees for the financial year ended December 31, 1999. Directors' fees in 1999 were higher owing to the convening of more meetings of the Board in connection with our initial public offering and quotation of our ADSs and listing of our ordinary shares on the Nasdaq National Market and the Singapore Exchange Securities Trading Limited, respectively. C. BOARD PRACTICES WITH RESPECT TO DIRECTORS AND OFFICERS' TERM OF SERVICE BOARD OF DIRECTORS Our Articles of Association set the minimum number of directors at two. We currently have eight directors and two alternate directors. A portion of our directors are elected at each annual general meeting of shareholders. The number of directors retiring and eligible to stand for 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 Chief Executive Officer and President will not be required to stand for re-election as a director while he or she is in office. As Singapore Technologies Pte Ltd and its affiliates own 72.1% of our outstanding ordinary shares, it is able to control actions over many matters requiring approval by our shareholders, including the election of directors. Our Articles of Association permit a director to appoint an alternate director to act in place of such director should the director be unable to perform his or her duties as director for a period of time. Under Singapore law, the alternate director is not merely an agent of the director but is accountable to the company for his or her actions as director during the period for which he or she acts as alternate director See "-- Compensation" for details on the directors' service contracts with us. COMMITTEES OF THE BOARD OF DIRECTORS (i) Audit Committee The Audit Committee of our Board of Directors currently consists of 3 members of which a majority may not be executive directors of our company. The Audit Committee members are Koh Beng Seng (Chairman), Charles Richard Wofford and Teng Cheong Kwee. The Audit Committee reviews the scope and results of the audits provided by our internal and independent auditors; reviews and evaluates our administrative, operating and internal accounting controls; reviews material related party transactions; and reviews the integrity of the financial information presented to our shareholders. 41 44 The Audit Committee held four meetings in 2000. (ii) Executive Resource & Compensation Committee The Executive Resource & Compensation Committee currently consists of Ms. Ho Ching (Chairman), Lim Ming Seong and Charles Richard Wofford. Ms. Ho Ching is neither a director nor a member of senior management of our company. She is the President & Chief Executive Officer of Singapore Technologies Pte Ltd and was nominated by Singapore Technologies Pte Ltd and co-opted to the committee. She serves on the boards of some companies within the Singapore Technologies Group. Our Articles of Association allow non-board members to serve on board committees, other than the Audit Committee which must comprise only board members under Singapore law. The Executive Resource & Compensation Committee 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 that attract, motivate and retain talented executives to meet our current and future growth plans. Specifically, the Executive Resource & Compensation Committee establishes compensation policies and incentive programs for key executives; approves salary reviews, bonuses and incentives for key executives; approves share incentives, including share options and share ownership for executives; approves key appointments and reviews succession plans for key positions; and oversees the development of key executives and younger talented executives. The Executive Resource & Compensation Committee held three meetings in 2000. (iii) Budget Committee The Budget Committee currently consists of Lim Ming Seong (Chairman), Premod Paul Thomas and Steven Hugh Hamblin. The Budget Committee meets with our senior management to review our annual budget and to review our quarterly financial performance in relation to our budget. The Budget Committee held four meetings in 2000. D. EMPLOYEES We had 2,693 full time employees as at December 31, 2000. Our employees are not members of any labor union or organization in Singapore or any other country in which we operate. Our employees are equity owners of our company and we believe in providing opportunities for our employees to build careers with us. To that end we have in place extensive training and development programs for our employees. We believe that we have a good relationship with our employees. 42 45 The following table sets forth the total number of employees as of December 31, 2000, broken down by functional responsibility and by geographical locations.
NO. OF EMPLOYEES AS AT DECEMBER 31, 2000 --------------------------------------------------------------------------------- RESEARCH & SALES & OPERATING OPERATIONS DEVELOPMENT MARKETING SUPPORT TOTAL ---------- ----------- --------- --------- ----- Singapore 1982 107 17 507 2613 USA 14 46 12 72 Others 8 8 ---- --- -- --- ---- TOTAL 1982 121 71 519 2693 ==== === == === ====
E. SHARE OWNERSHIP FOR DIRECTORS AND SENIOR MANAGEMENT The following table provides certain information with respect to beneficial ownership of our ordinary shares, including ordinary shares held directly or in the form of American Depositary Shares and share options granted as of February 28, 2001, based on an aggregate of 988,276,050 ordinary shares outstanding as of such date by our directors and senior management. Beneficial ownership is determined in accordance with rules of the U.S. Securities and Exchange Commission and includes shares over which the indicated beneficial owner exercises voting and/or investment power. Ordinary shares subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but are not deemed outstanding for computing the percentage ownership of any other person.
ORDINARY SHARES(1) BENEFICIALLY OWNED ----------------------- DIRECTORS NUMBER PERCENT - --------- ---------- ------- Tan Bock Seng 9,000,000 * Steven Hugh Hamblin 88,000 * Koh Beng Seng 83,000 * Premod Paul Thomas 106,000 * Charles Richard Wofford 109,000 * Gan Chee Yen 45,000 * All directors and senior management(2) as a group (10 persons) 13,316,000 1.35%
- ------------ * Beneficial ownership of less than 1% of our outstanding ordinary shares. (1) All our ordinary shares have identical rights in all respects and rank equally with one another. (2) Each of our senior management owns less than 1% of our outstanding shares. 43 46 SHARE OPTIONS FOR DIRECTORS The following table contains information pertaining to share options held by directors as of February 28, 2001:
NUMBER OF ORDINARY SHARES ISSUABLE ON EXERCISE OF PER SHARE EXERCISE PRICE EXERCISABLE OPTION S$ PERIOD ------------------------- ------------------------ ------------------------ Tan Bock Seng 1,600,000 3.554 11/22/2000 to 11/22/2009 1,000,000 6.93 04/20/2001 to 04/20/2010 Steven Hugh Hamblin 10,000 0.25 02/09/2000 to 12/10/2004 20,000 0.25 02/09/2000 to 06/12/2004 30,000 3.554 02/09/2000 to 11/22/2004 40,000 6.93 04/20/2001 to 04/20/2005 Koh Beng Seng 10,000 0.25 02/09/2000 to 12/10/2004 50,000 3.554 02/09/2000 to 11/22/2004 40,000 6.93 04/20/2001 to 04/20/2005 Premod Paul Thomas 12,500 0.42 12/10/2000 to 12/10/2009 7,500 0.25 12/10/2000 to 12/10/2009 16,000 3.554 11/22/2000 to 11/22/2009 40,000 6.93 04/20/2001 to 04/20/2010 Charles Richard Wofford 25,000 0.42 02/09/2000 to 12/10/2004 20,000 0.25 02/09/2000 to 06/12/2004 20,000 3.554 02/09/2000 to 11/22/2004 40,000 6.93 04/20/2001 to 04/20/2005 Gan Chee Yen 20,000 3.554 02/09/2000 to 11/22/2009 40,000 6.93 04/20/2001 to 04/20/2010
EMPLOYEE'S SHARE OWNERSHIP SCHEME We had an Employees' Share Ownership Scheme for employees and directors of our company and our subsidiary and the related companies within the Singapore Technologies Group which was terminated prior to the initial public offering of our shares on the Nasdaq National Market and Singapore Exchange. SHARE OPTION PLAN Effective as of May 28, 1999, our company adopted the ST Assembly Test Services Ltd Share Option Plan 1999 or the Share Option Plan. The purpose of the plan is to offer selected individuals an opportunity to acquire or increase a proprietary interest in our company. Options granted under the Share Option Plan may be non-statutory options or incentive stock options intended to qualify under Section 422 of the United States Internal Revenue Code. The aggregate number of shares that may be issued under the Share Option Plan and under all of our other share incentive and options schemes or agreements may not exceed 150 million shares (subject to anti-dilution adjustment pursuant to the Share Option Plan). If an outstanding option expires for any reason or is cancelled or otherwise terminated, the shares allocable to the unexercised portion of such option will again be available for the purposes of the Share Option Plan and all other share incentive and option schemes approved by our Board of Directors. 44 47 The Share Option Plan is administered by the Executive Resource & Compensation Committee. Our employees, outside directors and consultants are eligible to receive grants of option except for (i) employees of our affiliates and our outside directors and consultants are not eligible for the grant of incentive stock options; and (ii) employees, outside directors and consultants of our affiliates who are residents of the United States who are not eligible for the grant of options. An individual who owns more than 10% of the total combined voting power of all classes of our outstanding shares or of the shares of our parent or subsidiary is not eligible for the grant of options unless the exercise price of the option is at least 110% of the fair market value of a share on the date of grant and in the case of an incentive stock option, such option by its terms is not exercisable after the expiration of five years from the date of grant. The exercise price of an incentive stock option shall not be less than 100% of the fair market value of a share on the date of grant. The exercise price of a non statutory option shall not be less than 85% of the fair market value of a share on the date of grant. In no event will the exercise price for a share be below the par value of that share. Options granted to persons other than officers, outside directors and consultants shall become exercisable at least as rapidly as 20% per year over the five-year period commencing on the date of grant. The exercisability of options outstanding under the Share Option Plan may be fully or partially accelerated under certain circumstances such as a change in control of our company, as defined in the Share Option Plan. Each grant under the Share Option Plan is evidenced by a share option agreement and the term of options granted may not exceed ten years from the date of grant. If the optionee's service with us is terminated, the optionee's outstanding options, to the extent then exercisable, remain exercisable for a specified period (which is based on the reason for the termination) following the date of termination. All options which are not exercisable at the date of termination lapse when the optionee's service terminates. The Executive Resource & Compensation Committee may modify, extend or assume outstanding options or may accept the cancellation of outstanding options in return for the grant of new options for the same or a different number of shares and at the same or a different exercise price. No modification of an option shall, without the consent of the optionee, impair the optionee's rights or increase the optionee's obligations under such option. Options are generally not transferable under the Share Option Plan. In the event of certain changes in our capitalization, the Executive Resource & Compensation Committee will make appropriate adjustments in one or more of the number of shares available for future grants under the Share Option Plan, the number of shares covered by each outstanding option or the exercise price of each outstanding option. If we are a party to a merger or consolidation, outstanding options will be subject to the agreement of merger or consolidation. The Share Option Plan will terminate automatically on May 28, 2009. The Executive Resource & Compensation Committee may amend, suspend or terminate the Share Option Plan at any time and for any reason, provided that any amendment which increases the number of shares available for issuance under the Share Option Plan, or which materially changes the class of persons who are eligible for the grant of incentive stock options, will be subject to the approval of our shareholders. As of February 28, 2001, options to purchase an aggregate of 31,817,120 Ordinary Shares were accepted and outstanding out of which 10,341,000 were held by all non-executive directors and senior management as a group. The exercise prices of these options range from S$0.25 to S$6.93. The expiration dates of the options range from June 2004 to October 2010. 45 48 We expect to grant to our directors, officers and employees further options under the Share Option Plan in 2001. The exercise price of such options will be the fair market value of ordinary shares at the time of the grant. Total compensation cost is measured based on the difference between the fair value of the shares and the price at which the shares are offered under the plan at the time the shares are granted. Compensation expense is provided generally over the vesting period on a systematic basis. See "Note 21. Share Options and Incentive Plans" of "Notes to the Consolidated Financial Statements" filed as part of this Annual Report in "Item 18 -- Financial Statements". ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. MAJOR SHAREHOLDERS As of February 28, 2001, Singapore Technologies Pte Ltd beneficially owns approximately 72.1% of our ordinary shares. Singapore Technologies Pte Ltd is wholly-owned by Temasek Holdings (Private) Limited, the principal holding company through which the corporate investments of the Government of Singapore are held. As a result, Singapore Technologies Pte Ltd is able to exercise direct or indirect control over matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. Matters that typically require shareholder approval include, among other things: - - the election of directors; - - our merger or consolidation with any other entity; - - any sale of all or substantially all of our assets; and - - the timing and payment of dividends. The following table sets forth certain information regarding the ownership of our ordinary shares as of February 28, 2001 (i) by each person who is known by us to own beneficially more than 5% of our outstanding ordinary shares and (ii) by all directors and senior management as a group. Beneficial ownership is determined in accordance with rules of the U.S. Securities and Exchange Commission and includes shares over which the indicated beneficial owner exercises voting and/or investment power. Ordinary shares subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but are not deemed outstanding for computing the percentage ownership of any other person. 46 49
NUMBER OF SHARES PERCENTAGE NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED - ------------------------ ------------------ ------------------ Singapore Technologies Pte Ltd(1) 511,532,398 51.76% Singapore Technologies Semiconductors Pte Ltd(1) 200,695,652 20.31% EDB Investments Pte Ltd(2) 48,021,950 4.86% All directors and senior management as a group(3) 13,316,000 1.35%
- ------------ (1) Temasek Holdings (Private) Limited, the principal holding company through which the corporate investments of the Government of Singapore are held, owns 78.6% of Singapore Technologies Pte Ltd and owns 100% of Singapore Technologies Holdings Pte Ltd which owns the remaining 21.4% of Singapore Technologies Pte Ltd which, in turn, owns 100% of Singapore Technologies Semiconductors Pte Ltd. Temasek Holdings (Private) Limited may therefore be deemed to beneficially own the shares directly owned by Singapore Technologies Pte Ltd and Singapore Technologies Semiconductors Pte Ltd. (2) EDB Investments Pte Ltd is a wholly owned investment holding arm of the Economic Development Board, a Singapore government agency. (3) In addition, all directors and senior management as a group own 10,341,000 options under the Share Option Plan. All our ordinary shares have identical rights in all respects and rank equally with one another. Our ordinary shares have been traded on the Singapore Exchange Securities Trading Limited or SGX-ST since January 31, 2000 and our ADSs have been traded on the Nasdaq National Market or Nasdaq since January 28, 2000. As of February 28, 2001, there were approximately 30,449 shareholders on record of the ordinary shares, of which 29,810 holders were registered in Singapore and 24 were registered in the United States, and 4 registered ADR holders on record of the ADRs, all of which were registered in the United States. Because many of our ordinary shares and ADRs were held by brokers and other institutions on behalf of shareholders in street name, we believe that the number of beneficial holders of our ordinary shares and ADRs is substantially higher. On February 28, 2001, the closing price of our ordinary shares on the SGX-ST was S$2.07 per ordinary share and on Nasdaq was $11 15/32 per ADS. B. RELATED PARTY TRANSACTIONS We engage in transactions with companies in the Singapore Technologies Group in the normal course of its business. Such transactions are generally entered into on normal commercial terms. We have entered into a turnkey contract with Chartered Semiconductor for its wafer, sort assembly and test services in March 2000. This agreement governs the conduct of business between the parties, relating, among other things, to the sort, assembly and test services which were previously solely governed by purchase orders executed by Chartered Semiconductor. The agreement does not contain any firm commitment for Chartered Semiconductor to purchase or for us to supply services covered thereunder. The agreement is for a period of three years and will be automatically renewed thereafter unless certain events occur. In the year ended December 31, 2000, we paid a management fee of $1.7 million to Singapore Technologies Pte Ltd for various management and corporate services provided pursuant to the Singapore Technologies Management and Support Services Agreement entered in December 1999. 47 50 All new material related party transactions among us and our officers, directors, principal shareholders and their affiliates require approval of a majority of the board of directors and must be on such terms the directors believe are no less favorable to our company than could be obtained from unaffiliated parties. In addition, since our initial public offering, all material related party transactions must be separately approved by the Audit Committee of our Board of Directors. C. INTEREST OF EXPERTS AND COUNSEL Not applicable ITEM 8. FINANCIAL INFORMATION A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION Please see Item 18 for a list of the financial statements filed as part of this Annual Report. DIVIDEND POLICY We have never declared or paid any cash dividends on our ordinary shares. We currently expect to retain future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. In addition, our loan agreement may restrict the payment of dividends without the consent of the lender. LEGAL PROCEEDINGS On February 20, 2001, a lawsuit was filed by Amkor Technology, Inc. against us and our subsidiary, ST Assembly Test Services, Inc., alleging patent infringement in respect of certain integrated circuit packages. B. SIGNIFICANT CHANGES There has been no significant subsequent events following the close of the last financial year up to the date of this Annual Report that are known to us and require disclosure in this Annual Report and for which disclosure was not made in this Annual Report. 48 51 ITEM 9. THE OFFER AND LISTING PRICE RANGE OF OUR ORDINARY SHARES AND ADSS The historical "high" and "low" prices of stock over the past year and the six monthly periods from September 2000 to February 2001 are as shown below.
PRICE PER ORDINARY SHARE ON THE PRICE PER ADS ON SGX NASDAQ (IN S$) (IN US$) ------------------------------- ------------------------ HIGH LOW HIGH LOW ----- ---- ------- -------- Annual for 2000 10.60 2.28 60-1/16 13 1/4 Quarterly highs and lows: - -- quarter ending March 31, 2000 10.60 6.20 60-1/16 21-0/00 - -- quarter ending June 30, 2000 8.30 4.44 45 3/4 23-9/16 - -- quarter ending September 30, 2000 4.68 3.26 26 1/2 18-1/8 - -- quarter ending December 31, 2000 3.44 2.28 20-1/8 13 1/4 Monthly highs and lows: September 2000 3.98 3.42 22-5/8 19-1/8 October 2000 3.34 2.75 18 1/4 15-3/8 November 2000 3.34 2.76 20-1/8 15 1/2 December 2000 2.95 2.28 17-1/16 13 1/4 January 2001 2.79 2.09 16-0/00 12-1/8 February 2001 2.67 2.07 15-9/16 11-15/32
EXCHANGE RATES Fluctuations in the exchange rate between the Singapore dollar and the U.S. dollar will affect the U.S. dollar equivalent of the Singapore dollar price of the ordinary shares on the Singapore Exchange Securities Trading Limited and, as a result, are expected to affect the market price of ADSs. These fluctuations will also affect the U.S. dollar conversion by the depositary of any cash dividends paid in Singapore dollars on the ordinary shares represented by ADSs or any other distribution received by the depositary in connection with the payment of dividends on the ordinary shares. Currently, there are no restrictions in Singapore on the conversion of Singapore dollars into U.S. dollars and vice versa. The following table sets forth, for the fiscal years indicated, information concerning the exchange rates between Singapore dollars and U.S. dollars based on the average of the noon buying rate in the city of New York on the last business day of each month during the period for cable transfers in Singapore dollars as certified for customs purposes by the Federal Reserve Bank of New York. The table illustrates how many Singapore dollars it would take to buy one U.S. dollar. These transactions should not be construed as a representation that those Singapore dollar or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Singapore dollars, as the case may be, at any particular rate, the rate stated below, or at all. 49 52
SINGAPORE DOLLARS PER US$1.00 NOON BUYING RATE --------------------------------------------------------- AVERAGE(1) LOW HIGH PERIOD END ---------- ---- ----- ---------- Year Ended December 31, 1996 1.41 1.40 1.43 1.40 1997 1.49 1.40 1.71 1.61 1998 1.67 1.58 1.80 1.65 1999 1.70 1.66 1.74 1.67 2000 1.72 1.65 1.76 1.73
LOW HIGH PERIOD END ---- ---- ---------- Month September 2000 1.71 1.75 1.74 October 2000 1.74 1.76 1.76 November 2000 1.73 1.76 1.75 December 2000 1.73 1.75 1.73 January 2001 1.73 1.75 1.74 February 2001 1.74 1.75 1.75
- ------------ (1) The average of the daily Noon Buying Rates on the last business day of each month during the year. ITEM 10. ADDITIONAL INFORMATION A. SHARE CAPITAL Not applicable B. MEMORANDUM AND ARTICLES OF ASSOCIATION We are a company limited by shares organized under the laws of the Republic of Singapore. The company registration number with the Registry of Companies and Businesses in Singapore is 199407932D. OBJECTS We were established mainly to manufacture, assemble, test and provide services relating to electrical and electronic components. We also carry out research and development work in relation to the electrical and electronic industry. A detailed list of all the other objects and purposes can be found in Article 3 of our Memorandum of Association which was filed as an Exhibit to our registration statement on Form F-1 (Registration Number: 333-93661) in connection with our initial public offering in 2000 and is available for examination at our principal and registered office at No. 5, Yishun Street 23, Singapore 768442, Republic of Singapore. BOARD OF DIRECTORS Our Articles of Association state that a director must declare at a meeting of the Board of Directors if there are matters which may conflict with his duties or interests as a director. He is not allowed to vote in respect of any contract or arrangement or other proposal whatsoever in which he has any interest, directly or indirectly and shall not be counted in the quorum in relation to any resolution which he is not entitled to vote. If an independent 50 53 quorum is not achieved, the remaining directors may convene a general meeting, but not do so for any other purpose. Our directors may exercise all the borrowing powers of our company to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities. No shares are required to be held by a director for director's qualification. Under Singapore law, no person of or over the age of 70 years shall be appointed to act as a director unless the shareholders at a general meeting vote by at least three-fourths majority in favor of his appointment to hold office until the next annual general meeting of the company. Our Articles of Association set the minimum number of directors at two. The number of directors retiring and eligible to stand for re-election each year varies, but generally it is equal to at least 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 Chief Executive Officer and President will not be subject to retirement by rotation as described above while he or she is in office. Our Articles of Association permit a director to appoint an alternate director to act in place of such director should the director be unable to perform his or her duties as director for a period of time. There are currently two alternate directors. Under Singapore law, the alternate director is not merely an agent of the director but is accountable to the company for his or her actions as director during the period for which he or she acts as alternate director. ORDINARY SHARES Our authorized capital is S$300,000,000 consisting of 1,200,000,000 ordinary shares of par value S$0.25 each. We have only one class of shares, namely, the ordinary shares, which have identical rights in all respects and rank equally with one another. Our Articles of Association provide that we may issue shares of a different class with preferential, deferred, qualified or other special rights, privileges or conditions as our Board of Directors may determine and may issue preference shares which are, at the option of the company, redeemable, subject to certain limitations. Our directors may issue shares at a premium. If shares are issued at a premium, a sum equal to the aggregate amount or value of the premium will, subject to certain exceptions, be transferred to a share premium account. All of our ordinary shares are in registered form. All issued ordinary shares are entitled to voting rights. We may, subject to and in accordance with the Companies Act, Chapter 50 of Singapore (the "Companies Act"), purchase our own ordinary shares. We may not, except as provided in the Companies Act, grant any financial assistance for the acquisition or proposed acquisition of our ordinary shares. NEW ORDINARY SHARES New ordinary shares may only be issued with the prior approval of the shareholders in a general meeting of the 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 shareholders have given the general authority to issue any remaining approved but unissued ordinary shares prior to the next annual general meeting. Subject to the foregoing, the provisions of the Companies Act and any special rights attached to any class of shares currently issued, all new ordinary shares are under the control of our Board Of Directors who may allot and issue the same with such rights and restrictions as it may think fit. Our shareholders are not entitled to pre-emptive rights under our Articles of Association or Singapore law. SHAREHOLDERS Only persons who are registered in the register of members and, in cases in which the person so registered as depositors in the Depository Register maintained by the Central Depository (Pte) Limited of Singapore, or the 51 54 CDP, for our ordinary shares, are recognized as shareholders. We will not, except as required by law, recognize any equitable, contingent, future or partial interest in any ordinary share or other rights for any ordinary share other than the absolute right thereto of the registered holder of the ordinary share or of the person whose name is entered in the depository register for that ordinary share. We may close the register of members for any time or times if we provide the Registrar of Companies and Businesses of Singapore at least 14 days' notice. However, the register may not be closed for more than 30 days in aggregate in any calendar year. We typically close the register to determine shareholders' entitlement to receive dividends and other distributions for no more than ten days a year. TRANSFER OF ORDINARY SHARES There is no restriction on the transfer of fully paid ordinary shares except where required by law, the listing rules of any stock exchange on which we are listed or the rules or by-laws of such stock exchange. The Board of Directors may decline to register any transfer of ordinary shares which are not fully paid shares or ordinary shares on which we have a lien. Ordinary shares may be transferred by a duly signed instrument of transfer in a form approved by any stock exchange on which we are listed. Our Board of Directors may also decline to register any instrument of transfer unless, among other things, it has been duly stamped and is presented for registration together with the share certificate and such other evidence of title as they may require. We will replace lost or destroyed certificates for ordinary shares if we are properly notified and if the applicant pays a fee which will not exceed S$2 and furnishes any evidence and indemnity that our Board Of Directors may require. GENERAL MEETINGS OF SHAREHOLDERS We are required to hold an annual general meeting every year. Our Board of Directors may convene an extraordinary general meeting whenever it thinks fit and must do so if shareholders representing not less than 10% of the total voting rights of all shareholders request in writing that such a meeting be held. In addition, two or more shareholders holding not less than 10% of our issued share capital may call a meeting. Unless otherwise required by Singapore law or by the 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 our company, amendments to the Memorandum and Articles of Association, a change of the corporate name and a reduction in the share capital, share premium account or capital redemption reserve fund. We must give at least 21 days' notice in writing for every general meeting convened for the purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days' notice in writing. The notice must be given to every shareholder who has supplied us with an address in Singapore for the giving of notices and must set forth the place, the day and the hour of the meeting and, in the case of special business, the general nature of that business. VOTING RIGHTS A shareholder is entitled to attend, speak and vote at any general meeting, in person or by proxy. A proxy need not be a shareholder. A person who holds ordinary shares through the CDP book-entry clearance system will only be entitled to vote at a general meeting as a shareholder if his name appears on the depository register maintained by CDP 48 hours before the time for holding the general meeting. Except as otherwise provided in the Articles of Association, two or more shareholders holding at least 33 1/3% of the issued and fully-paid ordinary shares must be present in person or by proxy to constitute a quorum at any general meeting. Under the Articles of Association, on a show of hands, every shareholder present in person and each proxy shall have one vote, and on a poll, every shareholder present in person or by proxy shall have one vote for each ordinary share held. A poll may be demanded in certain circumstances, including by the chairman of the meeting or by any shareholder present in person or by proxy and representing not less than 10% of the total voting rights of all shareholders having the right to attend and vote at the meeting or by any two shareholders present in person or by proxy and entitled to vote. 52 55 DIVIDENDS We may, by ordinary resolution of the 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. However, we may capitalize our share premium account and apply it to pay dividends, if such dividends are satisfied by the issue of shares to the shareholders. Our Board of Directors may also declare an interim dividend without the approval of the shareholders. All dividends are paid pro rata among the shareholders in proportion to the amount paid up on each shareholder's ordinary shares, unless the rights attaching to an issue of any ordinary share provides otherwise. Unless otherwise directed, dividends are paid by check or warrant sent through the post to each shareholder at his registered address. Notwithstanding the foregoing, the payment to the CDP of any dividend payable to a shareholder whose name is entered in the depository register shall, to the extent of payment made to the CDP, discharge us from any liability to that shareholder in respect of that payment. BONUS AND RIGHTS ISSUE Our Board of Directors may, with approval by the shareholders at a general meeting, capitalize any reserves or profits (including profit or monies carried and standing to any reserve or to the share premium account) and distribute the same as bonus shares credited as paid-up to the shareholders in proportion to their shareholdings. The Board of Directors may also issue rights to take up additional ordinary shares to shareholders in proportion to their shareholdings. Such rights are subject to any conditions attached to such issue. TAKE-OVERS The Companies Act and the Singapore Code on Take-Overs and Mergers regulate the acquisition of ordinary shares of public companies and contain certain provisions that may delay, deter or prevent a future takeover or change in control of our company. Any person acquiring an interest, either on his own or together with parties acting in concert with him, in 25% or more of the voting shares must extend a takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Code on Take-Overs and Mergers. "parties acting in concert" include a company and its related and associated companies, a company and its directors (including their relatives), a company and its pension funds, a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis, and a financial advisor and its client in respect of shares held by the financial advisor and shares in the client held by funds managed by the financial advisor on a discretionary basis. An offer for consideration other than cash must be accompanied by a cash alternative at not less than the highest price paid by the offer or parties acting in concert with the offer or within the preceding 12 months. A mandatory takeover offer is also required to be made if a person holding, either on his own or together with parties acting in concert with him, between 25% and 50% of the voting shares acquires additional voting shares representing more than 3% of the voting shares in any 12 month period. LIQUIDATION OR OTHER RETURN OF CAPITAL If our company liquidates or in the event of any other return of capital, holders of ordinary shares will be entitled to participate in any surplus assets in proportion to their shareholdings, subject to any special rights attaching to any other class of shares. INDEMNITY As permitted by Singapore law, the Articles of Association provide that, subject to the Companies Act, we will indemnify our Board of Directors and officers against any liability incurred in defending any proceedings, whether civil or criminal, which relate to anything done or omitted to have been done as an officer, director or employee and in which judgment is given in their favor or in which they are acquitted or in connection with any application 53 56 under any statute for relief from liability in respect thereof in which relief is granted by the court. We may not indemnify directors and officers against any liability which by law would otherwise attach to them in respect of any negligence, default, breach or duty or breach of trust of which they may be guilty in relation to our company. LIMITATIONS ON RIGHTS TO HOLD OR VOTE SHARES Except as described herein, there are no limitations imposed by Singapore law or by the Articles of Association on the rights of non-resident shareholders to hold or vote ordinary shares. SUBSTANTIAL SHAREHOLDINGS Under the Companies Act, a person has a substantial shareholding in a company if he has an interest (or interests) in one or more voting shares in the company and the nominal amount of that share (or the aggregate of the nominal amounts of those shares) is not less than 5 per cent of the aggregate of the nominal amount of all voting shares in the company. A person having a substantial shareholding in our company is required to make certain disclosures under the Companies Act, including the particulars of his interests in our company and the circumstances by which he has such interests. MINORITY RIGHTS The rights of minority shareholders of Singapore-incorporated companies are protected under section 216 of the Companies Act, which gives the Singapore courts a general power to make any order, upon application by any shareholder of the company as they think fit to remedy situations where the affairs of the company are being conducted or the powers of the board of directors are being exercised in a manner oppressive to, or in disregard of the interests of, one or more of the shareholders; or the company takes an action, or threaten to take an action, or the shareholders pass a resolution, or threaten to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more of the shareholders, including the applicant. Singapore courts have wide discretion as to the reliefs they may grant and those reliefs are in no way limited to those listed in the Companies Act itself. Without prejudice to the foregoing, Singapore courts may direct or prohibit any act or cancel or vary any transaction or resolution, regulate the 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 court may direct, provide for the purchase of a minority shareholder's shares by the other shareholders or by us and, in the case of a purchase of shares by us, a corresponding reduction of the share capital, provide that the Memorandum or Articles of Association be amended or provide that our company be wound up. C. MATERIAL CONTRACTS Not Applicable D. EXCHANGE CONTROL Currently, there are no exchange control restrictions in Singapore. E. TAXATION In this section we summarize certain Singapore income tax, stamp duty and estate duty consequences of the purchase, ownership and disposal of the ordinary shares or ADSs, collectively, the "securities", to a holder of the securities that is not resident in Singapore. This discussion does not purport to be a comprehensive description of 54 57 all the tax considerations that may be relevant to a decision to purchase, own or dispose of the securities and does not purport to deal with the tax consequences applicable to all categories of investors. You should consult your own tax advisers as to the Singapore tax consequences of the purchase, ownership and dispositions of the securities. This discussion is based on tax laws in effect in Singapore and on administrative and judicial interpretations of these tax laws, as of the date of this Annual Report, all of which are subject to change, possibly on a retroactive basis. INCOME TAX GENERAL Non-resident corporate taxpayers are subject to income tax on income that is accrued in or derived from Singapore and on foreign income received in Singapore. A non-resident individual is subject to income tax on the income accrued in or derived from Singapore. Subject to the provisions of any applicable double taxation treaty and subject as discussed below, non-resident taxpayers who derive certain types of income from Singapore are subject to a withholding tax on that income which is at a rate of 25.5% for the year of assessment 2001 and 24.5% for the year of assessment 2002, or generally 15% in the case of interest, royalty and rental of movable equipment. We are obligated by law to withhold tax at the source. A corporation will be regarded as being resident in Singapore if the control and management of its business is exercised there (for example, if the corporation's board of directors meets and conducts the business of the corporation in Singapore). An individual will be regarded as being resident in Singapore in a year of assessment if, in the preceding year, he or she was physically present in Singapore or exercised an employment in Singapore (other than as a director of a company) for 183 days or more, or if he or she resides in Singapore. TAXATION OF DIVIDENDS If we pay dividends on the ordinary shares or ADSs out of the tax exempt income received because of our pioneer status or out of our income subject to a concessionary tax rate, if any, such dividends will be free of Singapore tax in the hands of the holders of the ordinary shares and ADSs. See "Item 5. Operating and Financial Review and Prospects -- Special Tax Status" for a discussion of our pioneer status. Where the dividend is declared out of the above tax exempt income or income subject to tax at a concessionary rate, we would have to obtain agreement from the Inland Revenue Authority of Singapore confirming the amount of income available for distribution of tax exempt dividends. Before this agreement has been obtained, the Comptroller of Income Tax in Singapore may issue a provisional assessment of our tax exempt income, and we will be able to distribute tax exempt dividends based on this provisional assessment. Exempt dividends paid by us in excess of our finalised tax exempt income will be deemed distributed out of our ordinary income and will be subject to the treatment outlined below. We pay tax on our non-tax exempt income at the prevailing corporate tax rate, which is currently 24.5%. This tax paid by us is in effect imputed to, and deemed paid on behalf of, our shareholders. Thus, if we pay dividends on our ordinary shares out of our non-tax exempt income, our shareholders receive the dividends net of the tax paid by us. Dividends received by either a resident or non-resident of Singapore are not subject to withholding tax. Shareholders are taxed in Singapore on the gross amount of dividends, which is the cash amount of the dividend plus an amount normally equivalent to the corporate income tax rate paid by us on the dividend. The tax paid by us effectively becomes available to shareholders as a tax credit to offset the Singapore income tax liability on their overall income, including the gross amount of dividends. 