##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 (Mark One)
 o
    
    Registration statement pursuant to section 12(b) or 12(g) of the Securities Exchange Act of
1934
 or
 þ
    
    Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2006
 or
 o
    
    Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from  to
 or
 o
    
    Shell company report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
Date of event requiring this shell company report
 Commission file number 000-29103
 STATS ChipPAC Ltd.
 (Exact Name of Registrant as specified in its charter)
 Republic of Singapore(Jurisdiction of incorporation or organization)
    
    10 Ang Mo Kio Street 65
#05-17/20 Techpoint
Singapore 569059(Address of principal executive offices)
  Ordinary Shares, including Ordinary Shares 
represented by American Depositary Shares
(each representing ten Ordinary Shares)(Title of Class)
    
    NASDAQ Stock Market(Name of Exchange on which registered)
 None
 None
  2,002,814,117 Ordinary Shares of Registrant.
 well-known
 þ o
  o þ
  þ o
 non-accelerated 12b-2
 Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
  o þ
 12b-2
 o þ
   o o




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##### 



TABLE OF CONTENTS
 PAGEITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    2ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    2ITEM 3.
    
    KEY INFORMATION
    
    
    2ITEM 4.
    
    INFORMATION ON OUR COMPANY
    
    
    20ITEM 4A.
    
    UNRESOLVED STAFF COMMENTS
    
    
    42ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    42ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    59ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    74ITEM 8.
    
    FINANCIAL INFORMATION
    
    
    76ITEM 9.
    
    THE OFFER AND LISTING
    
    
    78ITEM 10.
    
    ADDITIONAL INFORMATION
    
    
    79ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    91ITEM 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    92ITEM 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    92ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    92ITEM 15.
    
    CONTROLS AND PROCEDURES
    
    
    92ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    93ITEM 16B.
    
    CODE OF ETHICS
    
    
    93ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    94ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
    
    
    94ITEM 16E.
    
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    94ITEM 17.
    
    FINANCIAL STATEMENTS
    
    
    94ITEM 18.
    
    FINANCIAL STATEMENTS
    
    
    95ITEM 19.
    
    EXHIBITS
    
    
    95SIGNATURES
    
    
    100INDEX TO FINANCIAL
STATEMENTSEx-1.1 Memorandum of Association of STATS ChipPAC Ltd.Ex-4.28 STATS ChipPAC Ltd. Share Option PlanEx-4.30 STATS ChipPAC Ltd. Performance Share PlanEx-4.41 Subscription Agreement dated June 22, 2006Ex-4.42 Deed of Indemnity dated June 22, 2006Ex-4.43 Joint Venture Agreement dated June 22, 2006Ex-4.44 Asset Sale and Purchase Agreement dated June 22, 2006EX-4.45 Amendment Number One dated  July 14, 2006 to the Asset Sales & Purchase Agreement dated June 22, 2006Ex-4.46 Manufacturer's Representative Agreement dated June 22, 2006Ex-4.47 US$125,000,000 Syndicated Facility Agreement dated August 10, 2006 between STATS ChiPAC Ltd. and Oversea-Chinese Banking Corporation LimitedEx-4.48 English language translation of Korean language US$25,000,000 Term Loan Agreement dated May 29, 2006 between STATS ChipPAC Korea Ltd. and Hana BankEx-4.49 English language summary of Chinese language NT$1.8 Billion Syndicated Loan Agreement dated March 2, 2004 between Winstek Semiconductor Corporation and Mega BankEx-4.50 English language summary of Chinese language NT$3.6 Billion Syndicated Loan Agreement dated August 18, 2006 between Winstek Semiconductor Corporation and Taishin BankEx-12.1 Certification by CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002Ex-12.2 Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act 2002Ex-13.1 Certification by CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Ex-13.2 Certification by CFO pursuant to Section 906 of the Sarbanes-Oxley Act 2002Ex-15.1 Consent of Pricewaterhouse Coopers, Singapore,independent registered public accounting firm
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GENERAL INFORMATION
   wholly-owned
  52-53 week
 FORWARD-LOOKING STATEMENTS
 20-F forward-looking
 end-use
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forward-looking
 RECENT DEVELOPMENTS
 Temasek Holdings Subsidiary, Singapore Technologies Semiconductors Pte Ltds, Tender Offer
 wholly-owned
   Take-Overs Take-Over Schedule 14D-9
  
 ITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3.
    
    KEY INFORMATION
 A. Selected Financial Data
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 25,
    
    
    December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(In thousands, except per share data and ratios)Income Statement Data:Net revenues
    
    $
    225,738
    
    
    $
    380,691
    
    
    $
    769,121
    
    
    $
    1,157,253
    
    
    $
    1,616,933Cost of revenues
    
    
    (247,943
    )
    
    
    (328,014
    )
    
    
    (643,540
    )
    
    
    (968,023
    )
    
    
    (1,290,773
    )Gross profit (loss)
    
    
    (22,205
    )
    
    
    52,677
    
    
    
    125,581
    
    
    
    189,230
    
    
    
    326,160Operating expenses:Selling, general and administrative
    
    
    37,241
    
    
    
    36,849
    
    
    
    84,501
    
    
    
    135,751
    
    
    
    139,466Research and development
    
    
    18,856
    
    
    
    15,295
    
    
    
    17,637
    
    
    
    26,071
    
    
    
    30,446Goodwill impairment(1)
    
    
    
    
    
    
    
    
    
    
    453,000
    
    
    
    
    
    
    
    Equipment impairments(2)
    
    
    14,666
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 25,
    
    
    December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(In thousands, except per share data and ratios)Prepaid leases written off
    
    
    764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    830
    
    
    
    1,938Total operating expenses
    
    
    71,527
    
    
    
    52,144
    
    
    
    555,138
    
    
    
    162,652
    
    
    
    171,850Operating income (loss)(3)
    
    
    (93,732
    )
    
    
    533
    
    
    
    (429,557
    )
    
    
    26,578
    
    
    
    154,310Other income (expense), net:Interest income (expense), net
    
    
    (5,143
    )
    
    
    (9,209
    )
    
    
    (24,386
    )
    
    
    (36,215
    )
    
    
    (40,415
    )Foreign currency exchange gain (loss)
    
    
    (512
    )
    
    
    1,634
    
    
    
    (1,122
    )
    
    
    531
    
    
    
    (1,578
    )Equity income from equity investee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152Other non-operating income (expense), net
    
    
    3,419
    
    
    
    7,570
    
    
    
    (936
    )
    
    
    (1,076
    )
    
    
    108Total other income (expense), net
    
    
    (2,236
    )
    
    
    (5
    )
    
    
    (26,444
    )
    
    
    (36,760
    )
    
    
    (41,733
    )Income (loss) before income taxes
    
    
    (95,968
    )
    
    
    528
    
    
    
    (456,001
    )
    
    
    (10,182
    )
    
    
    112,577Income tax benefit (expense)
    
    
    7,163
    
    
    
    (705
    )
    
    
    (7,894
    )
    
    
    (9,689
    )
    
    
    (25,759
    )Income (loss) before minority interest
    
    
    (88,805
    )
    
    
    (177
    )
    
    
    (463,895
    )
    
    
    (19,871
    )
    
    
    86,818Minority interest
    
    
    (514
    )
    
    
    (1,539
    )
    
    
    (3,828
    )
    
    
    (6,440
    )
    
    
    (10,010
    )Net income (loss)
    
    $
    (89,319
    )
    
    $
    (1,716
    )
    
    $
    (467,723
    )
    
    $
    (26,311
    )
    
    $
    76,808Net income (loss) per ordinary share:Basic
    
    $
    (0.09
    )
    
    $
    (0.00
    )
    
    $
    (0.33
    )
    
    $
    (0.01
    )
    
    $
    0.04Diluted
    
    $
    (0.09
    )
    
    $
    (0.00
    )
    
    $
    (0.33
    )
    
    $
    (0.01
    )
    
    $
    0.04Net income (loss) per ADS:Basic
    
    $
    (0.90
    )
    
    $
    (0.02
    )
    
    $
    (3.27
    )
    
    $
    (0.13
    )
    
    $
    0.39Diluted
    
    $
    (0.90
    )
    
    $
    (0.02
    )
    
    $
    (3.27
    )
    
    $
    (0.13
    )
    
    $
    0.37Ordinary shares (in thousands) used in per ordinary
share calculation:Basic
    
    
    991,549
    
    
    
    1,005,374
    
    
    
    1,428,954
    
    
    
    1,961,950
    
    
    
    1,991,110Diluted
    
    
    991,549
    
    
    
    1,005,374
    
    
    
    1,428,954
    
    
    
    1,961,950
    
    
    
    2,161,545ADS (in thousands) used in per ADS calculation:Basic
    
    
    99,155
    
    
    
    100,537
    
    
    
    142,895
    
    
    
    196,195
    
    
    
    199,111Diluted
    
    
    99,155
    
    
    
    100,537
    
    
    
    142,895
    
    
    
    196,195
    
    
    
    216,154Balance Sheet Data:Cash and cash equivalents
    
    $
    167,661
    
    
    $
    313,163
    
    
    $
    227,509
    
    
    $
    224,720
    
    
    $
    171,457Working capital
    
    
    165,851
    
    
    
    328,583
    
    
    
    124,028
    
    
    
    250,369
    
    
    
    227,967Total assets
    
    
    721,968
    
    
    
    993,852
    
    
    
    2,271,702
    
    
    
    2,393,382
    
    
    
    2,458,280Current installments of obligations under capital leases
    
    
    6,558
    
    
    
    5,296
    
    
    
    7,587
    
    
    
    7,091
    
    
    
    3,680Short-term borrowings and current installments of
long-term debt
    
    
    21,588
    
    
    
    6,841
    
    
    
    174,281
    
    
    
    35,542
    
    
    
    61,693Obligation under capital leases, excluding current
installments
    
    
    5,520
    
    
    
    812
    
    
    
    10,771
    
    
    
    3,680
    
    
    
