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                                  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)
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<S>                                   <C>
    REPUBLIC OF SINGAPORE               5 YISHUN STREET 23, SINGAPORE 768442
(Jurisdiction of Incorporation        (Address of Principal Executive Offices)
      or Organization)
</TABLE>

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]

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<CAPTION>
<S>         <C>                                                                                   <C>
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
</TABLE>

     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.

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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.

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<CAPTION>

                                                                        YEAR ENDED DECEMBER 31
                                                     --------------------------------------------------------------
                                                       1996        1997        1998(1)         1999          2000
                                                     --------    --------      --------      --------      --------
                                                       (IN THOUSANDS, EXCEPT PER ORDINARY SHARE AND PER ADS DATA)
<S>                                                   <C>       <C>            <C>           <C>           <C>
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
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<CAPTION>

                                                                         YEAR ENDED DECEMBER 31
                                                     --------------------------------------------------------------
                                                       1996       1997          1998(1)        1999          2000
                                                     --------   ---------      --------      --------      --------
                                                                              (IN THOUSANDS)
<S>                                                  <C>        <C>            <C>           <C>           <C>
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
</TABLE>

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

(1)  Effective July 1, 1998, we changed our functional currency from the
     Singapore dollar to the U.S. dollar. See Note 2(d) to the "Notes to the
     Consolidated Financial Statements" filed as part of this Annual Report in
     "Item 18. Financial Statements".

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<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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.
<TABLE>
<CAPTION>


                                                               YEAR ENDED DECEMBER 31
                                                -------------------------------------------------
                                                 1998                     1999               2000
                                                -----                    -----              -----
<S>                                             <C>                      <C>                <C>
 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%
                                                =====                    =====              =====

</TABLE>

ADDITIONAL TEST-RELATED SERVICES

     We offer a variety of additional test-related services, including:

-    "Burn-in process support". Burn-in is the process of electrically stressing
     semiconductors, usually at high temperature and voltage, for a period of
     time long enough to cause the failure of marginal semiconductors. During
     burn-in process support, we perform an analysis of burn-in rejects in order
     to determine the cause of failure.

-    "Reliability testing". Reliability testing is the process of testing a
     semiconductor to evaluate its life span. It is performed on a sample of
     devices that have passed final testing.

-    "Thermal and electrical characterization". Thermal and electrical
     characterization is the process of testing a semiconductor for performance
     consistency under thermal and electrical stress.

-    "Dry pack". Dry pack is the process of 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
<PAGE>   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.

<TABLE>
<CAPTION>
                               NUMBER
PACKAGE FORMAT                OF LEADS    DESCRIPTION                                 TYPICAL APPLICATIONS
--------------                --------    -----------                                 --------------------
<S>                           <C>         <C>                                         <C>
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
</TABLE>

                                       16
<PAGE>   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.

<TABLE>
<CAPTION>

                                 NUMBER
PACKAGE FORMAT                  OF LEADS    DESCRIPTION                                 TYPICAL APPLICATIONS
--------------                  --------    -----------                                 --------------------
<S>                             <C>         <C>                                         <C>
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
</TABLE>

     Laminate Packages. Our laminate packages include BGA packages which employ
leads, also known as interconnects, on the bottom of the package in the form of
small bumps, or balls, in a matrix or array pattern. 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
<PAGE>   20

     Our BGA packages are described below:

<TABLE>
<CAPTION>
                                 NUMBER
PACKAGE FORMAT                  OF BALLS    DESCRIPTION                               TYPICAL APPLICATIONS
--------------                  --------    -----------                               --------------------
<S>                             <C>         <C>                                       <C>
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

</TABLE>

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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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.
<TABLE>
<CAPTION>


                                                              YEAR ENDED DECEMBER 31
                                               ---------------------------------------------------
                                                1998                   1999                   2000
                                               -----                  -----                  -----
<S>                                            <C>                    <C>                    <C>
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%
                                               =====                  =====                  =====

</TABLE>

     We characterize a sale geographically based on the country in which the
customer is headquartered. The following table sets forth the geographical
distribution, by percentage, of our net revenues for the periods indicated.
<TABLE>
<CAPTION>