55 58 A non-resident shareholder is effectively taxed on non-tax exempt dividends at the corporate income tax rate. Thus, because tax deducted from the dividend and paid by us at the corporate income tax rate is in effect imputed to, and deemed paid on behalf of, our shareholders (as discussed in the preceding paragraph), no further Singapore income tax will be imposed on the net dividend received by a non-resident holder of ordinary shares or ADSs. Further, the non-resident shareholder will normally not receive any tax refund from the Inland Revenue Authority of Singapore. No comprehensive tax treaty currently exists between Singapore and the United States. GAINS ON DISPOSAL OF THE ORDINARY SHARES OR ADSS Singapore does not impose tax on capital gains. However, gains or profits may be construed to be of an income nature and subject to tax, especially if they arise from activities which the Inland Revenue Authority of Singapore regards as the carrying on of a trade in Singapore, or if they are short-term gains from the sale of real property or shares in unlisted companies with substantial real property or real property-related assets in Singapore. Thus, any gains or profits from the disposal of the ordinary shares or ADSs are not taxable in Singapore unless the seller is regarded as carrying on a trade in securities in Singapore, in which case the disposal profits would be taxable as trading profits rather than capital gains. STAMP DUTY There is no stamp duty payable in respect of the issuance and holding of new ordinary shares or ADSs. Where existing ordinary shares or ADSs evidenced in certificated form are acquired in Singapore, stamp duty is payable on the instrument of transfer of the ordinary shares or ADSs at the rate of S$2.00 for every S$1,000 of the consideration for, or market value of, the ordinary shares or ADSs, whichever is higher. The stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where an instrument of transfer is executed outside Singapore or no instrument of transfer is executed, no stamp duty is payable on the acquisition of existing ordinary shares or ADSs. Stamp duty may be payable if the instrument of transfer is executed outside Singapore and is received in Singapore. ESTATE DUTY In the case of an individual who is not domiciled in Singapore, Singapore estate duty is imposed on the value of most movable and immovable properties situated in Singapore. Thus, an individual holder of the ordinary shares who is not domiciled in Singapore at the time of his or her death will be subject to Singapore estate duty on the value of any ordinary shares held by the individual upon the individual's death. Such a shareholder will be required to pay Singapore estate duty to the extent that the value of the ordinary shares, and any other assets subject to Singapore estate duty, exceeds S$600,000. Unless other exemptions apply to the other assets, for example, the separate exemption limit for residential properties, any excess beyond S$600,000 will be taxed at a rate equal to 5% on the first S$12,000,000 of the individual's Singapore chargeable assets and thereafter at a rate equal to 10%. However, an individual who holds ADSs and is not domiciled in Singapore at the time of his or her death would not be subject to Singapore estate tax duty on such ADSs because such ADSs are registered outside Singapore and hence would not be considered as movable properties in Singapore. F. DIVIDENDS AND PAYING AGENTS Not applicable G. STATEMENTS BY EXPERTS Not applicable 56 59 H. DOCUMENTS ON DISPLAY All documents relating to our the company which are referred to in this Annual Report are available at our principal executive and registered office at No. 5, Yishun Street 23, Singapore 768442, Republic of Singapore. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We may employ derivative instruments such as interest rate swaps and currency swaps, forward foreign currency contracts and foreign currency option contracts to manage our interest rate and foreign exchange exposures. These instruments are used solely to reduce or eliminate the financial risks associated with our assets and liabilities and not for trading or speculation purposes. Our exposure to market risk associated with changes in interest rates would primarily relate to our debt obligations. However, as of December 31, 2000, our exposure to interest rate risk was relatively non existent in view of the absence of outstanding debt obligations except for the long-term loan from Economic Development Board. The applicable interest rate under the terms of the loan is the interest rate declared by the Central Provident Fund Board (a Singapore Government Statutory Board) and is relatively risk free. Nonetheless, our policy is to manage interest rate risk by borrowing a combination of fixed and floating rate obligations depending upon market conditions. We have adopted a foreign currency hedging policy and may utilize foreign currency swaps as well as foreign exchange forward contracts and options. The goal of the hedging policy is to effectively manage risk associated with fluctuations in the value of the foreign currency, thereby making financial results more stable and predictable. Our currency, maturity and interest rate information relating to our short-term and long-term debt and marketable securities are disclosed in Notes 7, 10, and 14 to the consolidated financial statements, respectively. The tables below provide information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates and foreign currencies as of the dates shown. Weighted average variable rates were based on average interest rates applicable to the loans. The information is presented in U.S. dollar equivalents, which is our reporting currency. Actual cash flows are denominated in various currencies including U.S. dollars and Singapore dollars. 57 60
EXPECTED MATURITY DATE AS OF DECEMBER 31, 2000 AS OF DECEMBER 31, 1999 ------------------------ ----------------------- ----------------------- 2001 2002 2003 TOTAL FAIR VALUE TOTAL FAIR VALUE ------ ------ ------ ------ ---------- ------ ---------- (IN THOUSANDS, EXCEPT INTEREST AND SETTLEMENT RATE) Debt: Variable rate long-term debt: 14,799 14,799 14,800 44,398 42,802 53,780 54,265 Average interest rate 3.5% 3.5% Variable rate short-term debt: -- -- 25,000 25,000 Average interest rate -- 6.8% Fixed rate short-term debt: -- -- 35,000 35,000 Average interest rate -- 6.6% Foreign currency contract: Notional amount of $53,780 (S$) -- -- 1,836 2,320 Settlement rate (vs US$) -- -- 1.73 Assets: Marketable debt securities 11,486 2,902 7,518 21,906 21,906 -- -- Average interest rate 3.5% --
The variable rate long-term debt is repayable in seven equal semi-annual instalments commencing September 1, 2000. The interest rate for the marketable debt securities represents the contractual interest rate. LIMITATIONS Fair value estimates are made at a specific point in time and are based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not applicable PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES Not applicable 58 61 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS See "Item 10. Additional Information" for a description of the rights of securities holders, which remain unchanged. We completed our initial public offering of 175,950,000 ordinary shares, directly or in the form of American Depositary Shares or ADSs, at S$3.554 per ordinary share or $21.00 per ADS in February 2000, after our ordinary shares and American Depositary Receipts were registered under the Securities Act. The aggregate price of the offering amount registered and sold was $369,495,000. We also completed a separate offering of 19,550,000 ordinary shares at S$3.554 per ordinary share in Singapore on the same date. The effective date of our registration statement on Form F-1 (File number: 333-93661) was January 27, 2000. Salomon Smith Barney Inc. was the global coordinator and sole book running manager for the global offering of our ordinary shares and ADSs. The net proceeds from our initial public offering were mainly used to repay debt liabilities due to ST Treasury Services Ltd of approximately $25.0 million and Den Danske Bank amounting to approximately $35.0 million, to settle the first instalment due on the EDB loan of $7.5 million and to fund working capital requirements and capital expenditure for the purchase of test and assembly equipment which totaled approximately $299.6 million in 2000. None of the proceeds were paid, directly or indirectly to our directors, officers or their associates or to any person owning ten percent or more of our ordinary shares or to our affiliates. PART III ITEM 15. Not applicable ITEM 16. Not applicable PART IV ITEM 17. FINANCIAL STATEMENTS See Item 18 for a list of the Financial Statements filed as part of this Annual Report. ITEM 18. FINANCIAL STATEMENTS The following financial statements are filed as part of this Annual Report, together with the report of the independent auditors: Independent Auditors' Report Consolidated Balance Sheets as at December 31, 1999 and 2000 Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 1998, 1999 and 2000 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998, 1999 and 2000 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000 Notes to the Consolidated Financial Statements 59 62 ITEM 19. EXHIBITS The following exhibits are filed as part of this Annual Report:
1.1 Memorandum and Articles of Association of ST Assembly Test Services Ltd -- incorporated by reference to Exhibit 3.1 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000. 2.1 Form of specimen certificate representing ST Assembly Test Services Ltd's ordinary shares -- incorporated by reference to Exhibit 4.1 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000. 2.2 Deposit Agreement among ST Assembly Test Services Ltd, Citibank, N.A., as depositary, and the holders from time to time of ADRs issued thereunder (including the form of ADR). 4.1 ST Group Management & Support Services Agreement dated December 27, 1999 by and between Singapore Technologies Pte Ltd and ST Assembly Test Services Ltd -- incorporated by reference to Exhibit 10.1 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000. 4.2 Loan Agreement dated June 5, 1998 by and between the Economic Development Board and ST Assembly Test Services Ltd -- incorporated by reference to Exhibit 10.2 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000. 4.4 Lease Agreement dated November 18, 1996 by and between the Housing and Development Board and ST Assembly Test Services Ltd -- incorporated by reference to Exhibit 10.4 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000. 4.5 Immunity Agreement dated October 18, 1996 by and between Motorola Inc. and ST Assembly Test Services Ltd -- incorporated by reference to Exhibit 10.5 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000. 4.6 Loan Agreement dated November 16, 1999 by and between Citibank, N.A., Singapore Branch, and ST Assembly Test Services Ltd -- incorporated by reference to Exhibit 10.6 of Amendment No. 1 to Form F-1 of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on January 3, 2000. 8.1 List of subsidiaries See "Item 4. Information on the Company-C. Organizational Structure".
60 63 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant 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. ST ASSEMBLY TEST SERVICES LTD By /s/ TAN BOCK SENG ------------------------------------ Tan Bock Seng Chairman and Chief Executive Officer March 30, 2001 61 64 Financial Statements Index
PAGE NUMBER ----------- INDEPENDENT AUDITORS' REPORT 62 CONSOLIDATED BALANCE SHEETS 63 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 64 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 65 CONSOLIDATED STATEMENTS OF CASH FLOWS 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 67
65 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders of ST Assembly Test Services Ltd We have audited the accompanying consolidated balance sheets of ST Assembly Test Services Ltd and Subsidiary as of December 31, 1999 and 2000, and the related consolidated statements of operations and comprehensive income (loss), shareholders' equity and cash flows for the years ended December 31, 1998, 1999 and 2000. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ST Assembly Test Services Ltd and Subsidiary as of December 31, 1999 and 2000, and the consolidated results of their operations and their cash flows for the years ended December 31, 1998, 1999 and 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG - -------------- KPMG Singapore March 16, 2001 62 66 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31 --------------------------------- NOTE 1999 2000 ---- -------- -------- ASSETS Current assets: Cash and cash equivalents 3 $ 16,568 $141,733 Accounts receivable, net 4 37,404 52,315 Amounts due from ST and ST affiliates 22 6,532 8,727 Short-term deposits with ST affiliates 22 -- 10,000 Other receivables 5 9,572 18,989 Inventories 6 11,313 14,793 Marketable securities 7 -- 11,486 Prepaid expenses 8 7,079 24,809 -------- -------- Total current assets 88,468 282,852 Property, plant and equipment, net 9 251,298 380,934 Other receivables 1,835 -- Marketable securities 7 -- 10,420 Prepaid expenses 8 10,364 37,552 -------- -------- Total Assets $351,965 $711,758 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt 10 $ 60,000 $ -- Current installments of long-term debt 14 7,420 14,799 Accounts payable 13,070 13,956 Amounts due to ST and ST affiliates 22 5,533 2,062 Accrued operating expenses 11 21,389 32,963 Other payables 12 54,408 27,705 Income taxes payable 678 2,846 -------- -------- Total current liabilities 162,498 94,331 Deferred grant 13 1,923 2,631 Long-term debt, excluding current installments 14 46,360 29,599 -------- -------- Total liabilities $210,781 $126,561 ======== ======== SHAREHOLDERS' EQUITY Share capital: Ordinary shares -- par value S$0.25 Authorized ordinary shares -- 1,200,000,000 Issued ordinary shares -- 785,427,695 as of December 31, 1999 and 986,171,915 as of December 31, 2000 15 $129,827 $159,461 Additional paid-in capital 16 26,305 386,325 Accumulated other comprehensive loss (9,731) (9,731) Retained earnings (deficit) 17 (5,217) 49,142 -------- -------- Total shareholders' equity 141,184 585,197 -------- -------- Total Liabilities and Shareholders' Equity $351,965 $711,758 ======== ========
See accompanying notes to consolidated financial statements. 63 67 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31 -------------------------------------- NOTE 1998 1999 2000 ---- -------- --------- --------- Net revenues $113,920 $ 201,098 $ 331,271 Cost of revenues (87,066) (132,889) (231,944) -------- --------- --------- Gross profit 26,854 68,209 99,327 -------- --------- --------- Operating expenses: Selling, general and administrative 16,772 28,437 40,798 Research and development 3,482 7,283 14,636 Stock-based compensation 384 25,327 448 Other general expenses (net) (582) 37 (22) -------- --------- --------- Total operating expenses 20,056 61,084 55,860 -------- --------- --------- Operating income 6,798 7,125 43,467 Other income (expense): Interest income 147 524 10,638 Interest expense (8,391) (6,058) (2,424) Foreign currency exchange gain 857 1,385 2,018 Other non-operating income, net 18 2,103 2,379 3,525 -------- --------- --------- Total other income (expense) (5,284) (1,770) 13,757 -------- --------- --------- Income before income taxes 1,514 5,355 57,224 Income tax expense 19 (390) (500) (2,865) -------- --------- --------- Net income 1,124 4,855 54,359 ======== ========= ========= Other comprehensive income (loss): Foreign currency translation (1,636) -- -- -------- --------- --------- Comprehensive income (loss) $ (512) $ 4,855 $ 54,359 ======== ========= ========= Basic net income per ordinary share $ -- $ 0.01 $ 0.06 Diluted net income per ordinary share $ -- $ 0.01 $ 0.06 Basic net income per ADS $ 0.02 $ 0.06 $ 0.56 Diluted net income per ADS $ 0.02 $ 0.06 $ 0.56 -------- --------- --------- Ordinary shares (in thousands) used in per ordinary share calculation: - -- basic 669,671 770,259 962,828 - -- effect of dilutive options 1,305 16,466 7,803 -------- --------- --------- - -- diluted 670,976 786,725 970,631 ======== ========= ========= ADS (in thousands) used in per ADS calculation: - -- basic 66,967 77,026 96,283 - -- effect of dilutive options 131 1,646 780 -------- --------- --------- - -- diluted 67,098 78,672 97,063 ======== ========= =========
See accompanying notes to consolidated financial statements. 64 68 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)
ACCUMULATED OTHER COMPRE- TOTAL ORDINARY SHARES ADDITIONAL UNEARNED SUBSCRIP- HENSIVE RETAINED SHARE- NO. PAID-IN COMPEN- TIONS INCOME EARNINGS HOLDERS' (IN THOUSANDS) CAPITAL SATION RECEIVABLE (LOSS) (DEFICIT) EQUITY ------------------- ---------- --------- ----------- ----------- --------- --------- Balances at December 31, 1997 92,000 $ 64,900 $ -- $ -- $ -- $(8,095) $(11,099) $ 45,706 Foreign currency Translation -- -- -- -- -- (1,636) -- (1,636) Share issuance 100,000 62,305 -- -- -- -- -- 62,305 Effect of stock split 576,000 -- -- -- -- -- -- -- Share issuance 12,174 1,837 1,979 (730) (2,931) -- -- 155 Other changes in Unearned Compensation -- -- 3,410 (3,410) -- -- -- -- Amortization of stock compensation -- -- -- 384 -- -- -- 384 Net income -- -- -- -- -- -- 1,124 1,124 ------- -------- -------- -------- ------- ------- -------- -------- Balances at December 31, 1998 780,174 129,042 5,389 (3,756) (2,931) (9,731) (9,975) 108,038 Share issuances 15,972 2,381 -- -- (2,262) -- -- 119 Other changes in unearned compensation -- -- 21,339 (21,339) -- -- -- -- Amortization of stock compensation -- -- 61 9,352 -- -- -- 9,413 Termination of Ownership Scheme (10,718) (1,596) (655) 15,743 5,193 -- (97) 18,588 Amortization of stock compensation -- -- 171 -- -- -- -- 171 Net income -- -- -- -- -- -- 4,855 4,855 ------- -------- -------- -------- ------- ------- -------- -------- Balances at December 31, 1999 785,428 129,827 26,305 -- -- (9,731) (5,217) 141,184 Share issuances 200,744 29,634 359,572 -- -- -- -- 389,206 Stock compensation -- -- 448 -- -- -- -- 448 Net income -- -- -- -- -- -- 54,359 54,359 ------- -------- -------- -------- ------- ------- -------- -------- Balances at December 31, 2000 986,172 $159,461 $386,325 $ -- $ -- $(9,731) $ 49,142 $ 85,197 ======= ======== ======== ======== ======= ======= ======== ========
See accompanying notes to consolidated financial statements. 65 69 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS
FOR THE YEAR ENDED DECEMBER 31 ----------------------------------------- 1998 1999 2000 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,124 $ 4,855 $ 54,359 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 42,156 74,166 72,419 Loss (gain) on sale of property, plant and equipment (582) 37 (22) Loss on write-off of property, plant and equipment 248 101 -- Exchange loss (gain) (423) (2,337) (2,104) Changes in operating working capital: Accounts receivable 8,244 (16,751) (14,430) Amounts due from ST and ST affiliates (1,970) (239) (2,195) Inventories (2,537) (4,719) (3,480) Other receivables and prepaid expenses 554 (4,337) 14,968 Accounts payable 1,961 4,246 1,621 Amounts due to ST and ST affiliates 826 1,222 (3,471) Accrued operating expenses and other payables (1,671) 16,998 12,435 --------- -------- --------- Net cash provided by operating activities 47,930 73,242 130,100 --------- -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (68,727) (84,301) (299,554) Sale of property, plant and equipment 1,254 1,971 5,423 Short-term deposits with ST affiliates -- -- (10,000) Purchases of marketable securities -- -- (21,930) --------- -------- --------- Net cash used in investing activities (67,473) (82,330) (326,061) --------- -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Bank overdrafts (3,012) -- -- Proceeds from issuance of long-term debt 54,299 -- -- Proceeds from issuance of short-term debt 25,000 10,000 -- Repayment of short-term debt (107,550) -- (60,000) Repayment of long-term debt -- -- (7,468) Proceeds from issuance of shares 62,460 3,080 389,206 Purchase consideration for share buy-back -- (116) -- --------- -------- --------- Net cash provided by financing activities 31,197 12,964 321,738 --------- -------- --------- Net increase in cash and cash equivalents for the year 11,654 3,876 125,777 Effect of exchange rate changes on cash (13) -- (612) Cash and cash equivalents at beginning of the year 1,051 12,692 16,568 --------- -------- --------- Cash and cash equivalents at end of the year $ 12,692 $ 16,568 $ 141,733 ========= ======== ========= SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (net of amount capitalized) $ 7,126 $ 6,001 $ 3,045 Income taxes paid $ 162 $ 143 $ 616 Non-cash items Share issue (cancellation) subscriptions receivable $ 2,931 $ (1,000) $ -- Sale-leaseback transactions: Sales consideration applied to leasing prepayments $ -- $ 20,246 $ 59,536 Sales consideration included in other receivables $ -- $ -- $ 7,722 ========= ======== =========
See accompanying notes to consolidated financial statements. 66 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 1. BUSINESS AND ORGANIZATION BACKGROUND ST Assembly Test Services Ltd (the "Company") is an independent provider of a full range of semiconductor test and assembly services. The Company has operations in Singapore and in the United States of America, its principal market. As of December 31, 2000, the Company was 72.2% owned by Singapore Technologies Pte Ltd ("ST"). SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISKS The Company has a number of major customers in North America, Europe and Asia. During the years ended December 31, 1998, 1999 and 2000, the Company's largest customer accounted for 21%, 25%, and 32% of revenues, respectively. The Company's five largest customers collectively accounted for approximately 70%, 73% and 70% of revenues for the years ended December 31, 1998, 1999 and 2000, respectively (See Note 20). The Company anticipates that significant customer concentration will continue for the foreseeable future, although the companies which constitute the Company's largest customers may change. The Company believes that the concentration of its credit risk in trade receivables is mitigated substantially by its credit evaluation process, credit policies and credit control and collection procedures. In addition, the Company participates in a pooled cash management program and places short-term advances with ST or its affiliates. RISKS AND UNCERTAINTIES The Company's future results of operations include a number of risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, dependence on the highly cyclical nature of both the semiconductor and the communications and personal computer industries, competitive pricing and declines in average selling prices, dependence on the Company's relations with ST and the government of Singapore, reliance on a small group of principal customers, timing and volume of orders relative to the Company's production capacity, availability of manufacturing capacity and fluctuations in manufacturing yields, availability of financing, competition, dependence on raw material and equipment suppliers, exchange rate fluctuations, dependence on key personnel, enforcement of intellectual property rights, environmental regulations and fluctuations in quarterly operating results. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) ACCOUNTING PRINCIPLES The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). 67 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) (B) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the financial statements of ST Assembly Test Services Ltd and its subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. (C) USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of the consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ from these estimates. (D) FUNCTIONAL CURRENCY Through June 30, 1998, the Company's functional currency was the Singapore dollar. Effective July 1, 1998, the Company changed its functional currency to the US dollar. The Singapore dollar was the functional currency of the Company because, historically, the Singapore dollar was the currency of the primary economic environment in which the operations of the Company were conducted. However, significant changes in economic facts necessitated a change in the Company's functional currency from the Singapore dollar to the US dollar. The Company's business had changed in that a more significant portion of its revenues was derived from companies based outside of Singapore, principally the United States. Interdependencies amongst the Company and its parent and other Singapore government controlled entities had diminished. There were ongoing changes in sources of financing from Singapore dollars to US dollars. With more of the Company's transactions and cash flows denominated in US dollars, the functional currency changed effective July 1, 1998 from the Singapore dollar to the US dollar. The change in functional currency was recognized through the translation of Singapore dollar amounts of the Company's non-monetary assets, principally property, plant and equipment at June 30, 1998, to US dollars on July 1, 1998 with those US dollar amounts becoming the accounting basis for those assets at July 1, 1998 and for subsequent periods. The $9,731 cumulative translation adjustment at July 1, 1998 in shareholders' equity prior to the change remains as a separate component of accumulated other comprehensive income (loss). (E) FOREIGN CURRENCY TRANSACTIONS Assets and liabilities which are denominated in foreign currencies are converted into the functional currency at the rates of exchange prevailing at the balance sheet date. Income and expenses are converted at the rates of exchange at transaction dates prevailing during the year. Foreign currency transaction gains or losses are included in results of operations, except as described below with respect to forward foreign exchange contracts utilized as a hedge against debt obligations. (F) FINANCIAL INSTRUMENTS Gains and losses on hedges of existing assets or liabilities are included in the carrying amounts of those assets or liabilities and are ultimately recognized in income as part of those carrying amounts. Gains and losses related to qualifying hedges of firm commitments or anticipated transactions are also deferred and are recognized in income or as adjustments of carrying amounts when the hedged transaction occurs. 68 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) At December 31, 2000, the Company had no outstanding derivative instruments. The adoption of Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 138, on January 1, 2001, did not have a material effect on the Company's financial position or results of operations. (G) CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. (H) INVENTORIES Inventories are valued at the lower of cost and net realizable value. Cost is determined principally on a standard cost basis which approximates the actual cost on the weighted average basis. (I) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line method over the following periods: Building, mechanical and electrical installation -- 3 to 20 years Plant and machinery -- 5 years Toolings -- 5 years Office furniture and equipment -- 5 years Computer equipment -- 2 to 3 years
No depreciation is provided on property, plant and equipment under installation or construction. Repairs and replacements of a routine nature are expensed, while those that extend the life of an asset are capitalized. (J) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. 69 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) (K) MARKETABLE SECURITIES Marketable securities at December 31, 2000 consist of corporate debt securities denominated principally in Singapore dollars. The Company may classify its securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. All securities not included in trading or held-to-maturity are classified as available-for-sale. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income 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 or held-to-maturity security below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity or available-for-sale security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned. At December 31, 2000, the securities held were classified as available-for-sale. (L) OPERATING LEASES Rental payments under operating leases are expensed on a straight-line basis over the periods of the respective leases. (M) GRANTS Asset-related government grants consist of grants for the purchase of equipment used for research and development activities. Asset-related grants are presented in the consolidated balance sheet as deferred grants and are credited to other income on the straight-line basis over the estimated useful lives of the relevant assets. Income-related government grants are subsidies of training and research and development expenses. Income-related grants are credited to other income concurrent with the related qualifying expenditures. (N) REVENUE RECOGNITION Net revenue represents the invoiced value of services rendered, excluding goods and services tax, net of returns, trade discounts and allowances. Revenue is recognized upon shipment of goods on which services have been rendered. (O) RESEARCH AND DEVELOPMENT Research and development expenses are expensed as incurred. Research and development expenses amounted to $3,482, $7,283 and $14,636 during the years ended December 31, 1998, 1999 and 2000, respectively. 70 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) (P) STOCK-BASED EMPLOYEE COMPENSATION The Company measures stock-based employee compensation cost for financial statement purposes in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and its related interpretations and includes pro forma information in Note 21 in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation". Compensation cost for stock options granted to employees in connection with the Company's fixed option plan is measured as the excess of fair market value of the stock subject to the option at the grant date over the exercise price of the option and is recorded over the requisite vesting periods. Compensation cost for options granted to employees under the Company's prior variable option plan was recorded over the requisite vesting periods based upon the current market value of the Company's stock at the end of each period. (Q) INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for loss carryforwards and other deferred tax assets where it is more likely than not that such loss carryforwards and deferred tax assets will not be realized. (R) NET INCOME (LOSS) PER SHARE The computation of basic net income (loss) per share is calculated as the net income or loss for the year divided by the weighted number of shares outstanding during the year, as adjusted on a retroactive basis for stock splits. Diluted net income (loss) per share reflects the potential dilution that would occur if share options or other contracts to issue ordinary shares were exercised and converted into ordinary shares. (s) COMPREHENSIVE INCOME Comprehensive income (loss) consists of net income (loss) and foreign currency translation adjustments and is presented in the consolidated statements of operations and comprehensive income (loss). (T) SEGMENT DISCLOSURES SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"), requires that a public company report descriptive information about its reportable operating segments. Operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has one operating segment. 71 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) (U) RECLASSIFICATIONS Certain items in the comparative figures have been reclassified to conform with the current year's presentation. 3. CASH AND CASH EQUIVALENTS Cash and cash equivalents at December 31, 1999 and 2000 consist of:
DECEMBER 31 ---------------------- 1999 2000 ------- -------- Cash at banks and in hand $ 5,142 $ 1,828 Cash equivalents -- bank fixed deposits -- 38,132 Cash equivalents -- ST pooled cash management 11,426 5,409 Cash equivalents -- ST treasury deposits -- 96,364 ------- -------- $16,568 $141,733 ======= ========
Certain of the Company's treasury management activities are undertaken by ST or its affiliates. The Company participates in a pooled cash management program which requires the Company to place surplus cash with ST as overnight advances. These deposits, as well as short-term deposits with the ST treasury unit with original maturities of three months or less, are classified as cash equivalents. 4. ACCOUNTS RECEIVABLE Accounts receivable at December 31, 1999 and 2000 consist of:
DECEMBER 31 --------------------- 1999 2000 ------- ------- Accounts receivable - third parties $37,496 $53,408 Allowance for doubtful accounts (92) (1,093) ------- ------- $37,404 $52,315 ======= =======
Movements in the allowance for doubtful accounts are as follows:
1998 1999 2000 ---- ---- ------ Beginning $448 $211 $ 92 Charge (credit) for the year (241) (119) 1,384 Utilized for the year -- -- (383) Translation adjustment 4 -- -- ---- ---- ------ Ending $211 $ 92 $1,093 ==== ==== ======
72 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 5. OTHER RECEIVABLES Other receivables at December 31, 1999 and 2000 consist of:
DECEMBER 31 -------------------- 1999 2000 ------ ------- Deposits and staff advances $ 225 $ 410 Grant receivable (Note 13) 4,202 7,467 Other receivables 5,145 11,112 ------ ------- $9,572 $18,989 ====== =======
6. INVENTORIES Inventories at December 31, 1999 and 2000 consist of:
DECEMBER 31 --------------------- 1999 2000 ------- ------- Raw materials $ 8,440 $12,047 Factory supplies 1,268 1,849 Work-in-progress 2,360 2,501 Finished goods 348 40 ------- ------- 12,416 16,437 Allowance for inventory obsolescence (1,103) (1,644) ------- ------- $11,313 $14,793 ======= =======
Movements in the allowance for inventory obsolescence are as follows:
1998 1999 2000 ---- ------ ------ Beginning $580 $ 583 $1,103 Utilized in year (208) (893) -- Charge for the year 207 1,413 541 Translation adjustment 4 -- -- ---- ------ ------ Ending $583 $1,103 $1,644 ==== ====== ======
73 77 NOTES TO THE Consolidated FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 7. MARKETABLE SECURITIES Available-for-sale debt securities at December 31, 2000 consist of the following (at amortized cost):
DECEMBER 31 ----------- Corporate debt securities: Due in one year or less $11,486 Due after one year through five years 10,420 ------- $21,906 =======
The amortized cost of these securities approximated fair value at December 31, 2000. There were no sales of securites in 2000. 8. PREPAID EXPENSES Prepaid expenses at December 31, 1999 and 2000 consist of:
DECEMBER 31 --------------------- 1999 2000 ------- ------- Leasing prepayments $16,044 $61,940 Other prepayments 1,399 421 ------- ------- $17,443 $62,361 ======= ======= Current assets $ 7,079 $24,809 Non-current assets 10,364 37,552 ------- ------- $17,443 $62,361 ======= =======
Leasing prepayments represent prepayments of lease rental obligations for certain plant and machinery leased under sale and lease-back arrangements. 74 78 NOTES TO THE Consolidated FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 9. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31, 1999 and 2000 consist of:
DECEMBER 31 ---------------------- 1999 2000 -------- -------- Cost: Building, mechanical and electrical installation $ 47,549 $ 52,154 Plant and machinery 216,621 348,071 Toolings 16,168 26,861 Office furniture and equipment 3,255 8,386 Computer equipment 7,563 10,357 Assets under installation and construction in progress 73,252 81,006 -------- -------- Total cost $364,408 $526,835 ======== ======== Accumulated depreciation: Building, mechanical and electrical installation $ 8,317 $ 12,065 Plant and machinery 92,121 113,561 Toolings 8,243 12,540 Office furniture and equipment 1,213 2,249 Computer equipment 3,216 5,486 Total accumulated depreciation 113,110 145,901 -------- -------- Property, plant and equipment (net) $251,298 $380,934 ======== ========
Depreciation charged to results of operations amounted to $41,772, $48,839 and $71,971 for the years ended December 31, 1998, 1999 and 2000. The building is built on land held on a 30-year operating lease, renewable for a further 30-year period subject to the fulfillment of certain conditions. 75 79 NOTES TO THE Consolidated FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 10. SHORT-TERM DEBT Loans at December 31, 1999 and 2000 consist of:
DECEMBER 31 --------------------- 1999 2000 ------- -------- Loans from ST affiliate -- US Dollar $25,000 $ -- Bank loans -- US Dollar 35,000 -- ------- -------- $60,000 $ -- ======= ========
Weighted average interest rate: Loans from ST affiliate -- US Dollar 6.6% NA Bank loans -- US Dollar 6.8% NA
The US Dollar loans payable to an ST affiliate at December 31, 1999 bore interest at rates quoted by specified banks to the lender. The loans were unsecured and were repaid in 2000. The US Dollar bank loans comprised two loans of $25,000 and $10,000 respectively. The $25,000 loan payable at December 31, 1999 bore interest at a rate of 0.5% above London Inter-Bank Rate for US dollars. The loan agreement required ST to maintain at least 51.0% equity in the Company and the Company to maintain a debt to equity ratio of less than 1.5 to 1. The $10,000 loan payable at December 31, 1999 bore interest at 6.8% per annum. The loans were unsecured and were repaid in 2000. 11. ACCRUED OPERATING EXPENSES Accrued operating expenses at December 31, 1999 and 2000 consist of:
DECEMBER 31 --------------------- 1999 2000 ------- ------- Staff costs $11,341 $ 7,646 Purchase of raw materials 4,722 11,163 Maintenance fees, license fees and royalties 1,068 1,778 Interest expense 1,118 535 Provision for vacation liability 830 1,688 Others 2,310 10,153 ------- ------- $21,389 $32,963 ======= =======
76 80 NOTES TO THE Consolidated FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 12. OTHER PAYABLES Other payables at December 31, 1999 and 2000 consist of:
DECEMBER 31 --------------------- 1999 2000 ------- ------- Liabilities for purchase of property, plant and equipment $54,408 $27,705 ======= =======
13. DEFERRED GRANT In 1997, the Company obtained a 5-year grant of $13,878 for funding of certain research and development projects from the National Science & Technology Board ("NSTB"). The grant, which is a reimbursement of specified costs, has no requirement for repayment. 14. LONG-TERM DEBT Long-term debt at December 31, 1999 and 2000 consists of:
DECEMBER 31 --------------------- 1999 2000 ------- ------- Singapore dollar loan $ 3,780 $44,398 Less current installments (7,420) (14,799) ------- ------- $46,360 $29,599 ======= =======
The term loan bears interest at 1% over the prevailing rate declared by the Central Provident Fund ("CPF") Board, a statutory board of Singapore, for contributions made to the CPF under the CPF Act. Interest is payable semi-annually. Principal is denominated in Singapore dollars and is repayable in 7 equal semi-annual installments commencing September 1, 2000. The loan agreement restricts the Company without prior approval from paying dividends, from incurring further indebtedness and from undertaking any form of reconstruction, including amalgamation with another company, which would result in a change in the control of the Company. The loan is unsecured, but is supported by a corporate guarantee given by ST. The term loan at December 31, 1999 and 2000 bore interest at 3.5% per annum (See Note 22). The Company has an undrawn line of credit of US$20 million with a bank. 15. SHARE CAPITAL The Company's authorized share capital at December 31, 2000 comprised 1,200,000,000 ordinary shares of Singapore dollars S$0.25 par value each. Under Singapore law, all increases in share capital (including rights issues) require prior shareholders' approval. Singapore law does not provide for the issue of shares of no par value and prohibits the issue of shares at a discount to par value. 77 81 NOTES TO THE Consolidated FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) The Company was incorporated with an initial paid-in share capital of 2 ordinary shares with a par value of Singapore dollars S$1 each. In 1995, the paid-in capital was increased to Singapore dollars S$45,000 (US$31,802) through the issue of 44,999,998 ordinary shares at Singapore dollars S$1 per share. In 1996, the paid-in capital was further raised by Singapore dollars S$47,000 (US$33,098) to Singapore dollars S$92,000 with the issue of 47,000,000 ordinary shares at Singapore dollars S$1 per share. In March 1998, the paid-in capital was further increased by Singapore dollars S$100,000 (US$62,305) to Singapore dollars S$192,000 with the issue of 100,000,000 ordinary shares at Singapore dollars S$1 per share. At an extraordinary general meeting held on April 30, 1998, the shareholders of the Company approved the sub-division of the authorized share capital of 300,000,000 ordinary shares of Singapore dollars S$1 each into 1,200,000,000 ordinary shares of Singapore dollars S$0.25 each. The 192,000,000 ordinary shares of Singapore dollars S$1 each in issue at that time were sub-divided into 768,000,000 ordinary shares of Singapore dollars S$0.25 each. In June 1998, the paid-in capital, net of subscriptions receivable, was increased by Singapore dollars S$256 (US$155) to Singapore dollars S$192,256 with the issue of 12,174,000 ordinary shares of Singapore dollars S$0.25 each, partly paid to Singapore dollars S$0.0125, at a subscription price of Singapore dollars S$0.42 to employees of the Company, its subsidiary, ST and related corporations of ST under the ST Assembly Test Services Ltd Employees' Share Ownership Scheme ("the Ownership Scheme"). (See Note 21) In January 1999, the paid-in capital, net of subscriptions receivable, was increased by Singapore dollars S$108 (US$65) to Singapore dollars S$192,363 with the issue of 8,600,000 ordinary shares of Singapore dollars S$0.25 each at par, partly paid to Singapore dollars S$0.0125 to employees of the Company, its subsidiary, ST and related corporations of ST under the Ownership Scheme. (See Note 21) In July 1999, the paid-in capital, net of subscriptions receivable, was increased by Singapore dollars S$92 (US$54) to Singapore dollars S$192,455 with the issue of 7,371,600 ordinary shares of Singapore dollars S$0.25 each at par, partly paid to Singapore dollars S$0.0125 to employees of the Company, its subsidiary, ST and related corporations of ST under the Ownership Scheme. (See Note 21) In November 1999, the Company terminated the Ownership Scheme. Under the terms of the termination, the Company received proceeds from participants amounting to approximately $2,961 to fully pay up the remaining second installment of 95% of the subscription price for 17,407,695 ordinary shares issued under the Ownership Scheme. The remaining 9,605,505 partly paid ordinary shares in issue under the Ownership Scheme were bought back from the employees by the Company at a total cash consideration of approximately $104. Also, as part of the consideration for the buy back, under the terms of the termination, such employees were granted new options to subscribe for 6,385,450 ordinary shares, at an exercise price of $0.25 each (S$0.42), and 3,220,055 ordinary shares, at an exercise price of $0.15 each (S$0.25), under the ST Assembly Test Services Ltd Share Option Plan 1999 (See Note 21). All the shares purchased by the Company were cancelled on acquisition. Also at this time, the Company purchased 1,112,400 partly paid shares held by a subsidiary of ST for a cash consideration of $12. All the shares purchased by the Company were cancelled on acquisition. 78 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) In February 2000, the Company issued 175,950,000 ordinary shares at $2.10 per share and 19,550,000 ordinary shares at Singapore dollars S$3.554 (US$2.10) per share in the initial public offering of the Company's shares on the Nasdaq National Market and Singapore Exchange. Offering proceeds, net of expenses, amounted to approximately $387,025. 5,244,220 ordinary shares were issued as a result of the employees exercising their share options during the year 2000. 16. ADDITIONAL PAID-IN CAPITAL Additional paid-in capital includes the excess of proceeds received from issues of share capital (net of the costs of issue) over the par value of shares issued, which under Singapore law must be credited to the share premium account. The share premium may only be applied in paying up unissued shares to be issued to shareholders, paying up in whole or in part the balance unpaid on shares in issue, in payment of dividends, if such dividends are satisfied by the issue of shares to members of the Company, in writing off preliminary expenses and share and debenture issue expenses and by provision for premiums payable on the redemption of redeemable preferred shares. The Company has not utilized any amounts in the share premium account for the above mentioned purposes. As of December 31, 1999 and 2000, the Company's share premium account amounted to $497 and $360,069, respectively. In 2000, the share premium arising from the initial public offering and exercise of employees' share options amounted to $359,572, net of share issue expenses of $23,500. In 1999, as part of the termination of the Ownership Scheme, the Company purchased 10,717,905 of its own ordinary shares of S$0.25 each, partly paid up to S$0.0125 per share. All the shares purchased by the Company were cancelled on acquisition. Upon cancellation, an amount of $97, representing the amount by which the Company's issued share capital was diminished on cancellation, was transferred to the capital redemption reserve within additional paid-in capital, as required by Singapore law (See Note 21). 17. RETAINED EARNINGS Singapore law allows dividends to be paid only out of profits of the Company, determined in accordance with accounting principles generally accepted in Singapore. 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. 18. OTHER NON-OPERATING INCOME
FOR THE YEAR ENDED DECEMBER 31 -------------------------------------- 1998 1999 2000 ------ ------ ------ Government grant income $1,151 $1,612 $2,792 Other income, net 952 767 733 ------ ------ ------ $2,103 $2,379 $3,525 ====== ====== ======
79 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 19. INCOME TAXES The Company has been granted pioneer status under The Economic Expansion Incentives (Relief from Income Tax) Act, Chapter 86 (the "Act"), for "Subcontract Assembly And Testing Of Integrated Circuits Including Wafer Probing Services" from January 1, 1996 to December 31, 2003 , subject to compliance with certain conditions. During the pioneer status period, Singapore-resident income from pioneer trade is exempt from income tax, subject to compliance with the conditions stated in the pioneer certificate and the Act. Income derived from non-pioneer activities during the pioneer period, however, is subject to income tax at the prevailing enacted rate of tax. The tax-exempt profits arising from the pioneer trade can be distributed as tax-exempt dividends that are not subject to Singapore income tax in the hands of the shareholders. Losses and unutilized capital allowances arising in the pioneer status period are available for carryforward to be offset against profits arising in subsequent periods, including profits arising after the pioneer status period. Pioneer loss and unutilized capital allowance carryforwards are available indefinitely, subject to more than 50% of the shareholders staying the same from the incurrence of the tax loss or allowance to its utilization. As of December 31, 2000, the Company had no pioneer loss and unutilized capital allowance carryforwards. Income tax expense for the years ended December 31, 1998, 1999 and 2000 represents income tax payable on non-pioneer trade income, principally rental and interest income. A reconciliation of the expected tax expense at the statutory rate of tax to actual tax expense is as follows:
FOR THE YEAR ENDED DECEMBER 31 ------------------------------------ 1998 1999 2000 ---- ------ -------- Income tax expense (benefit) computed at Singapore statutory rate of 25.5% (1999: 26%, 1998: 26%) $394 $1,392 $ 14,592 Non-deductible expenses 174 6,635 143 Pioneer status relief (476) (7,862) (11,772) All other items, net 298 335 (98) ---- ------ -------- Income tax expense $390 $ 500 $ 2,865 ==== ====== ========
The pioneer status relief has the effect of increasing diluted net income per ordinary share by $0.00, $0.01 and $0.01 and diluted net income per ADS by $0.01, $0.10 and $0.12 for the years ended December 31, 1998, 1999 and 2000, respectively. At December 31, 1998, 1999 and 2000, there were no material deferred tax assets or liabilities. 80 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 20. BUSINESS SEGMENT DATA AND MAJOR CUSTOMERS Revenue by major service line and by geographical areas (identified by location of customer headquarter) were:
FOR THE YEAR ENDED DECEMBER 31 ---------------------------------------- 1998 1999 2000 -------- -------- -------- United States -- assembly $ 46,850 $ 93,989 $155,892 -- test 36,852 58,896 102,629 -------- -------- -------- 83,702 152,885 258,521 ======== ======== ======== Singapore -- assembly 10,219 11,230 5,919 -- test 17,829 22,547 18,215 -------- -------- -------- 28,048 33,777 24,134 ======== ======== ======== Rest of Asia -- assembly 97 259 1,112 -- test 39 106 731 -------- -------- -------- 136 365 1,843 ======== ======== ======== Europe -- assembly 9 3,010 16,440 -- test 2,025 11,061 30,333 -------- -------- -------- 2,034 14,071 46,773 ======== ======== ======== Total $113,920 $201,098 $331,271 ======== ======== ========
In previous periods, geographical analyses were based on location of immediate customer entity. The comparative analyses have been adjusted to conform with the current basis of presentation. Revenue from major customers, as a percentage of net revenues, were as follows:
FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- 1998 1999 2000 % % % ----- ----- ----- Customer A 11.5 16.8 32.1 Customer B 12.1 25.2 18.1 Customer C 19.4 6.4 4.6 Customer D* 20.9 16.4 7.3 Others 36.1 35.2 37.9 ----- ----- ----- 100.0 100.0 100.0 ===== ===== =====
- ------------ * -- ST affiliate 81 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 21. SHARE OPTIONS AND INCENTIVE PLANS (A) EMPLOYEES' SHARE OWNERSHIP SCHEME Effective April 1998, the Company adopted the ST Assembly Test Services Employees' Share Ownership Scheme. The Ownership Scheme is administered by a committee nominated by the directors and provides for the grant of options to employees and directors of the Company and certain of its affiliates. The exercise period of the options was 30 days and the subscription price for each share which may be purchased upon exercise of the options was determined by the committee but could not be less than the par value. The subscription price was payable in installments, the first installment of 5% of the subscription price being payable upon exercise of the option, the second installment of 95% of the subscription price being payable over a period between the second and fifth years following the date the option was granted, however, such cumulative second installment due could be deferred and payable at each successive anniversary date but was not due until ten years after the date of grant of the option. Where employees failed to pay the second installment within ten years of the date of grant of the option, the employees were required to sell their shares to an ST affiliate at the greater of 5% of the market value of the shares, as determined by the committee, or 5% of the net asset value of the shares. Employees leaving the employment of the Company were entitled to retain those shares which had been fully paid for, while shares not fully paid for were either required to be sold to the ST affiliate or, in certain circumstances, were allowed to be fully paid. The Ownership Scheme was accounted for in accordance with variable plan accounting under Accounting Principles Board Opinion ("APB") No. 25. Compensation cost for shares granted under the Ownership Scheme was recorded as compensation expense over the requisite vesting period, with the unvested shares reflected as unearned compensation in a separate component of shareholders' equity based on the current market price of the shares at the end of the relevant period. The Company determined the fair market values of ordinary shares underlying each option grant based on the income approach and the market approach. The income approach indicates the fair market value of the common stock of a business based on the value of the cash flows that the business can be expected to generate in the future. The market approach indicates the fair market value of the ordinary shares based on a comparison of the Company to comparable publicly traded companies, comparable transactions in its industry, and prior transactions. In November 1999, the Company terminated the Ownership Scheme. Under the terms of the termination, the Company received proceeds from participants amounting to approximately $2,961 to fully pay up the remaining second installment of 95% of the subscription price for 17,407,695 ordinary shares issued under the Ownership Scheme. The remaining 9,605,505 partly paid ordinary shares in issue under the Ownership Scheme were bought back from the employees by the Company at a total cash consideration of approximately $104. Also, as part of the consideration for the buy back, under the terms of the termination, such employees were granted new options to subscribe for 6,385,450 ordinary shares, at an exercise price of $0.25 each (Singapore dollars S$0.42), and 3,220,055 ordinary shares, at an exercise price of $0.15 each (Singapore dollars S$0.25), under the Option Plan. Total compensation expense recognized for stock-based compensation under the Ownership Scheme for the years ended December 31, 1998 and 1999 were $384 and $25,095, respectively. 82 86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) (A) EMPLOYEES' SHARE OWNERSHIP SCHEME Information for the years ended December 31, 1998 and 1999 was as follows:-
DECEMBER 31 ---------------------- 1998 1999 ------- -------- Shares outstanding at beginning of year (in thousands) -- 20,774 Shares granted during the year (in thousands) 20,774 7,372 ------- -------- 20,774 28,146 Termination of Ownership Scheme: -- shares converted into fully paid shares (in thousands) -- (17,408) -- shares repurchased and cancelled (in thousands) -- (10,718) ------- -------- Other shares converted into fully paid shares (in thousands) -- (20) ------- -------- Shares outstanding at year end (in thousands) 20,774 -- ======= ======== Weighted average grant date fair value of options $ 0.30 $ 0.51 ======= ========
(B) SHARE OPTION PLAN Effective May 1999, the Company adopted the ST Assembly Test Services Ltd Share Option Plan 1999 (the "Option Plan") which provides for a maximum of 85 million shares (subject to adjustment under the plan) to be reserved for option plans. Options granted under the plan may include non-statutory options as well as incentive stock options intended to qualify under Section 422 of the United States Internal Revenue Code. The plan is administered by a committee appointed by the directors. Employees, outside directors and consultants are eligible for the grant of options except for (i) employees of affiliates, and outside directors and consultants, who are not eligible for the grant of incentive stock options; and (ii) employees, outside directors and consultants of affiliates resident in the United States, who are not eligible for the grant of options. The exercise price of an incentive stock option is the fair market value of the shares at the date of the grant. The exercise price of non-statutory options cannot be less than 85% of the fair market value of the shares at the date of the grant. In certain circumstances, the exercise price may be higher than the fair market value but in no event will the exercise price be below the par value of the share. Option periods may not exceed 10 years from the date of grant. Upon leaving the employment of the Company, outstanding options remain exercisable for a specified period. 83 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) The following table summarizes stock option activity under the Option Plan for the years ended December 31, 1999 and 2000:
WEIGHTED AVERAGE OPTIONS EXERCISE PRICE -------------- -------------- (IN THOUSANDS) Options outstanding at January 1, 1999 -- -- Granted during the year 18,840 $0.97 Lapsed during the year (126) $1.12 Exercised during the year -- -- ------ ----- Options outstanding at December 31, 1999 18,714 $0.99 Granted during the year 27,568 $2.85 Lapsed during the year (4,999) $2.77 Exercised during the year (5,244) $0.42 ------ ----- Options outstanding at December 31, 2000 36,039 $2.21 ====== ===== Exercisable at end of year (in thousands) 7,355 $0.75 ====== =====
The following table summarizes information about fixed stock options outstanding at December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------------------------- --------------------------------- WEIGHTED NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE EXERCISE AT CONTRACTUAL EXERCISE AT EXERCISABLE PRICES 12/31/2000 LIFE PRICE 12/31/2000 PRICE ---------------- -------------- ----------- -------------- -------------- --------------- (IN THOUSANDS) (IN THOUSANDS) $0.14 to $0.24 5,890 8.8 years $0.21 (S$0.36) 5,137 $0.211 (S$0.38) (S$0.25 to $0.42) $2.04 (S$3.55) 6,308 8.9 years $2.04 (S$3.55) 2,218 $ 2.04 (S$3.55) $3.99 (S$6.93) 11,172 9.3 years $3.99 (S$6.93) -- $ -- $2.61 (S$4.53) 410 9.5 years $2.61 (S$4.53) -- $ -- $2.00 (S$3.48) 270 9.8 years $2.00 (S$3.48) -- $ -- $1.63 (S$2.83) 11,989 9.8 years $1.63 (S$2.83) -- $ -- ------ 36,039 ======
Total compensation expense recognized for stock-based compensation under the Option Plan for the years ended December 31, 1999 and 2000 were $232 and $448, respectively. 84 88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) (C) IMPACT OF APPLYING FAIR VALUE BASED METHOD The fair value of shares granted under the Ownership Scheme for the years ended December 31, 1998 and 1999 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
FOR THE YEAR ENDED DECEMBER 31 ---------------------------------- 1998 1999 ------------- -------- Expected term 10 years 10 years Dividend yield 0.0% 0.0% Risk -- free interest rate 4.8% - 5.7% 5.6% Expected volatility 61.1% - 92.3% 78.6%
The fair value of options granted under the Option Plan for the years ended December 31, 1999 and 2000 is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
FOR THE YEAR ENDED DECEMBER 31 ---------------------------------- 1999 2000 ------------- ------------- Expected term 10 years 10 years Dividend yield 0.0% 0.0% Risk -- free interest rate 5.9% - 6.4% 4.2% - 4.7% Expected volatility 59.4% - 77.3% 67.4% - 82.9%
Had the Company determined compensation for the Ownership Scheme and the Option Plan under Statement of Financial Accounting Standards No. 123, the Company's net income (loss) would have been reduced to the pro forma amounts indicated below:
FOR THE YEAR ENDED DECEMBER 31 --------------------------------- 1998 1999 2000 ------ ------- ------- Net income (loss): As reported $1,124 $ 4,855 $54,359 Pro forma 999 18,952 36,011 Basic net income (loss) per share: As reported -- 0.01 0.06 Pro forma -- 0.02 0.04 Diluted net income (loss) per share: As reported -- 0.01 0.06 Pro forma -- 0.02 0.04
85 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 22. RELATED PARTY TRANSACTIONS ST is a multi-national conglomerate headquartered in Singapore which has five principal business groups: engineering, technology, infrastructure, property and financial services. ST is in turn 100%-owned by Temasek Holdings (Private) Limited ("Temasek"). Temasek is a holding company through which the corporate investments of the government of Singapore are held. The Company is in the semiconductor division of the ST Group which specializes in design, manufacture, assembly and testing of semiconductors. Companies within the ST Group, including Chartered Semiconductor Manufacturing Ltd engage in transactions with the Company in the normal course of their respective businesses. The building of the Company is built on land held on a long-term operating lease from a statutory board of the government of Singapore. The lease is for a 30-year period commencing March 1, 1996 and renewable for a further 30 years subject to the fulfillment of certain conditions. The rent is subject to annual revision, with the increase capped at 4% per annum. In 1997, the Company subleased office premises to TriTech Microelectronics Ltd ("TriTech"), an ST affiliate and a fabless designer of semiconductor products, at a monthly rate of $49 subject to annual revision. On July 2, 1999, TriTech was placed under judicial management. Rental income for the years ended December 31, 1998 and 1999 was $810 and $482, respectively. The Company repossessed the office premises in October 1999. TriTech was previously a major customer of the Company. Sales to TriTech were made on substantially the same terms as those available to third parties for similar products and volumes committed. The Company has not made sales to TriTech since it was placed under judicial management. ST provides management and corporate services to the Company. Under a new service agreement dated December 27, 1999, effective January 1, 2000, annual management fees are payable for the provision of specified services on mutually agreed terms which the Company believes approximates the cost of providing those services. The fees are subject to review by the parties every three years. Prior to this agreement these services were subject to a management fee computed based on certain percentages of capital employed, revenue, manpower and payroll. ST provides short-term financing for the Company (generally on a 3 to 6 months renewable basis) using its cost competitive corporate banking advantage in the banking community. In February 2000, the Company repaid the short-term loan and has since not utilized the financing facility. The Company participates with ST in a cash management program managed by a bank. Under the program, cash balances are pooled and daily cash surpluses or shortfalls may, on a short-term basis, be loaned to or borrowed from other ST affiliates participating in the arrangement at prevailing inter-bank rates. The Company also places short-term deposits with ST or its affiliates at competitive interest rates comparable to rates offered by commercial banks in Singapore. Short-term deposits with the ST Treasury unit with original maturities in excess of three months are included in short-term deposits with ST affiliates. Certain general and administrative expenses of ST Assembly Test Services, Inc., our subsidiary, are borne by and recharged to the Company by Chartered Semiconductor Manufacturing Inc., a United States incorporated affiliate of ST. These expenses amounted to $1,020, $1,252 and $556 for 1998, 1999 and 2000, respectively. 86 90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) The Company had the following significant transactions with ST and ST affiliates:
FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- 1998 1999 2000 ------- ------- ------- ST -- Management fees expense $ 1,066 $ 1,223 $ 1,676 Interest expense 4,747 -- -- ST affiliates -- Net revenues 28,048 33,777 24,091 Property, plant and equipment sold 190 -- -- Purchase of property, plant and equipment 1,207 160 -- Interest income -- -- 4,621 Interest expense 1,867 1,458 211 Rental income 810 482 -- General and administrative expenses 1,020 1,252 556
As of December 31, 1999 and 2000, there were the following amounts owing by (to) affiliates:-
DECEMBER 31 -------------------- 1999 2000 -------- ------- Amounts due from ST and ST affiliates Accounts receivable, net of allowance for doubtful accounts $ 6,271 $ 8,727 Others 261 -- ------- ------- $ 6,532 $ 8,727 ======= ======= Short-term deposits with ST affiliates $ -- $10,000 ======= ======= Amounts due to ST Other payables $ 3,994 $ 927 Amounts due to ST affiliates Accounts payable 260 1,135 Other payables 1,279 -- ------- ------- $ 5,533 $ 2,062 ======= ======= Loans from ST affiliate Short-term debt $25,000 $ -- ======= =======
87 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) 23. COMMITMENTS (A) LEASES The Company has leased land for a 30-year period commencing March 1, 1996 and renewable for a further 30 years subject to the fulfillment of certain conditions. The annual rent is currently fixed at $594. The rent is subject to annual revision with the increase capped at 4% per annum. Operating lease rental expense for the years ended December 31, 1998, 1999 and 2000 was $771, $594 and $583, respectively. The Company has leased certain plant and equipment under operating leases and under sale and lease-back arrangements. These leases extend through 2004. Operating lease rental expenses in respect of these leases for the years ended December 31, 1998, 1999 and 2000 were $270, $1,673 and $17,971, respectively. Future minimum lease payments under non-cancelable operating leases of factory land and plant and equipment as of December 31, 1999 and 2000 were:
DECEMBER 31 --------------------- 1999 2000 ------- ------- Payable in year ending December 31, 2000 $ 3,151 $ -- 2001 2,489 3,735 2002 605 2,248 2003 605 1,379 2004 605 801 2005 605 622 Thereafter 12,100 11,653 ------- ------- $20,160 $20,438 ======= =======
(B) TECHNOLOGY ARRANGEMENTS As is typical of the semiconductor industry, the Company may in the future receive notices from third parties asserting patent rights, copyrights or other rights covering the Company's designs or processes. On October 18, 1996, the Company acquired patent rights from Motorola Inc. ("Motorola") to use technology in making ball grid array packages ("BGA"). Under the agreement, the Company is required to pay Motorola a royalty based on the number of pads used on each BGA package. The agreement expires on December 31, 2002 and the Company has the option to renew the agreement subject to possible amendment of the provisions thereof. Total expense recorded under the agreement for the years ended December 31, 1998, 1999 and 2000, was $134, $596 and $1,629, respectively. The Company may obtain other suitable patent rights in the future relating to current or future technologies. There can be no assurance that the Company will always be able to obtain such future patents on favorable commercial terms. 88 92 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) (C) CAPITAL COMMITMENTS As of December 31, 1999 and 2000, there were the following capital commitments:-
DECEMBER 31 ------------------ 1999 2000 ------- ------- Building, mechanical and electrical installation $ 3,543 $ 103 Plant and machinery $35,282 $25,084 ======= =======
(D) FOREIGN CURRENCY CONTRACTS The Company had the following notional amounts of forward foreign currency contracts as of December 31, 1999 and 2000:
DECEMBER 31 ------------------ 1999 2000 ------- ---- Forward foreign currency contracts $53,780 $ -- ======= ====
The Company has only limited involvement with derivative financial instruments and does not use them for trading. Previously the Company used a forward foreign currency swap contract to hedge Singapore dollar dominated long-term debt. The payment terms of the foreign currency swap contract matched the principal repayments of the long-term debt, as described in Note 14. The Company incurred an annual financing charge of 1.7% of the principal amount of the loan outstanding under this hedging transaction. The forward foreign currency swap contract was terminated during the year ended December 31, 2000. The Company had no derivative financial instrument contracts at December 31, 2000. 24. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies. However, considerable judgment is required in interpreting market data to develop the estimates for fair value. Accordingly, these estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Certain of these financial instruments are with major financial institutions and expose the Company to market and credit risks and may at times be concentrated with certain counterparties or groups of counterparties. The creditworthiness of counterparties is continually reviewed, and full performance is anticipated. The methods and assumptions used to estimate the fair value of significant classes of financial instruments is set forth below: 89 93 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA) CASH AND CASH EQUIVALENTS Cash and cash equivalents are due on demand or carry a maturity date of less than three months when purchased. The carrying amount of these financial instruments is a reasonable estimate of fair value. MARKETABLE SECURITIES The fair value is estimated based upon the quoted market price on the last business day of the fiscal year. The fair value of securities, for which there are no quoted market prices, is estimated based upon similar types of securities that are traded in the market. BANK OVERDRAFTS Bank overdrafts are due on demand and have interest rates that reflect currently available terms and conditions for similar borrowings. The carrying amount of the debt is a reasonable estimate of fair value. SHORT-TERM DEBT Short-term debt has variable rates that reflected available terms and conditions for similar borrowings. The carrying amount of the debt is a reasonable estimate of fair value. LONG-TERM DEBT The fair value is based on current interest rates available to the Company for issuance of debts of similar terms and remaining maturities. FOREIGN CURRENCY CONTRACTS The fair value is estimated by reference to market quotations for foreign currency contracts with similar terms adjusted where necessary for maturity differences. LIMITATIONS Fair value estimates are made at a specific point in time, and are based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. 90 94 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998, 1999 AND 2000 IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA)
AS OF DECEMBER 31, 1999 AS OF DECEMBER 31, 2000 ------------------------- ------------------------- ESTIMATED ESTIMATED CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- --------- -------- --------- FINANCIAL ASSETS: Cash and cash equivalents $16,568 $16,568 $141,733 $141,733 Marketable securities -- -- 21,906 21,906 FINANCIAL LIABILITIES: Short-term debt 60,000 60,000 -- -- Long-term debt 53,780 54,265 44,398 42,802 DERIVATIVES: Foreign currency contracts 1,835 2,320 -- --