    Long-term debt, excluding current installments
    
    
    218,370
    
    
    
    358,789
    
    
    
    642,175
    
    
    
    775,425
    
    
    
    697,523Shareholders equity
    
    
    366,512
    
    
    
    475,956
    
    
    
    1,159,350
    
    
    
    1,141,652
    
    
    
    1,246,150Share capital
    
    $
    160,295
    
    
    $
    172,434
    
    
    $
    298,233
    
    
    $
    303,052
    
    
    $
    1,847,002Ordinary shares outstanding (in thousands)
    
    
    992,115
    
    
    
    1,076,620
    
    
    
    1,944,330
    
    
    
    1,976,292
    
    
    
    2,002,814
 
 (1)
    
    We recorded impairment charges of $453,000,000 in 2004 on our goodwill associated with
purchase accounting for the acquisition of ChipPAC.(2)
    
    We recognized impairment charges of $14,666,000 in 2002 on our equipment.(3)
    
    Includes share-based compensation expenses of $60,000, $97,000, $658,000 and $743,000 in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) in 2002, 2003, 2004 and 2005, respectively, and $13,688,000 in accordance
with Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment in
2006. 3




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B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
  Risks Relating to Our Company
 Downturns in the semiconductor industry have adversely affected our operating results and may
continue to adversely affect our operating results.
  
    
    rapid technological change;
    
    evolving industry standards;
    
    intense competition; and
    
    fluctuations in end-user demand.
 end-user
 We may not be able to compete successfully in our industry.
 multi-national
   
    
    their desire to realize higher utilization of their existing test and packaging capacity;
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
    
    their unwillingness to disclose proprietary technology;
    
    their possession of more advanced packaging and testing technologies; and
    
    the guaranteed availability of their own packaging and test capacity.
  A decrease in demand for communications equipment, consumer and multi-applications, or personal
computers, may significantly decrease the demand of our services.
 multi-applications, multi-applications, multi-applications, multi-applications,
 Decisions by our IDM customers to curtail outsourcing may adversely affect our business.
 in-house
 short-term
 We depend on a small number of customers for a significant portion of our revenues and any decrease
in sales to any of them could adversely affect our business and results of operations.
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We may not be able to develop or access leading technology which may affect our ability to compete
effectively.
 write-down write-down
  We expect to incur significant capital expenditures in the future and therefore may require
additional financing in the future which may not be available on terms favorable to us, if at all.
   
    
    limit our Company or its subsidiaries 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.
  Our profitability will be affected by average selling prices of packaging and test services that
have experienced pricing pressures and have a tendency to decline.
  6




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We have experienced substantial losses in the past and may continue to do so in the future.
  The
announcement by Temasek Holdings subsidiary, STSPL, of a proposed tender offer to purchase
all of our outstanding ordinary shares and ADSs may cause disruptions in our business, which could
have a material adverse effect on our business and operations.
 wholly-owned
 Litigation may arise in connection with the proposed tender offer by STSPL, which could negatively
impact our business and our results of operations.
  Our substantial indebtedness could adversely affect our financial health.
 short-term
  
    
    increasing our vulnerability to general adverse economic and industry conditions by
limiting our flexibility in planning for, or reacting to, changes in the business and the
industry in which we operate;
    
    requiring us to dedicate a substantial portion of our cash flow from operations to
payments on our indebtedness, thus reducing the availability of cash flow to fund working
capital, capital expenditures, research and development efforts and other general corporate
purposes;
    
    placing us at a competitive disadvantage relative to our competitors that have less leverage; and
    
    limiting, along with the financial and other restrictive covenants in the indebtedness, our ability to borrow additional funds.
  To service our indebtedness and other potential liquidity requirements we will require a
significant amount of cash. Our ability to generate cash depends on many factors beyond our
control.
  We recorded an impairment charge of $453.0 million to our earnings in 2004 and may be required to
record another significant charge to earnings in the future when we review our goodwill or other
intangible assets for potential impairment.
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We could suffer adverse tax and other financial consequences if taxing authorities do not agree
with our interpretation of applicable tax laws.
 wholly-owned
 Our intellectual property is important to our ability to succeed in our business but may be
difficult to obtain and protect.
 know-how non-disclosure
 know-how non-disclosure
  We may be subject to intellectual property rights disputes which could materially adversely affect
our business.
  8




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
    
    stop using certain processes or other intellectual property;
    
    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.
 multi-chip
    Our operating results have fluctuated, and may continue to fluctuate, from quarter to quarter,
which may make it difficult to predict our future performance.
  
    
    general economic conditions in the semiconductor industry and the markets addressed by end-users of semiconductors;
    
    a shift by IDMs between internal and outsourced test and packaging services;
    
    the seasonality of the semiconductor industry;
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
    
    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 erosion of the selling prices of packages;
    
    changes in our product mix;
    
    the rescheduling, cancellation and timing of expenditures in anticipation of future orders;
    
    disruptions caused by the installation of new equipment;
    
    the ability to obtain adequate equipment and materials on a timely and cost-effective basis;
    
    any exposure to currency and interest rate fluctuations that may not be adequately covered under our hedging policy;
    
    weakness in the supply of wafers and substrates;
    
    loss of key personnel or the shortage of available skilled workers; and
    
    changes in effective tax rates.
  If we are unable to maintain or increase our capacity utilization, our gross margin will be
adversely affected.
   
    
    overall industry conditions;
    
    installation of new equipment in anticipation of future business;
    
    the level of customer orders;
    
    operating efficiencies;
    
    mechanical failure;
    
    disruption of operations due to expansion of operations, introduction of new packages or relocation of equipment;
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
    
    disruption in supply of raw materials;
    
    changes in product mix; and
    
    fire or other natural disasters.
  If we are unable to obtain packaging and testing equipment in a timely manner or on reasonably
favorable terms and prices, we may be unable to meet customer demand and our revenue may decline.
   We have entered into a number of financing arrangements that impose limitations on our actions
which may limit our ability to maintain and grow our business.
  
    
    incur additional debt and issue certain preferred stock;
    
    consolidate or merge with another entity;
    
    create liens;
    
    pay dividends, repurchase stock and make other distributions;
    
    prepay subordinated debt;
    
    make investments and other restricted payments;
    
    enter into sale and leaseback transactions;
    
    sell assets; and
    
    enter into transactions with affiliates.
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cross-acceleration cross-default
 Research and development investments may not yield profitable and commercially viable packages or
test services and thus will not necessarily result in increases in revenues for us.
  We do not have any significant backlog because our customers do not place purchase orders far in
advance, which makes us vulnerable to sudden changes in customer demand.
  We generally do not have any long-term supply contracts with our raw materials suppliers and may
not be able to obtain the raw materials required for our business, which could have a material
adverse effect on our business.
 long-term
 We need a controlled environment for our operations and any prolonged inability to maintain a clean
room environment may disrupt our operations and materially adversely affect our business.
  Loss of our key management and other personnel, or an inability to attract such management and
other personnel, could impact our business.
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The packaging and testing process is complex and our production yields and customer relationships
may suffer from defects or malfunctions in our testing equipment or defective packages and the
introduction of new packages.
   
    
    contaminants in the manufacturing environment;
    
    human error;
    
    equipment malfunction;
    
    defective raw materials; or
    
    defective plating services.
   Liabilities and obligations under certain environmental laws and regulations could require us to
spend additional funds and could adversely affect our business, financial condition and results of
operations.
 by-products off-site
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Significant fluctuations in exchange rates may affect our business, financial condition and results
of operations.
  Our ability to make further investments in our subsidiaries may be dependent on regulatory
approvals.
 equity-related
 We are exposed to certain risks as a result of the significant ownership by Temasek Holdings,
through its wholly-owned subsidiary. Temasek Holdings interests may conflict with your interests.
 wholly-owned wholly-owned
  
    
    the election of directors;
    
    the merger or consolidation of our Company with any other entity;
    
    any sale of all or substantially all of our assets; and
    
    the timing and payment of dividends.
 day-to-day
  We may have conflicts of interest with our affiliates which may not be resolved in our favor.
 Singapore-based
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application-specific
 We may not be successful in our acquisitions and investments in other companies and businesses.
 Micro-Assembly flip-chip
  
    
    our ability to identify suitable opportunities for investment or acquisition;
    
    our ability to finance any future acquisition or investment on terms acceptable to us or at all;
    
    whether we are able to reach an acquisition or investment agreement on terms that are satisfactory to us or at all;
    
    the extent to which we are able to exercise control over the acquired company;
    
    the economic, business or other strategic objectives and goals of the acquired company compared to those of our Company; and
    
    our ability to successfully integrate the acquired company or business with our business.
  We may be unable to integrate our operations successfully and may not realize the full anticipated
benefits of the combination of STATS and ChipPAC.
  
    
    integration of the two companies products and services, sales and marketing,
information and software systems and other operations;
    
    retention and integration of management and other employees;
    
    achievement of the expected cost savings;
    
    coordination of ongoing and future research and development efforts and marketing activities;
    
    retention of existing customers of both companies and attraction of additional customers;
    
    retention of strategic partners of each company and attraction of new strategic partners;
    
    developing and maintaining uniform standards, controls, procedures and policies;
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
    
    minimization of disruption of the combined companys ongoing business and distraction of its management; and
    
    limiting expenses related to integration.
  
    
    the impairment of relationships with employees, customers and business partners;
    
    our ability to attract and retain key management, sales, marketing and technical personnel;
    
    a delay in, or cancellation of, purchasing decisions by current and prospective customers and business partners;
    
    the potential disruption of the combined companys ongoing business and distraction of its management; and
    
    the difficulty of incorporating acquired technology and rights into the products and service offerings of the combined company.
  If we encounter future labor problems, we may fail to deliver our products in a timely manner,
which could adversely affect our revenues and profitability.
  With our operations conducted in a limited number of facilities, a fire, flood or other calamity at
one of our facilities could adversely affect us.
 flip-chip
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New laws and regulations, currency devaluation and political instability in countries in which we
operate, particularly in South Korea, China, Malaysia and Taiwan could make it more difficult for
us to operate successfully.
  