                                                              YEAR ENDED DECEMBER 31
                                               ---------------------------------------------------
GEOGRAPHICAL AREA                               1998                   1999                   2000
-----------------                              -----                  -----                  -----
<S>                                            <C>                    <C>                    <C>
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%
                                               =====                  =====                  =====

</TABLE>

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

CUSTOMER SERVICE

     We place 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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   32

RESULTS OF OPERATIONS

     The following table sets forth certain operating data as a percentage of
net revenues for the periods indicated:
<TABLE>
<CAPTION>

                                                                           YEAR ENDED DECEMBER 31
                                                             --------------------------------------------------
                                                              1998                     1999               2000
                                                             -----                    -----              -----
<S>                                                          <C>                      <C>                <C>
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%
                                                             -----                    -----              -----
</TABLE>

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
<PAGE>   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
<PAGE>   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
<PAGE>   35

<TABLE>
<CAPTION>


                                                                             QUARTER ENDED
                                             ------------------------------------------------------------------------------
                                             MAR-99    JUN-99    SEP-99     DEC-99    MAR-00     JUN-00    SEP-00    DEC-00
                                             ------    ------    ------     ------    ------     ------    ------    ------
                                                                      (IN THOUSANDS)
<S>                                          <C>       <C>       <C>        <C>       <C>        <C>       <C>       <C>
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
                                             ======    ======    ======     ======    ======     ======    ======    ======
</TABLE>

<TABLE>
<CAPTION>


                                                                     AS A PERCENTAGE OF NET REVENUE
                                             ------------------------------------------------------------------------------
                                             MAR-99    JUN-99    SEP-99     DEC-99    MAR-00     JUN-00    SEP-00    DEC-00
                                             ------    ------    ------     ------    ------     ------    ------    ------
<S>                                          <C>       <C>       <C>        <C>        <C>       <C>       <C>       <C>
Net revenues                                  100.0%    100.0%    100.0%     100.0%    100.0%     100.0%    100.0%    100.0%
Cost of revenues                               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%
                                             ======    ======    ======     ======    ======     ======    ======    ======
</TABLE>

                                       33
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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:
<TABLE>
<CAPTION>

NAME                                         AGE             POSITION
----                                         ---             --------
<S>                                          <C>             <C>
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.
</TABLE>
------------

(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
<PAGE>   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
<PAGE>   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
<PAGE>   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:

<TABLE>
<CAPTION>
                                                                           EXECUTIVE       NON-EXECUTIVE
                                                                           DIRECTORS         DIRECTORS         TOTAL
                                                                           ---------       -------------     ---------
<S>                                                                        <C>             <C>               <C>
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
                                                                           ========           ======         ==========
</TABLE>
------------

(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
<PAGE>   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
<PAGE>   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
<PAGE>   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.

<TABLE>
<CAPTION>
                                                NO. OF EMPLOYEES AS AT DECEMBER 31, 2000
                           ---------------------------------------------------------------------------------
                                              RESEARCH &          SALES &         OPERATING
                           OPERATIONS        DEVELOPMENT         MARKETING         SUPPORT             TOTAL
                           ----------        -----------         ---------        ---------            -----
<S>                        <C>               <C>                 <C>              <C>                  <C>
Singapore                     1982               107                 17              507               2613
USA                                               14                 46               12                 72
Others                                                                8                                   8
                              ----               ---                 --              ---               ----
TOTAL                         1982               121                 71              519               2693
                              ====               ===                 ==              ===               ====

</TABLE>

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.
<TABLE>
<CAPTION>


                                                                               ORDINARY SHARES(1)
                                                                                BENEFICIALLY OWNED
                                                                            -----------------------
DIRECTORS                                                                     NUMBER        PERCENT
---------                                                                   ----------      -------
<S>                                                                         <C>             <C>
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%

</TABLE>
------------

  *  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
<PAGE>   46

SHARE OPTIONS FOR DIRECTORS

     The following table contains information pertaining to share options held
by directors as of February 28, 2001:

<TABLE>
<CAPTION>
                               NUMBER OF ORDINARY SHARES
                                ISSUABLE ON EXERCISE OF              PER SHARE EXERCISE PRICE                EXERCISABLE
                                         OPTION                                  S$                             PERIOD
                               -------------------------             ------------------------          ------------------------
<S>                            <C>                                   <C>                               <C>
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

</TABLE>

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
<PAGE>   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
<PAGE>   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
<PAGE>   49
<TABLE>
<CAPTION>

                                                        NUMBER OF SHARES                              PERCENTAGE
NAME OF BENEFICIAL OWNER                               BENEFICIALLY OWNED                          BENEFICIALLY OWNED
------------------------                               ------------------                          ------------------
<S>                                                    <C>                                         <C>
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%

</TABLE>
------------

(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
<PAGE>   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
<PAGE>   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.

<TABLE>
<CAPTION>
                                                      PRICE PER ORDINARY SHARE ON THE           PRICE PER ADS ON
                                                                    SGX                              NASDAQ
                                                                  (IN S$)                           (IN US$)
                                                      -------------------------------       ------------------------
                                                         HIGH                  LOW           HIGH              LOW
                                                         -----                ----          -------         --------
<S>                                                      <C>                  <C>           <C>             <C>
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
</TABLE>

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
<PAGE>   52
<TABLE>
<CAPTION>
                                                                           SINGAPORE DOLLARS PER US$1.00
                                                                                  NOON BUYING RATE
                                                             ---------------------------------------------------------
                                                             AVERAGE(1)           LOW           HIGH        PERIOD END
                                                             ----------          ----          -----        ----------
<S>                                                          <C>                 <C>           <C>          <C>
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
</TABLE>

<TABLE>
<CAPTION>
                                                                                  LOW           HIGH        PERIOD END
                                                                                 ----           ----        ----------
<S>                                                                              <C>            <C>         <C>
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
</TABLE>

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

(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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   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
<PAGE>   60
<TABLE>
<CAPTION>

                                        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)
<S>                                   <C>       <C>       <C>        <C>     <C>             <C>        <C>
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%                     --
</TABLE>

     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
<PAGE>   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
<PAGE>   62

ITEM 19. EXHIBITS

     The following exhibits are filed as part of this Annual Report:

<TABLE>
<CAPTION>
<S>     <C>
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".
</TABLE>

                                       60
<PAGE>   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
<PAGE>   64

                           Financial Statements Index
<TABLE>
<CAPTION>

                                                                           PAGE NUMBER
                                                                           -----------
<S>                                                                        <C>
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
</TABLE>
<PAGE>   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
<PAGE>   66
                          CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 1999 AND 2000
                 IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)

<TABLE>
<CAPTION>


                                                                                   FOR THE YEAR ENDED DECEMBER 31
                                                                                  ---------------------------------
                                                                   NOTE             1999                     2000
                                                                   ----           --------                 --------
<S>                                                                <C>            <C>                      <C>
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
                                                                                  ========                 ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       63
<PAGE>   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)

<TABLE>
<CAPTION>


                                                                                 FOR THE YEAR ENDED DECEMBER 31
                                                                             --------------------------------------
                                                                  NOTE         1998         1999            2000
                                                                  ----       --------     ---------       ---------
<S>                                                               <C>        <C>          <C>             <C>
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
                                                                             ========     =========       =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      64
<PAGE>   68
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
                 IN THOUSANDS OF US DOLLARS (EXCEPT SHARE DATA)
<TABLE>
<CAPTION>                                                                                      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
                            -------------------     ----------    ---------     -----------    -----------    ---------   ---------
<S>                         <C>        <C>           <C>          <C>             <C>            <C>          <C>         <C>
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
                            =======    ========      ========     ========        =======        =======      ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       65
<PAGE>   69
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
                           IN THOUSANDS OF US DOLLARS

<TABLE>
<CAPTION>



                                                                                    FOR THE YEAR ENDED DECEMBER 31
                                                                              -----------------------------------------
                                                                                1998           1999             2000
                                                                              ---------      ---------        ---------
<S>                                                                           <C>             <C>             <C>
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
                                                                              =========       ========        =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      66



<PAGE>   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

<PAGE>   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

<PAGE>   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:

<TABLE>

<S>                                                                    <C>   <C>
Building, mechanical and electrical installation                       --    3 to 20 years
Plant and machinery                                                    --    5 years
Toolings                                                               --    5 years
Office furniture and equipment                                         --    5 years
Computer equipment                                                     --    2 to 3 years
</TABLE>

     No depreciation is provided on property, plant and equipment under
installation or construction. Repairs and replacements of a routine nature are
expensed, while those that extend the life of an asset are capitalized.