25. CONTINGENCY On February 20, 2001, Amkor Technology, Inc. ("Amkor") served a lawsuit against the Company and its subsidiary, ST Assembly Test Services, Inc.(formerly known as Singapore Technologies Assembly and Test Services, Inc.) alleging patent infringement in respect of certain integrated circuit packages. Amkor is seeking permanent injunction against the Company and its subsidiary, and the award of unspecified damages, including loss of profits. No provision has been made in respect of this lawsuit as the Company believes that the lawsuit is without merit. The Company intends to vigorously defend against the lawsuit. While the Company believes that it has meritorious defenses against the lawsuit, the ultimate resolution of the matter, if unfavorable, could have a material effect on the Company's results of operations. 91 EX-2.2 2 u91719ex2-2.txt DEPOSIT AGREEMENT 1 EXHIBIT 2.2 - -------------------------------------------------------------------------------- DEPOSIT AGREEMENT - -------------------------------------------------------------------------------- by and among ST ASSEMBLY TEST SERVICES LTD AND CITIBANK, N.A., as Depositary, AND THE HOLDERS AND BENEFICIAL OWNERS OF AMERICAN DEPOSITARY SHARES EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS ISSUED HEREUNDER - -------------------------------------------------------------------------------- Dated as of February 8, 2000 2 DEPOSIT AGREEMENT DEPOSIT AGREEMENT, dated as of February 8, 2000, by and among (i) ST ASSEMBLY TEST SERVICES LTD, a company incorporated under the laws of the Republic of Singapore, and its successors (the "Company"), (ii) CITIBANK, N.A., a national banking association organized under the laws of the United States of America acting in its capacity as depositary, and any successor depositary hereunder (the "Depositary"), and (iii) all Holders and Beneficial Owners of American Depositary Shares evidenced by American Depositary Receipts issued hereunder (all such capitalized terms as hereinafter defined). W I T N E S S E T H T H A T: WHEREAS, the Company has duly authorized and has outstanding ordinary shares, par value S$0.25 per share (the "Shares"), which are listed for trading on the Singapore Exchange Securities Trading Limited; and WHEREAS, the Company desires to establish with the Depositary an ADR facility to provide for the deposit of the Shares and the creation of American Depositary Shares representing the Shares so deposited and for the execution and delivery of American Depositary Receipts evidencing such American Depositary Shares; and WHEREAS, the Depositary is willing to act as the Depositary for such facility upon the terms set forth in this Deposit Agreement; and WHEREAS, the American Depositary Receipts evidencing the American Depositary Shares issued pursuant to the terms of this Deposit Agreement are to be substantially in the form 3 of Exhibit A attached hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Deposit Agreement; and WHEREAS, certain American Depositary Shares to be issued pursuant to the terms of this Deposit Agreement are to be quoted on the Nasdaq National Market; and WHEREAS, the Board of Directors of the Company (or an authorized committee thereof) has duly approved (i) the execution and delivery of this Deposit Agreement on behalf of the Company and (ii) the actions of the Company and the transactions contemplated herein. NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS All capitalized terms used, but not otherwise defined, herein shall have the meanings set forth below, unless otherwise clearly indicated: Section 1.1 "Affiliate" shall have the meaning assigned to such term by the Commission (as hereinafter defined) under Regulation C promulgated under the Securities Act (as hereinafter defined). Section 1.2 "American Depositary Share(s)" and "ADS(s)" shall mean the rights and interests in the Deposited Securities granted to the Holders and Beneficial Owners pursuant to the terms and conditions of this Deposit Agreement and the American Depositary Receipts issued hereunder. Each American Depositary Share shall represent ten (10) Shares, until (i) there shall occur either a distribution upon Deposited Securities referred to in Section 4.2 1 4 or a change in Deposited Securities referred to in Section 4.11 and (ii) with respect to such occurrence additional American Depositary Shares are not issued. Thereafter each American Depositary Share shall represent the number of Shares and/or Deposited Securities as specified in such Sections. Section 1.3 "ADS Record Date" shall have the meaning given to such term in Section 4.9. Section 1.4 "Applicant" shall have the meaning given to such term in Section 5.10. Section 1.5 "Beneficial Owner" shall mean, as to any ADS, any person or entity having a beneficial interest deriving from the ownership of such ADS. A Beneficial Owner may or may not be the Holder of the ADR(s) evidencing such ADSs. A Beneficial Owner who is not a Holder shall be able to exercise any right or receive any benefit hereunder solely through the person or entity who is the Holder of the ADR(s) evidencing the ADSs owned by such Beneficial Owner. Section 1.6 "Business Day" shall mean any day on which both the banks in Singapore and the banks in New York are open for business. Section 1.7 "CDP" shall mean The Central Depositary (Pte) Limited, which provides the book-entry settlement system for equity securities traded in Singapore, or any successor entity thereto. Section 1.8 "Commission" shall mean the Securities and Exchange Commission of the United States or any successor governmental agency in the United States. 2 5 Section 1.9 "Company" shall mean ST Assembly Test Services Ltd, a company incorporated and existing under the laws of Singapore, having its principal office at 5 Yishun Street 23, Singapore 768442, and its successors. Section 1.10 "Custodian" shall mean, as of the date hereof, Citibank Nominees Singapore Pte Ltd, a subsidiary of the Depositary, having its principal office at 300 Tampines Avenue #07-00, Tampines Junction, Singapore 529653, as the custodian for the purposes of this Deposit Agreement, and any other entity that may be appointed by the Depositary pursuant to the terms of Section 5.5 as successor, substitute or additional custodian hereunder, as the context shall require. The term "Custodian" shall mean any Custodian individually or all custodians collectively, as the context requires. Section 1.11 "Deliver" and "Delivery" shall mean, when used in respect of American Depositary Shares, Receipts, Deposited Securities and Shares, the physical delivery of the certificate representing such security, or the electronic delivery of such security by means of book-entry transfer, if available. Section 1.12 "Deposit Agreement" shall mean this Deposit Agreement and all exhibits hereto, as the same may from time to time be amended and supplemented in accordance with the terms hereof. Section 1.13 "Depositary" shall mean Citibank, N.A., a national banking association organized under the laws of the United States, in its capacity as depositary under the terms of this Deposit Agreement, and any successor depositary hereunder. Section 1.14 "Deposited Securities" shall mean Shares at any time deposited under this Deposit Agreement and any and all other securities, property and cash held by the 3 6 Depositary or the Custodian in respect thereof, subject, in the case of cash, to the provisions of Section 4.8. The collateral delivered in connection with Pre-Release Transactions described in Section 5.10 hereof shall not constitute Deposited Securities. Section 1.15 "Dollars" and "$" shall refer to the lawful currency of the United States. Section 1.16 "DTC" shall mean The Depository Trust Company, a national clearinghouse and the central book-entry settlement system for securities traded in the United States and, as such, the custodian for the securities of DTC Participants (as hereinafter defined) maintained in the Depository Trust Company, and any successor thereto. Section 1.17 "DTC Participant" shall mean any financial institution (or any nominee of such institution) having one or more participant accounts with DTC for receiving, holding and delivering the securities and cash held in DTC. Section 1.18 "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as from time to time amended. Section 1.19 "Foreign Currency" shall mean currency other than Dollars. Section 1.20 "Holder" shall mean the person or entity in whose name a Receipt is registered on the books of the Depositary (or the Registrar, if any) maintained for such purpose. A Holder may or may not be a Beneficial Owner. If a Holder is not the Beneficial Owner of the ADSs evidenced by the Receipt registered in its name, such Holder nonetheless shall be deemed to have all requisite authority to act on behalf of the Beneficial Owners of the ADSs evidenced by such Receipt. 4 7 Section 1.21 "Pre-Release Transaction" shall have the meaning set forth in Section 5.10. Section 1.22 "Principal Office" when used with respect to the Depositary, shall mean the principal office of the Depositary at which at any particular time its depositary receipts business shall be administered, which, at the date of this Deposit Agreement, is located at 111 Wall Street, New York, New York 10043, U.S.A. If the address of the principal office of the Depositary changes after the date of this Deposit Agreement, the Depositary shall, without unreasonable delay and at its own expense, give written notice thereof to the Company and the Holders. Section 1.23 "Receipt(s)"; "American Depositary Receipt(s)" and "ADR(s)" shall mean the certificate(s) issued by the Depositary to evidence the American Depositary Shares issued under the terms of this Deposit Agreement, as such Receipts may be amended from time to time in accordance with the provisions of this Deposit Agreement. A Receipt may evidence any number of American Depositary Shares and may, in the case of American Depositary Shares held through a central depository such as DTC, be in the form of a "Balance Certificate." Section 1.24 "Registrar" shall mean the Depositary or any bank or trust company having an office in the Borough of Manhattan, The City of New York, which shall be appointed by the Depositary to register issuances and transfers of Receipts as herein provided, and shall include any co-registrar appointed by the Depositary for such purposes. Registrars (other than the Depositary) may be removed and substitutes appointed by the Depositary, with the prior consent of the Company. Each Registrar (other than the Depositary) appointed 5 8 pursuant to this Deposit Agreement shall be required to give notice in writing to the Depositary accepting such appointment and agreeing to be bound by the applicable terms of this Deposit Agreement. Section 1.25 "Restricted Securities" shall mean Shares, Deposited Securities or ADSs, which (i) have been acquired directly or indirectly from the Company or any of its Affiliates in a transaction or chain of transactions not involving any public offering and which are subject to resale limitations under the Securities Act or the rules issued thereunder, or (ii) are held by an officer or director (as such terms are defined under Regulation C of the Securities Act) or other Affiliate of the Company and which are subject to selling or resale limitations, as the case may be, under the Securities Act or the rules and regulations promulgated thereunder, or (iii) are subject to other restrictions on sale or deposit under the laws of the United States, Singapore, or under a shareholder agreement or the Memorandum and Articles of Association of the Company or under the regulations of an applicable securities exchange unless, in each case, such Shares, Deposited Securities or ADSs are being sold to persons other than an Affiliate of the Company in a transaction (i) covered by an effective resale registration statement, or (ii) exempt from the registration requirements of the Securities Act (as hereinafter defined), and the Shares, Deposited Securities or ADSs will not be, when acquired by such person(s) or entity(ies), Restricted Securities. Section 1.26 "Securities Act" shall mean the United States Securities Act of 1933, as from time to time amended. Section 1.27 "Share Registrar" shall mean M&C Services Private Limited or a depository institution organized under the laws of Singapore, which carries out the duties of 6 9 registrar for the Shares or any successor as Share Registrar for such Shares appointed by the Company. Section 1.28 "Shares" shall mean the Company's ordinary shares, par value S$0.25 per share, validly issued and outstanding and fully paid and may, if the Depositary so agrees after consultation with the Company, include evidence of the right to receive Shares; provided that in no event shall Shares include evidence of the right to receive Shares with respect to which the full purchase price has not been paid or Shares as to which preemptive rights have theretofore not been validly waived or exercised; provided further, however, that, if there shall occur any change in par value, split-up, consolidation, reclassification, conversion or any other event described in Section 4.11 in respect of the Shares, the term "Shares" shall thereafter, to the maximum extent permitted by law, represent the successor securities resulting from such change in par value, split-up, consolidation, exchange, conversion, reclassification or event. Section 1.29 "Singapore" shall mean the Republic of Singapore. Section 1.30 "Singapore Dollars" and "S$" shall refer to the lawful currency of Singapore. Section 1.31 "United States" shall have the meaning assigned to it in Regulation S as promulgated by the Commission under the Securities Act. ARTICLE 2. APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS; DEPOSIT OF SHARES; EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS 7 10 Section 2.1 Appointment of Depositary. The Company hereby appoints the Depositary as depositary for the Deposited Securities and hereby authorizes and directs the Depositary to act in accordance with the terms set forth in this Deposit Agreement. Each Holder and each Beneficial Owner, upon acceptance of any ADSs (or any interest therein) issued in accordance with the terms of this Deposit Agreement, shall be deemed for all purposes to (a) be a party to and bound by the terms of this Deposit Agreement and (b) appoint the Depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in this Deposit Agreement with respect to the ADSs, to adopt any and all procedures necessary to comply with applicable law and to take such action as the Depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of this Deposit Agreement. Section 2.2 Form and Transferability of Receipts. 2.2.1 Form. ADSs shall be evidenced by definitive Receipts which shall be engraved, printed, lithographed or produced in such other manner as may be agreed upon by the Company and the Depositary. Receipts may be issued under this Deposit Agreement in denominations of any whole number of ADSs. The Receipts shall be substantially in the form set forth in Exhibit A to this Deposit Agreement, with any appropriate insertions, modifications and omissions, in each case as otherwise contemplated in this Deposit Agreement or required by law. Receipts shall be (i) dated, (ii) signed by the manual or facsimile signature of a duly authorized signatory of the Depositary, (iii) countersigned by the manual or facsimile signature of a duly authorized signatory of the Registrar, and (iv) registered in the books maintained by the Registrar for the registration of issuances and transfers of Receipts. No Receipt and no ADS 8 11 evidenced thereby shall be entitled to any benefits under this Deposit Agreement or be valid or enforceable for any purpose against the Depositary or the Company, unless such Receipt shall have been so dated, signed, countersigned and registered. Receipts bearing the facsimile signature of a duly-authorized signatory of the Depositary or the Registrar, who at the time of signature was a duly authorized signatory of the Depositary or the Registrar, as the case may be, shall bind the Depositary, notwithstanding the fact that such signatory has ceased to be so authorized prior to the delivery of such Receipt by the Depositary. The Receipts shall bear a CUSIP number that is different from any CUSIP number that may be assigned to any depositary receipts subsequently issued pursuant to any other arrangement between the Depositary (or any other depositary) and the Company and which are not Receipts issued hereunder. 2.2.2 Legends. The Receipts may, with the prior written consent of the Company (which consent shall not be unreasonably withheld), and, upon the written request of the Company, shall be, endorsed with or have incorporated in the text thereof, such legends or recitals not inconsistent with the provisions of this Deposit Agreement (i) as may be necessary to enable the Depositary or the Company to perform its obligations hereunder, (ii) as may be required to comply with any applicable laws or regulations, or with the rules and regulations of any securities exchange or market upon which ADSs may be traded, listed or quoted, or to conform with any usage with respect thereto, (iii) as may be necessary to indicate any special limitations or restrictions to which any particular Receipts or ADSs are subject by reason of the date of issuance of the Deposited Securities or otherwise, or (iv) as may be required by any book-entry system in which the ADSs are held. 9 12 2.2.3 Title. Subject to the limitations contained herein and in the Receipt, title to a Receipt (and to each ADS evidenced thereby) shall be transferable upon the same terms as a certificated security under the laws of the State of New York, provided that such Receipt has been properly endorsed or is accompanied by proper instruments of transfer. Notwithstanding any notice to the contrary, the Depositary may deem and treat the Holder of a Receipt as the absolute owner thereof for all purposes. Neither the Depositary nor the Company shall have any obligation or be subject to any liability under this Deposit Agreement or any Receipt to any holder of a Receipt or any Beneficial Owner unless such holder is the Holder of such Receipt registered on the books of the Depositary or, in the case of a Beneficial Owner, such Beneficial Owner or the Beneficial Owner's representative is the Holder registered on the books of the Depositary. 2.2.4 Book-Entry Systems. The Depositary has made arrangements for, and DTC has agreed to, the acceptance of the American Depositary Shares into DTC's book-entry settlement system. A single ADR in the form of a "Balance Certificate" will evidence all ADSs held through DTC and will be registered in the name of the nominee for DTC (currently "Cede & Co.") and will provide that it represents the aggregate amount of ADSs from time to time indicated in the records of the Depositary as being issued hereunder and that the aggregate amount of ADSs represented thereby may from time to time be increased or decreased by making adjustments on such records of the Depositary and of DTC or its nominee as hereinafter provided. As such, the nominee for DTC will be the only "Holder" of the ADR evidencing all ADSs held through DTC. Citibank, N.A. (or such other entity as is appointed by DTC) may hold the "Balance Certificate" as custodian for DTC. Each Beneficial Owner of ADSs held through 10 13 DTC must rely upon the procedures of DTC and the DTC Participants to exercise or be entitled to any rights attributable to such ADSs. The DTC Participants shall for all purposes be deemed to have all requisite power and authority to act on behalf of the Beneficial Owners of the ADSs held in the DTC Participants' respective accounts in DTC and the Depositary shall for all purposes be authorized to rely upon any instructions and information given to it by DTC Participants on behalf of Beneficial Owners of ADSs. So long as ADSs are held through DTC or unless otherwise required by law, ownership of beneficial interests in the ADR registered in the name of the nominee for DTC will be shown on, and transfers of such ownership will be effected only through, records maintained by (i) DTC (or its nominee), or (ii) DTC Participants (or their nominees). The Depositary acknowledges that if at any time DTC notifies the Company and the Depositary that it (or its nominee) is unwilling or unable to continue as the Holder of the "Balance Certificate" evidencing all ADSs held through DTC or if at any time it ceases to be a clearing agency registered under the Exchange Act, and in either case a successor Holder is not appointed by the Company within 90 days, then (i) beneficial interests in the "Balance Certificate" shall be exchanged for Receipts in certificated form, (ii) the Depositary shall obtain a supply of definitive certificated Receipts substantially in the form of Exhibit A hereto, and (iii) the Depositary shall, upon the order of the Company, execute and deliver such definitive certificated Receipts registered in such names and in such amounts as directed by the Holder in exchange for the "Balance Certificate". Section 2.3 Deposit with Custodian. Subject to the terms and conditions of this Deposit Agreement and applicable law, Shares or evidence of rights to receive Shares (in each 11 14 case, other than Restricted Securities) may be deposited by any person or entity (including the Depositary in its individual capacity but subject, however, in the case of the Company or any Affiliate of the Company, to Section 5.7 hereof) at any time, whether or not the transfer books of the Company or the Share Registrar, if any, are closed, by Delivery of the Shares to the Custodian, and (A) (in the case of Shares represented by certificates issued in registered form) appropriate instruments of transfer or endorsement, in a form satisfactory to the Custodian or, (in the case of Shares represented by certificates in bearer form) of the requisite coupons and talons pertaining thereto, (B) such certifications and payments (including, without limitation, the Depositary's fees and related charges) and evidence of such payments (including, without limitation, stamping or otherwise marking such Shares by way of receipt) as may be required by the Depositary or the Custodian in accordance with the provisions of this Deposit Agreement and applicable law, (C) if the Depositary so requires, a written order directing the Depositary to execute and deliver to, or upon the written order of, the person(s) or entity(ies) stated in such order a Receipt or Receipts for the number of American Depositary Shares representing the Shares so deposited, (D) evidence satisfactory to the Depositary (which may be an opinion of counsel) that all necessary approvals have been granted by, or there has been compliance with the rules and regulations of, any applicable governmental agency in Singapore, including those which are then performing the function of the regulation of currency exchange, and (E) if the Depositary so requires, (i) an agreement, assignment or other instrument satisfactory to the Depositary or the Custodian which provides for the prompt transfer by any person or entity in whose name the Shares are or have been recorded to the Custodian of any distribution, or right to subscribe for additional Shares or to receive other property in respect of any such deposited 12 15 Shares or, in lieu thereof, such indemnity or other agreement as shall be satisfactory to the Depositary or the Custodian and (ii) if the Shares are registered in the name of the person or entity on whose behalf they are presented for deposit, a proxy or proxies entitling the Custodian to exercise voting rights in respect of the Shares for any and all purposes until the Shares so deposited are registered in the name of the Depositary, the Custodian or any nominee. Without limiting any other provision of this Deposit Agreement, the Depositary shall instruct the Custodian not to, and the Depositary shall not knowingly, accept for deposit (a) any Restricted Securities, except as expressly permitted by Section 2.12 herein, nor (b) any fractional Shares or fractional Deposited Securities nor (c) a number of Shares or Deposited Securities which, upon application of the ADS to Shares ratio, would give rise to fractional ADSs. No Share shall be accepted for deposit unless accompanied by evidence, if required by the Depositary, that is reasonably satisfactory to the Depositary or the Custodian that all conditions to such deposit have been satisfied by the person or entity depositing such Shares under the laws and regulations of Singapore and any necessary approval has been granted by any governmental body in Singapore, if any, which is then performing the function of the regulation of currency exchange. The Depositary may issue Receipts against evidence of rights to receive Shares from the Company, any agent of the Company or any custodian, registrar, transfer agent, clearing agency or other entity involved in ownership or transaction records in respect of the Shares. Such evidence of rights shall consist of written blanket or specific guarantees of ownership of Shares furnished by the Company or any such custodian, registrar, transfer agent, clearing agency or other entity involved in ownership or transaction records in respect of such Shares. 13 16 Section 2.4 Registration of Shares. The Depositary shall instruct the Custodian upon each delivery of certificates representing registered Shares being deposited hereunder with the Custodian (or other Deposited Securities pursuant to Article IV hereof), together with the other documents above specified, to present such certificate or certificates, together with the appropriate instrument or instruments of transfer or endorsement, duly stamped, to the Share Registrar for transfer and registration of the Shares (as soon as transfer and registration can be accomplished and at the expense of the person or entity for whom the deposit is made) in the name of the Depositary, the Custodian or a nominee of either. Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or a nominee in each case on behalf of the Holders and Beneficial Owners, at such place or places as the Depositary or the Custodian shall determine. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under this Deposit Agreement any Shares or other Deposited Securities required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such Shares or other Deposited Securities, or any Shares or Deposited Securities the deposit of which would violate any provisions of the Memorandum and Articles of Association of the Company. Section 2.5 Execution and Delivery of Receipts. The Depositary has made arrangements with the Custodian to confirm to the Depositary (i) that a deposit of Shares has been made pursuant to Section 2.3 hereof, (ii) that any such Deposited Securities have been recorded in the name of the Depositary, Custodian or a nominee of either on the shareholders' register maintained by or on behalf of the Company, if registered Shares have been deposited or, 14 17 if deposit is made by book-entry transfer, confirmation of such transfer in the books of the CDP, (iii) that all required documents, if any, have been received, and (iv) the person(s) or entity(ies) to whom or upon whose order American Depositary Shares are deliverable in respect thereof and the number of American Depositary Shares to be so delivered thereby. Such notification may be made by letter, cable, telex, swift message or, at the risk and expense of the person making the deposit, by facsimile or other means of electronic transmission. Upon receiving such notice from the Custodian, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall issue the American Depositary Shares representing the Shares so deposited and shall execute and Deliver at its Principal Office to or upon the order of the person(s) or entity(ies) named in the notice delivered to the Depositary Receipt(s) registered in the name or names requested by such person(s) or entity(ies) and evidencing the aggregate number of American Depositary Shares to which such person(s) or entity(ies) are entitled, but only upon payment to the Depositary of the charges of the Depositary for accepting a deposit, issuing American Depositary Shares and executing and delivering such Receipt(s) (as set forth in Section 5.9 and Exhibit B hereto) and all taxes and governmental charges and fees payable in connection with such deposit and the transfer of the Shares and the issuance of the Receipt(s). The Depositary shall only issue American Depositary Shares in whole numbers and deliver American Depositary Receipts evidencing whole numbers of American Depositary Shares. Nothing herein shall prohibit any Pre-Release Transaction upon the terms set forth in this Deposit Agreement. 15 18 Section 2.6 Transfer, Combination and Split-up of Receipts. 2.6.1 Transfer. The Depositary or the Registrar, if any, shall, without unreasonable delay, register the transfer of Receipts (and of the ADSs represented thereby) on the books maintained for such purpose and the Depositary shall cancel such Receipts and execute new Receipts evidencing the same aggregate number of ADSs as those evidenced by the Receipts cancelled by the Depositary, shall cause the Registrar to countersign such new Receipts and shall Deliver such new Receipts to or upon the order of the person or entity entitled thereto, if each of the following conditions has been satisfied: (i) the Receipts have been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a transfer thereof, (ii) the surrendered Receipts have been properly endorsed or are accompanied by proper instruments of transfer (including signature guarantees in accordance with standard securities industry practice), (iii) the surrendered Receipts have been duly stamped (if required by the laws of the State of New York or of the United States or any other applicable law), and (iv) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B hereto) have been paid, subject, however, in each case, to the terms and conditions of the applicable Receipts, of this Deposit Agreement and of applicable law , in each case as in effect at the time thereof. 2.6.2 Combination & Split Up. The Depositary or the Registrar, if any, shall, without unreasonable delay, register the split-up or combination of Receipts (and of the ADSs represented thereby) on the books maintained for such purpose and the Depositary shall cancel such Receipts and execute new Receipts for the number of ADSs requested, but in the aggregate 16 19 not exceeding the number of ADSs evidenced by the Receipts cancelled by the Depositary, shall cause the Registrar to countersign such new Receipts and shall Deliver such new Receipts to or upon the order of the Holder thereof, if each of the following conditions has been satisfied: (i) the Receipts have been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a split-up or combination thereof, and (ii) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B hereto) have been paid, subject, however, in each case, to the terms and conditions of the applicable Receipts, of this Deposit Agreement and of applicable law, in each case, as in effect at the time thereof. 2.6.3 Co-Transfer Agents. The Depositary may, with the prior written consent of the Company (which consent shall not be unreasonably withheld), and, upon the written request of the Company, shall promptly, appoint one or more co-transfer agents for the purpose of effecting transfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Holders, Beneficial Owners, or persons entitled to such Receipts and will be entitled to protection and indemnity to the same extent as the Depositary or the Company. Such co-transfer agents may be removed and substitutes appointed by the Depositary. Each co-transfer agent appointed under this Section 2.6 (other than the Depositary) shall give notice in writing to the Depositary accepting such appointment and agreeing to be bound by the applicable terms of this Deposit Agreement. 17 20 Section 2.7 Surrender of ADSs and Withdrawal of Deposited Securities. The Holder of ADSs shall be entitled to Delivery by book-entry transfer (or in the case of certificates, Delivery at the Custodian's principal office) of the Deposited Securities at the time represented by the ADS(s) upon satisfaction of each of the following conditions: (i) the Holder (or a duly authorized attorney of the Holder) has duly Delivered ADSs to the Depositary at its Principal Office (and if applicable, the Receipts evidencing such ADSs) for the purpose of withdrawal of the Deposited Securities represented thereby, (ii) if so required by the Depositary, the Receipts Delivered to the Depositary for such purpose have been properly endorsed in blank or are accompanied by proper instruments of transfer in blank (including signature guarantees in accordance with standard securities industry practice), (iii) if so required by the Depositary, the Holder of the ADSs has executed and delivered to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be Delivered to or upon the written order of the person(s) or entity(ies) designated in such order, and (iv) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B hereof) have been paid, subject, however, in each case, to the terms and conditions of the Receipts evidencing the surrendered ADSs, of this Deposit Agreement, of the Company's Memorandum and Articles of Association and of any applicable laws and the rules of the CDP, and to any provisions of or governing the Deposited Securities, in each case as in effect at the time thereof. Upon satisfaction of each of the conditions specified above, the Depositary (i) shall cancel the ADSs Delivered to it (and, if applicable, the Receipts evidencing the ADSs so Delivered), (ii) shall direct the Registrar to record the cancellation of the ADSs so Delivered on 18 21 the books maintained for such purpose, and (iii) shall direct the Custodian to Deliver (without unreasonable delay) at the Custodian's principal office the Deposited Securities represented by the ADSs so cancelled together with any certificate or other document of or relating to title for the Deposited Securities, or evidence of the electronic transfer thereof (if available), and any other securities, property and cash to which such Holder is then entitled in respect of such Receipts, as the case may be, to or upon the written order of the person(s) or entity(ies) designated in the order delivered to the Depositary for such purpose, subject however, in each case, to the terms and conditions of this Deposit Agreement, of the Receipts evidencing the ADSs so cancelled, of the Memorandum and Articles of Association of the Company, of applicable laws and of the rules of the CDP, and to the terms and conditions of or governing the Deposited Securities, in each case as in effect at the time thereof. The Depositary shall not accept for surrender ADSs representing less than one Share. In the case of the Delivery of ADSs representing a number other than a whole number of Shares, the Depositary shall cause ownership of the appropriate whole number of Shares to be Delivered in accordance with the terms hereof, and shall, at the discretion of the Depositary, either (i) return to the person or entity surrendering such ADSs the number of ADSs representing any remaining fractional Share, or (ii) sell or cause to be sold the fractional Shares represented by the ADSs so surrendered and remit the proceeds of such sale (net of (a) applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to the person(s) or entity(ies) designated in the order delivered to the Depositary for such purpose. Notwithstanding anything else contained in any Receipt or this Deposit Agreement, the Depositary may make delivery at the Principal Office of the Depositary of (i) any 19 22 cash dividends or cash distributions, or (ii) any proceeds from the sale of any distributions of shares or rights, which are at the time held by the Depositary in respect of the Deposited Securities represented by the ADSs surrendered for cancellation and withdrawal. At the request, risk and expense of any Holder so surrendering ADSs, and for the account of such Holder, the Depositary shall direct the Custodian to forward (to the extent permitted by law) any cash or other property (other than securities) held by the Custodian in respect of the Deposited Securities represented by such ADSs to the Depositary for delivery at the Principal Office of the Depositary. Such direction shall be given by letter or, at the request, risk and expense of such Holder, by cable, telex or facsimile transmission. Section 2.8 Limitations on Execution and Delivery, Transfer, etc. of Receipts; Suspension of Delivery, Transfer, etc. 2.8.1 Additional Requirements. As a condition precedent to the execution and delivery, registration, registration of transfer, split-up, combination or surrender of any Receipt, the delivery of any distribution thereon or withdrawal of any Deposited Securities, the Depositary or the Custodian may require (i) payment from the depositor of Shares or presenter of ADSs or of a Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees and charges of the Depositary as provided in Section 5.9 and Exhibit B hereof, (ii) the production of proof satisfactory to it as to the identity and genuineness of any signature or any other matter contemplated by Section 3.1 hereof and (iii) compliance with (A) any laws or governmental regulations relating to the execution and delivery of Receipts or American Depositary Shares or 20 23 to the withdrawal of Deposited Securities and (B) such reasonable regulations, if any, as the Depositary and the Company may establish consistent with the provisions of this Deposit Agreement and applicable law. 2.8.2 Additional Limitations. The issuance of ADSs against deposits of Shares generally or against deposits of particular Shares may be suspended, or the issuance of ADSs against the deposit of particular Shares may be withheld, or the registration of transfer of Receipts in particular instances may be refused, or the registration of transfers of Receipts generally may be suspended, during any period when the transfer books of the Company, the Depositary, a Registrar or the Share Registrar are closed or if any such action is deemed necessary or advisable by the Depositary or the Company, in good faith, at any time or from time to time because of any requirement of law, any government or governmental body or commission or any securities exchange on which the ADSs or Shares are listed, or under any provision of this Deposit Agreement or provisions of, or governing, the Deposited Securities, or any meeting of shareholders of the Company or for any other reason, subject, in all cases, to Section 7.8 hereof. 2.8.3 Regulatory Restrictions. Notwithstanding any provision of this Deposit Agreement or any Receipt to the contrary, Holders are entitled to surrender outstanding ADSs to withdraw the Deposited Securities at any time subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares in connection with voting at a shareholders' meeting or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or non-U.S. laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities, and (iv) other 21 24 circumstances specifically contemplated by Section I.A.(l) of the General Instructions to Form F-6 (as such General Instructions may be amended from time to time). Section 2.9 Lost Receipts, etc. In case any Receipt shall be mutilated, destroyed, lost, or stolen, the Depositary shall execute and deliver a new Receipt of like tenor at the expense of the Holder (a) in the case of a mutilated Receipt, in exchange of and substitution for such mutilated Receipt upon cancellation thereof, or (b) in lieu of and in substitution for such destroyed, lost, or stolen Receipt, after the Holder thereof (i) has submitted to the Depositary a written request for such exchange and substitution before the Depositary has notice that the Receipt has been acquired by a bona fide purchaser, (ii) has provided such security or indemnity (including an indemnity bond) as may be required by the Depositary to save it and any of its agents harmless, and (iii) has satisfied any other reasonable requirements imposed by the Depositary, including, without limitation, evidence satisfactory to the Depositary of such destruction, loss or theft of such Receipt, the authenticity thereof and the Holder's ownership thereof. Section 2.10 Cancellation and Destruction of Surrendered Receipts; Maintenance of Records. All Receipts surrendered to the Depositary shall be canceled by the Depositary. Canceled Receipts shall not be entitled to any benefits under this Deposit Agreement or be valid or enforceable against the Depositary for any purpose. The Depositary is authorized to destroy Receipts so canceled, provided the Depositary maintains a record of all destroyed Receipts. Any ADSs held in book-entry form (i.e., through accounts at DTC) shall be deemed canceled when the Depositary causes the number of ADSs evidenced by the Balance Certificate to be reduced 22 25 by the number of ADSs surrendered to it (without the need to physically destroy the Balance Certificate). Section 2.11 Partial Entitlement ADSs. In the event any Shares are deposited which entitle the holders thereof to receive a per-share distribution or other entitlement in an amount different from the Shares then on deposit (the Shares then on deposit collectively, "Full Entitlement Shares" and the Shares with different entitlement, "Partial Entitlement Shares"), the Depositary shall (i) cause the Custodian to hold Partial Entitlement Shares separate and distinct from Full Entitlement Shares, and (ii) subject to the terms of this Agreement, issue ADSs and deliver ADRs representing Partial Entitlement Shares which are separate and distinct from the ADSs and ADRs representing Full Entitlement Shares, by means of separate CUSIP numbering and legending (if necessary) ("Partial Entitlement ADSs/ADRs" and "Full Entitlement ADSs/ADRs", respectively). If and when Partial Entitlement Shares become Full Entitlement Shares, the Depositary shall (a) give notice thereof to Holders of Partial Entitlement ADSs and give Holders of Partial Entitlement ADRs the opportunity to exchange such Partial Entitlement ADRs for Full Entitlement ADRs, (b) cause the Custodian to transfer the Partial Entitlement Shares into the account of the Full Entitlement Shares, and (c) take such actions as are necessary to remove the distinctions between (i) the Partial Entitlement ADRs and ADSs, on the one hand, and (ii) the Full Entitlement ADRs and ADSs on the other. Holders and Beneficial Owners of Partial Entitlement ADSs shall only be entitled to the entitlements of Partial Entitlement Shares. Holders and Beneficial Owners of Full Entitlement ADSs shall be entitled only to the entitlements of Full Entitlement Shares. All provisions and conditions of this Deposit Agreement shall apply to Partial Entitlement ADRs and ADSs to the same extent as Full 23 26 Entitlement ADRs and ADSs, except as contemplated by this Section 2.11. The Depositary is authorized to take any and all other actions as may be necessary (including, without limitation, making the necessary notations on Receipts) to give effect to the terms of this Section 2.11. The Company agrees to give timely written notice to the Depositary if any Shares issued or to be issued are Partial Entitlement Shares and shall assist the Depositary with the establishment of procedures enabling the identification of Partial Entitlement Shares upon Delivery to the Custodian. Section 2.12 Restricted ADSs. The Depositary shall, at the request and expense of the Company, establish procedures enabling the deposit hereunder of Shares that are Restricted Securities in order to enable the holder of such Shares to hold its ownership interests in such Restricted Securities in the form of ADSs issued under the terms hereof (such Shares, "Restricted Shares"). Upon receipt of a written request from the Company to accept Restricted Shares for deposit hereunder, the Depositary agrees to establish procedures permitting the deposit of such Restricted Shares and the issuance of ADSs representing such deposited Restricted Shares (such ADSs, the "Restricted ADSs," and the ADRs evidencing such Restricted ADSs, the "Restricted ADRs"). The Company shall assist the Depositary in the establishment of such procedures and agrees that it shall take all steps necessary and satisfactory to the Depositary to ensure that the establishment of such procedures does not violate the provisions of the Securities Act or any other applicable laws or regulations. The depositors of such Restricted Shares and the holders of the Restricted ADSs may be required prior to the deposit of such Restricted Shares, the transfer of the Restricted ADRs and the Restricted ADSs evidenced thereby or the withdrawal of the Restricted Shares represented by Restricted ADSs to provide such written certifications or 24 27 agreements as the Depositary or the Company may require. The Company shall provide to the Depositary in writing the legend(s) to be affixed to the Restricted ADRs, which legends shall (i) be in a form satisfactory to the Depositary and (ii) set forth the specific circumstances under which the Restricted ADRs and the Restricted ADSs represented thereby may be transferred or the Restricted Shares withdrawn. The Restricted ADSs issued upon the deposit of Restricted Shares shall be separately identified on the books of the Depositary and the Restricted Shares so deposited shall be held separate and distinct from the other Deposited Securities held hereunder. Neither the Restricted Shares nor the Restricted ADSs shall be eligible for Pre-Release Transactions described in Section 5.10 hereof. The Restricted ADSs shall not be eligible for inclusion in any book-entry settlement system, including, without limitation, DTC, and shall not in any way be fungible with the ADSs issued under the terms hereof that are not Restricted ADSs. The Restricted ADRs and the Restricted ADSs evidenced thereby shall be transferable only by the Holder thereof upon delivery to the Depositary of (i) all documentation otherwise contemplated by this Deposit Agreement and (ii) an opinion of counsel reasonably satisfactory to the Depositary setting forth, inter alia, the conditions upon which the Restricted ADR presented is, and the Restricted ADSs evidenced thereby are, transferable by the Holder thereof under applicable securities laws and the transfer restrictions contained in the legend set forth on the Restricted ADR presented for transfer. Except as set forth in this Section 2.12 and except as required by applicable law, the Restricted ADRs and the Restricted ADSs evidenced thereby shall be treated as ADRs and ADSs issued and outstanding under the terms of this Deposit Agreement. 