    
    regulatory limitations imposed by foreign governments;
    
    fluctuations in currency exchange rates;
    
    political, military and terrorist risks;
    
    disruptions or delays in shipments caused by customs brokers or government agencies;
    
    unexpected changes in regulatory requirements, tariffs, customs, duties and other trade barriers;
    
    difficulties in staffing and managing foreign operations; and
    
    potentially adverse tax consequences resulting from changes in tax laws.
  Conducting business in China involves uncertainties and there can be no assurances that the
intended benefits from our new China facility will be realized.
  
    
    economic and political uncertainties in China;
    
    local infrastructure problems, such as electrical power interruptions;
    
    transportation difficulties that may be encountered in receiving supplies and/or in shipping finished products by land or by air;
    
    an unwillingness or hesitancy on the part of customers to qualify their products in the new facilities;
    
    an inability to attract and retain sufficient and qualified engineering and management talent and resources;
    
    measures which may be introduced to control inflation or deflation;
    
    continuing fluctuations in the value of the Chinese Renminbi currency; and
    
    modifications to fiscal, banking or monetary policies to reduce the rate of future growth in China.
 Because a significant portion of Winsteks business and operations, our 300mm wafer
bumping facility, the production facilities of many of our suppliers and customers and providers of
complementary semiconductor manufacturing services are located in Taiwan, a severe earthquake could
severely disrupt their normal operations and adversely affect our earnings.
  17




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##### Table of Contents



Outbreaks of epidemics and communicable diseases in China and other parts of Asia may disrupt our
business operations, causing us to lose customers and revenue.
 re-appearance
 Risks Relating to Our Ordinary Shares and ADSs
 The trading price of our ordinary shares and our ADSs has been and may continue to be volatile.
  
    
    quarterly variations in operating results;
    
    changes in financial estimates and recommendations by securities analysts;
    
    the operating and stock price performance of other companies in our industry;
    
    developments affecting us, our customers or our competitors;
    
    changes in government regulation;
    
    changes in general economic conditions;
    
    changes in accounting principles; and
    
    other events or factors described in this annual report.
  Singapore law contains provisions that could discourage a take-over of our Company.
 Take-Over take-over take-over Take-Over take-over
 18




---



##### Table of Contents



six-month
 Our public shareholders may have more difficulty protecting their interests than they would as
shareholders of a corporation incorporated in the United States.
  It may be difficult for you to enforce any judgment obtained in the United States against us or our
affiliates.
  The Singapore securities market is relatively small and more volatile than markets in the United
States and may cause the market price of our ordinary shares and our ADSs to fluctuate.
 (SGX-ST) SGX-ST SGX-ST SGX-ST
 Future sales, or perceived sales, of our ordinary shares or our ADSs by our Company or existing
shareholders could cause the price of our ordinary shares and our ADSs to decline.
  Your voting rights with respect to the ADSs are limited by the terms of the deposit agreement for
the ADSs.
  19




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##### Table of Contents




    
    the notice of such meeting;
    
    voting instruction forms; and
    
    a statement as to the manner in which instructions may be given by holders.
   The ability of holders of ADSs to participate in any rights offering of our Company is limited,
which may cause dilution to their holdings.
  
 ITEM 4.
    
    INFORMATION ON OUR COMPANY
 A. History and Development of Our Company
  SGX-ST (SGX-ST: #05-17/20 www.statschippac.com. (510) 979-8000; (510) 979-8001.
 wholly-owned
  20




---



##### Table of Contents

\

B. Business Overview
  
    
    Packaging services:providing leaded, power, array, memory card and wafer level
chip-scale packages to customers with a broad range of packaging solutions and full backend
turnkey services for a wide variety of electronics applications. We also provide
redistribution layers (RDL), integrated passive device (IPD), and wafer bumping services
for flip-chip and wafer level chip-scale packages. As part of customer support on packaging
services, we also offer package design, electrical, mechanical and thermal simulation,
measurement and design of lead-frames and laminate substrates;
    
    Test services:including wafer probe and final testing, on a diverse selection of test
platforms, covering the major test platforms in the industry. We have expertise in testing
a broad variety of semiconductors, especially mixed-signal and high-performance digital
devices. We also offer test-related services such as burn-in process support, reliability
testing, thermal and electrical characterization, dry pack and tape and reel; and
    
    Pre-production and post-production services:such as package development, test software
and related hardware development, warehousing and drop shipment services.
 System-in-Package flip-chip, chip-scale high-volume
 mixed-signal Mixed-signal fast-growing high-performance
  pre-production fully-integrated, multi-site, end-to-end
 Our Industry
   21




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##### Table of Contents



lower-technology in-house.
 mid-1980s.
 cost-effective state-of-the-art
  end-user
  Semiconductor Manufacturing Process
  
    
    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.
 Wafer Probe.
 Assembly.
 22




---



##### Table of Contents



Final Testing.
 Our Strengths and Strategy
  Leverage our broad portfolio of packaging and test services to provide full turnkey solutions. end-to-end value-added cost-effective
 Leverage our established presence in the major hubs of wafer fabrication. pre-production fully-integrated, multi-site, end-to-end
 Capitalize on our research and development capabilities to drive accelerated growth.
 Continue to cultivate our strong customer relationships. fast-growing
 Continue to focus on high-quality customer service. product-specific real-time high-quality service-oriented customer-focused
 Capitalize on our financial position.
 Our Services
  23




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##### Table of Contents



Year EndedDecember 31,
    
    December 25,
    
    December 31,2004
    
    2005
    
    2006Packaging  array
    
    
    40.6
    %
    
    
    50.2
    %
    
    
    55.5
    %Packaging  leaded
    
    
    20.9
    
    
    
    22.0
    
    
    
    18.3Test and other services
    
    
    38.5
    
    
    
    27.8
    
    
    
    26.2Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Packaging Services
 lead-frames
 Leaded Packaging. lead-frame lead-frame multi-chip
 Standard Lead-frame Packages. lead-frame high-performance, chip-scale lead-frame
  NumberPackage Format
    
    of I/Os
    
    Description
    
    Typical ApplicationsPlastic Dual In-line Package
(PDIP)
    
    8-40
    
    Lead-frame package of low pin
countwith two-side leads and
plated-through-hole (PTH)
technology
    
    Automotive electronics, power
management, audio and remote
controlSmall Outline Integrated Circuit
(SOIC)
    
    8-32
    
    Lead-frame package of low pin
count with two-side leads, and
a surface mount technology
(SMT) designed for logic,
linear, digital and
read-only-memory devices
    
    Automotive electronics, power
management, audio and remote
controlPlastic Leaded Chip Carrier
(PLCC)
    
    20-84
    
    Traditional lead-frame package
designed for applications that
do not have space constraints
and do not require a high
number of interconnects
    
    Personal computers (PCs),
access equipment and multimedia
 24




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##### Table of Contents



NumberPackage Format
    
    of I/Os
    
    Description
    
    Typical ApplicationsMicro
Small outline Package(MSOP)
    
    8-10
    
    Lead-frame package of very low pin count with thickness below
1.0mm designed for logic,
analog and mixed-signal devices
such as analog and operation
amplifiers, controllers and drivers,
logic, memory and RF/wireless devices
    
    Mobile phone, mass storage, multimedia and Personal Digital
Assistant (PDA)Shrink Small Outline Package
(SSOP)
    
    36-56
    
    Traditional lead-frame package
designed for logic, analog and
mixed-signal devices such as
Flash, SRAM, EPROM, EEPROM and
DRAM
    
    PCs, mass storage and multimediaThin Shrink Small Outline 
Package (TSSOP)
    
    8-56
    
    Traditional lead-frame package
with thickness below 1.0mm
designed for logic, analog and
mixed-signal devices such as
Flash, SRAM, EPROM, EEPROM and
DRAM
    
    Mobile phone, mass storage,
multimedia and PDAThin Small Outline Package(TSOP)
    
    28-56
    
    Traditional lead-frame package
with two-side leads, and a SMT
designed for memory,
RF/wireless, logic, linear and
automotive devices
    
    PCs, portable electronics,
networking equipment and
automotive electronicsThin Quad Flat Package (TQFP)
    
    32-128
    
    Advanced QFP with thickness of
1.0mm for use in low profile,
space constrained applications
    
    Mobile phone, mass storage and
multimediaLow Quad Flat Package (LQFP)
    
    32-208
    
    Advanced QFP with thickness of
1.4mm for use in low profile,
space constrained applications
    
    Mobile phone, mass storage and
multimediaMetric Quad Flat Package (MQFP)
    
    44-240
    
    Traditional QFP designed for
ASICs, field programmable gate
arrays (FPGAs) and digital
signal processors (DSPs)
    
    Access/Local Area Network (LAN)
equipment, multimedia and mass
storage
 Enhanced Lead-frame Packages. lead-frame lead-frame leading-edge
  lead-frame
 25




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##### Table of Contents



NumberPackage Format
    
    of I/Os
    
    Description
    
    Typical ApplicationsQuad Flat No-Lead (QFN)
    
    4-88
    
    Lead-frame based plastic encapsulated chip-scale package in single mold cavity format (punch singulated) or molded array format (saw singulated)
    
    Mobile phone, PDA, Global Positioning System (GPS)Dual Row Quad Flat No-Lead(QFN-dr)
    
    4-156
    
    QFN version with staggered dual
row leads offers higher I/O
counts.
    
    Mobile phone, PDA, GPSBumped Chip Carrier (BCC)
    
    16-84
    
    Lead-frame based near chip-scale
    
    Mobile phone, PDA, GPSDual Row Bumped Chip Carrier(BCCs)
    
    16-116
    
    BCC version with staggered dual
row leads offers higher I/O
counts.
    