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

     The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of". This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

                                       69

<PAGE>   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

<PAGE>   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

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                                DECEMBER 31
                                                                                          ----------------------
                                                                                            1999          2000
                                                                                           -------      --------
     <S>                                                                                   <C>          <C>
     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
                                                                                           =======      ========
</TABLE>

     Certain of the Company's treasury management activities are undertaken by
ST or its affiliates. The Company participates in a pooled cash management
program which requires the Company to place surplus cash with ST as 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:

<TABLE>
<CAPTION>

                                                                                                    DECEMBER 31
                                                                                              ---------------------
                                                                                                1999          2000
                                                                                              -------       -------
     <S>                                                                                      <C>           <C>

     Accounts receivable - third parties                                                      $37,496       $53,408
     Allowance for doubtful accounts                                                              (92)       (1,093)
                                                                                              -------       -------
                                                                                              $37,404       $52,315
                                                                                              =======       =======
</TABLE>

     Movements in the allowance for doubtful accounts are as follows:

<TABLE>
<CAPTION>

                                                                               1998            1999           2000
                                                                               ----            ----          ------
     <S>                                                                       <C>             <C>           <C>

     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
                                                                               ====            ====          ======
</TABLE>

                                       72

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                                    DECEMBER 31
                                                                                               --------------------
                                                                                                1999          2000
                                                                                               ------       -------
     <S>                                                                                       <C>          <C>
     Deposits and staff advances                                                               $  225       $   410
     Grant receivable (Note 13)                                                                 4,202         7,467
     Other receivables                                                                          5,145        11,112
                                                                                               ------       -------
                                                                                               $9,572       $18,989
                                                                                               ======       =======
</TABLE>

6.   INVENTORIES

     Inventories at December 31, 1999 and 2000 consist of:

<TABLE>
<CAPTION>

                                                                                                   DECEMBER 31
                                                                                              ---------------------
                                                                                                1999          2000
                                                                                              -------       -------
     <S>                                                                                      <C>           <C>
     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
                                                                                              =======       =======
</TABLE>

     Movements in the allowance for inventory obsolescence are as follows:

<TABLE>
<CAPTION>

                                                                               1998           1999            2000
                                                                               ----          ------          ------
     <S>                                                                       <C>           <C>             <C>
     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
                                                                               ====          ======          ======
</TABLE>

                                       73

<PAGE>   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):

<TABLE>
<CAPTION>

                                                                                                        DECEMBER 31
                                                                                                        -----------
     <S>                                                                                                <C>
     Corporate debt securities:
         Due in one year or less                                                                          $11,486
         Due after one year through five years                                                             10,420
                                                                                                          -------
                                                                                                          $21,906
                                                                                                          =======
</TABLE>

     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:

<TABLE>
<CAPTION>

                                                                                                   DECEMBER 31
                                                                                              ---------------------
                                                                                                1999          2000
                                                                                              -------       -------
     <S>                                                                                      <C>           <C>
     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
                                                                                              =======       =======
</TABLE>

     Leasing prepayments represent prepayments of lease rental obligations for
certain plant and machinery leased under sale and lease-back arrangements.