25 28 ARTICLE 3. CERTAIN OBLIGATIONS OF HOLDERS AND BENEFICIAL OWNERS OF RECEIPTS Section 3.1 Proofs, Certificates and Other Information. Any person or entity presenting Shares for deposit, any Holder and any Beneficial Owner may be required by the Depositary or the Company, and every Holder and Beneficial Owner agrees, from time to time to provide to the Depositary, the Custodian or the Company such proof of citizenship or residence, taxpayer status, payment of all applicable taxes or other governmental charges, exchange control approval, legal or beneficial ownership of ADSs and Deposited Securities, compliance with applicable laws and the terms of this Deposit Agreement and the provisions of, or governing, the Deposited Securities, to execute such certifications and to make such representations and warranties, and to provide such other information and documentation (or, in the case of Shares in registered form presented for deposit, such information relating to the registration on the books of the Company or of the appointed agent of the Company for the registration and transfer of Shares) as the Depositary or the Custodian reasonably may deem necessary or proper or as the Company may reasonably require by written request to the Depositary consistent with its obligations hereunder. The Depositary and the Registrar, as applicable, may, and at the reasonable request of the Company, shall, withhold the execution or delivery or registration of transfer of any Receipt or the distribution or sale of any dividend or distribution of rights or of the proceeds thereof or, to the extent not limited by the terms of Section 7.8 hereof, the delivery of any Deposited Securities until such proof or other information is filed or such certifications are executed, or such representations are made, or such other documentation or information 26 29 provided, in each case to the Depositary's, the Registrar's and the Company's reasonable satisfaction. The Depositary shall from time to time advise the Company of (i) any such proofs of citizenship or residence, taxpayer status, or exchange control approval which it receives from Holders and Beneficial Owners, and (ii) any other information or documents which the Company may reasonably request and which the Depositary shall request and receive from any Holder or Beneficial Owner or any person or entity presenting Shares for deposit or ADSs for cancellation and withdrawal and shall provide the Company, in a timely manner, with copies, or originals thereof upon the request of the Company. Nothing herein shall obligate the Depositary to (i) obtain any information for the Company if not provided by the Holders or Beneficial Owners or (ii) verify or vouch for the accuracy of the information so provided by the Holders or Beneficial Owners. Section 3.2 Liability for Taxes and Other Charges. If any tax or other governmental charge shall become payable with respect to any ADR or any Deposited Securities or American Depositary Shares, such tax or other governmental charge shall be payable by the Holders and Beneficial Owners to the Depositary. The Company, the Custodian and/or the Depositary may withhold or deduct from any distributions made in respect of Deposited Securities and may sell for the account of a Holder and/or Beneficial Owner any or all of the Deposited Securities and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, the Holder and the Beneficial Owner remaining liable for any deficiency. The Custodian may refuse the deposit of Shares and the Depositary may refuse to issue ADSs, to deliver ADRs, register the transfer, split-up or combination of ADRs and (subject to Section 7.8) the withdrawal of Deposited Securities until payment in full of such tax, charge, 27 30 penalty or interest is received. Every Holder and Beneficial Owner agrees to indemnify the Depositary, the Company, the Custodian, and any of their agents, officers, employees and Affiliates for, and to hold each of them harmless from, any claims with respect to taxes (including applicable interest and penalties thereon) arising from any tax benefit obtained for such Holder and/or Beneficial Owner. Section 3.3 Representations and Warranties on Deposit of Shares. Each person or entity depositing Shares under this Deposit Agreement shall be deemed thereby to represent and warrant that (i) such Shares and the certificates therefor are duly authorized, validly issued, fully paid and legally obtained by such person or entity, (ii) all preemptive (and similar) rights, if any, with respect to such Shares have been validly waived or exercised, (iii) the person or entity making such deposit is duly authorized so to do, (iv) the Shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, except as contemplated in Section 2.12 herein, and the ADSs issuable upon such deposit will not be, except as contemplated in Section 2.12 herein, Restricted Securities, and (v) the Shares presented for deposit have not been stripped of any right or entitlement. Such representations and warranties shall survive the deposit and withdrawal of Shares, the issuance and cancellation of American Depositary Shares in respect thereof and the transfer of such American Depositary Shares. If any such representations or warranties are false in any way, the Company and the Depositary shall be authorized, at the cost and expense of the person or entity depositing Shares, to take any and all actions necessary to correct the consequences thereof. Section 3.4 Compliance with Information Requests. Notwithstanding any other provision of this Deposit Agreement, each Holder and Beneficial Owner agrees to comply with requests from 28 31 the Company pursuant to Singapore law, the rules and requirements of the Singapore Exchange Securities Trading Limited, and any other stock exchange on which the Shares are, or will be, registered, traded or listed, the rules and requirements of the CDP or any other clearing system through which transactions in the Shares may be settled or the Memorandum and Articles of Association of the Company, which are made to provide information, inter alia, as to the capacity in which such Holder or Beneficial Owner owns American Depositary Shares (and Shares as the case may be) and regarding the identity of any other person(s) or entity(ies) interested in such American Depositary Shares and the nature of such interest and various other matters, whether or not they are Holders and/or Beneficial Owners at the time of such request. The Depositary agrees to use its reasonable efforts to forward, upon the request of the Company, and at the Company's expense, any such request from the Company to the Holders and to forward to the Company any such responses to such requests received by the Depositary. Section 3.5 Ownership Restrictions. Notwithstanding any other provision in this Deposit Agreement, the Company may restrict transfers of the Shares where such transfer might result in ownership of Shares exceeding limits imposed by applicable law or the Memorandum and Articles of Association of the Company. The Company may also restrict, in such manner as it deems appropriate, transfers of the American Depositary Shares where such transfer may result in the total number of Shares represented by the American Depositary Shares owned by a single Holder or Beneficial Owner to exceed any such limits. The Company may, in its sole discretion but subject to applicable law, instruct the Depositary to take action with respect to the ownership interest of any Holder or Beneficial Owner in excess of the limits set forth in the preceding sentence, including, but not limited to, the imposition of restrictions on the transfer of American 29 32 Depositary Shares, the removal or limitation of voting rights or mandatory sale or disposition on behalf of a Holder or Beneficial Owner of the Shares represented by the American Depositary Shares held by such Holder or Beneficial Owner in excess of such limitations, if and to the extent such disposition is permitted by applicable law and the Memorandum and Articles of Association of the Company. ARTICLE 4. THE DEPOSITED SECURITIES Section 4.1 Cash Distributions. Whenever the Depositary receives confirmation from the Custodian of receipt of any cash dividend or other cash distribution on any Deposited Securities, or receives proceeds from the sale of any Shares, rights, securities or other entitlements under the terms hereof, the Depositary will, if at the time of receipt thereof any amounts received in a Foreign Currency can, in the reasonable judgment of the Depositary (pursuant to Section 4.8 hereof), be converted on a practicable basis into Dollars transferable to the United States, promptly convert or cause to be converted such cash dividend, distribution or proceeds into Dollars (on the terms described in Section 4.8) and will distribute promptly the amount thus received (net of (a) the applicable fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes withheld) to the Holders entitled thereto as of the ADS Record Date in proportion to the number of American Depositary Shares held as of the ADS Record Date. The Depositary shall distribute only such amount, however, as can be distributed without attributing to any Holder a fraction of one cent, and any balance not so distributed shall be held by the Depositary (without liability for interest thereon) and shall be added to and become part of the next sum received by the Depositary for distribution to Holders of ADSs 30 33 outstanding at the time of the next distribution. If the Company, the Custodian or the Depositary is required to withhold and does withhold from any cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, duties or other governmental charges, the amount distributed to Holders of the American Depositary Shares representing such Deposited Securities shall be reduced accordingly. Such withheld amounts shall be forwarded by the Company, the Custodian or the Depositary to the relevant governmental authority. Evidence of payment thereof by the Company shall be forwarded by the Company to the Depositary upon request. Section 4.2 Distribution in Shares. If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Company shall cause such Shares to be deposited with the Custodian and registered, as the case may be, in the name of the Depositary, the Custodian or any of their nominees. Upon receipt of confirmation of such deposit from the Custodian, the Depositary shall establish the ADS Record Date upon the terms described in Section 4.9 hereof and shall, subject to Section 5.9 hereof, either (i) distribute to the Holders as of the ADS Record Date in proportion to the number of American Depositary Shares held as of the ADS Record Date, additional American Depositary Shares, which represent in the aggregate the number of Shares received as such dividend, or free distribution, subject to the other terms of this Deposit Agreement (including, without limitation, (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes), or (ii) if additional American Depositary Shares are not so distributed, each American Depositary Share issued and outstanding after the ADS Record Date shall, to the extent permissible by law, thenceforth also represent rights and interests in the additional integral number of Shares distributed upon the 31 34 Deposited Securities represented thereby (net of (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes). In lieu of delivering fractional American Depositary Shares, the Depositary shall sell the number of Shares or American Depositary Shares, as the case may be, represented by the aggregate of such fractions and distribute the net proceeds upon the terms described in Section 4.1. In the event that the Depositary determines that any distribution in property (including Shares) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, or, if the Company, in the fulfillment of its obligation under Section 5.7 hereof, has furnished an opinion of U.S. counsel determining that Shares must be registered under the Securities Act or other laws in order to be distributed to Holders (and no such registration statement has been declared effective), the Depositary may dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable, and the Depositary shall distribute the net proceeds of any such sale (after deduction of such (a) taxes and (b) fees and charges of, and expenses incurred by, the Depositary) to Holders entitled thereto upon the terms described in Section 4.1. The Depositary shall hold and/or distribute any unsold balance of such property in accordance with the provisions of this Deposit Agreement. Section 4.3 Elective Distributions in Cash or Shares. Whenever the Company intends to distribute a dividend payable at the election of the holders of Shares in cash or in additional Shares, the Company shall use its best efforts to give notice thereof to the Depositary at least 60 days prior to the proposed distribution stating whether or not it wishes such elective distribution to be made available to Holders of ADSs. Upon receipt of notice indicating that the Company 32 35 wishes such elective distribution to be made available to Holders of ADSs, the Depositary shall consult with the Company to determine, and the Company shall assist the Depositary in its determination, whether it is lawful and reasonably practicable to make such elective distribution available to the Holders of ADSs. The Depositary shall promptly make such elective distribution available to Holders only if (i) the Depositary shall have determined that such distribution is reasonably practicable and (ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7. If the above conditions are not satisfied, the Depositary shall, to the extent permitted by law, distribute to the Holders, on the basis of the same determination as is made in Singapore in respect of the Shares for which no election is made, either (x) cash upon the terms described in Section 4.1 or (y) additional ADSs representing such additional Shares upon the terms described in Section 4.2. If the above conditions are satisfied, the Depositary shall establish an ADS Record Date (on the terms described in Section 4.9) and establish procedures to enable Holders to elect the receipt of the proposed dividend in cash or in additional ADSs. The Company shall assist the Depositary in establishing such procedures to the extent necessary. If a Holder elects to receive the proposed dividend (x) in cash, the dividend shall be distributed upon the terms described in Section 4.1, or (y) in ADSs, the dividend shall be distributed upon the terms described in Section 4.2. Nothing herein shall obligate the Depositary to make available to Holders a method to receive the elective dividend in Shares (rather than ADSs). There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of Shares. 33 36 Section 4.4 Distribution of Rights to Purchase Shares. 4.4.1 Distribution to ADS Holders. Whenever the Company intends to distribute to the holders of the Deposited Securities rights to subscribe for additional Shares, the Company shall use its best efforts to give notice thereof to the Depositary at least 60 days prior to the proposed distribution stating whether or not it wishes such rights to be made available to Holders of ADSs. Upon receipt of a notice indicating that the Company wishes such rights to be made available to Holders of ADSs, the Depositary shall consult with the Company to determine, and the Company shall assist the Depositary in its determination, whether it is lawful and reasonably practicable to make such rights available to the Holders. The Depositary shall promptly make such rights available to Holders only if (i) the Company shall have requested that such rights be made available to Holders, (ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7, and (iii) the Depositary shall have determined that such distribution of rights is reasonably practicable. In the event any of the conditions set forth above are not satisfied, the Depositary shall proceed with the sale of the rights as contemplated in Section 4.4.2 below. In the event all conditions set forth above are satisfied, the Depositary shall establish an ADS Record Date (upon the terms described in Section 4.9) and establish procedures to distribute rights to purchase additional ADSs (by means of warrants or otherwise) and to enable the Holders to exercise such rights (upon payment of applicable (a) fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes). The Company shall assist the Depositary to the extent necessary in establishing such procedures. Nothing herein shall obligate the Depositary to make available to the Holders a method to exercise rights to subscribe for Shares (rather than ADSs). 34 37 4.4.2 Sale of Rights. If (i) the Company does not request the Depositary to make the rights available to Holders or requests that the rights not be made available to Holders, (ii) the Depositary fails to receive satisfactory documentation within the terms of Section 5.7 or determines it is not reasonably practicable to make the rights available to Holders, or (iii) any rights made available are not exercised and appear to be about to lapse, the Depositary, upon consultation with the Company, shall determine whether it is lawful and reasonably practicable to sell such rights, in a riskless principal capacity, at such place and upon such terms (including public or private sale) as it may deem proper. The Company shall assist the Depositary to the extent necessary to determine such legality and practicability. The Depositary shall, upon such sale, convert and distribute proceeds of such sale (net of applicable (a) fees and charges of, and reasonable expenses incurred by, the Depositary and (b) taxes) upon the terms set forth in Section 4.1. 4.4.3 Lapse of Rights. If the Depositary is unable to make any rights available to Holders upon the terms described in Section 4.4.1 or to arrange for the sale of the rights upon the terms described in Section 4.4.2, the Depositary shall allow such rights to lapse. Neither the Depositary nor the Company shall be responsible for (i) any failure to determine that it may be lawful or practicable to make such rights available to Holders in general or any Holders in particular, or (ii) any foreign exchange exposure or loss incurred in connection with such sale, or exercise. The Depositary shall not be responsible for the content of any materials forwarded to the Holders on behalf of the Company in connection with the rights distribution. 35 38 Notwithstanding anything to the contrary in this Section 4.4, if registration (under the Securities Act or any other applicable law) of the rights or the securities to which any rights relate may be required in order for the Company to offer such rights or such securities to Holders and to sell the securities represented by such rights, the Depositary will not distribute such rights to the Holders unless and until a registration statement under the Securities Act (or other applicable law) covering such offering is in effect. In the event that the Company, the Depositary or the Custodian shall be required to withhold and does withhold from any distribution of property (including rights) an amount on account of taxes or other governmental charges, the amount distributed to the Holders of American Depositary Shares representing such Deposited Securities shall be reduced accordingly. In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, the Depositary may dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable to pay any such taxes or charges. There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to receive or exercise rights on the same terms and conditions as the holders of Shares or be able to exercise such rights. Nothing herein shall obligate the Company to file any registration statement in respect of any rights or Shares or other securities to be acquired upon the exercise of such rights. 36 39 Section 4.5 Distributions Other Than Cash, Shares or Rights to Purchase Shares. 4.5.1 Whenever the Company intends to distribute to the holders of Deposited Securities property other than cash, Shares or rights to purchase additional Shares, the Company shall give timely notice thereof to the Depositary and shall indicate whether or not it wishes such distribution to be made to Holders of ADSs. Upon receipt of a notice indicating that the Company wishes such distribution be made to Holders of ADSs, the Depositary shall consult with the Company, and the Company shall assist the Depositary, to determine whether such distribution to Holders is lawful and reasonably practicable. The Depositary shall not make such distribution unless (i) the Company shall have requested the Depositary to make such distribution to Holders, (ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7, and (iii) the Depositary shall have determined that such distribution is reasonably practicable. 4.5.2 Upon receipt of satisfactory documentation and the request of the Company to distribute property to Holders of ADSs and after making the requisite determinations set forth in (a) above, the Depositary shall distribute as promptly as practicable the property so received to the Holders of record, as of the ADS Record Date, in proportion to the number of ADSs held by them respectively and in such manner as the Depositary may deem reasonably practicable for accomplishing such distribution (i) upon receipt of payment or net of the applicable fees and charges of, and expenses incurred by, the Depositary, and (ii) net of any taxes withheld. The Depositary may dispose of all or a portion of the property so distributed and deposited, in such amounts and in such manner (including public or private sale) as the Depositary may deem 37 40 reasonably practicable or necessary to satisfy any taxes (including applicable interest and penalties) or other governmental charges applicable to the distribution. 4.5.3 If (i) the Company does not request the Depositary to make such distribution to Holders or requests not to make such distribution to Holders, (ii) the Depositary does not receive satisfactory documentation within the terms of Section 5.7, or (iii) the Depositary reasonably determines that all or a portion of such distribution is not reasonably practicable, the Depositary shall as promptly as practicable sell or cause such property to be sold in a public or private sale, at such place or places and upon such terms as it may deem reasonably proper and shall as promptly as practicable (i) cause the proceeds of such sale, if any, to be converted into Dollars and (ii) distribute the proceeds of such conversion received by the Depositary (net of applicable (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) to the Holders as of the ADS Record Date upon the terms of Section 4.1. If the Depositary is unable to sell such property, the Depositary may, upon consultation with the Company, dispose of such property in any way it deems reasonably practicable under the circumstances. Section 4.6 Distributions with Respect to Deposited Securities in Bearer Form. Subject to the terms of this Article IV, distributions in respect of Deposited Securities that are held by the Depositary in bearer form shall be made to the Depositary for the account of the respective Holders of Receipts with respect to which any such distribution is made upon due presentation by the Depositary or the Custodian to the Company of any relevant coupons, talons, or certificates. The Company shall promptly notify the Depositary of such distributions. The Depositary or the Custodian shall promptly present such coupons, talons or certificates, as the case may be, in connection with any such distribution. 38 41 Section 4.7 Redemption. If the Company intends to exercise any right of redemption in respect of any of the Deposited Securities, the Company shall use its reasonable best efforts to give notice thereof to the Depositary at least 60 days prior to the intended date of redemption which notice shall set forth the particulars of the proposed redemption. Upon receipt of (i) such notice and (ii) satisfactory documentation given by the Company to the Depositary within the terms of Section 5.7, and only if the Depositary shall have determined that such proposed redemption is practicable, the Depositary shall mail to each Holder a notice setting forth the intended exercise by the Company of the redemption rights and any other particulars set forth in the Company's notice to the Depositary. The Depositary shall instruct the Custodian to present to the Company the Deposited Securities in respect of which redemption rights are being exercised against payment of the applicable redemption price. Upon receipt of confirmation from the Custodian that the redemption has taken place and that funds representing the redemption price have been received, the Depositary shall convert, transfer, and distribute the proceeds (net of applicable (a) fees and charges of, and the reasonable expenses incurred by, the Depositary, and (b) taxes), retire ADSs and cancel ADRs upon delivery of such ADSs by Holders thereof and the terms set forth in Sections 4.1 and 6.2 hereof. If less than all outstanding Deposited Securities are redeemed, the ADSs to be retired will be selected by lot or on a pro rata basis, as may be determined by the Depositary. The redemption price per ADS shall be the per share amount received by the Depositary upon the redemption of the Deposited Securities represented by American Depositary Shares (subject to the terms of Section 4.8 hereof and the applicable fees and charges of, and reasonable expenses incurred by, the Depositary, and taxes) multiplied by the number of Deposited Securities represented by each ADS redeemed. 39 42 Section 4.8 Conversion of Foreign Currency. Whenever the Depositary or the Custodian shall receive Foreign Currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, which in the reasonable judgment of the Depositary can at such time be converted on a practicable basis, by sale or in any other manner that it may determine in accordance with applicable law, into Dollars transferable to the United States and distributable to the Holders entitled thereto, the Depositary shall, as promptly as practicable, convert or cause to be converted, by sale or in any other manner that it may reasonably determine, such Foreign Currency into Dollars, and shall, as promptly as practicable, distribute such Dollars (net of any applicable fees, any reasonable and customary expenses incurred in such conversion and any expenses incurred on behalf of the Holders in complying with currency exchange control or other governmental requirements) to the Holders in accordance with the terms of the applicable sections of this Deposit Agreement. If the Depositary shall have distributed warrants or other instruments that entitle the holders thereof to such Dollars, the Depositary shall distribute such Dollars to the holders of such warrants and/or instruments upon surrender thereof for cancellation, in either case without liability for interest thereon. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Holders on account of any application of exchange restrictions or otherwise. If such conversion or distribution generally or with regard to a particular Holder can be effected only with the approval or license of any government or agency thereof, the Depositary shall promptly file such application for approval or license, if reasonably practical. 40 43 If at any time the Depositary shall determine that in its reasonable judgment the conversion of any Foreign Currency and the transfer and distribution of proceeds of such conversion received by the Depositary is not reasonably practical or lawful, or if any approval or license of any governmental authority or agency thereof that is required for such conversion, transfer and distribution is denied or, in the reasonable opinion of the Depositary, not obtainable at a reasonable cost or within a reasonable period, the Depositary shall, upon consultation with the Company, (i) as promptly as practicable make such conversion and distribution in Dollars to the Holders for whom such conversion, transfer and distribution is lawful and practicable, (ii) as promptly as practicable distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) to Holders for whom such distribution is lawful and practicable or (iii) hold (or cause the Custodian to hold) such Foreign Currency (without liability for interest thereon) for the respective accounts of the Holders entitled to receive the same. Section 4.9 Fixing of ADS Record Date. Whenever the Depositary shall receive notice of the fixing of a record date by the Company for the determination of holders of Deposited Securities entitled to receive any distribution (whether in cash, Shares, rights, or other distribution), or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meeting of, or solicitation of consents or of proxies, of holders of Shares or other Deposited Securities, or whenever the Depositary shall find it necessary or convenient in connection with the giving of any notice, solicitation of any consent or any other matter, the Depositary, upon consultation with the Company, shall fix a record date (the "ADS Record Date") for the determination of the Holders of Receipts who shall be entitled to receive such 41 44 distribution, to give instructions for the exercise of voting rights at any such meeting, to give or withhold such consent, to receive such notice or solicitation or to otherwise take action, or to exercise the rights of Holders with respect to such changed number of Shares represented by each American Depositary Share. The Depositary shall make reasonable efforts to establish the ADS Record Date as closely as possible to the applicable record date for the Deposited Securities (if any). Subject to applicable law and the provisions of Section 4.1 through 4.8 and to the other terms and conditions of this Deposit Agreement, only the Holders of Receipts at the close of business in New York on such ADS Record Date shall be entitled to receive such distribution, to give such voting instructions, to receive such notice or solicitation, or otherwise take action. Section 4.10 Voting of Deposited Securities. As soon as practicable after receipt of notice of any meeting at which the holders of Shares are entitled to vote, or of solicitation of consents or proxies from holders of Shares or other Deposited Securities, the Depositary shall fix the ADS Record Date in respect of such meeting or solicitation of consent or proxy. The Depositary shall, if requested by the Company in writing in a timely manner (the Depositary having no obligation to take any further action if the request shall not have been received by the Depositary at least 21 days prior to the date of such vote or meeting) and at the Company's expense, as soon as practicable, mail to Holders: (a) such notice of meeting or solicitation of consent or proxy, (b) a statement that the Holders at the close of business on the ADS Record Date will be entitled, subject to any applicable law, the Memorandum and Articles of Association of the Company and the provisions of or governing the Deposited Securities (which provisions, if any, shall be summarized in pertinent part by the Company), to instruct the 42 45 Depositary as to the exercise of the voting rights, if any, pertaining to the Shares or other Deposited Securities represented by such Holder's American Depositary Shares, and (c) a brief statement as to the manner in which such instructions may be given. Voting instructions may be given only in respect of a number of American Depositary Shares representing an integral number of Shares or other Deposited Securities. Upon the timely receipt of written instructions of a Holder of American Depositary Shares on the ADS Record Date, the Depositary shall endeavor, insofar as reasonably practicable and permitted under applicable law and the provisions of the Memorandum and Articles of Association of the Company and the provisions of the Deposited Securities, to vote or cause the Custodian to vote the Shares and/or other Deposited Securities (in person or by proxy) represented by such Holder's American Depositary Shares in accordance with such instructions. Neither the Depositary nor the Custodian shall, under any circumstances exercise any discretion as to voting and neither the Depositary nor the Custodian shall vote, attempt to exercise the right to vote, or in any way make use of, for purposes of establishing a quorum or otherwise, the Shares or other Deposited Securities represented by American Depositary Shares except pursuant to and in accordance with such written instructions from Holders. If voting instructions are received by the Depositary from any Holder on or before the date established by the Depositary for the receipt of such instructions, which are signed but without further indication as to specific instructions, the Depositary will deem such Holder to have instructed the Depositary to vote in favor of the items set forth in such instructions. Shares or other Deposited Securities represented by American Depositary Shares for which no specific voting instructions are received by the Depositary from the Holder shall not be voted. 