    Mobile phone, PDA, GPSLead-frame Chip-scale Packages
(LFCSPs)
    
    8-64
    
    Lead-frame based near chip-scale
    
    Mobile phone, PDA, GPSExposed Pad Low Quad Flat 
Package (LQFP-ep)
    
    48-216
    
    Thermally enhanced QFP with 30% greater thermal dissipation than MQFP
    
    Access/Wide Area Network
(WAN)/LAN equipment and
PC/graphics, high disk drive
(HDD)Exposed Pad Thin Quad Flat 
Package (TQFP-ep)
    
    32-100
    
    Thermally enhanced TQFP with 30% greater thermal dissipation than TQFP
    
    Access/WAN/LAN equipment,
PC/graphics, HDD, PDA, GPS and
mobile phoneExposed Drop-in Heat Sink QuadFlat Package (MQFP-ed)
    
    128-240
    
    Thermally enhanced QFP with 60% greater thermal dissipation than MQFP
    
    Access/WAN/LAN equipment and
PC/graphicsDrop-in Heat Sink Quad Flat 
Package (MQFP-d)
    
    64-208
    
    Thermally enhanced QFP with 30% greater thermal dissipation than MQFP
    
    Access/WAN/LAN equipment and
PC/graphicsExposed Pad Thin Shrink SmallOutline Package (TSSOP-ep)
    
    16-38
    
    Thermally enhanced TSSOP with 30% greater thermal dissipation than TSSOP
    
    Mobile phone, mass storage
multimedia and PDAStacked Die Quad Flat Package(LQFP-SD)
    
    32-208
    
    Compact multiple die designed for space constrained applications
    
    Mobile phone, PDA, GPS, disk
drive and multimediaStacked Die Exposed Pad Low 
Quad Flat Package(LQFP-ep-SD)
    
    32-216
    
    Thermally enhanced LQFP-SD
designed for space constrained
applications with thickness of
1.4mm and greater thermal
dissipation than LQFP-SD
    
    PC, mobile phone, PDA, GPS,
disk drive, MP3, pagers and
consumer electronicsStacked Die Exposed Pad ThinQuad Flat Package(TQFP-ep-SD)
    
    32-100
    
    Thermally enhanced with
multiple die TQFP designed for
space constrained applications
with thickness of 1.0mm and
greater thermal dissipation
than
LQFP-SD
    
    PC, mobile phone, PDA, GPS,
disk drive, MP3 and consumer
electronics
 26




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##### Table of Contents



Power Packaging. end-markets,
 non-power non-power
 Array Packaging. hand-held
  
    
    smaller size;
    
    greater pin count, or number of connections to the printed circuit board;
    
    greater reliability;
    
    higher power dissipation;
    
    better electrical signal integrity; and
    
    easier attachment to a printed circuit board.
 lead-frame.
  chip-scale pin-count hand-held
  
    
    Standard BGA.Standard BGA packaging has a grid array of balls on the underside of the
integrated circuit, and is used in high-performance applications, like PC chipsets, graphic
controllers and DSPs. A BGA generally has greater than 100 pins.
 27




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##### Table of Contents




    
    Chip-scale.Chip-scale packaging includes all packages where the package is less than
1.2 times the size of the silicon die. Chip-scale BGA is a substrate (laminate or
tape)-based package that is designed for memory devices and other medium pin count
semiconductors and requires dense ball arrays in very small package sizes, like wireless
telephones and personal digital assistants, video cameras, digital cameras and pagers.
    
    System-in-Package.SiP is a family of chip-scale-packages that contain several
semiconductor dies along with passive components such as resistors, capacitors and
inductors in one package. Dies can be either stacked on top of each other or side by side.
This technology allows greater functionality in the same package footprint and thickness
without significant cost increase. These packages are used in wireless handsets, consumer
products and mobile computing applications.
    
    Chip-scale Module Packaging (CSMP).CSMP is an advanced SiP solution which features a
modular architecture that integrates mixed IC technologies and a wide variety of IPD such
as resistors, capacitors, inductors, filters, Balanced Unbalanced (BALUNs) and
interconnects directly onto a silicon substrate. The result is a high performance system
level solution, which provides a significant reduction in die size, weight, number of
interconnections and system board space requirements, and can be used for many
applications.
    
    Flip-chip BGA.Flip-chip BGA packaging, in which the silicon die is directly attached
to the substrate using gold or solder bumps instead of wire bonds, provides the most dense
interconnect with the highest electrical and thermal performance. Flip-chip BGA technology
is used in a wide array of applications ranging from consumer products to highly
sophisticated ASICs, PC chipsets, graphics and memory packages.
 flip-chip chip-scale
  NumberPackage Format
    
    of I/Os
    
    Description
    
    Typical ApplicationsLand Grid Array (LGA)
    
    8-200
    
    Laminate substrate based
package with plastic
overmolded encapsulation.
Unlike a standard flip-chip
BGA, second level interconnect
is achieved on the LGA by
connecting lands on the
package directly onto the
printed circuit board through
solder re-flow
    
    Mobile phone, wireless RF,
analog, ASIC, memory chipFlip-chip Low Profile FinePitch BGA (fcLFBGA)
    
    49-144
    
    CSP BGA with Flip-chip/bump
interconnect, instead of wire
bonding
    
    Mobile phone, WAN/LAN equipmentFlip-chip BGA (fcBGA)
    
    225-1152
    
    BGA with Flip-Clip/bump
interconnect instead of wire
bonding
    
    DSP, ASIC, FPGATape based Very Thin Fine 
Pitch BGA (VFBGA-T)
    
    81-169
    
    Thin CSP BGA (<1.0mm)
characterized by flex-tape
substrate for high density
circuits
    
    Mobile phone, PDA and
multimediaStacked Die Low Profile FinePitch BGA (LFBGA-SD)
    
    72-409
    
    Compact multiple die designed
for space sensitive
applications. Capability to
stack up to seven dies in one
package
    
    Mobile phone, PDA and
multimediaTape Enhanced Plastic baseBGA (TBGA)
    
    208-792
    
    BGA characterized by a
flex-tape substrate mounted on
a copper heatspreader. This
package has a high thermal dissipation
    
    WAN/LAN equipment and base
station
 28




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##### Table of Contents



NumberPackage Format
    
    of I/Os
    
    Description
    
    Typical ApplicationsEnhanced BGA (EBGA)
    
    159-1140
    
    High pin count, thermally-enhanced
BGA suitable for high power
applications which utilize
heat sinks for thermal
dissipation
    
    WAN/LAN equipment and base
stationLow Profile Fine Pitch BGA(LFBGA)
    
    16-450
    
    Smaller and thinner BGA
designed for applications
which are space constrained
and require electrical
performance
    
    Mobile phone, PDA, GPS and
multimediaPlastic Ball Grid Array
(PBGA)
    
    169-1152
    
    Electrically enhanced BGA
package designed for high I/O
replacement
    
    Access/LAN equipment,
PC/graphics and base stationThin Fine Pitch BGA
(TFBGA)
    
    41-280
    
    CSP BGA characterized by a
thin core laminate substrate
    
    Mobile phone, PDA and
multimediaExposed Drop-in Heat 
Spreader Plastic BGA(PBGA-H)
    
    208-841
    
    Thermally Enhanced PBGA with
20% greater thermal
dissipation than PBGA
    
    Access/LAN/PC/graphics and
base station equipmentMulti Chip Module Plastic 
BGA (PBGA-MC)
    
    80-600
    
    BGA integrated with two or
more multiple die within a
PBGA
    
    Access/LAN/PC/graphics and
base station equipmentPackage-in-Package (PiP)
    
    40-450
    
    Three-dimensional package
stacking fully tested packaged
chips and bare chips in a CSP
    
    PC, mobile phone, PDA, MP3,
base station modems, memory
cards and consumer electronicsPackage-on-Package (PoP)
    
    128-700
    
    Three-dimensional package
stacking multiple fully tested
separate packages
    
    PC, mobile phone, PDA, MP3,
base station modems, memory
cards and consumer electronics
 lead-free
 lead-free lead-free lead-free lead-free
 in-line
 Wafer Process Services. high-end flip-chip Flex-On-Cap
 29




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##### Table of Contents



Test Services
 mixed-signal, time-to-market,
 un-bumped known-good-die flip-chip
 device-specific pick-and-place mixed-signal
 socket-custom
 state-of-the-art mixed-signal high-performance
 Mixed-signal Testing. mixed-signal set-top Bluetooth tm Bluetooth tm Bluetooth tm mixed-signal CD-ROM,
 Digital Testing. high-performance
 Memory Testing. non-volatile
 Test-Related Services. value-added test-related
 
    
    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.
 30




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##### Table of Contents




    
    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 prevent the
failure of any semiconductors due to exposure to moisture during shipping. We dry pack
many of our packaged integrated circuits in specially sealed, environmentally secure
containers.
    