                                       74

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                                  DECEMBER 31
                                                                                             ----------------------
                                                                                               1999          2000
                                                                                             --------      --------
     <S>                                                                                     <C>           <C>
     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
                                                                                             ========      ========
</TABLE>

     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

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                                   DECEMBER 31
                                                                                              ---------------------
                                                                                                1999          2000
                                                                                              -------      --------
     <S>                                                                                      <C>          <C>
     Loans from ST affiliate
     --  US Dollar                                                                            $25,000      $     --
     Bank loans
     --  US Dollar                                                                             35,000            --
                                                                                              -------      --------
                                                                                              $60,000      $     --
                                                                                              =======      ========
</TABLE>

     Weighted average interest rate:

<TABLE>

     <S>                                                                                       <C>              <C>
     Loans from ST affiliate
     -- US Dollar                                                                              6.6%             NA
     Bank loans
     --  US Dollar                                                                             6.8%             NA
</TABLE>

     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:

<TABLE>
<CAPTION>

                                                                                                    DECEMBER 31
                                                                                              ---------------------
                                                                                                1999          2000
                                                                                              -------       -------
     <S>                                                                                      <C>           <C>
     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
                                                                                              =======       =======
</TABLE>

                                       76

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                                     DECEMBER 31
                                                                                               ---------------------
                                                                                                 1999          2000
                                                                                               -------       -------
    <S>                                                                                        <C>           <C>
     Liabilities for purchase of property, plant and
         equipment                                                                             $54,408       $27,705
                                                                                               =======       =======
</TABLE>


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:

<TABLE>
<CAPTION>

                                                                                                     DECEMBER 31
                                                                                              ---------------------
                                                                                                1999          2000
                                                                                              -------       -------
     <S>                                                                                      <C>           <C>
     Singapore dollar loan                                                                    $ 3,780       $44,398
     Less current installments                                                                 (7,420)      (14,799)
                                                                                              -------       -------
                                                                                              $46,360       $29,599
                                                                                              =======       =======
</TABLE>

     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

<PAGE>   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

<PAGE>   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
<TABLE>
<CAPTION>

                                                                            FOR THE YEAR ENDED DECEMBER 31
                                                                        --------------------------------------
                                                                         1998            1999            2000
                                                                        ------          ------          ------
<S>                                                                     <C>             <C>             <C>

Government grant income                                                 $1,151          $1,612          $2,792
Other income, net                                                          952             767             733
                                                                        ------          ------          ------
                                                                        $2,103          $2,379          $3,525
                                                                        ======          ======          ======
</TABLE>

                                       79

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                  FOR THE YEAR ENDED DECEMBER 31
                                                                               ------------------------------------
                                                                               1998           1999           2000
                                                                               ----          ------        --------
     <S>                                                                       <C>           <C>           <C>
     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
                                                                               ====          ======        ========
</TABLE>

     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

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                    FOR THE YEAR ENDED DECEMBER 31
                                                                               ----------------------------------------
                                                                                 1998            1999            2000
                                                                               --------        --------        --------
     <S>                                                                       <C>             <C>             <C>
     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
                                                                               ========        ========        ========
</TABLE>

     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:

<TABLE>
<CAPTION>

                                                                                    FOR THE YEAR ENDED DECEMBER 31
                                                                               ---------------------------------------
                                                                               1998             1999             2000
                                                                                 %                %                %
                                                                               -----            -----            -----
     <S>                                                                       <C>              <C>              <C>
     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
                                                                               =====            =====            =====
</TABLE>

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

* -- ST affiliate

                                       81

<PAGE>   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

<PAGE>   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:-
<TABLE>
<CAPTION>

                                                                                                     DECEMBER 31
                                                                                              ----------------------
                                                                                                1998          1999
                                                                                              -------       --------
     <S>                                                                                      <C>           <C>
     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
                                                                                              =======       ========
</TABLE>

(B)  SHARE OPTION PLAN

     Effective May 1999, the Company adopted the ST Assembly Test Services Ltd
Share Option Plan 1999 (the "Option Plan") which provides for a maximum of 85
million shares (subject to adjustment under the plan) to be reserved for option
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


<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                                         WEIGHTED
                                                                                                          AVERAGE
                                                                                         OPTIONS      EXERCISE PRICE
                                                                                     --------------   --------------
                                                                                     (IN THOUSANDS)
     <S>                                                                             <C>              <C>
     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
                                                                                          ======            =====