43 46 Voting at any meeting of shareholders is by a show of hands unless a poll is demanded. Neither the Depositary nor the Custodian shall demand voting by a poll. In the event a poll is demanded, voting of Shares and/or other Deposited Securities shall be in accordance with the written instructions received from the Holders giving such instructions. There can be no assurance that Holders generally or any Holder in particular will receive the notice described above with sufficient time to enable the Holder to return voting instructions to the Depositary in a timely manner. Section 4.11 Changes Affecting Deposited Securities. Upon any change in nominal or par value, split-up, stock split (either forward or reverse), cancellation, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or the Custodian in exchange for, or in conversion of or replacement of or otherwise in respect of, such Deposited Securities shall, to the extent permitted by law, be treated as new Deposited Securities under this Deposit Agreement, and the Receipts shall, subject to the provisions of this Deposit Agreement and applicable law, evidence American Depositary Shares representing the right to receive such securities. The Depositary may, with the Company's approval, and shall, if the Company shall so request, subject to the terms of this Deposit Agreement and the receipt of an opinion of counsel to the Company (if an opinion is requested by the Depositary) reasonably satisfactory to the Depositary that such distributions are not in violation of any applicable laws or regulations, execute and deliver additional Receipts as in the case of a stock dividend or stock split, or call for the surrender of outstanding Receipts to be exchanged for new Receipts as in the case of a reverse stock split and 44 47 in either case, with any necessary modifications to the form of Receipt contained in Exhibit A hereto, to give effect to such corporate change. The Company agrees to, jointly with the Depositary, amend the Registration Statement on Form F-6 as filed with the Commission to permit the issuance of such new form of Receipts. Notwithstanding the foregoing, in the event that any security so received may not be lawfully distributed to some or all Holders, the Depositary may, with the Company's approval, and shall, if the Company requests, subject to, if requested by the Depositary, the receipt of an opinion of counsel to the Company reasonably satisfactory to the Depositary that such action is not in violation of any applicable laws or regulations, sell such securities at public or private sale, at such place or places and upon such terms as it may deem reasonably proper and may allocate the net proceeds of such sales (net of (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) for the account of the Holders otherwise entitled to such securities upon an averaged or other practicable basis without regard to any distinctions among such Holders and distribute the net proceeds so allocated to the extent practicable as in the case of a distribution received in cash pursuant to Section 4.1. Neither the Depositary nor the Company shall be responsible for (i) any failure to determine that it may be lawful or feasible to make such securities available to Holders in general or to any Holder in particular or any foreign exchange exposure or loss incurred in connection with such sale. The Depositary shall not be responsible for any liability to the purchaser of such securities. Section 4.12 Available Information. The Company is subject to the periodic reporting requirements of the Exchange Act and accordingly files certain information with the Commission. These reports and documents can be inspected and copied at the public reference 45 48 facilities maintained by the Commission located at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at the Commission's New York City office located at Seven World Trade Center, 13th Floor, New York, New York 10048. Section 4.13 Reports. The Depositary shall make available for inspection by Holders at its Principal Office any reports and communications, including any proxy soliciting materials, received from the Company which are both (a) received by the Depositary, the Custodian, or the nominee of either of them as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary shall also mail to Holders copies of such reports when furnished by the Company pursuant to Section 5.6. Section 4.14 List of Holders. Upon written request by the Company, the Depositary shall promptly furnish to it a list, as of a recent date, of the names, addresses and holdings of American Depositary Shares of all Holders. Section 4.15 Taxation. The Depositary will, and will instruct the Custodian to, forward to the Company or its agents such information from its records as the Company may reasonably request to enable the Company or its agents to file the necessary tax reports with governmental authorities or agencies. The Depositary, the Custodian or the Company and its agents may file such reports as are necessary to reduce or eliminate applicable taxes on dividends and on other distributions in respect of Deposited Securities under applicable tax treaties or laws for the Holders and Beneficial Owners. In accordance with instructions from the Company and to the extent reasonably practicable, the Depositary or the Custodian will take reasonable administrative actions to obtain tax refunds, reduced withholding of tax at source on dividends and other benefits under applicable tax treaties or laws with respect to dividends and other 46 49 distributions on the Deposited Securities. Holders and Beneficial Owners may be required from time to time, and in a timely manner, to file such proof of taxpayer status, residence and beneficial ownership (as applicable), to execute such certificates and to make such representations and warranties, or to provide any other information or documents, as the Depositary or the Custodian may deem necessary or proper to fulfill the Depositary's or the Custodian's obligations under applicable law. Holders and Beneficial Owners shall indemnify the Depositary, the Company, the Custodian and any of their respective directors, employees, agents and Affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained (except with respect to taxes which are payable by the Company as provided in Section 3.2). If the Company (or any of its agents) withholds from any distribution any amount on account of taxes or governmental charges, or pays any other tax in respect of such distribution (i.e. stamp duty tax, capital gains or other similar tax), the Company shall (and shall cause such agent to) remit promptly to the Depositary information about such taxes or governmental charges withheld or paid, and, if so requested, the tax receipt (or other proof of payment to the applicable governmental authority) therefor, in each case, in a form satisfactory to the Depositary. The Depositary shall, to the extent required by U.S. law or to the extent requested in writing by the Company, report to Holders any taxes withheld by it or the Custodian, and, if such information is provided to it by the Company, any taxes withheld by the Company. The Depositary and the Custodian shall not be required to provide the Holders with any evidence of the remittance by the Company (or its agents) of any taxes withheld, or of the payment of taxes by the Company, 47 50 except to the extent the evidence is provided by the Company to the Depositary. None of the Depositary, the Custodian and the Company shall be liable for any failure by any Holder or Beneficial Owner to obtain the benefits of credits on the non-U.S. tax paid against such Holder's or Beneficial Owner's income tax liability. The Depositary is under no obligation to provide the Holders and Beneficial Owners with any information about the tax status of the Company, except to the extent the Company provides such information to the Depositary for distribution to the Holders and Beneficial Owners. Neither the Depositary nor the Company shall incur any liability for any tax consequences that may be incurred by Holders and Beneficial Owners on account of their ownership of the American Depositary Shares, including without limitation, tax consequences resulting from the Company (or any of its subsidiaries) being treated as a "Foreign Personal Holding Company," or as a "Passive Foreign Investment Company" (in each case as defined in the U.S. Internal Revenue Code and the regulations issued thereunder) or otherwise, provided that it has acted in accordance with the standard of care set forth in Section 5.3. ARTICLE 5. THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY Section 5.1 Maintenance of Office and Transfer Books by the Registrar. Until termination of this Deposit Agreement in accordance with its terms, the Registrar shall maintain in the Borough of Manhattan, the City of New York, an office and facilities for the execution and delivery, registration, registration of transfers, combination and split-up of Receipts, the 48 51 surrender of Receipts for the purpose of withdrawal of Deposited Securities in accordance with the provisions of this Deposit Agreement. The Registrar shall keep books for the registration of issuances and transfers of Receipts which at all reasonable times shall be open for inspection by the Company and by the Holders of such Receipts, provided that such inspection shall not be, to the Registrar's knowledge, for the purpose of communicating with Holders of such Receipts in the interest of a business or object other than the business of the Company or other than a matter related to this Deposit Agreement or the Receipts. The Registrar may close the transfer books with respect to the Receipts, at any time or from time to time, when deemed reasonably necessary or advisable by it in good faith in connection with the performance of its duties hereunder, or at the reasonable written request of the Company subject, in all cases, to Section 7.8 hereof. If any Receipts or the American Depositary Shares evidenced thereby are listed on one or more stock exchanges or automated quotation systems in the United States, the Depositary, upon the request of or with the approval of the Company, shall act as Registrar or appoint a Registrar or one or more co-registrars for registration of Receipts and transfers, combinations and split-ups, and to countersign such Receipts in accordance with any requirements of such exchanges or systems. Such Registrar or co-registrars may be removed and a substitute or substitutes appointed by the Depositary upon the request of or with the approval of the Company. Section 5.2 Exoneration. Neither the Depositary nor the Company shall be obligated to do or perform any act which is inconsistent with the provisions of this Deposit Agreement or incur any liability (i) if the Depositary or the Company shall be prevented or forbidden from, or 49 52 delayed in, doing or performing any act or thing required by the terms of this Deposit Agreement, by reason of any provision of any present or future law or regulation of the United States, Singapore or any other country, or of any other governmental authority or regulatory authority or stock exchange, or on account of the possible criminal or civil penalties or restraint, or by reason of any provision, present or future of the Memorandum and Articles of Association of the Company or any provision of or governing any Deposited Securities, or by reason of any act of God or war or other circumstances beyond its control (including, without limitation, nationalization, expropriation, currency restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions, explosions and computer failure), (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement or in the Memorandum and Articles of Association of the Company or provisions of or governing Deposited Securities, (iii) for any action or inaction in reliance upon the advice of or information from legal counsel, accountants, any person or entity presenting Shares for deposit, any Holder, any Beneficial Owner or authorized representative thereof, or any other person or entity believed by it in good faith to be competent to give such advice or information, (iv) for the inability by a Holder or Beneficial Owner to benefit from any distribution, offering, right or other benefit which is made available to holders of Deposited Securities but is not, under the terms of this Deposit Agreement, made available to Holders of American Depositary Shares or (v) for any consequential or punitive damages for any breach of the terms of this Deposit Agreement. The Depositary, its controlling persons, its agents, any Custodian and the Company, its controlling persons and its agents may rely and shall be protected in acting upon any written 50 53 notice, request or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. No disclaimer of liability under the Securities Act is intended by any provision of this Deposit Agreement. Section 5.3 Standard of Care. The Company and its agents assume no obligation and shall not be subject to any liability under this Deposit Agreement or the Receipts to Holders or Beneficial Owners or other persons, except that the Company and its agents agree to perform their obligations specifically set forth in this Deposit Agreement without negligence or bad faith. The Depositary and its agents assume no obligation and shall not be subject to any liability under this Deposit Agreement or the Receipts to Holders or Beneficial Owners or other persons, except that the Depositary and its agents agree to perform their obligations specifically set forth in this Deposit Agreement without negligence or bad faith. Without limitation of the foregoing, neither the Depositary, the Company, nor any of their respective controlling persons, or agents, shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability be furnished as often as may be required (and no Custodian shall be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary). The Depositary and its agents shall not be liable for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any vote is cast 51 54 or the effect of any vote, provided that any such action or omission is in good faith and in accordance with the terms of this Deposit Agreement. Neither the Depositary nor, to the extent permitted by law, the Company, shall incur any liability for any failure to determine that any distribution or action may be lawful or reasonably practicable, for any investment risk associated with acquiring an interest in the Deposited Securities, for the validity or worth of the Deposited Securities or for any tax consequences that may result from the ownership of ADSs, Shares or Deposited Securities, for the credit-worthiness of any third party, or for allowing any rights to lapse upon the terms of this Deposit Agreement. The Depositary shall not incur liability for the content of any information submitted to it by the Company for distribution to the Holders or for any inaccuracy of any translation thereof or the failure or timeliness of any notice from the Company. Section 5.4 Resignation and Removal of the Depositary; Appointment of Successor Depositary. The Depositary may at any time resign as Depositary hereunder by written notice of resignation delivered to the Company, such resignation to be effective on the earlier of (i) the 60th day after delivery thereof to the Company (whereupon the Depositary shall be entitled to take the actions contemplated in Section 6.2 hereof), or (ii) upon the appointment by the Company of a successor depositary and its acceptance of such appointment as hereinafter provided. The Depositary may at any time be removed by the Company by written notice of such removal, which removal shall be effective on the earlier of (i) the 60th day after delivery thereof to the Depositary (whereupon the Depositary shall be entitled to take the actions contemplated in Section 6.2 hereof), or (ii) upon the appointment by the Company of a successor depositary and its acceptance of such appointment as hereinafter provided. 52 55 In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall use its best efforts to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, the City of New York. Every successor depositary shall be required by the Company to execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed (except as required by applicable law), shall become fully vested with all the rights, powers, duties and obligations of its predecessor. The predecessor depositary, upon payment of all sums due it and on the written request of the Company shall, (i) execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder (other than as contemplated in Sections 5.8 and 5.9), (ii) duly assign, transfer and deliver all right, title and interest to the Deposited Securities to such successor, and (iii) deliver to such successor a list of the Holders of all outstanding Receipts and such other information relating to Receipts and Holders thereof as the successor may reasonably request. Any such successor depositary shall promptly mail notice of its appointment to such Holders. Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act. Section 5.5 The Custodian. The Depositary has initially appointed Citibank Nominees Singapore Pte Ltd as Custodian for the purpose of this Deposit Agreement. The Custodian or its successors in acting hereunder shall be subject at all times and in all respects to the direction of the Depositary for the Shares, for which the Custodian acts as custodian and shall be responsible 53 56 solely to it. If any Custodian resigns or is discharged from its duties hereunder with respect to any Deposited Securities and no other Custodian has previously been appointed hereunder, the Depositary, with the prior written consent of the Company, shall promptly appoint a substitute custodian that is organized under the laws of Singapore. The Depositary shall require such resigning or discharged Custodian to deliver the Deposited Securities held by it, together with all such records maintained by it as Custodian with respect to such Deposited Securities as the Depositary may request, to the Custodian designated by the Depositary. Whenever the Depositary determines, with the prior approval of the Company, that it is appropriate to do so, it may appoint an additional custodian with respect to any Deposited Securities, or discharge the Custodian with respect to any Deposited Securities and appoint a substitute custodian, which shall thereafter be Custodian hereunder with respect to the Deposited Securities. Immediately upon any such change, the Depositary shall give prompt notice thereof in writing to all Holders of Receipts, each other Custodian and the Company. Upon the appointment of any successor depositary, any Custodian then acting hereunder shall, unless otherwise instructed by the Depositary, continue to be the Custodian of the Deposited Securities without any further act or writing, and shall be subject to the direction of the successor depositary. The successor depositary so appointed shall, nevertheless, on the written request of any Custodian, execute and deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete power and authority to act on the direction of such successor depositary. Section 5.6 Notices and Reports. As soon as practicable after the first date on which the Company gives notice, by publication or otherwise, of any meeting of holders of Shares or 54 57 other Deposited Securities, or of any adjourned meeting of such holders, or of the taking of any action by such holders other than at a meeting, or of the taking of any action in respect of any cash or other distributions or the offering of any rights in respect of Deposited Securities, the Company shall transmit to the Depositary and the Custodian a copy of the notice thereof in the English language but otherwise in the form given or to be given to holders of Shares or other Deposited Securities. The Company shall also furnish to the Custodian and the Depositary a summary, in English, of any applicable provisions or proposed provisions of the Memorandum and Articles of Association of the Company that may be relevant or pertain to such notice of meeting or be the subject of a vote thereat. The Company will also transmit to the Depositary (a) an English language version of the other notices, reports and communications which are made generally available by the Company to holders of its Shares or other Deposited Securities and (b) the English-language versions of the Company's annual and semi-annual reports prepared in accordance with the applicable requirements of the Commission. The Depositary shall arrange, at the request of the Company and at the Company's expense, for the mailing of copies thereof to all Holders or make such notices, reports and other communications available to all Holders on a basis similar to that for holders of Shares or other Deposited Securities or on such other basis as the Company may advise the Depositary or as may be required by any applicable law, regulation or stock exchange requirement. The Company has delivered to the Depositary and the Custodian a copy of the Company's Memorandum and Articles of Association along with the provisions of or governing the Shares and any other Deposited Securities issued by the Company or any Affiliate of the Company in connection with such Shares, and promptly upon any amendment thereto or change 55 58 therein, the Company shall deliver to the Depositary and the Custodian a copy of such amendment thereto or change therein. The Depositary may rely upon such copy for all purposes of this Deposit Agreement. The Depositary will, at the expense of the Company, make available a copy of any such notices, reports or communications issued by the Company and delivered to the Depositary for inspection by the Holders of the Receipts evidencing the American Depositary Shares representing such Shares governed by such provisions at the Depositary's Principal Office, at the office of the Custodian and at any other designated transfer office. Section 5.7 Issuance of Additional Shares, ADSs etc. The Company agrees that in the event it or any of its Affiliates proposes (i) an issuance, sale or distribution of additional Shares, (ii) an offering of rights to subscribe for Shares or other Deposited Securities, (iii) an issuance of securities convertible into or exchangeable for Shares, (iv) an issuance of rights to subscribe for securities convertible into or exchangeable for Shares, (v) an elective dividend of Shares, (vi) a meeting of holders of Deposited Securities, or solicitation of consents or proxies, relating to any reclassification of securities, merger or consolidation or transfer of assets, or (vii) any reclassification, recapitalization, reorganization, merger, consolidation or sale of assets, and in the event that any such transaction affects the Deposited Securities, the Company, if requested by the Depositary, will furnish to the Depositary (a) a written opinion of U.S. counsel (reasonably satisfactory to the Depositary) stating whether or not application of such transaction to Holders and Beneficial Owners (1) requires a registration statement under the Securities Act to be in effect or (2) is exempt from the registration requirements of the Securities Act and (b) an opinion of Singapore counsel stating that (1) making the transaction available to Holders and Beneficial 56 59 Owners does not violate the laws or regulations of Singapore and (2) all requisite regulatory consents and approvals have been obtained in Singapore. The Company further agrees that in the event it or any of its Affiliates proposes a redemption of Deposited Securities, the Company, if requested by the Depositary, will furnish to the Depositary an opinion of Singapore counsel satisfying the requirements of (b) above. If the filing of a registration statement is required, the Depositary shall not have any obligation to proceed with the transaction unless it shall have received evidence reasonably satisfactory to it that such registration statement has been declared effective. If, being advised by counsel, the Company determines that a transaction is required to be registered under the Securities Act, the Company will either (i) register such transaction to the extent necessary, (ii) alter the terms of the transaction to avoid the registration requirements of the Securities Act or (iii) direct the Depositary to take specific measures, in each case as contemplated in this Deposit Agreement, to prevent such transaction from violating the registration requirements of the Securities Act. The Company agrees with the Depositary that neither the Company nor any of its Affiliates will at any time (i) deposit any Shares or other Deposited Securities, either upon original issuance or upon a sale of Shares or other Deposited Securities previously issued and reacquired by the Company or by any such Affiliate, or (ii) issue additional Shares, rights to subscribe for such Shares, securities convertible into or exchangeable for Shares or rights to subscribe for such securities, unless such transaction and the securities issuable in such transaction are exempt from registration under the Securities Act and, if applicable, the Exchange Act or have been registered under the Securities Act and, if applicable, the Exchange Act (and such registration statement has been declared effective). 57 60 Notwithstanding anything else contained in this Deposit Agreement, nothing in this Deposit Agreement shall be deemed to obligate the Company to file any registration statement in respect of any proposed transaction. Section 5.8 Indemnification. The Depositary agrees to indemnify the Company and its directors, officers, employees, agents and Affiliates against, and hold each of them harmless from, any direct loss, liability, tax, charge or expense of any kind whatsoever (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted under the terms hereof due to the negligence or bad faith of (i) the Depositary, (ii) any custodian, registrar or transfer agent which is a subsidiary (as such term is defined under Regulation C of the Securities Act) or branch of the Depositary, and (iii) any other Citibank entities performing the function of custodian, registrar or transfer agent. The Company agrees to indemnify the (i) the Depositary, (ii) any custodian, registrar or transfer agent which is a subsidiary (as such term is defined under Regulation C of the Securities Act) or branch of the Depositary and (iii) any other Citibank entities performing the function of custodian, registrar or transfer agent, and any of their respective directors, officers, employees, agents and Affiliates (each, an "Indemnified Person") against, and hold each of them harmless from, any direct loss, liability, tax, charge or expense of any kind whatsoever (including, but not limited to, the reasonable fees and expenses of counsel) that may arise out of acts performed or omitted (x) at the instruction and on behalf of the Company pursuant to the provisions of this Deposit Agreement or the Receipts by an Indemnified Person, except to the extent such loss, liability, tax, charge or expense is due to the negligence or bad faith of such Indemnified Person, 58 61 or (y) by the Company or any of its directors, officers, employees, agents and Affiliates pursuant to the provisions of this Deposit Agreement or the Receipts. The Company shall not be liable for any loss or liability or expense which arises out of information (or omissions from such information) relating to the Indemnified Persons, furnished in writing to the Company by such Indemnified Person expressly for use in any registration statement, proxy statement or prospectus under the Securities Act. The obligations set forth in this Section shall survive the termination of this Deposit Agreement and the succession or substitution of any party hereto. Any person seeking indemnification hereunder (an "indemnified person") shall notify the person from whom it is seeking indemnification (the "indemnifying person") of the commencement of any indemnifiable action or claim promptly after such indemnified person becomes aware of such commencement (provided that the failure to make such notification shall not affect such indemnified person's rights to seek indemnification except to the extent the indemnifying person is materially prejudiced by such failure) and shall consult in good faith with the indemnifying person as to the conduct of the defense of such action or claim that may give rise to an indemnity hereunder, which defense shall be reasonable in the circumstances. No indemnified person shall compromise or settle any action or claim that may give rise to an indemnity hereunder without the consent of the indemnifying person, which consent shall not be unreasonably withheld. Section 5.9 Fees and Charges of Depositary. The Company, the Holders, the Beneficial Owners, and persons depositing Shares or surrendering ADSs for cancellation and withdrawal of Deposited Securities shall be required to pay to the Depositary the Depositary's 59 62 fees and related charges identified as payable by them respectively in the Fee Schedule attached hereto as Exhibit B. All fees and charges so payable may, at any time and from time to time, be changed by agreement between the Depositary and the Company, but, in the case of fees and charges payable by Holders and Beneficial Owners, only in the manner contemplated in Section 6.1. The Depositary shall provide, without charge, a copy of its latest fee schedule to anyone upon request. The Company agrees to promptly pay to the Depositary such other fees and charges and to reimburse the Depositary for such out-of-pocket expenses as the Depositary and the Company may agree to in writing from time to time. Responsibility for payment of such charges may at any time and from time to time be changed by agreement in writing between the Company and the Depositary. Unless otherwise agreed, the Depositary shall present its statement for such expenses and fees or charges to the Company once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary. Notwithstanding any provision to the contrary in this Deposit Agreement, the fees and expenses payable by the Company to the Depositary shall be paid in accordance with arrangements previously agreed to in writing between the Company and the Depositary, as well as any further agreements which the Depositary and the Company may agree to in writing from time to time, which terms shall govern in the event of an inconsistency between such agreements and this Deposit Agreement. The right of the Depositary to receive payment of fees, charges and expenses as provided above shall survive the termination of this Deposit Agreement. As to any Depositary, upon the resignation or removal of such Depositary as described in Section 5.4 hereof, such right shall 60 63 extend for those fees, charges and expenses incurred prior to the effectiveness of such resignation or removal. Section 5.10 Pre-Release. Subject to the further terms and provisions of this Section 5.10, the Depositary, its Affiliates and their agents, on their own behalf, may own and deal in any class of securities, including ADSs, of the Company and its Affiliates. In its capacity as Depositary, the Depositary shall not lend Shares or ADSs; provided, however, that the Depositary may (i) issue ADSs prior to the receipt of Shares pursuant to Section 2.3 and (ii) deliver Shares prior to the receipt of ADSs for withdrawal of Deposited Securities pursuant to Section 2.7, including ADSs which were issued under (i) above but for which Shares may not have been received (each such transaction a "Pre-Release Transaction"). The Depositary may receive ADSs in lieu of Shares under (i) above and receive Shares in lieu of ADSs under (ii) above. Each such Pre-Release Transaction will be (a) subject to a written agreement whereby the person or entity (the "Applicant") to whom ADSs or Shares are to be delivered (w) represents that at the time of the Pre-Release Transaction the Applicant or its customer owns the Shares or ADSs that are to be delivered by the Applicant under such Pre-Release Transaction, (x) agrees to indicate the Depositary as owner of such Shares or ADSs in its records and to hold such Shares or ADSs in trust for the Depositary until such Shares or ADSs are delivered to the Depositary or the Custodian, (y) unconditionally guarantees to deliver to the Depositary or the Custodian, as applicable, such Shares or ADSs, and (z) agrees to any additional restrictions or requirements that the Depositary deems appropriate, (b) at all times fully collateralized with cash, United States government securities or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days' notice and (d) subject to 61 64 such further indemnities and credit regulations as the Depositary deems appropriate. The Depositary will normally limit the number of ADSs and Shares involved in such Pre-Release Transactions at any one time to thirty percent (30%) of the ADSs outstanding (without giving effect to ADSs outstanding under (i) above), provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems reasonably appropriate. The Depositary may also set limits with respect to the number of ADSs and Shares involved in Pre-Release Transactions with any one person on a case by case basis as it deems reasonably appropriate. The Depositary may retain for its own account any compensation received by it in conjunction with the foregoing. Collateral provided pursuant to (b) above, but not the earnings thereon, shall be held for the benefit of the Holders (other than the Applicant). Section 5.11 Restricted Securities Owners. The Company agrees to provide the Depositary a list setting forth each of the persons who, to the actual knowledge of the Company, holds Restricted Securities and agrees to advise each of the persons so listed that such Restricted Securities are ineligible for deposit hereunder, except as contemplated by Section 2.12 hereof. Upon each issuance by the Company of any securities that are Restricted Securities, the Company shall provide the Depositary with an updated list setting forth, to the actual knowledge of the Company, those persons who beneficially acquired Restricted Securities, and shall advise each of the persons so listed but not previously notified that such Restricted Securities are ineligible for deposit hereunder, except as contemplated by Section 2.12 hereof. The Depositary may rely on such a list or update but shall not be liable for any action or omission made in reliance thereon. The Company shall establish reasonable procedures to reasonably ensure that 62 65 such Restricted Securities are not deposited hereunder by the holders thereof except as contemplated by Section 2.12 hereof. ARTICLE 6. AMENDMENT AND TERMINATION Section 6.1 Amendment/Supplement. The Receipts outstanding at any time, the provisions of this Deposit Agreement and the form of Receipt attached thereto and to be issued under the terms thereof may at any time and from time to time be amended or supplemented by written agreement between the Company and the Depositary in any respect which they may deem necessary or desirable without the prior written consent of the Holders or Beneficial Owners. Any amendment or supplement which shall impose or increase any fees or charges (other than charges in connection with foreign exchange control regulations, and taxes and other governmental charges, delivery and other such expenses), or which shall otherwise materially prejudice any substantial existing right of Holders or Beneficial Owners, shall not, however, become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment or supplement shall have been given to the Holders of outstanding Receipts. The parties hereto agree that any amendments or supplements which (i) are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the American Depositary Shares to be registered on Form F-6 under the Securities Act or (b) the American Depositary Share(s) to be traded solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to materially prejudice any substantial rights of Holders or Beneficial Owners. Every Holder and Beneficial Owner at the 63 66 time any amendment or supplement so becomes effective shall be deemed, by continuing to hold such American Depositary Share(s), to consent and agree to such amendment or supplement and to be bound by this Deposit Agreement as amended and supplemented thereby. In no event shall any amendment or supplement impair the right of the Holder to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law. Notwithstanding the foregoing, if any governmental body should adopt new laws, rules or regulations which would require amendment or supplement of this Deposit Agreement to ensure compliance therewith, the Company and the Depositary may amend or supplement this Deposit Agreement and the Receipt at any time in accordance with such changed laws, rules or regulations. Such amendment or supplement to this Deposit Agreement in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance with such laws, rules or regulations. Section 6.2 Termination. The Depositary shall, at any time at the written direction of the Company, terminate this Deposit Agreement by mailing notice of such termination to the Holders of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. If 60 days shall have expired after (i) the Depositary shall have delivered to the Company a written notice of its election to resign, or (ii) the Company shall have delivered to the Depositary a written notice of the removal of the Depositary, and in either case a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.4, the Depositary may terminate this Deposit Agreement by mailing notice of such termination to the Holders of all Receipts then outstanding at least 30 days prior to the date fixed for such 64 67 termination. On and after the date of termination of this Deposit Agreement, the Holder will, upon surrender of such Receipt at the Principal Office of the Depositary, upon the payment of the charges of the Depositary for the surrender of Receipts referred to in Section 2.7 and subject to the conditions and restrictions therein set forth, and upon payment of any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by such Receipt. If any Receipts shall remain outstanding after the date of termination of this Deposit Agreement, the Registrar thereafter shall discontinue the registration of transfers of Receipts, and the Depositary shall suspend the distribution of dividends to the Holders thereof, and shall not give any further notices or perform any further acts under this Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in this Deposit Agreement, and shall continue to deliver Deposited Securities, subject to the conditions and restrictions set forth in Section 2.7, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, or charging, as the case may be, in each case, the charges of the Depositary for the surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of this Deposit Agreement and any applicable taxes or governmental charges or assessments). At any time after the expiration of six months from the date of termination of this Deposit Agreement, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, in an unsegregated account, without liability for interest for the pro rata benefit of the 65 68 Holders of Receipts whose Receipts have not theretofore been surrendered. After making such sale, the Depositary shall be discharged from all obligations under this Deposit Agreement with respect to the Receipts, the Deposited Securities and the American Depositary Shares, except to account for such net proceeds and other cash (after deducting, or charging, as the case may be, in each case, the charges of the Depositary for the surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of this Deposit Agreement and any applicable taxes or governmental charges or assessments). Upon the termination of this Deposit Agreement, the Company shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary under Sections 5.8, 5.9 and 7.6 hereof. ARTICLE 7. MISCELLANEOUS Section 7.1 Counterparts. This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts together shall constitute one and the same agreement. Copies of this Deposit Agreement shall be maintained with the Depositary and shall be open to inspection by any Holder during business hours. Section 7.2 No Third-Party Beneficiaries. This Deposit Agreement is for the exclusive benefit of the parties hereto (and their successors) and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person or entity, except to the extent specifically set forth in this Deposit Agreement. Nothing in this Deposit Agreement shall be deemed to give rise to a partnership or joint venture among the parties nor establish a fiduciary or similar relationship among the parties. The parties hereto acknowledge and agree 66 69 that (i) the Depositary and its Affiliates may at any time have multiple banking relationships with the Company and its Affiliates, (ii) the Depositary and its Affiliates may be engaged at any time in transactions in which parties adverse to the Company or the Holders or Beneficial Owners may have interests and (iii) nothing contained in this Agreement shall (a) preclude the Depositary or any of its Affiliates from engaging in such transactions or establishing or maintaining such relationships, (b) obligate the Depositary or any of its Affiliates to disclose such transactions or relationships or to account for any profit made or payment received in such transactions or relationships. Section 7.3 Severability. In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby. Section 7.4 Holders and Beneficial Owners as Parties; Binding Effect. The Holders and Beneficial Owners from time to time of American Depositary Shares shall be parties to this Deposit Agreement and shall be bound by all of the terms and conditions thereof and of any Receipt by acceptance thereof of any beneficial interest therein. Section 7.5 Notices. Any and all notices to be given to the Company shall be deemed to have been duly given if personally delivered or sent by mail, air courier or cable, telex or facsimile transmission, confirmed by letter, addressed to ST Assembly Test Services Ltd, 5 Yishun 23, Singapore 768442, Republic of Singapore, Attention: Legal Department, or to any other address which the Company may specify in writing to the Depositary. 