    Tape and reel.Many electronic assembly lines utilize tape and reel methods in which
semiconductors are placed into a pocket tape to enable faster attachment to the printed
circuit board. We offer a service in which we ship packaged and tested devices on a tape
and reel mechanism, in a tray or in a tube in accordance with our customers post-test
requirements.
 Pre-production and Post-production Services
 pre-production post-production pre-production wholly-owned high-end pre-production pre-production customer-to-lab-to-factory high-volume high-volume high-end post-production
 Package Development
 lead-frame end-use quick-turn time-to-volume
 Test Software and Hardware Development
 multi-site check-plot
 31




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##### Table of Contents



on-going
 Warehousing and Drop Shipment Services
 time-to-market end-customers.
 Research and Development
  Packaging Services
 web-based time-to-market
 high-performance flip-chip build-up Flip-chip Build-up flip-chip high-end high-end
 lead-frame, low-profile, three-dimensional Package-in-Package Package-on-Package hand-held hand-held base-band
   32




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##### Table of Contents




    
    Lead free Flip-Chip Land Grid Array (fcLGA);
    
    Chip-scale Module Package (LFBGA-CSMP, fcLGA-CSMP, QLP-CSMP);
    
    Low profile, Fine pitch BGA with Heatspreader (LFBGA-H);
    
    Dual Row Leadframe CSP (LFCSP-dr);
    
    0.4mm Leadframe CSP;
    
    Power Leadframe CSP;
    
    Stacked Die Leadframe CSP;
    
    Dual Row Quad Leadless Package (QLPp-dr);
    
    Molded multi-die chip-scale package family with the following chip-stack combinations in
package profile thickness ranging from 0.8 to 1.4mm (LF/TF/VFBGA):
 
    
    Two-chip stack, same chip size;
    
    Three-chip stack, pyramid stack;
    
    Three-chip stack with the two chip same size;
    
    Four-chip stack, pyramid stack;
    
    Four-chip stack with two chips same size;
    
    Five-chip stack, pyramid stack;
    
    Five-chip stack with three chips same size;
    
    Six-chip stack, pyramid stack;
    
    Six-chip stack with three chips same size; and
    
    Seven-chip stack with four chips same size;
 
    
    Lead-frame chip-scale package (LFCSPtm);
    
    Stacked Die Bumped Chip Carrier package (BCC++ -SD2);
    
    Gigabit-Green-Gold-to-Gold flip-chip interconnection package family of CSPs and BGAs (G4TM);
    
    Higher thermal performance PBGA with embedded heatslug (PBG-H);
    
    Thermally enhanced ball grid array family with integrated passive components (PBGA-H-SiP);
    
    Stacked Die System-in-Package PBGA (PBGA-SiP-SD);
    
    Flip-Chip Multi Package Module family module (fcBGA-MP);
 33




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##### Table of Contents




    
    Flip-Chip BGA with High Lead bumping (fcBGA-Hi Lead);
    
    Enhanced BGA with Multi Cavity (EBGA-MC);
    
    Flip-Chip on lead-frame substrate (fcLFCSPs);
    
    Package-in-Package (PiP) stacking  LFBGA-PiPs; PiPm;
    
    Package-on-Package (PoP)  LFBGA-PoP; VFBGA-PoP;
    
    Stacked Die System-in-Package Multi Package Module  TFLGA-SiP-SD2-MP;
    
    Stacked Die System-in-Package LGA  VFLGA-SiP-SD4;
    
    Bond on Chip Fine Ball Grid Array  TFBGA-BOC;
    
    Stacked Die Bond on Chip Fine Ball Grid Array  TFBGA-BOC-SD2;
    
    Extremely Thin Fine Ball Grid Array (XFBGA);
    
    Extremely Thin Fine Land Grid Array (XFLGA);
    
    Flip-Chip Quad Leadless Package (fcQLPp);
    
    Stacked Die Thin Small Outline Package (TSOP-SD7);
    
    Thin Internal Stack Module (Thin ISM);
    
    Stack Die Package-on-Package  LFBGA-PoPt-SD5;
    
    Flip-Chip Stacked Die Fine Ball Grid Array  fcTFBGA-SD2; fcLFBGA-SD2;
    
    Flip-Chip System-in-Package BGA with 160 um Bump Pitch  fcBGA-SiP-SS2 with 160 um Bump Pitch;
    
    Extremely thin Quad Flat No-Lead  XQFN;
    
    Multi Pad Quad Flat No-Lead  Multi Pad QFNs;
    
    0.4mm pitch Quad Flat No-Lead (punch-singulated); and
    
    Memory Card Format  SD-SiP-SD5; MS Micro; rsMMC/MMC.
  Test Services
 multi-site
 34




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##### Table of Contents



Customers
   Year EndedDecember 31,
    
    December 25,
    
    December 31,2004
    
    2005
    
    2006Communications
    
    
    60.1
    %
    
    
    55.2
    %
    
    
    56.7
    %Personal computers
    
    
    22.8
    
    
    
    21.5
    
    
    
    18.7Customer, multi-applications
and others
    
    
    17.1
    
    
    
    23.3
    
    
    
    24.6Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Year EndedDecember 31,
    
    December 25,
    
    December 31,2004
    
    2005
    
    2006United States of America
    
    
    77.2
    %
    
    
    76.5
    %
    
    
    73.2
    %Europe
    
    
    4.6
    
    
    
    2.3
    
    
    
    2.9Asia
    
    
    18.2
    
    
    
    21.2
    
    
    
    23.9Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  time-to-market
 35




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##### Table of Contents



Sales and Marketing
  near-term work-in-progress
 end-user Bluetooth TM three-dimensional
 Pricing Policy
 per-second
 non-recurring
 Customer Service
 real-time works-in-progress,
 Suppliers
 Raw Materials
 lead-frames lead-frames, lead-frames customer-supplied
 36




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##### Table of Contents



long-term long-term


Equipment






Packaging Equipment. lead-frame Dai-Ichi


Testing Equipment.


mixed-signal


Quality Control


in-line in-house






37



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##### Table of Contents



socio-economic
 Competition
 state-of-the-art multi-national
  
    
    Advanced Semiconductor Engineering, Inc.  South Korea, Taiwan, Malaysia, Hong Kong and the United States;
    
    Amkor Technology, Inc.  South Korea, Japan, Taiwan, China, the Philippines and the United States;
    
    ASE Test Limited  South Korea, Taiwan, Malaysia, Hong Kong and the United States; and
    
    Siliconware Precision Industries Co., Ltd.  Taiwan.
   
    
    their desire to realize higher utilization of their existing packaging or test capacity;
    
    their unwillingness to disclose proprietary technology;
    
    their possession of more advanced packaging or testing technologies; and
    
    the guaranteed availability of their own packaging or test capacity.
   Intellectual Property
 know-how, non-patented
 38




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##### Table of Contents



know-how non-disclosure
 cross-license non-disclosure
 non-disclosure
 multi-chip
   Insurance
  39




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##### Table of Contents



Environmental Matters and Compliance
   C. Corporate Structure
  
 
 Note:(1)
    
    In June 2006, we entered into a strategic joint venture with CR Logic for the assembly and
test of select products in Wuxi, China, in connection with which we acquired a 25%
shareholding in MAT with CR Logic owning a 75% interest. MAT wholly owns ANST, an assembly
and test company based in Wuxi, China. 40




---



##### Table of Contents



D. Property, Plants and Equipment
  AreaProperty/Location(1)
    
    (Sq. Feet)
    
    Functions/Services
    
    Principal Packaging or Services ProvidedYishun, Singapore(2)
    
    
    594,036
    
    
    Turnkey packaging and test
services, research and
development, warehousing
services, and drop shipment
services
    
    Test services, including mixed-signal and
high performance testing, wafer sort and
probe, traditional and advanced leaded and
array packaging including BGA, flip-chip
packaging, wafer level packaging and CSP
and drop shipment servicesIcheon, South Korea
    
    
    587,273
    
    
    Turnkey packaging and test
services, research and
development, warehousing
services, and drop shipment
services
    
    Advanced array packaging such as stacked
die, SiP and flip-chip, standard array
packaging such as BGA and CSP and test
servicesKuala Lumpur, Malaysia(3)
    
    
    488,448
    
    
    Turnkey packaging and test
services, research and
development, warehousing
services, and drop shipment
services
    
    Advanced lead frame packages such as LFCSP
and BCC, discrete power packages, and test
servicesQing Pu, Shanghai, China(4)
    
    
    421,748
    
    
    Turnkey packaging and test
services, research and
development, warehousing
services, and drop shipment
services
    
    Packaging of leaded packages, CSP, BGA,
memory card, wafer probe, test and
distribution servicesHsin-Chu Hsien, Taiwan(5)
    
    
    217,258
    
    
    Test services, research and
development, warehousing
services, and drop shipment
services
    
    Test development, final test, wafer probe
and distribution servicesFremont, California, United 
States
    
    
    56,320
    
    
    Sales, marketing, administration and research
and development
    
    Sales, marketing, administration and
design review servicesMilpitas, California, United 
States
    
    
    34,000
    
    
    Test facility and sales office
    
    Sales, marketing, administration, design
and test engineering servicesAng Mo Kio, Singapore
    
    
    31,261
    
    
    Corporate executive,
administrative, sales and
marketing and finance office
    
    Corporate administration and finance,
sales and marketingSan Diego, California, 
United States(6)
    
    
    20,000
    
    
    Test facility
    
    Test engineering servicesSong Jiang, Shanghai, China
    
    
    15,000
    
    
    LCD driver, IC bumping and
assembly turnkey services
    
    Gold bumping, Circuit probe (CP) testing,
Chip-on-glass (COG) assembly and
Chip-on-flex (COF) assembly for LCD driver
IC
 41




---



##### Table of Contents



AreaProperty/Location(1)
    
    (Sq. Feet)
    
    Functions/Services
    
    Principal Packaging or Services ProvidedTempe, Arizona, United States
    
    
    9,300
    
    
    Package design, research and
development and sales office
    
    Sales, marketing, administration, design
and characterization servicesHsin-Chu Hsien, Taiwan
    
    
    7,000
    
    
    Solder bump services forflip-chip assembly
    
    Eutectic/High-lead/Lead-free solder bump
for 300mm wafers
 
 (1)
    
    We lease all of our facilities except where otherwise noted.(2)
    
    We own the production assets but lease the land from the statutory housing development board
of the Government of Singapore under a long-term lease with an initial term expiring in March
2026 with an option to renew.(3)
    
    We own the building and improvements and lease the land from the State Government of
Malaysia, but the land and all buildings on the land will revert to the lessor upon the
expiration of the long-term lease in 2086.(4)
    
    We own the building and improvements and lease the land, but the land and all buildings on
the land will revert to the lessor upon the expiration of the long-term lease in 2044. Our
investment of approximately $53.6 million to expand our existing facility in Qing Pu,
Shanghai, by adding new buildings next to it, is near completion. The addition of the new
buildings will increase the total floor space indicated above by approximately 500,000 square
feet.(5)
    
    Winstek owns the land and building, which is subject to mortgages and certain other security
interests.(6)
    
    Situated within the campus of Conexant Systems Inc.  
 ITEM 4A.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 forward-looking forward-looking 52-53 week
 Overview
  42