</TABLE>

     The following table summarizes information about fixed stock options
outstanding at December 31, 2000:

<TABLE>
<CAPTION>

                           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)
     <S>               <C>                <C>             <C>                   <C>               <C>
     $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
                          ======

</TABLE>

     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

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                   FOR THE YEAR ENDED DECEMBER 31
                                                                                 ----------------------------------
                                                                                     1998                    1999
                                                                                 -------------             --------
     <S>                                                                         <C>                       <C>
     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%
</TABLE>

     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:

<TABLE>
<CAPTION>

                                                                                   FOR THE YEAR ENDED DECEMBER 31
                                                                                 ----------------------------------
                                                                                     1999                 2000
                                                                                 -------------        -------------
     <S>                                                                         <C>                  <C>
     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%
</TABLE>

     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:

<TABLE>
<CAPTION>

                                                                                   FOR THE YEAR ENDED DECEMBER 31
                                                                                  ---------------------------------
                                                                                   1998          1999         2000
                                                                                  ------       -------      -------
     <S>                                                                          <C>          <C>          <C>
     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
</TABLE>

                                       85

<PAGE>   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

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                 FOR THE YEAR ENDED DECEMBER 31
                                                                            ---------------------------------------
                                                                             1998            1999            2000
                                                                            -------         -------         -------
     <S>                                                                    <C>             <C>             <C>
     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
</TABLE>

     As of December 31, 1999 and 2000, there were the following amounts owing by
(to) affiliates:-

<TABLE>
<CAPTION>

                                                                                                 DECEMBER 31
                                                                                           --------------------
                                                                                             1999         2000
                                                                                           --------     -------
     <S>                                                                                   <C>           <C>
     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      $    --
                                                                                           =======      =======
</TABLE>

                                       87

<PAGE>   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:

<TABLE>
<CAPTION>

                                                                                                   DECEMBER 31
                                                                                              ---------------------
                                                                                                1999          2000
                                                                                              -------       -------
     <S>                                                                                      <C>           <C>
     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
                                                                                              =======       =======
</TABLE>

(B)  TECHNOLOGY ARRANGEMENTS

     As is typical of the semiconductor industry, the Company may in the future
receive notices from third parties asserting patent rights, copyrights or other
rights covering the Company's designs or processes.

     On October 18, 1996, the Company acquired patent rights from Motorola Inc.
("Motorola") to use technology in making ball grid array packages ("BGA"). Under
the agreement, the Company is required to pay Motorola a royalty based on the
number of pads used on each BGA package. The agreement expires on December 31,
2002 and the Company has the option to renew the agreement subject to possible
amendment of the provisions thereof. Total expense recorded under the agreement
for the 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

<PAGE>   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:-

<TABLE>
<CAPTION>

                                                                                               DECEMBER 31
                                                                                           ------------------
                                                                                             1999       2000
                                                                                           -------    -------
     <S>                                                                                   <C>        <C>
     Building, mechanical and electrical installation                                      $ 3,543    $   103
     Plant and machinery                                                                   $35,282    $25,084
                                                                                           =======    =======
</TABLE>

(D)  FOREIGN CURRENCY CONTRACTS

     The Company had the following notional amounts of forward foreign currency
contracts as of December 31, 1999 and 2000:

<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31
                                                                                             ------------------
                                                                                               1999        2000
                                                                                             -------       ----
     <S>                                                                                     <C>           <C>
     Forward foreign currency contracts                                                      $53,780       $ --
                                                                                             =======       ====

</TABLE>

     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

<PAGE>   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

<PAGE>   94
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1998, 1999 AND 2000
               IN THOUSANDS OF US DOLLARS (EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>

                                                           AS OF DECEMBER 31, 1999     AS OF DECEMBER 31, 2000
                                                          -------------------------   -------------------------
                                                                          ESTIMATED                   ESTIMATED
                                                          CARRYING          FAIR        CARRYING        FAIR
                                                           AMOUNT           VALUE        AMOUNT         VALUE
                                                          --------        ---------     --------      ---------
     <S>                                                   <C>             <C>          <C>            <C>
     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            --             --
</TABLE>


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