67 70 Any and all notices to be given to the Depositary shall be deemed to have been duly given if personally delivered or sent by mail, air courier or cable, telex or facsimile transmission, confirmed by letter, addressed to Citibank, N.A., 111 Wall Street, New York, New York 10043, U.S.A. Attention: ADR Department, or to any other address which the Depositary may specify in writing to the Company. Any and all notices to be given to the Custodian shall be deemed to have been duly given if personally delivered or sent by mail, air courier or cable, telex or facsimile transmission, confirmed by letter, addressed to Citibank Nominees Singapore Pte Ltd, 300 Tampines Avenue #07-00, Tampines Junction, Singapore 529653 or to any other address which the Custodian may specify in writing to the Company. Any and all notices to be given to any Holder shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission, confirmed by letter, addressed to such Holder at the address of such Holder as it appears on the transfer books for Receipts of the Depositary, or, if such Holder shall have filed with the Depositary a written request that notices intended for such Holder be mailed to some other address, at the address specified in such request. Notice to Holders shall be deemed to be notice to Beneficial Owners for all purposes of this Deposit Agreement. Delivery of a notice sent by mail, air courier or cable, telex or facsimile transmission shall be deemed to be effective at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post-office letter box or delivered to an air courier service. The Depositary or the Company may, however, act upon any cable, telex or facsimile transmission received by it from 68 71 the other or from any Holder, notwithstanding that such cable, telex or facsimile transmission shall not subsequently be confirmed by letter as aforesaid. Section 7.6 Governing Law and Jurisdiction. This Deposit Agreement and the Receipts shall be interpreted in accordance with, and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by, the laws of the State of New York without reference to the principles of choice of law thereof. Notwithstanding anything contained in this Deposit Agreement, any Receipt or any present or future provisions of the laws of the State of New York, the rights of holders of Shares and of any other Deposited Securities and the obligations and duties of the Company in respect of the holders of Shares and other Deposited Securities, as such, shall be governed by the laws of Singapore (or, if applicable, such other laws as may govern the Deposited Securities). Except as set forth in the following paragraph of this Section 7.6, the Company and the Depositary agree that the federal or state courts in the City of New York shall have jurisdiction to hear and determine any suit, action or proceeding and to settle any dispute between them that may arise out of or in connection with this Deposit Agreement and, for such purposes, each irrevocably submits to the non-exclusive jurisdiction of such courts. The Company hereby irrevocably designates, appoints and empowers the president of Singapore Technologies Assembly and Test Services, Inc. (the "Agent") now at 1450 McCandless Drive, Milpitas, California 95035 as its authorized agent to receive and accept for and on its behalf, and on behalf of its properties, assets and revenues, service by mail of any and all legal process, summons, notices and documents that may be served in any suit, action or proceeding brought against the Company in any federal or state court as described in the preceding sentence or in the next 69 72 paragraph of this Section 7.6. If for any reason the Agent shall cease to be available to act as such, the Company agrees to designate a new agent on the terms and for the purposes of this Section 7.6 reasonably satisfactory to the Depositary. The Company further hereby irrevocably consents and agrees to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding against the Company, by service by mail of a copy thereof upon the Agent (whether or not the appointment of such Agent shall for any reason prove to be ineffective or such Agent shall fail to accept or acknowledge such service), with a copy mailed to the Company by registered or certified air mail, postage prepaid, to its address provided in Section 7.5 hereof. The Company agrees that the failure of the Agent to give any notice of such service to it shall not impair or affect in any way the validity of such service or any judgment rendered in any action or proceeding based thereon. Notwithstanding the foregoing, the Depositary and the Company unconditionally agree that in the event that a Holder or Beneficial Owner brings a suit, action or proceeding against (a) the Company, (b) the Depositary in its capacity as Depositary under this Deposit Agreement or (c) against both the Company and the Depositary, in any such case, in any state or federal court of the United States, and the Depositary or the Company have any claim, for indemnification or otherwise, against each other arising out of the subject matter of such suit, action or proceeding, then the Company and the Depositary may pursue such claim against each other in the state or federal court in the United States in which such suit, action, or proceeding is pending and, for such purposes, the Company and the Depositary irrevocably submit to the non-exclusive jurisdiction of such courts. The Company agrees that service of process upon the Agent in the 70 73 manner set forth in the preceding paragraph shall be effective service upon it for any suit, action or proceeding brought against it as described in this paragraph. The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any actions, suits or proceedings brought in any court as provided in this Section 7.6, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, and agrees not to plead or claim, any right of immunity from legal action, suit or proceeding, from setoff or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution or judgment, from execution of judgment, or from any other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, and consents to such relief and enforcement against it, its assets and its revenues in any jurisdiction, in each case with respect to any matter arising out of, or in connection with, this Deposit Agreement, any Receipt or the Deposited Securities. No disclaimer of liability under the Securities Act is intended by any provision of this Deposit Agreement. The provisions of this Section 7.6 shall survive any termination of this Deposit Agreement, in whole or in part. Section 7.7 Assignment. Subject to the provisions of Section 5.4 hereof, this Deposit Agreement may not be assigned by either the Company or the Depositary. 71 74 Section 7.8 Compliance with U.S. Securities Laws. Notwithstanding anything in this Deposit Agreement to the contrary, the withdrawal or delivery of Deposited Securities will not be suspended by the Company or the Depositary except as would be permitted by Instruction I.A.(1) of the General Instructions to Form F-6 Registration Statement, as amended from time to time, under the Securities Act. Section 7.9 Titles. All references in this Deposit Agreement to exhibits, articles, sections, subsections, and other subdivisions refer to the exhibits, articles, sections, subsections and other subdivisions of this Deposit Agreement unless expressly provided otherwise. The words "this Deposit Agreement", "herein", "hereof", "hereby", "hereunder", and words of similar import refer to this Deposit Agreement as a whole as in effect between the Company, the Depositary and the Holders and Beneficial Owners of ADSs and not to any particular subdivision unless expressly so limited. Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires. Titles to sections of this Deposit Agreement are included for convenience only and shall be disregarded in construing the language contained in this Deposit Agreement. 72 75 IN WITNESS WHEREOF, ST ASSEMBLY TEST SERVICES LTD and CITIBANK, N.A. have duly executed this Deposit Agreement as of the day and year first above set forth and all Holders and Beneficial Owners shall become parties hereto upon acceptance by them of American Depositary Shares evidenced by Receipts issued in accordance with the terms hereof, or upon acquisition of any beneficial interest therein. ST ASSEMBLY TEST SERVICES LTD By: -------------------------------- Name: Title: CITIBANK, N.A. By: -------------------------------- Name: Title: 73 76 EXHIBIT A [FORM OF RECEIPT] Number CUSIP NUMBER: AMERICAN DEPOSITARY RECEIPT FOR AMERICAN DEPOSITARY SHARES representing DEPOSITED ORDINARY SHARES of ST ASSEMBLY TEST SERVICES LTD (Incorporated under the laws of the Republic of Singapore) CITIBANK, N.A., a national banking association organized and existing under the laws of the United States of America, as depositary (the "Depositary"), hereby certifies that _____________is the owner of ______________ American Depositary Shares (hereinafter "ADS"), representing deposited ordinary shares, each of Par Value of S$0.25, including evidence of rights to receive such ordinary shares (the "Shares") of ST Assembly Test Services Ltd, a corporation incorporated under the laws of the Republic of Singapore (the "Company"). As of the date of the Deposit Agreement (as hereinafter defined), each ADS represents ten (10) Shares deposited under the Deposit Agreement with the Custodian, which at the date of execution of the Deposit Agreement is Citibank Nominees Singapore Pte Ltd (the "Custodian"). The ratio of 1 77 American Depositary Shares to Shares is subject to amendment as provided in Article IV of the Deposit Agreement. The Depositary's Principal Office is located at 111 Wall Street, New York, New York 10043, U.S.A. (1) The Deposit Agreement. This American Depositary Receipt is one of an issue of American Depositary Receipts ("Receipts"), all issued and to be issued upon the terms and conditions set forth in the Deposit Agreement, dated as of February 8, 2000 (as amended from time to time, the "Deposit Agreement"), by and among the Company, the Depositary, and all Holders and Beneficial Owners from time to time of American Depositary Shares ("ADSs") evidenced by Receipts issued thereunder, each of whom by accepting an ADS (or an interest therein) agrees to become a party thereto and becomes bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights and obligations of Holders and Beneficial Owners of Receipts and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Shares and held thereunder (such Shares, securities, property and cash are herein called "Deposited Securities"). Copies of the Deposit Agreement are on file at the Principal Office of the Depositary and with the Custodian. The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and the Memorandum and Articles of Association of the Company (as in effect on the date of the signing of the Deposit Agreement) and are qualified by and subject to the detailed provisions of the Deposit Agreement and the Memorandum and Articles of Association, to which reference is hereby made. All capitalized terms used herein which are not otherwise defined herein shall have the meanings ascribed thereto in the Deposit 2 78 Agreement. The Depositary makes no representation or warranty as to the validity or worth of the Deposited Securities. The Depositary has made arrangements for the acceptance of the ADSs into DTC. Each Beneficial Owner of ADSs held through DTC must rely on the procedures of DTC and the DTC Participants to exercise and be entitled to any rights attributable to such ADSs. (2) Surrender of Receipts and Withdrawal of Deposited Securities. The Holder of this Receipt (and of the ADSs evidenced hereby) shall be entitled to Delivery (at the Custodian's designated office) of the Deposited Securities at the time represented by the ADS(s) evidenced hereby upon satisfaction of each of the following conditions: (i) the Holder (or a duly authorized attorney of the Holder) has duly Delivered to the Depositary at its Principal Office the ADSs evidenced hereby (and, if applicable, this Receipt) for the purpose of withdrawal of the Deposited Securities represented thereby, (ii) if so required by the Depositary, this Receipt has been properly endorsed in blank or is accompanied by proper instruments of transfer in blank (including signature guarantees in accordance with standard securities industry practice), (iii) if so required by the Depositary, the Holder of the ADSs has executed and delivered to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be Delivered to or upon the written order of the person(s) or entity(ies) designated in such order, and (iv) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B of the Deposit Agreement) have been paid, subject, however, in each case, to the terms and conditions of this Receipt, of the Deposit Agreement, of the Company's Memorandum and Articles of Association and of any applicable laws and the rules of the CDP, 3 79 and to any provisions of or governing the Deposited Securities, in each case as in effect at the time thereof. Upon satisfaction of each of the conditions specified above, the Depositary (i) shall cancel the ADSs Delivered to it (and, if applicable, the Receipt evidencing the ADSs so Delivered), (ii) shall direct the Registrar to record the cancellation of the ADSs so Delivered on the books maintained for such purpose, and (iii) shall direct the Custodian to Deliver (without unreasonable delay) at the Custodian's designated office the Deposited Securities represented by the ADSs so cancelled together with any certificate or other document of or relating to title for the Deposited Securities, or evidence of the electronic transfer thereof (if available), as the case may be, to or upon the written order of the person(s) or entity(ies) designated in the order delivered to the Depositary for such purpose, subject however, in each case, to the terms and conditions of the Deposit Agreement, of this Receipt, of the Memorandum and Articles of Association of the Company, of applicable laws and of the rules of the CDP, and to the terms and conditions of or governing the Deposited Securities, in each case as in effect at the time thereof. The Depositary shall not accept for surrender ADSs representing less than one Share. In the case of surrender of ADSs representing other than a whole number of Shares, the Depositary shall cause ownership of the appropriate whole number of Shares to be Delivered in accordance with the terms hereof, and shall, at the discretion of the Depositary, either (i) return to the person or entity surrendering such ADSs the number of ADSs representing any remaining fractional Share, or (ii) sell or cause to be sold the fractional Shares represented by the ADSs so surrendered and remit the proceeds of such sale (net of (a) applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to the person or entity surrendering 4 80 the ADSs. Notwithstanding anything else contained in this Receipt or the Deposit Agreement, the Depositary may make delivery at the Principal Office of (i) any cash dividends or cash distributions, or (ii) any proceeds from the sale of any distributions of stock or rights, which may at the time be held by the Depositary in respect of the Deposited Securities represented by the ADSs evidenced by this Receipt. At the request, risk and expense of any Holder surrendering ADSs represented by this Receipt, and for the account of such Holder, the Depositary shall direct the Custodian to forward (to the extent permitted by law) any cash or other property (other than securities) held by the Custodian in respect of the Deposited Securities represented by such ADSs to the Depositary for delivery at the Principal Office of the Depositary. Such direction shall be given by letter or, at the request, risk and expense of such Holder, by cable, telex or facsimile transmission. (3) Transfer, Combination and Split-Up of Receipts. (a) Transfer. The Registrar shall, without unreasonable delay, register the transfer of this Receipt (and of the ADSs represented thereby) on the books maintained for such purpose and the Depositary shall cancel this Receipt and execute new Receipts evidencing the same aggregate number of ADSs as those evidenced by this Receipt when cancelled, shall cause the Registrar to countersign such new Receipts, and shall Deliver such new Receipts to or upon the order of the person or entity entitled thereto, if each of the following conditions has been satisfied: (i) this Receipt has been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a transfer thereof, (ii) this Receipt has been properly endorsed or is accompanied by proper instruments of transfer (including signature guarantees in accordance with standard securities industry practice), (iii) this Receipt has been duly stamped (if 5 81 required by the laws of the State of New York or of the United States), and (iv) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B to the Deposit Agreement) have been paid, in each case, however, subject to the terms and conditions of this Receipt, of the Deposit Agreement and of applicable law, in each case as in effect at the time thereof. (b) Combination and Split-Up. The Registrar shall, without unreasonable delay, register the split-up or combination of this Receipt (and of the ADSs represented hereby) on the books maintained for such purpose and the Depositary shall cancel this Receipt and execute new Receipts for the number of ADSs requested, but in the aggregate not exceeding the number of ADSs evidenced by this Receipt (when cancelled), shall cause the Registrar to countersign such new Receipts, and shall Deliver such new Receipts to or upon the order of the Holder thereof, if each of the following conditions has been satisfied: (i) this Receipt has been duly Delivered by the Holder (or by a duly authorized attorney of the Holder) to the Depositary at its Principal Office for the purpose of effecting a split-up or combination hereof, and (ii) all applicable fees and charges of, and expenses incurred by, the Depositary and all applicable taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B to the Deposit Agreement) have been paid, subject, however, in each case, to the terms and conditions of this Receipt, of the Deposit Agreement and of applicable law, in each case, as in effect at the time thereof. (4) Pre-Conditions to Registration, Transfer, Etc. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any Receipt or withdrawal of any Deposited Securities, the Depositary or the Custodian may require (i) payment from the depositor of Shares or presenter of ADSs or of a Receipt of a sum sufficient to 6 82 reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax, charge or fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees and charges of the Depositary as provided in the Deposit Agreement and in this Receipt, (ii) the production of proof satisfactory to it as to the identity and genuineness of any signature or any other matters and (iii) compliance with (A) any laws or governmental regulations relating to the execution and delivery of Receipts and ADSs or to the withdrawal of Deposited Securities and (B) such reasonable regulations of the Depositary or the Company consistent with the Deposit Agreement and applicable law. The issuance of ADSs against deposits of Shares generally or against deposits of particular Shares may be suspended, or the delivery of ADSs against the deposit of particular Shares may be withheld, or the registration of transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts generally may be suspended, during any period when the transfer books of the Company, Depositary, a Registrar or the Share Registrar are closed or if any such action is deemed necessary or advisable by the Depositary or the Company, in good faith, at any time or from time to time because of any requirement of law, any government or governmental body or commission or any securities exchange upon which the Receipts or Shares are listed, or under any provision of the Deposit Agreement or provisions of, or governing, the Deposited Securities or any meeting of shareholders of the Company or for any other reason, subject in all cases to Article (24) hereof. Notwithstanding any provision of the Deposit Agreement or this Receipt to the contrary, Holders are entitled to surrender outstanding ADSs to withdraw the Deposited Securities at any time subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares 7 83 in connection with voting at a shareholders' meeting or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities, and (iv) other circumstances specifically contemplated by Section I.A.(l) of the General Instructions to Form F-6 (as such General Instructions may be amended from time to time). (5) Compliance With Information Requests. Notwithstanding any other provision of the Deposit Agreement or this Receipt, each Holder and Beneficial Owner of the ADSs represented hereby agrees to comply with requests from the Company pursuant to Singapore law, the rules and requirements of the Singapore Exchange Securities Trading Limited, and of any stock exchange on which Shares or ADSs are or will be registered, traded or listed, the rules and requirements of the CDP or any other clearing system through which transactions in the Shares may be settled or the Memorandum and Articles of Association of the Company, which are made to provide information as to the capacity in which such Holder or Beneficial Owner owns ADSs (and Shares, as the case may be) and regarding the identity of any other persons then or previously interested in such ADSs and the nature of such interest and various other matters, whether or not they are Holders and/or Beneficial Owners at the time of such request. The Depositary agrees to use reasonable efforts to forward, upon the request of the Company, any such requests to the Holders and to forward to the Company any such responses to such requests received by the Depositary. (6) Ownership Restrictions. The Company may restrict transfers of the Shares where such transfer might result in ownership of Shares exceeding limits under applicable law or the 8 84 Memorandum and Articles of Association of the Company. The Company may also restrict, in such manner as it deems appropriate, transfers of ADSs where such transfer may result in the total number of Shares represented by the ADSs owned by a single Holder or Beneficial Owner to exceed any such limits. The Company may, in its sole discretion but subject to applicable law, instruct the Depositary to take action with respect to the ownership interest of any Holder or Beneficial Owner in excess of the limits set forth in the preceding sentence, including but not limited to the imposition of restrictions on the transfer of ADSs, the removal or limitation of voting rights or a mandatory sale or disposition on behalf of a Holder or Beneficial Owner of the Shares represented by the ADSs held by such Holder or Beneficial Owner in excess of such limitations, if and to the extent such disposition is permitted by applicable law and the Memorandum and Articles of Association of the Company. (7) Liability of Holder for Taxes, Duties and Other Charges. If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities or ADSs, such tax, or other governmental charge shall be payable by the Holders and Beneficial Owners to the Depositary. The Company, the Custodian and/or Depositary may withhold or deduct from any distributions made in respect of Deposited Securities and may sell for the account of the Holder and/or Beneficial Owner any or all of the Deposited Securities and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, the Holder and the Beneficial Owner hereof remaining liable for any deficiency. The Custodian may refuse the deposit of Shares and the Depositary may refuse to issue ADSs, to deliver Receipts, register the transfer, split-up or combination of ADRs and (subject to Article (24) hereof) the withdrawal of Deposited Securities until payment in full of 9 85 such tax, charge, penalty or interest is received. Every Holder and Beneficial Owner agrees to indemnify the Depositary, the Company, the Custodian and any of their agents, employees and Affiliates for, and hold each of then harmless from, any claims with respect to taxes (including applicable interest and penalties thereon) arising from any tax benefit obtained for such Holder and/or Beneficial Owner. (8) Representations and Warranties of Depositors. Each person or entity depositing Shares under the Deposit Agreement shall be deemed thereby to represent and warrant that (i) such Shares (and the certificates therefor) are duly authorized, validly issued, fully paid and legally obtained by such person or entity, (ii) all preemptive (and similar) rights, if any, with respect to such Shares, have been validly waived or exercised, (iii) the person or entity making such deposit is duly authorized so to do, (iv) the Shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim and are not, except as contemplated in Section 2.12 therein, and the ADSs issuable upon such deposit will not be, except as contemplated in Section 2.12 therein, Restricted Securities; and (v) the Shares presented for deposit have not been stripped of any rights or entitlements. Such representations and warranties shall survive the deposit and withdrawal of Shares, the issuance and cancellation of ADSs in respect thereof and the transfer of such ADSs. If any such representations or warranties are false in any way, the Company and Depositary shall be authorized, at the cost and expense of the person or entity depositing Shares, to take any and all actions necessary to correct the consequences thereof. (9) Filing Proofs, Certificates and Other Information. Any person or entity presenting Shares for deposit, any Holder and any Beneficial Owner may be required, and every 10 86 Holder and Beneficial Owner agrees, from time to time to provide to the Depositary and the Custodian such proof of citizenship or residence, taxpayer status, payment of all applicable taxes or other governmental charges, exchange control approval, legal or beneficial ownership of ADSs and Deposited Securities, compliance with applicable laws and the terms of the Deposit Agreement and the provisions of, or governing, the Deposited Securities, to execute such certifications and to make such representations and warranties and to provide such other information or documentation (or, in the case of Shares in registered form presented for deposit, such information relating to the registration on the books of the Company or of the appointed agent of the Company for registration and transfer of Shares) as the Depositary or the Custodian may deem reasonably necessary or proper or as the Company may reasonably require by written request to the Depositary consistent with its obligations under the Deposit Agreement. Subject to Article (24) hereof and the terms of the Deposit Agreement, the Depositary and the Registrar, as applicable, may, and at the reasonable request of the Company, shall, withhold the delivery or registration of transfer of any Receipt or the distribution or sale of any dividend or other distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed, or such representations and warranties made or such information and documentation are provided, in each case to the Depositary's, the Registrar's and the Company's reasonable satisfaction. (10) Charges of Depositary. The Depositary shall charge the following fees for the services performed under the terms of the Deposit Agreement: (i) to any person or entity to whom ADSs are issued upon the deposit of Shares, a fee not in excess of U.S. $ 5.00 per 100 ADSs (or portion thereof) so issued under the 11 87 terms of the Deposit Agreement (excluding issuances pursuant to paragraph (iii) and (iv) below); (ii) to any person or entity surrendering ADSs for cancellation and withdrawal of Deposited Securities, a fee not in excess of U.S. $ 5.00 per 100 ADSs (or portion thereof) so surrendered; (iii) to any Holder of ADRs, a fee not in excess of U.S. $5.00 per 100 ADSs (or portion thereof) held for the distribution of (a) cash dividends or (b) ADSs pursuant to stock dividends (or other free distributions of stock); (iv) to any Holder of ADRs, a fee not in excess of U.S. $ 2.00 per 100 ADSs (or portion thereof) held for the distribution of cash proceeds (i.e. upon the sale of rights and other entitlements); and (v) to any Holder of ADRs, a fee not in excess of U.S. $ 5.00 per 100 ADSs (or portion thereof) issued upon the exercise of rights. In addition, Holders, Beneficial Owners, persons depositing Shares for deposit and persons surrendering ADSs for cancellation and withdrawal of Deposited Securities will be required to pay the following charges: (i) taxes (including applicable interest and penalties) and other governmental charges; (ii) such registration fees as may from time to time be in effect for the registration of Shares or other Deposited Securities on the share register and applicable to transfers of Shares or other Deposited Securities to or from the name of the 12 88 Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively; (iii) such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person or entity depositing or withdrawing Shares or Holders and Beneficial Owners of ADSs; (iv) the expenses and charges incurred by the Depositary in the conversion of foreign currency; (v) such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Shares, Deposited Securities, ADSs and ADRs; and (vi) the fees and expenses incurred by the Depositary in connection with the delivery of Deposited Securities. Any other charges and expenses of the Depositary under the Deposit Agreement will be paid by the Company upon agreement between the Depositary and the Company. All fees and charges may, at any time and from time to time, be changed by agreement between the Depositary and Company but, in the case of fees and charges payable by Holders or Beneficial Owners, only in the manner contemplated by Article (22) of this Receipt. The Depositary will provide, without charge, a copy of its latest fee schedule to anyone upon request. The charges and expenses of the Custodian are for the sole account of the Depositary. (11) Title to Receipts. It is a condition of this Receipt, and every successive Holder of this Receipt by accepting or holding the same consents and agrees, that title to this Receipt (and 13 89 to each ADS evidenced hereby) shall be transferable on the same terms as a certificated security under the laws of the State of New York, provided that the Receipt has been properly endorsed or is accompanied by proper instruments of transfer. Notwithstanding any notice to the contrary, the Depositary may deem and treat the Holder of this Receipt (that is, the person or entity in whose name this Receipt is registered on the books of the Depositary) as the absolute owner thereof for all purposes. Neither the Depositary nor the Company shall have any obligation nor be subject to any liability under the Deposit Agreement or this Receipt to any holder of this Receipt or any Beneficial Owner unless such holder is the Holder of this Receipt registered on the books of the Depositary or, in the case of a Beneficial Owner, such Beneficial Owner or the Beneficial Owner's representative is the Holder registered on the books of the Depositary. (12) Validity of Receipt. This Receipt (and the American Depositary Shares represented hereby) shall not be entitled to any benefits under the Deposit Agreement or be valid or enforceable for any purpose against the Depositary or the Company unless this Receipt has been (i) dated, (ii) signed by the manual or facsimile signature of a duly authorized signatory of the Depositary, (iii) countersigned by the manual or facsimile signature of a duly authorized signatory of the Registrar, and (iv) registered in the books maintained by the Registrar for the registration of issuances and transfers of Receipts. Receipts bearing the facsimile signature of a duly-authorized signatory of the Depositary or the Registrar, who at the time of signature was a duly authorized signatory of the Depositary or the Registrar, as the case may be, shall bind the Depositary, notwithstanding the fact that such signatory has ceased to be so authorized prior to the delivery of such Receipt by the Depositary. 14 90 (13) Available Information; Reports; Inspection of Transfer Books. The Company is subject to the periodic reporting requirements of the Exchange Act and accordingly files certain information with the Commission. These reports and documents can be inspected and copied at public reference facilities maintained by the Commission located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's New York City office located at Seven World Trade Center, 13th Floor, New York, New York 10048. The Depositary shall make available for inspection by Holders at its Principal Office any reports and communications, including any proxy soliciting materials, received from the Company which are both (a) received by the Depositary, the Custodian, or the nominee of either of them as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Registrar shall keep books for the registration of issuances and transfers of Receipts which at all reasonable times shall be open for inspection by the Company and by the Holders of such Receipts, provided that such inspection shall not be, to the Registrar's knowledge, for the purpose of communicating with Holders of such Receipts in the interest of a business or object other than the business of the Company or other than a matter related to the Deposit Agreement or the Receipts. 