---



##### Table of Contents



wholly-owned
 Temasek Holdings Subsidiary, Singapore Technologies Semiconductors Pte Ltds, Tender Offer
    Take-Over Schedule 14D-9 www.sec.gov www.sgx.com www.statschippac.com
  Factors Affecting Our Results of Operations
 Cyclicality of the Semiconductor Industry
 end-user
  Declining Prices.
 Cost of Revenues. capital-intensive straight-line
 Capacity Utilization.
 43




---



##### Table of Contents



Goodwill and Intangible Assets.
 indefinite-lived
 
    
    longer than expected slow-down in the industry beginning late 2004 as customers
corrected excess inventory position. This reduction in demand, coupled with the competitive
pressures in the testing and packaging business, affected our short-term earnings
expectation; and
    
    a revision of the industry outlook beyond 2005 compared to the time the merger was
announced.
    Critical Accounting Policies
  Revenue Recognition, Allowance For Doubtful Debts, Trade Discounts and Allowances and Sales
Returns
   44




---



##### Table of Contents



multiple-element pre-production post-production
    Valuation of Inventory
   Depreciation and Amortization
    
    
    expected economic life of assets;
    
    equipments potential re-use among product lines;
    
    historical experience for equipment in our factories;
    
    prevailing industry practice; and
 45




---



##### Table of Contents




    
    consultation with equipment manufacturers.
  Valuation of Property, Plant and Equipment
    Deferred Tax Asset
    Valuation of Goodwill
  risk-adjusted
 46




---



##### Table of Contents



Results of Operations
  Year EndedDecember 31,
    
    
    December 25,
    
    
    December 31,2004
    
    
    2005
    
    
    2006Net revenuesPackaging  array
    
    
    40.6
    %
    
    
    50.2
    %
    
    
    55.5
    %Packaging  leaded
    
    
    20.9
    
    
    
    22.0
    
    
    
    18.3Test and other services
    
    
    38.5
    
    
    
    27.8
    
    
    
    26.2Total net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Year EndedDecember 31,
    
    
    December 25,
    
    
    December 31,2004
    
    
    2005
    
    
    2006Total net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    16.3
    
    
    
    16.4
    
    
    
    20.2Selling, general and administrative
    
    
    11.0
    
    
    
    11.7
    
    
    
    8.6Research and development
    
    
    2.3
    
    
    
    2.3
    
    
    
    1.9Goodwill impairment
    
    
    58.9
    
    
    
    0.0
    
    
    
    0.0Restructuring charges
    
    
    0.0
    
    
    
    0.1
    
    
    
    0.1Operating income (loss)
    
    
    (55.9
    )
    
    
    2.3
    
    
    
    9.6Other income (expense), net
    
    
    (3.4
    )
    
    
    (3.2
    )
    
    
    (2.6
    )Income tax expense
    
    
    (1.0
    )
    
    
    (0.8
    )
    
    
    (1.6
    )Minority interest
    
    
    (0.5
    )
    
    
    (0.6
    )
    
    
    (0.6
    )Net income (loss)
    
    
    (60.8
    )%
    
    
    (2.3
    )%
    
    
    4.8
    %
 Year Ended December 31, 2006 Compared to Year Ended December 25, 2005
 Net Revenues
   47




---



##### Table of Contents



multi-applications multi-applications
 Gross Profit
  Selling, General and Administrative
 share-based Sarbanes-Oxley share-based
 Research and Development
 share-based
 Restructuring Charges
  Goodwill Impairment
  Net Interest Income (Expense)
  48




---



##### Table of Contents



short-term long-term long-term interest-bearing
 Foreign Currency Exchange Gain (Loss)
 non-cash
 Other Non-Operating Income (Expense)
 non-operating write-off
 Income Tax Expense
  Year Ended December 25, 2005 Compared to Year Ended December 31, 2004
 Net Revenues
  three-dimensional
 multi-applications multi-applications
 49




---



##### Table of Contents



Gross Profit
  Selling, General and Administrative
 stock-based
 Research and Development
  Restructuring Charges
  Goodwill Impairment
  Net Interest Income (Expense)
 short-term long-term interest-bearing
 50




---



##### Table of Contents



Foreign Currency Exchange Gain (Loss)
 non-cash
 Other Non-Operating Income (Expense)
 write-off
 Income Tax Expense
  Quarterly Results
  Fiscal Quarter EndedMarch 27,
    
    
    June 26,
    
    
    September 25,
    
    
    December 25,
    
    
    March 26,
    
    
    June 25,
    
    
    September 24,
    
    
    December 31,2005
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006(In thousands)Net revenues
    
    $
    234,146
    
    
    $
    264,346
    
    
    $
    301,298
    
    
    $
    357,463
    
    
    $
    385,709
    
    
    $
    418,133
    
    
    $
    397,109
    
    
    $
    415,982Cost of revenues
    
    
    (209,748
    )
    
    
    (228,541
    )
    
    
    (250,588
    )
    
    
    (279,146
    )
    
    
    (309,116
    )
    
    
    (331,327
    )
    
    
    (318,185
    )
    
    
    (332,145
    )Gross profit
    
    
    24,398
    
    
    
    35,805
    
    
    
    50,710
    
    
    
    78,317
    
    
    
    76,593
    
    
    
    86,806
    
    
    
    78,924
    
    
    
    83,837Operating expenses:Selling, general and
administrative
    
    
    32,246
    
    
    
    33,761
    
    
    
    34,034
    
    
    
    35,710
    
    
    
    39,711
    
    
    
    39,914
    
    
    
    30,707
    
    
    
    29,134Research and
development
    
    
    5,942
    
    
    
    6,536
    
    
    
    6,243
    
    
    
    7,350
    
    
    
    6,973
    
    
    
    7,909
    
    
    
    7,632
    
    
    
    7,932Restructuring charges
    
    
    830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,938
    
    
    
    Total operating
expenses
    
    
    39,018
    
    
    
    40,297
    
    
    
    40,277
    
    
    
    43,060
    
    
    
    46,684
    
    
    
    47,823
    
    
    
    40,277
    
    
    
    37,066Operating income (loss).
    
    
    (14,620
    )
    
    
    (4,492
    )
    
    
    10,433
    
    
    
    35,257
    
    
    
    29,909
    
    
    
    38,983
    
    
    
    38,647
    
    
    
    46,771Other income
(expenses), net:Interest income
(expenses), net
    
    
    (9,447
    )
    
    
    (8,283
    )
    
    
    (9,148
    )
    
    
    (9,337
    )
    
    
    (9,696
    )
    
    
    (10,414
    )
    
    
    (10,796
    )
    
    
    (9,509
    )Foreign currency
exchange gain (loss).
    
    
    (391
    )
    
    
    71
    
    
    
    880
    
    
    
    (29
    )
    
    
    (9
    )
    
    
    (455
    )
    
    
    (593
    )
    
    
    (521
    )Equity income from
equity investee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    24Other non-operating
income (expenses),
net
    
    
    (1,544
    )
    
    
    157
    
    
    
    227
    
    
    
    84
    
    
    
    275
    
    
    
    294
    
    
    
    453
    
    
    
    (914
    )Total other
income
(expenses), net
    
    
    (11,382
    )
    
    
    (8,055
    )
    
    
    (8,041
    )
    
    
    (9,282
    )
    
    
    (9,430
    )
    
    
    (10,575
    )
    
    
    (10,808
    )
    
    
    (10,920
    )
 51




---



##### Table of Contents



Fiscal Quarter EndedMarch 27,
    
    
    June 26,
    
    
    September 25,
    
    
    December 25,
    
    
    March 26,
    
    
    June 25,
    
    
    September 24,
    
    
    December 31,2005
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006(In thousands)Income (loss) before
income taxes
    
    
    (26,002
    )
    
    
    (12,547
    )
    
    
    2,392
    
    
    
    25,975
    
    
    
    20,479
    
    
    
    28,408
    
    
    
    27,839
    
    
    
    35,851Income tax expense
    
    
    (1,139
    )
    
    
    (1,159
    )
    
    
    (1,247
    )
    
    
    (6,144
    )
    
    
    (5,918
    )
    
    
    (7,211
    )
    
    
    (7,137
    )
    
    
    (5,493
    )Income (loss) before
minority interest
    
    
    (27,141
    )
    
    
    (13,706
    )
    
    
    1,145
    
    
    
    19,831
    
    
    
    14,561
    
    
    
    21,197
    
    
    
    20,702
    
    
    
    30,358Minority interest
    
    
    22
    
    
    
    (1,357
    )
    
    
    (2,156
    )
    
    
    (2,949
    )
    
    
    (2,545
    )
    
    
    (3,177
    )
    
    
    (2,205
    )
    
    
    (2,083
    )Net income (loss)
    
    $
    (27,119
    )
    
    $
    (15,063
    )
    
    $
    (1,011
    )
    
    $
    16,882
    
    
    $
    12,016
    
    
    $
    18,020
    
    
    $
    18,497
    
    
    $
    28,275
 Fiscal Quarter Ended(As a Percentage of Net Revenues)March 27,
    
    
    June 26,
    
    
    September 25,
    
    
    December 25,
    
    
    March 26,
    
    
    June 25,
    
    
    September 24,
    
    
    December 31,2005
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006Net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    (89.6
    )
    
    
    (86.5
    )
    
    
    (83.2
    )
    
    
    (78.1
    )
    
    
    (80.1
    )
    
    
    (79.2
    )
    
    
    (80.1
    )
    
    
    (79.8
    )Gross profit
    
    
    10.4
    
    
    
    13.5
    
    
    
    16.8
    
    
    
    21.9
    
    
    
    19.9
    
    
    
    20.8
    
    
    
    19.9
    
    
    
    20.2Operating expenses:Selling, general and
administrative
    
    
    13.8
    
    
    
    12.8
    
    
    
    11.2
    
    
    
    9.9
    
    
    
    10.3
    
    
    
    9.5
    
    
    
    7.7
    
    
    
    7.0Research and
development
    
    
    2.5
    
    
    
    2.4
    
    
    
    2.1
    
    
    
    2.1
    
    
    
    1.8
    
    
    
    1.9
    
    
    
    1.9
    
    
    
    1.9Restructuring
charges
    
    
    0.3
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.5
    
    
    
    0.0Total operating
expenses
    
    
    16.6
    
    
    
    15.2
    
    
    
    13.3
    
    
    
    12.0
    
    
    
    12.1
    
    
    
    11.4
    
    
    
    10.1
    
    
    
    8.9Operating income
(loss)
    
    
    (6.2
    )
    
    
    (1.7
    )
    
    
    3.5
    
    
    
    9.9
    
    
    
    7.8
    
    
    
    9.4
    
    
    
    9.8
    
    
    
    11.3Other income
(expenses), net:Interest income
(expenses) net
    
    
    (4.0
    )
    
    
    (3.1
    )
    
    
    (3.0
    )
    
    
    (2.6
    )
    
    
    (2.5
    )
    
    
    (2.5
    )
    
    
    (2.7
    )
    
    
    (2.3
    )Foreign currency
exchange gain
(loss)
    
    
    (0.2
    )
    
    
    0.0
    
    
    
    0.3
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.1
    )Equity income from
equity investee
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0Other non-operating
income (expenses),
net
    
    
    (0.7
    )
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.0
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    (0.2
    )Total other income
(expenses), net
    
    
    (4.9
    )
    
    
    (3.0
    )
    
    
    (2.6
    )
    
    
    (2.6
    )
    
    
    (2.4
    )
    
    
    (2.5
    )
    
    
    (2.7
    )
    
    
    (2.6
    )Income (loss) before
income taxes
    
    
    (11.1
    )
    
    
    (4.7
    )
    
    
    0.9
    
    
    
    7.3
    
    
    
    5.4
    
    
    
    6.9
    
    
    
    7.1
    
    
    
    8.7Income tax expense
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    (0.4
    )
    
    
    (1.7
    )
    
    
    (1.5
    )
    
    
    (1.7
    )
    
    
    (1.8
    )
    
    
    (1.3
    )Income (loss) before
minority interest
    
    
    (11.6
    )
    
    
    (5.2
    )
    
    
    0.5
    
    
    
    5.6
    
    
    
    3.9
    
    
    
    5.2
    
    
    
    5.3
    
    
    
    7.4Minority interest
    
    
    (0.0
    )
    
    
    (0.5
    )
    
    
    (0.7
    )
    
    
    (0.8
    )
    
    
    (0.7
    )
    
    
    (0.8
    )
    
    
    (0.6
    )
    
    
    (0.5
    )Net income (loss)
    
    
    (11.6
    )%
    
    
    (5.7
    )%
    
    
    (0.2
    )%
    
    
    4.8
    %
    
    
    3.2
    %
    
    
    4.4
    %
    
    
    4.7
    %
    
    
    6.9
    %
 52




---



##### Table of Contents



Liquidity and Capital Resources
 long-term
   Total Borrowings
 long-term short-term
  Oversea-Chinese Oversea-Chinese
  53




---



##### Table of Contents



Oversea-Chinese
    Off-Balance Sheet Arrangements
 off-balance off-balance
 Contractual Obligations
  Payments DueWithin
    
    
    
    
    
    
    
    
    
    
    More Than1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    Total(In thousands)On balance sheet commitments:1.75% convertible notes due 2007(1)(3)
    
    $
    36,800
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    36,800Zero coupon convertible notes due
2008(1)(2)(3)
    
    
    
    
    
    
    131,280
    
    
    
    
    
    
    
    
    
    
    
    131,2802.5% convertible subordinated notes
due 2008(3)
    
    
    
    
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    150,0006.75% senior notes due 2011(3)
    
    
    
    
    
    
    
    
    
    
    215,000
    
    
    
    
    
    
    
    215,0007.5% senior notes due 2010(3)
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    
    
    
    
    150,000Capital lease obligations(3)
    
    
    3,680
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,680Long-term loans(3)
    
    
    24,301
    
    
    
    49,345
    
    
    
    1,380
    
    
    
    518
    
    
    
    75,544Short-term loans(3)
    
    
    592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    592Other non-current liabilities(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total on balance sheet commitment
    
    $
    65,373
    
    
    $
    330,625
    
    
    $
    366,380
    
    
    $
    518
    
    
    $
    762,896
 54




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##### Table of Contents



Payments DueWithin
    
    
    
    
    
    
    
    
    
    
    More Than1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    Total(In thousands)Off balance sheet commitments:Operating leases
    
    $
    29,945
    
    
    $
    42,226
    
    
    $
    16,561
    
    
    $
    43,261
    
    
    $
    131,993Royalty/licensing agreements
    
    
    7,363
    
    
    
    14,587
    
    
    
    13,890
    
    
    
    
    
    
    
    35,840Contingent payments to Cirrus
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750Purchase obligations: Capital commitments
    
    
    24,932
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,932 Inventory purchase commitments
    
    
    80,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,049Total off balance sheet commitments
    
    
    143,039
    
    
    
    56,813
    
    
    
    30,451
    
    
    
    43,261
    
    
    
    273,564Total commitments
    
    $
    208,412
    
    
    $
    387,438
    
    
    $
    396,831
    
    
    $
    43,779
    
    
    $
    1,036,460
 
 (1)
    
    On maturity of the 1.75% convertible notes due 2007 and zero coupon convertible notes due
2008, we are required to pay the note holders 117.665% and 123.4% of the principal amounts,
respectively.(2)
    
    Holders of our zero coupon convertible notes due 2008 have the right to require us to
repurchase all or a portion of their convertible notes on November 7, 2007.(3)
    
    The convertible notes, senior notes, capital lease obligations, short-term and long-term
loans agreements contain provisions for the payment of interest
either on maturity or on a monthly,
quarterly, semi-annual or annual basis at a stated rate of interest over the term of the debt.
These payment obligations are not reflected in the table above. The interest payments due
within 1 year, 1-3 years, 3-5 years and more than 5 years amount to $32.6 million, $65.8 million, $40.4 million, and $0.01 million, respectively.(4)
    
    Our other non-current liabilities as of December 31, 2006 were $84.8 million, including $26.9
million related to severance benefits for our employees in South Korea which were not included
in the table due to lack of contractual certainty as to the timing of payments. Contingencies
 Cross-Complaint
 multi-chip
 55




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##### Table of Contents



Cash Flows From Operating Activities
 non-cash non-cash share-based non-cash share-based
 non-cash non-cash share-based
 56




---



##### Table of Contents



Cash Flows From Investing Activities
 long-term
  Cash Flows From Financing Activities
   Special Tax Status
 set-off non-qualifying set-off
 57




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##### Table of Contents



Derivative Financial Instruments
   Foreign Currency Risk
   Research and Development
  Recent Accounting Pronouncements
 fair-value share-based Share-Based share-based share-based
   58




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##### Table of Contents



year-end
 
 ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Name
    
    Age
    
    PositionBoard of DirectorsCharles R. Wofford(1)(2)(3)(4)
    
    
    73
    
    
    Chairman of our Board to DirectorsLim Ming Seong(5)
    
    
    59
    
    
    Deputy Chairman of our Board of DirectorsTan Lay Koon
    
    
    48
    
    
    Director, President and Chief Executive OfficerPeter Seah Lim Huat(6)(7)
    
    
    60
    
    
    DirectorSteven H. Hamblin(1)(8)(9)
    
    
    58
    
    
    DirectorRichard J. Agnich(1)(7)(9)
    
    
    63
    
    
    DirectorRobert W. Conn(1)(10)
    
    
    64
    
    
    DirectorR. Douglas Norby(1)(11)
    
    
    71
    
    
    DirectorPark Chong Sup(1)(10)
    
    
    59
    
    
    DirectorTeng Cheong Kwee(1)(12)
    
    
    53
    
    
    DirectorTokumasa Yasui(1)(13)
    
    
    62
    
    
    DirectorSenior ManagementWan Choong Hoe
    
    
    53
    
    
    Executive Vice President, Chief Operating OfficerHan Byung Joon
    
    
    47
    
    
    Executive Vice President, Chief Technology OfficerScott J. Jewler
    
    
    41
    
    
    Executive Vice President, Chief Strategy OfficerMichael G. Potter
    
    
    40
    
    
    Senior Vice President, Chief Financial OfficerNg Tiong Gee
    
    
    44
    
    
    Senior Vice President, Human Resources and Chief Information OfficerJanet T. Taylor
    
    
    49
    
    
    Senior Vice President, General Counsel
 
 (1)
    
    Determined by our Board of Directors to be independent under Rule 4200 of the Nasdaq
Marketplace Rules.(2)
    
    Chairman of the Executive Committee.(3)
    
    Chairman of the Executive Resource & Compensation Committee.(4)
    
    Chairman of the Nominating and Corporate Governance Committee. 59




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##### Table of Contents



(5)
    
    Chairman of the Budget Committee.(6)
    
    Member of the Executive Resource & Compensation Committee.(7)
    
    Member of the Nominating and Corporate Governance Committee.(8)
    
    Member of the Executive Committee.(9)
    
    Member of the Audit Committee.(10)
    
    Member of the Budget Committee.(11)
    
    Chairman of the Audit Committee.(12)
    
    Appointed as a director on October 1, 2006.(13)
    
    Appointed as a director on January 23, 2007.     Board of Directors
 Charles R. Wofford
 Vice-President
 Lim Ming Seong
  60




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##### Table of Contents



Tan Lay Koon
  Peter Seah Lim Huat
  Steven H. Hamblin
 Carnegie-Mellon
 Richard J. Agnich
 co-founder
 Robert W. Conn
 co-founded
 61




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##### Table of Contents



R. Douglas Norby
  Park Chong Sup
 A-Max
 Teng Cheong Kwee
 non-executive SGX-ST
 Tokumasa Yasui
  Senior Management
 Wan Choong Hoe
  62