15 91 The Registrar may close the transfer books with respect to the Receipts, at any time or from time to time, when deemed reasonably necessary or advisable by it in good faith in connection with the performance of its duties hereunder, or at the reasonable written request of the Company subject, in all cases, to Article (24) hereof. Dated: CITIBANK, N.A., as Depositary Countersigned By: ----------------------------------------------------------------------------- Authorized Representative Vice President The address of the Principal Office of the Depositary is 111 Wall Street, New York, New York 10043, U.S.A. 16 92 [FORM OF REVERSE OF RECEIPT] SUMMARY OF CERTAIN ADDITIONAL PROVISIONS OF THE DEPOSIT AGREEMENT (14) Dividends and Distributions in Cash, Shares, etc. Whenever the Depositary receives confirmation from the Custodian of receipt of any cash dividend or other cash distribution on any Deposited Securities, or receives proceeds from the sale of any Shares, rights securities or other entitlements under the Deposit Agreement, the Depositary will, if at the time of receipt thereof any amounts received in a Foreign Currency can, in the reasonable judgment of the Depositary (upon the terms of the Deposit Agreement), be converted on a practicable basis into Dollars transferable to the United States, promptly convert or cause to be converted such dividend, distribution or proceeds into Dollars (upon the terms of the Deposit Agreement) and will distribute promptly the amount thus received (net of (a) applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to the Holders entitled thereto as of the ADS Record Date in proportion to the number of ADSs held as of the ADS Record Date. The Depositary shall distribute only such amount, however, as can be distributed without attributing to any Holder a fraction of one cent, and any balance not so distributed shall be held by the Depositary (without liability for interest thereon) and shall be added to and become part of the next sum received by the Depositary for distribution to Holders of ADSs then outstanding. If the Company, the Custodian or the Depositary is required to withhold and does withhold from any cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, duties or other governmental charges, the amount distributed to Holders of the 17 93 ADSs representing such Deposited Securities shall be reduced accordingly. Such withheld amounts shall be forwarded by the Company to the relevant governmental authority. If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Company shall cause such Shares to be deposited with the Custodian and registered, as the case may be, in the name of the Depositary, the Custodian or their nominees. Upon receipt of confirmation of such deposit from the Custodian, the Depositary shall, subject to and in accordance with the Deposit Agreement, establish the ADS Record Date and either (i) distribute to the Holders as of the ADS Record Date in proportion to the number of ADSs held as of the ADS Record Date, additional ADSs, which represent in aggregate the number of Shares received as such dividend, or free distribution, subject to the terms of the Deposit Agreement (including, without limitation, (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes), or (ii) if additional ADSs are not so distributed, each ADS issued and outstanding after the ADS Record Date shall, to the extent permissible by law, thenceforth also represent rights and interests in the additional integral number of Shares distributed upon the Deposited Securities represented thereby (net (a) of the applicable fees and charges of, and the expenses incurred by, the Depositary, and (b) taxes). In lieu of delivering fractional ADSs, the Depositary shall sell the number of Shares or ADSs, as the case may be, represented by the aggregate of such fractions and distribute the net proceeds upon the terms set forth in the Deposit Agreement. In the event that the Depositary determines that any distribution in property (including Shares) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, or, if the Company, in the fulfillment of its obligations under the Deposit Agreement, 18 94 has furnished an opinion of U.S. counsel determining that Shares must be registered under the Securities Act or other laws in order to be distributed to Holders (and no such registration statement has been declared effective), the Depositary may dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable and the Depositary shall distribute the net proceeds of any such sale (after deduction of (a) taxes and fees and (b) charges of, and expenses incurred by, the Depositary) to Holders entitled thereto upon the terms of the Deposit Agreement. The Depositary shall hold and/or distribute any unsold balance of such property in accordance with the provisions of the Deposit Agreement. Upon timely receipt of a notice indicating that the Company wishes an elective distribution to be made available to Holders upon the terms described in the Deposit Agreement, the Company and the Depositary shall determine whether such distribution is lawful and reasonably practicable. If so, the Depositary shall, to the extent permitted by law and subject to the terms and conditions of the Deposit Agreement, promptly distribute either (x) cash as in the case of a cash distribution or (y) additional ADSs representing such additional Shares as in the case of a distribution of Shares. In either case, the Depositary shall, subject to the terms and conditions of the Deposit Agreement, establish an ADS Record Date according to Article (16) and establish procedures to enable the Holder hereof to elect to receive the proposed distribution in cash or in additional ADSs. If a Holder elects to receive the distribution in cash, the dividend shall be distributed as in the case of a distribution in cash. If the Holder hereof elects to receive the distribution in additional ADSs, the distribution shall be distributed as in the case of a distribution in Shares. Nothing herein or in the Deposit Agreement shall obligate the Depositary 19 95 to make available to the Holder hereof a method to receive the elective distribution in Shares (rather than ADSs). There can be no assurance that the Holder hereof will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of Shares. Upon timely receipt by the Depositary of a notice indicating that the Company wishes rights to subscribe for additional Shares (or any rights of any other nature) to be made available to Holders of ADSs, the Depositary upon consultation with the Company, shall determine, whether it is lawful and reasonably practicable to make such rights available to the Holders. The Depositary shall promptly make such rights available to any Holders only if (i) the Company shall have requested that such rights be made available to Holders, (ii) the Depositary shall have received the documentation contemplated in the Deposit Agreement, and (iii) the Depositary shall have determined that such distribution of rights is reasonably practicable. If such conditions are not satisfied, the Depositary shall sell the rights as described below. In the event all conditions set forth above are satisfied, the Depositary shall establish an ADS Record Date (upon the terms described in the Deposit Agreement) and establish procedures to distribute rights to purchase additional ADSs (by means of warrants or otherwise) and to enable the Holders to exercise the rights (upon payment of applicable (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes). Nothing herein or in the Deposit Agreement shall obligate the Depositary to make available to the Holders a method to exercise rights to subscribe for Shares (rather than ADSs). If (i) the Company does not request the Depositary to make the rights available to Holders or if the Company requests that the rights not be made available to Holders, (ii) the 20 96 Depositary fails to receive the documentation required by the Deposit Agreement or determines it is not reasonably practicable to make the rights available to Holders, or (iii) any rights made available are not exercised and appear to be about to lapse, the Depositary upon consultation with the Company shall determine whether it is lawful and reasonably practicable to sell such rights, in a riskless principal capacity, at such place and upon such terms (including public and private sale) as it may deem proper. The Depositary shall, upon such sale, convert and distribute proceeds of such sale (net of applicable fees and charges of, and expenses incurred by, the Depositary and taxes) upon the terms hereof and of the Deposit Agreement. If the Depositary is unable to make any rights available to Holders or to arrange for the sale of the rights upon the terms described above, the Depositary shall allow such rights to lapse. Neither the Depositary nor the Company shall be responsible for (i) any failure to determine that it may be lawful or feasible to make such rights available to Holders in general or any Holders in particular or (ii) any foreign exchange exposure or loss incurred in connection with such sale or exercise. The Depositary shall not be responsible for the content of any materials forwarded to the ADR Holders on behalf of the Company in connection with the rights distribution. Notwithstanding anything herein or in the Deposit Agreement to the contrary, if registration (under the Securities Act or any other applicable law) of the rights or the securities to which any rights relate may be required in order for the Company to offer such rights or such securities to Holders and to sell the securities represented by such rights, the Depositary will not distribute such rights to the Holders unless and until a registration statement under the Securities Act (or other applicable law) covering such offering is in effect. In the event that the Company, the Depositary or the Custodian shall be required to withhold and does withhold from any 21 97 distribution of property (including rights) an amount on account of taxes or other governmental charges, the amount distributed to the Holders of ADSs representing such Deposited Securities shall be reduced accordingly. In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, the Depositary may dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable to pay any such taxes or charges. There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to exercise rights on the same terms and conditions as the holders of Shares or to exercise such rights. Nothing herein or in the Deposit Agreement shall obligate the Company to file any registration statement in respect of any rights or Shares or other securities to be acquired upon the exercise of such rights. Upon receipt of a notice indicating that the Company wishes property other than cash, Shares or rights to purchase additional Shares, to be made to Holders of ADSs, the Depositary shall determine whether such distribution to Holders is lawful and reasonably practicable. The Depositary shall not make such distribution unless (i) the Company shall have requested the Depositary to make such distribution to Holders, (ii) the Depositary shall have received the documentation contemplated in the Deposit Agreement, and (iii) the Depositary shall have reasonably determined that such distribution is reasonably practicable. Upon satisfaction of such conditions, the Depositary shall distribute as promptly as practicable, the property so received to the Holders of record, as of the ADS Record Date, in proportion to the number of ADSs held by 22 98 them respectively and in such manner as the Depositary may deem reasonably practicable for accomplishing such distribution (i) upon receipt of payment or net of the applicable fees and charges of, and expenses incurred by, the Depositary, and (ii) net of any taxes withheld. The Depositary may dispose of all or a portion of the property so distributed and deposited, in such amounts and in such manner (including public or private sale) as the Depositary may deem reasonably practicable or necessary to satisfy any taxes (including applicable interest and penalties) or other governmental charges applicable to the distribution. If the conditions above are not satisfied, the Depositary shall sell or cause such property to be sold in a public or private sale, at such place or places and upon such terms as it may deem reasonably proper and shall as promptly as practicable (i) cause the proceeds of such sale, if any, to be converted into Dollars and (ii) distribute the proceeds of such conversion received by the Depositary (net of (a) applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxes) to the Holders upon the terms hereof and of the Deposit Agreement. If the Depositary is unable to sell such property, the Depositary, upon consultation with the Company, may dispose of such property in any way it deems reasonably practicable under the circumstances. (15) Redemption. Upon timely receipt of notice from the Company that it intends to exercise its right of redemption in respect of any of the Deposited Securities, and a satisfactory opinion of counsel (if requested by the Depositary), and upon determining that such proposed redemption is practicable, the Depositary shall (to the extent practicable) mail to each Holder a notice setting forth the Company's intention to exercise the redemption rights and any other particulars set forth in the Company's notice to the Depositary. Upon receipt of confirmation 23 99 that the redemption has taken place and that funds representing the redemption price have been received, the Depositary shall convert, transfer, distribute the proceeds (net of applicable (a) fees and charges of, and expenses incurred by, the Depositary, and (b) taxes), retire ADSs and cancel ADRs upon delivery of such ADSs by Holders thereof upon the terms of the Deposit Agreement. If less than all outstanding Deposited Securities are redeemed, the ADSs to be retired will be selected by lot or on a pro rata basis, as may be determined by the Depositary. The redemption price per ADS shall be the dollar equivalent of per share amount received by the Depositary upon the redemption of the Deposited Securities represented by American Depositary Shares (subject to the terms of the Deposit Agreement and the applicable fees and charges of, and expenses incurred by, the Depositary, and taxes) multiplied by the number of Units or Deposited Securities represented by each ADS redeemed. (16) Fixing of Record Date. Whenever the Depositary shall receive notice of the fixing of a record date by the Company for the determination of holders of Deposited Securities entitled to receive any distribution (whether in cash, Shares, rights or other distribution), or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each ADS, or whenever the Depositary shall receive notice of any meeting of, or solicitation of consents or proxies of, holders of Shares or other Deposited Securities, or whenever the Depositary shall find it necessary or convenient in connection with the giving of any notice, or any other matter, the Depositary shall fix a record date ("ADS Record Date") for the determination of the Holders of Receipts who shall be entitled to receive such distribution, to give instructions for the exercise of voting rights at any such meeting, or to give or withhold such consent, or to receive such notice or solicitation or to otherwise take action, or to exercise the 24 100 rights of Holders with respect to such changed number of Shares represented by each ADS. Subject to applicable law and the terms and conditions of this Receipt and the Deposit Agreement, only the Holders of Receipts at the close of business in New York on such ADS Record Date shall be entitled to receive such distributions, to give such instructions, to receive such notice or solicitation, or otherwise take action. (17) Voting of Deposited Securities. As soon as practicable after receipt of notice of any meeting at which the holders of Shares are entitled to vote, or of solicitation of consents or proxies from holders of Shares or other Deposited Securities, the Depositary shall fix the ADS Record Date in respect of such meeting or solicitation of such consent or proxy. The Depositary shall (if requested in writing in a timely manner by the Company and at the Company's expense) as soon as practicable mail to Holders: (a) such notice of meeting or solicitation of consent or proxies, (b) a statement that the Holders as of the ADS Record Date will be entitled, subject to any applicable law, the Company's Memorandum and Articles of Association and the provisions of or governing Deposited Securities (which provisions, if any, shall be summarized in pertinent part by the Company), to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Shares or other Deposited Securities represented by such Holder's ADS and (c) a brief statement as to the manner in which such instructions may be given. Upon the timely receipt of written instructions of a Holder of ADSs on the ADS Record Date, the Depositary shall endeavor, insofar as reasonably practicable and permitted under applicable law and the provisions of the Memorandum and Articles of Association of the Company and the provisions of the Deposited Securities, to vote or cause the Custodian to vote the Shares and/or other 25 101 Deposited Securities represented by ADSs held by such Holder in accordance with such instructions. Neither the Depositary nor the Custodian shall, under any circumstances exercise any discretion as to voting and neither the Depositary nor the Custodian shall vote, attempt to exercise the right to vote, or in any way make use of, for purposes of establishing a quorum or otherwise the Shares or other Deposited Securities represented by ADSs except pursuant to and in accordance with such written instructions from Holders. If voting instructions are received by the Depositary from any Holder on or before the date established by the Depositary for the receipt of such instructions, which are signed but without further indication as to specific instructions, the Depositary will deem such Holder to have instructed the Depositary to vote in favor of the items set forth in such instructions. Shares or other Deposited Securities represented by ADSs for which no specific voting instructions are received by the Depositary from the Holder shall not be voted. There can be no assurance that Holders generally or any Holder in particular will receive the notice described above with sufficient time to enable the Holder to return voting instructions to the Depositary in a timely manner. (18) Changes Affecting Deposited Securities. Upon any change in nominal or par value, split-up, stock split (either forward or reverse), cancellation, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or the Custodian in exchange for, or in conversion of or replacement of or otherwise in respect of, such Deposited Securities shall, to the extent permitted by law, be treated as new Deposited Securities under the Deposit Agreement, and the 26 102 Receipts shall, subject to the provisions of the Deposit Agreement and applicable law, evidence ADSs representing the right to receive such securities. The Depositary may, with the Company's approval, and shall, if the Company shall so request, subject to the terms of the Deposit Agreement and receipt of satisfactory documentation contemplated by the Deposit Agreement, execute and deliver additional Receipts as in the case of a stock dividend or stock split, or call for the surrender of outstanding Receipts to be exchanged for new Receipts as in the case of a reverse stock split, and in either case, with any necessary modifications to the form of Receipt contained in Exhibit A to the Deposit Agreement, to give effect to such corporate change. Notwithstanding the foregoing, in the event that any security so received may not be lawfully distributed to some or all Holders, the Depositary may, with the Company's approval, and shall if the Company requests, subject to receipt of satisfactory legal documentation contemplated in the Deposit Agreement, sell such securities at public or private sale, at such place or places and upon such terms as it may deem reasonably proper and may allocate the net proceeds of such sales (net of (a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes) for the account of the Holders otherwise entitled to such securities and distribute the net proceeds so allocated to the extent practicable as in the case of a distribution received in cash pursuant to the Deposit Agreement. Neither the Depositary nor the Company shall be responsible for (i) any failure to determine that it may be lawful or feasible to make such securities available to Holders in general or any Holder in particular, (ii) any foreign exchange exposure or loss incurred in connection with such sale, or (iii) any liability to the purchaser of such securities. (19) Exoneration. Neither the Depositary nor the Company shall be obligated to do or perform any act which is inconsistent with the provisions of the Deposit Agreement or incur any 27 103 liability (i) if the Depositary or the Company shall be prevented or forbidden from, or subjected to any civil or criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the Deposit Agreement and this Receipt, by reason of any provision of any present or future law or regulation of the United States, Singapore or any other country, or of any other governmental authority or regulatory authority or stock exchange, or by reason of any provision, present or future of the Memorandum and Articles of Association of the Company or any provision of or governing any Deposited Securities, or by reason of any act of God or war or other circumstances beyond its control (including, without limitation, nationalization, expropriation, currency restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions, explosions and computer failure), (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement or in the Memorandum and Articles of Association of the Company or provisions of or governing Deposited Securities, (iii) for any action or inaction in reliance upon the advice of or information from legal counsel, accountants, any person or entity presenting Shares for deposit, any Holder, any Beneficial Owner or authorized representative thereof, or any other person or entity believed by it in good faith to be competent to give such advice or information, (iv) for any inability by a Holder or Beneficial Owner to benefit from any distribution, offering, right or other benefit which is made available to holders of Deposited Securities but is not, under the terms of the Deposit Agreement, made available to Holders of ADSs or (v) for any consequential or punitive damages for any breach of the terms of the Deposit Agreement. The Depositary, its controlling persons, its agents, any Custodian and the Company, its controlling persons and its agents may rely and shall be protected in acting upon any written 28 104 notice, request or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. No disclaimer of liability under the Securities Act is intended by any provision of the Deposit Agreement. (20) Standard of Care. The Company and its agents assume no obligation and shall not be subject to any liability under the Deposit Agreement or the Receipts to Holders or Beneficial Owners or other persons, except that the Company and its agents agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary and its agents assume no obligation and shall not be subject to any liability under the Deposit Agreement or the Receipts to Holders or Beneficial Owners or other persons, except that the Depositary and its agents agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary and its agents shall not be liable for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any vote is cast or the effect of any vote, provided that any such action or omission is in good faith and in accordance with the terms of the Deposit Agreement. Neither the Depositary nor, to the extent permitted by law, the Company, shall incur any liability for any failure to determine that any distribution or action may be lawful or reasonably practicable, for any investment risk associated with acquiring an interest in the Deposited Securities, for the validity or worth of the Deposited Securities or for any tax consequences that may result from the ownership of ADSs, Shares or Deposited Securities, for the credit-worthiness of any third party, or for allowing any rights to lapse upon the terms of the Deposit Agreement. The Depositary shall not incur liability for the content of any information submitted to it by the 29 105 Company for distribution to the Holders or for any inaccuracy of any translation thereof or for the failure or timeliness of any notice from the Company. (21) Resignation and Removal of the Depositary; Appointment of Successor Depositary. The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of resignation delivered to the Company, such resignation to be effective on the earlier of (i) the 60th day after delivery thereof to the Company, or (ii) upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by written notice of such removal which notice shall be effective on the earlier of (i) the 60th day after delivery thereof to the Depositary, or (ii) upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall use its best efforts to appoint a successor depositary which shall be a bank or trust company having an office in the Borough of Manhattan, the City of New York. Every successor depositary shall execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor. The predecessor depositary, upon payment of all sums due it and on the written request of the Company, shall (i) execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder (other than as contemplated in the Deposit Agreement), (ii) duly assign, transfer and deliver all right, title and interest to the Deposited Securities to such successor, and (iii) deliver to such successor a list of 30 106 the Holders of all outstanding Receipts and such other information relating to Receipts and Holders thereof as the successor may reasonably request. Any such successor depositary shall promptly mail notice of its appointment to such Holders. Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act. (22) Amendment/Supplement. This Receipt and any provisions of the Deposit Agreement may at any time and from time to time be amended or supplemented by written agreement between the Company and the Depositary in any respect which they may deem necessary or desirable without the prior written consent of the Holders or Beneficial Owners. Any amendment or supplement which shall impose or increase any fees or charges (other than the charges in connection with foreign exchange control regulations, and taxes and other governmental charges, delivery and other such expenses), or which shall otherwise prejudice any substantial existing right of Holders or Beneficial Owners, shall not, however, become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment or supplement shall have been given to the Holders of outstanding Receipts. The parties hereto agree that any amendments or supplements which (i) are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act or (b) the ADSs to be traded solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to materially prejudice any substantial rights of Holders or Beneficial Owners. Every Holder and Beneficial Owner at the time any amendment or supplement so becomes effective shall be deemed, by continuing to hold such ADS(s), to consent and agree to such amendment or 31 107 supplement and to be bound by the Deposit Agreement as amended or supplemented thereby. In no event shall any amendment or supplement impair the right of the Holder to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law. Notwithstanding the foregoing, if any governmental body should adopt new laws, rules or regulations which would require amendment or supplement of the Deposit Agreement to ensure compliance therewith, the Company and the Depositary may amend or supplement the Deposit Agreement and the Receipt at any time in accordance with such changed laws, rules or regulations. Such amendment or supplement to the Deposit Agreement in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance with such laws, or rules or regulations. (23) Termination. The Depositary shall, at any time at the written direction of the Company, terminate the Deposit Agreement by mailing notice of such termination to the Holders of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. If 60 days shall have expired after (i) the Depositary shall have delivered to the Company a written notice of its election to resign, or (ii) the Company shall have delivered to the Depositary a written notice of the removal of the Depositary, and in either case a successor depositary shall not have been appointed and accepted its appointment as provided herein and in the Deposit Agreement, the Depositary may terminate the Deposit Agreement by mailing notice of such termination to the Holders of all Receipts then outstanding at least 30 days prior to the date fixed for such termination. On and after the date of termination of the Deposit Agreement, the Holder will, upon surrender of such Holders' Receipt(s) at the Principal Office of the 32 108 Depositary, upon the payment of the charges of the Depositary for the surrender of ADSs referred to in Article (2) hereof and in the Deposit Agreement and subject to the conditions and restrictions therein set forth, and upon payment of any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by such Receipt. If any Receipts shall remain outstanding after the date of termination of the Deposit Agreement, the Registrar thereafter shall discontinue the registration of transfers of Receipts, and the Depositary shall suspend the distribution of dividends to the Holders thereof, and shall not give any further notices or perform any further acts under the Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in the Deposit Agreement, and shall continue to deliver Deposited Securities, subject to the conditions and restrictions set forth in the Deposit Agreement, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, or charging, as the case may be, in each case the charges of the Depositary for the surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of the Deposit Agreement and any applicable taxes or governmental charges or assessments). At any time after the expiration of six months from the date of termination of the Deposit Agreement, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, in an unsegregated account, without liability for interest for the pro rata benefit of the Holders of Receipts whose Receipts have not theretofore been surrendered. After making such 33 109 sale, the Depositary shall be discharged from all obligations under the Deposit Agreement with respect to the Receipts and the Shares, the Deposited Securities and the ADSs, except to account for such net proceeds and other cash (after deducting, or charging, as the case may be, in each case the charges of the Depositary for the surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of the Deposit Agreement and any applicable taxes or governmental charges or assessments). Upon the termination of the Deposit Agreement, the Company shall be discharged from all obligations under the Deposit Agreement except as set forth in the Deposit Agreement. (24) Compliance with U.S. Securities Laws. Notwithstanding any provisions in this Receipt or the Deposit Agreement to the contrary, the withdrawal or delivery of Deposited Securities will not be suspended by the Company or the Depositary except as would be permitted by Section I.A.(1) of the General Instructions to the Form F-6 Registration Statement, as amended from time to time, under the Securities Act of 1933. (25) Certain Rights of the Depositary; Limitations. Subject to the further terms and provisions of this Article (25), the Depositary, its Affiliates and their agents, on their own behalf, may own and deal in any class of securities of the Company and its Affiliates and in ADSs. The Depositary may issue ADSs against evidence of rights to receive Shares from the Company, any agent of the Company or any custodian, registrar, transfer agent, clearing agency or other entity involved in ownership or transaction records in respect of the Shares. Such evidence of rights shall consist of written blanket or specific guarantees of ownership of Shares. In its capacity as Depositary, the Depositary shall not lend Shares or ADSs; provided, however, that the Depositary may (i) issue ADSs prior to the receipt of Shares pursuant to Section 2.3 of the 34 110 Deposit Agreement and (ii) Deliver Shares prior to the receipt of ADSs for withdrawal of Deposited Securities pursuant to Section 2.7 of the Deposit Agreement, including ADSs which were issued under (i) above but for which Shares may not have been received (each such transaction a "Pre-Release Transaction"). The Depositary may receive ADSs in lieu of Shares under (i) above and receive Shares in lieu of ADSs under (ii) above. Each such Pre-Release Transaction will be (a) accompanied by or subject to a written agreement whereby the person or entity (the "Applicant") to whom ADSs or Shares are to be delivered (w) represents that at the time of the Pre-Release Transaction the Applicant or its customer owns the Shares or ADSs that are to be delivered by the Applicant under such Pre-Release Transaction, (x) agrees to indicate the Depositary as owner of such Shares or ADSs in its records and to hold such Shares or ADSs in trust for the Depositary until such Shares or ADSs are delivered to the Depositary or the Custodian, (y) unconditionally guarantees to deliver to the Depositary or the Custodian, as applicable, such Shares or ADSs and (z) agrees to any additional restrictions or requirements that the Depositary deems appropriate, (b) at all times fully collateralized with cash, U.S. government securities or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days notice and (d) subject to such further indemnities and credit regulations as the Depositary deems reasonably appropriate. The Depositary will normally limit the number of ADSs and Shares involved in such Pre-Release Transactions at any one time to thirty percent (30%) of the ADSs outstanding (without giving effect to ADSs outstanding under (i) above), provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate. The Depositary may also set limits with respect to the number of ADSs and Shares involved in Pre-Release 35 111 Transactions with any one person on a case by case basis as it deems appropriate. The Depositary may retain for its own account any compensation received by it in conjunction with the foregoing. Collateral provided pursuant to (b) above, but not earnings thereon, shall be held for the benefit of the Holders (other than the Applicant). 36 112 (ASSIGNMENT AND TRANSFER SIGNATURE LINES) FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and transfer(s) unto whose taxpayer identification ------------------------------ number is and whose address including postal zip code is ----------------------- , the within Receipt and all rights thereunder, hereby - ---------------- irrevocably constituting and appointing ------------------------ attorney-in-fact to transfer said Receipt on the books of the Depositary with full power of substitution in the premises. Dated: Name: --------------------------- By: Title: NOTICE: The signature of the Holder to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatsoever. If the endorsement be executed by an attorney, executor, administrator, trustee or guardian, the person executing the endorsement must give his/her full title in such capacity and proper evidence of authority to act in such capacity, if not on file with the Depositary, must be forwarded with this Receipt. All endorsements or assignments of Receipts must be guaranteed by a member of a Medallion Signature Program approved by the Securities Transfer Association, Inc. SIGNATURE GUARANTEED 37 113 LEGENDS EACH RECEIPT ISSUED IN RESPECT OF PARTIAL ENTITLEMENT AMERICAN DEPOSITARY SHARES SHALL BEAR THE FOLLOWING LEGEND ON THE FACE OF THE RECEIPT: "THIS RECEIPT EVIDENCES AMERICAN DEPOSITARY SHARES REPRESENTING "PARTIAL ENTITLEMENT" ORDINARY SHARES OF ST ASSEMBLY TEST SERVICES LTD AND AS SUCH DO NOT ENTITLE THE HOLDERS THEREOF TO THE SAME PER-SHARE ENTITLEMENT AS OTHER ORDINARY SHARES (WHICH ARE "FULL ENTITLEMENT" ORDINARY SHARES) ISSUED AND OUTSTANDING AT SUCH TIME. THE AMERICAN DEPOSITARY SHARES REPRESENTED BY THIS RECEIPT SHALL ENTITLE HOLDERS TO DISTRIBUTIONS AND ENTITLEMENTS IDENTICAL TO OTHER AMERICAN DEPOSITARY SHARES WHEN THE ORDINARY SHARES REPRESENTED BY SUCH AMERICAN DEPOSITARY SHARES BECOME "FULL ENTITLEMENT" ORDINARY SHARES." EACH RESTRICTED ADR ISSUED IN RESPECT OF RESTRICTED SHARES SHALL BEAR THE FOLLOWING LEGEND ON THE FACE OF THE RESTRICTED ADR: "THIS CERTIFICATE REPRESENTS "RESTRICTED ADSS" ISSUED UPON THE TERMS OF SECTION 2.12 OF THE DEPOSIT AGREEMENT (AS HEREINAFTER DEFINED). THIS CERTIFICATE AND THE RESTRICTED ADSS REPRESENTED HEREBY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE FOR SUCH SALE OR TRANSFER." 38 114 EXHIBIT B FEE SCHEDULE DEPOSITARY FEES AND RELATED CHARGES All capitalized terms used but not otherwise defined herein shall have the meaning given to such terms in the Deposit Agreement. I. DEPOSITARY FEES The Company, the Holders, the Beneficial Owners and the persons depositing Shares or surrendering ADSs for cancellation agree to pay the following fees of the Depositary:
SERVICE RATE BY WHOM PAID ------- ---- ------------ (1) Issuance of ADSs upon deposit Up to $5.00 per 100 ADSs (or fraction Person for whom deposits are of Shares (excluding issuances thereof) issued. made or party receiving ADSs. contemplated by paragraphs (3) and (5) below). (2) Delivery of Deposited Up to $5.00 per 100 ADSs (or fraction Person surrendering ADSs or Securities, property and cash against thereof) surrendered. making withdrawal. surrender of ADSs. (3) Distribution of (a) cash Up to $2.00 per 100 ADSs (or fraction Person to whom distribution is dividends or (b) ADSs pursuant to stock thereof) held. made. dividends (or other free distribution of stock). (4) Distribution of cash proceeds Up to $2.00 per 100 ADSs (or fraction Person to whom distribution is (i.e. upon sale of rights and other thereof) held. made. entitlements). (5) Distribution of ADSs pursuant Up to $5.00 per 100 ADSs (or fraction Person to whom distribution is to exercise of rights. thereof) issued. made.
II. CHARGES. Holders, Beneficial Owners, persons depositing Shares for deposit and persons surrendering ADSs for cancellation and for the purpose of withdrawing Deposited Securities shall be responsible for the following charges: 39 115 (i) taxes (including applicable interest and penalties) and other governmental charges; (ii) such registration fees as may from time to time be in effect for the registration of Shares or other Deposited Securities on the share register and applicable to transfers of Shares or other Deposited Securities to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively; (iii) such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person depositing Shares or Holders and Beneficial Owners of ADSs; (iv) the expenses and charges incurred by the Depositary in the conversion of foreign currency; (v) such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Shares, Deposited Securities, ADSs and ADRs; and (vi) the fees and expenses incurred by the Depositary in connection with the deliver of Deposited Securities. 40 116 TABLE OF CONTENTS
PAGE ---- ARTICLE 1. DEFINITIONS Section 1.1 "Affiliate" 1 Section 1.2 "American Depositary Share(s)" and "ADS(s)" 1 Section 1.3 "ADS Record Date" 2 Section 1.4 "Applicant" 2 Section 1.5 "Beneficial Owner" 2 Section 1.6 "Business Day" 2 Section 1.7 "CDP" 2 Section 1.8 "Commission" 2 Section 1.9 "Company" 3 Section 1.10 "Custodian" 3 Section 1.11 "Deliver" and "Delivery" 3 Section 1.12 "Deposit Agreement" 3 Section 1.13 "Depositary" 3 Section 1.14 "Deposited Securities" 3 Section 1.15 "Dollars" and "$" 4 Section 1.16 "DTC" 4 Section 1.17 "DTC Participant" 4 Section 1.18 "Exchange Act" 4 Section 1.19 "Foreign Currency" 4 Section 1.20 "Holder" 4 Section 1.21 "Pre-Release Transaction" 5 Section 1.22 "Principal Office" 5 Section 1.23 "Receipt(s)"; "American Depositary Receipt(s)" and "ADR(s)" 5 Section 1.24 "Registrar" 5 Section 1.25 "Restricted Securities" 6 Section 1.26 "Securities Act" 6 Section 1.27 "Share Registrar" 6 Section 1.28 "Shares" 7 Section 1.29 "Singapore" 7 Section 1.30 "Singapore Dollars" and "S$" 7 Section 1.31 "United States" 7 ARTICLE 2. APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS; DEPOSIT OF SHARES; EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS Section 2.1 Appointment of Depositary 8 Section 2.2 Form and Transferability of Receipts 8 Section 2.3 Deposit with Custodian 11
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PAGE ---- Section 2.4 Registration of Shares 14 Section 2.5 Execution and Delivery of Receipts 14 Section 2.6 Transfer, Combination and Split-up of Receipts 16 Section 2.7 Surrender of ADSs and Withdrawal of Deposited Securities 18 Section 2.8 Limitations on Execution and Delivery, Transfer, etc. of Receipts; Suspension of Delivery, Transfer, etc 20 Section 2.9 Lost Receipts, etc 22 Section 2.10 Cancellation and Destruction of Surrendered Receipts; Maintenance of Records 22 Section 2.11 Partial Entitlement ADSs 23 Section 2.12 Restricted ADSs 24 ARTICLE 3. CERTAIN OBLIGATIONS OF HOLDERS AND BENEFICIAL OWNERS OF RECEIPTS Section 3.1 Proofs, Certificates and Other Information 26 Section 3.2 Liability for Taxes and Other Charges 27 Section 3.3 Representations and Warranties on Deposit of Shares 28 Section 3.4 Compliance with Information Requests 28 Section 3.5 Ownership Restrictions 29 ARTICLE 4. THE DEPOSITED SECURITIES Section 4.1 Cash Distributions 30 Section 4.2 Distribution in Shares 31 Section 4.3 Elective Distributions in Cash or Shares 32 Section 4.4 Distribution of Rights to Purchase Shares 34 Section 4.5 Distributions Other Than Cash, Shares or Rights to Purchase Shares 37 Section 4.6 Distributions with Respect to Deposited Securities in Bearer Form 38 Section 4.7 Redemption 39 Section 4.8 Conversion of Foreign Currency 40 Section 4.9 Fixing of ADS Record Date 41 Section 4.10 Voting of Deposited Securities 42 Section 4.11 Changes Affecting Deposited Securities 44 Section 4.12 Available Information 45 Section 4.13 Reports 46 Section 4.14 List of Holders 46 Section 4.15 Taxation 46 ARTICLE 5. THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY Section 5.1 Maintenance of Office and Transfer Books by the Registrar 48 Section 5.2 Exoneration 49 Section 5.3 Standard of Care 51 Section 5.4 Resignation and Removal of the Depositary; Appointment of
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PAGE ---- Successor Depositary 52 Section 5.5 The Custodian 53 Section 5.6 Notices and Reports 54 Section 5.7 Issuance of Additional Shares, ADSs etc 56 Section 5.8 Indemnification 58 Section 5.9 Fees and Charges of Depositary 59 Section 5.10 Pre-Release 61 Section 5.11 Restricted Securities Owners 62 ARTICLE 6. AMENDMENT AND TERMINATION Section 6.1 Amendment/Supplement 63 Section 6.2 Termination 64 ARTICLE 7. MISCELLANEOUS Section 7.1 Counterparts 66 Section 7.2 No Third-Party Beneficiaries 66 Section 7.3 Severability 67 Section 7.4 Holders and Beneficial Owners as Parties; Binding Effect 67 Section 7.5 Notices 67 Section 7.6 Governing Law and Jurisdiction 69 Section 7.7 Assignment 71 Section 7.8 Compliance with U.S. Securities Laws 72 Section 7.9 Titles 72 EXHIBIT A [FORM OF RECEIPT] EXHIBIT B FEE SCHEDULE DEPOSITARY FEES AND RELATED CHARGES
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