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##### Table of Contents



Han Byung Joon
 chip-scale
 Scott J. Jewler
  Michael G. Potter
  Ng Tiong Gee
  Janet T. Taylor
  63




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##### Table of Contents



B. Compensation of Directors and Senior Management
  Executive
    
    
    Non executiveDirector
    
    
    Directors(1)
    
    
    Total(2)(3)Charles R. Wofford
    
    
    
    
    
    $129,790
    
    
    $129,790Lim Ming Seong
    
    
    
    
    
    58,420
    
    
    58,420Tan Lay Koon
    
    $1,417,373
    
    
    
    
    
    
    1,417,373Peter Seah Lim Huat
    
    
    
    
    
    50,040
    
    
    50,040Tay Siew Choon(4)
    
    
    
    
    
    16,340
    
    
    16,340Steven H. Hamblin
    
    
    
    
    
    81,790
    
    
    81,790Richard J. Agnich
    
    
    
    
    
    65,790
    
    
    65,790R. Douglas Norby
    
    
    
    
    
    52,000
    
    
    52,000Robert W. Conn
    
    
    
    
    
    50,000
    
    
    50,000Park Chong Sup
    
    
    
    
    
    51,000
    
    
    51,000Teng Cheong Kwee(5)
    
    
    
    
    
    8,500
    
    
    8,500Senior management
(excluding our Executive Director) as a group
    
    
    
    
    
    
    
    
    
    

3,116,683$1,417,373
    
    
    $563,670
    
    
    $5,097,726
 
 (1)
    
    We will seek approval at our annual general meeting in 2007 for the payment of directors
fees of approximately $563,670 for 2006.(2)
    
    Does not include compensation given in the form of share options. For more information on
share options granted to our directors and senior management, see   E. Share Ownership for
Directors and Senior Management.(3)
    
    Includes $283,498 representing payment of one-third of
the notional Economic Value Added (EVA) bank account. See discussion below.(4)
    
    Resigned as a director on April 30, 2006.(5)
    
    Appointed as a director on October 1, 2006. non-executive non-executive company-sponsored
  Rule 10b-18
 64




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##### Table of Contents



short-term short-term
 short-term
 long-term one-third two-thirds
  post-retirement
 lump-sum
      65




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##### Table of Contents



C. Board Practices
 Board of Directors
 re-elected re-election one-third re-election re-election re-election re-election re-appointment re-appointment re-appointed re-appointment
 wholly-owned wholly-owned day-to-day
   66




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##### Table of Contents



Committees of our Board of Directors
 Audit Committee
 non-executive
  Executive Resource & Compensation Committee
  long-term long-term
 Nasdaq-listed
 
    
    The Executive Resource & Compensation Committee is comprised entirely of non-executive
directors, the majority of whom, including the Chairman, qualify as independent directors
under the Nasdaq Marketplace Rules and the Singapore code of corporate governance. Mr.
Peter Seah Lim Huat does not qualify as an independent director under the Nasdaq
Marketplace Rules or the Singapore code of corporate governance.
    
    The Executive Resource & Compensation Committee is responsible for reviewing,
considering and approving the compensation policies, incentive programs, specific
compensation (including each award and total proposed awards under each equity based plan)
of each Executive Vice President, Senior Vice President and Vice
President who reports directly to the Chief Executive Officer. The Executive Resource & Compensation Committee has
delegated to the Chief Executive Officer the power to approve awards to employees at the
job level of Vice President and below who do not report directly to the Chief Executive
Officer. The Executive Resource & Compensation Committee also reviews and approves all our
option plans, share plans and other equity based plans.
 long-term long-term
  67




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##### Table of Contents




    
    Consider, review, vary and approve our Companys policy for determining executive
remuneration including the remuneration policy with regard to
Executive Vice Presidents, Senior Vice Presidents and Vice
Presidents who reports directly to the Chief Executive Officer;
    
    Consider, review, vary and approve the entire specific remuneration package and service
contract terms for each Executive Vice President, Senior Vice President and Vice
President who reports directly to the Chief Executive Officer;
    
    Review and approve all our option plans, stock plans and other equity based plans; and
    
    Approve the remuneration framework, including directors fees for our non-executive directors.
  Budget Committee
   Executive Committee
   Nominating and Corporate Governance Committee
    68




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##### Table of Contents




    
    The Nominating and Corporate Governance Committee comprises not less than three members,
the majority of whom, including the Chairman, qualify as independent directors under the
Nasdaq Marketplace Rules and the Singapore code of corporate governance. Mr. Seah does not
qualify as an independent director under the Nasdaq Marketplace Rules or the Singapore code
of corporate governance.
    
    The Nominating and Corporate Governance Committees duties and responsibilities include
the following:
 (i)
    
    the identification of qualified candidates to become Board members;(ii)
    
    the selection of nominees for election as directors at the next annual meeting of
shareholders (or extraordinary general meeting of shareholders at which directors are to
be elected);(iii)
    
    the selection of candidates to fill any vacancies on our Board;(iv)
    
    the development and recommendation to our Board of a set of corporate governance
guidelines and principles applicable to our Company (being our Code of Business Conduct
and Ethics); and(v)
    
    oversight of the evaluation of our Board and Board committees.
  D. Employees
 full-time
   December 31,
    
    
    December 25,
    
    
    December 31,2004
    
    
    2005
    
    
    2006Function:Direct and indirect labor (manufacturing)
    
    
    10,398
    
    
    
    12,315
    
    
    
    13,181Indirect labor (administration)
    
    
    653
    
    
    
    694
    
    
    
    770Research and development
    
    
    229
    
    
    
    232
    
    
    
    260Total
    
    
    11,280
    
    
    
    13,241
    
    
    
    14,211Location:Singapore
    
    
    3,828
    
    
    
    4,092
    
    
    
    3,527China
    
    
    2,459
    
    
    
    3,452
    
    
    
    4,241Malaysia
    
    
    2,310
    
    
    
    2,472
    
    
    
    3,007South Korea
    
    
    2,031
    
    
    
    2,407
    
    
    
    2,513Taiwan
    
    
    443
    
    
    
    560
    
    
    
    645United States
    
    
    198
    
    
    
    245
    
    
    
    262Others
    
    
    11
    
    
    
    13
    
    
    
    16Total
    
    
    11,280
    
    
    
    13,241
    
    
    
    14,211
 69




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##### Table of Contents



E. Share Ownership for Directors and Senior Management
    Share Options for Directors
  Number of Ordinary Shares
    
    Per Share ExerciseIssuable on Exercise of Option
    
    Price (S$)
    
    Exercisable PeriodCharles R. Wofford
    
    
    70,000
    
    
    
    2.885
    
    
    04/29/2003 to 04/28/2007100,000
    
    
    
    1.99
    
    
    08/06/2004 to 08/05/200850,000
    
    
    
    1.91
    
    
    02/17/2005 to 02/16/200950,000
    (1)
    
    
    1.06
    
    
    08/11/2005 to 08/10/200957,500
    (1)
    
    
    1.01
    
    
    05/03/2006 to 05/02/201057,500
    (1)
    
    
    0.925
    
    
    10/31/2006 to 10/30/201060,000
    (1)
    
    
    1.08
    
    
    05/29/2007 to 05/28/2011Lim Ming Seong
    
    
    200,000
    
    
    
    1.592
    
    
    04/24/2002 to 04/23/201170,000
    
    
    
    2.885
    
    
    04/29/2003 to 04/28/200770,000
    
    
    
    1.99
    
    
    08/06/2004 to 08/05/200835,000
    
    
    
    1.91
    
    
    02/17/2005 to 02/16/200935,000
    
    
    
    1.06
    
    
    08/11/2005 to 08/10/200942,500
    
    
    
    1.01
    
    
    05/03/2006 to 05/02/201042,500
    
    
    
    0.925
    
    
    10/31/2006 to 10/30/201045,000
    
    
    
    1.08
    
    
    05/29/2007 to 05/28/2011Tan Lay Koon
    
    
    500,000
    
    
    
    6.93
    
    
    04/20/2001 to 04/19/2010700,000
    
    
    
    2.826
    
    
    10/19/2001 to 10/18/2010449,000
    
    
    
    1.592
    
    
    04/24/2002 to 04/23/2011325,000
    
    
    
    2.885
    
    
    04/29/2003 to 04/28/20122,000,000
    
    
    
    2.2
    
    
    06/26/2003 to 06/25/2012700,000
    
    
    
    1.99
    
    
    08/06/2004 to 08/05/2013500,000
    
    
    
    1.91
    
    
    02/17/2005 to 02/16/2014500,000
    
    
    
    1.06
    
    
    08/11/2005 to 08/10/2014600,000
    
    
    
    1.01
    
    
    05/03/2006 to 05/02/2015600,000
    
    
    
    0.925
    
    
    10/31/2006 to 10/30/2015700,000
    
    
    
    1.08
    
    
    05/29/2007 to 05/28/2011Peter Seah Lim Huat
    
    
    70,000
    
    
    
    1.99
    
    
    08/06/2004 to 08/05/201335,000
    
    
    
    1.91
    
    
    02/17/2005 to 02/16/201435,000
    
    
    
    1.06
    
    
    08/11/2005 to 08/10/201440,000
    
    
    
    1.01
    
    
    05/03/2006 to 05/02/201040,000
    
    
    
    0.925
    
    
    10/31/2006 to 10/30/201045,000
    
    
    
    1.08
    
    
    05/29/2007 to 05/28/2011
 70




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##### Table of Contents



Number of Ordinary Shares
    
    Per Share ExerciseIssuable on Exercise of Option
    
    Price (S$)
    
    Exercisable PeriodSteven H. Hamblin
    
    
    70,000
    
    
    
    2.885
    
    
    04/29/2003 to 04/28/200770,000
    
    
    
    1.99
    
    
    08/06/2004 to 08/05/200835,000
    
    
    
    1.91
    
    
    02/17/2005 to 02/16/200935,000
    (1)
    
    
    1.06
    
    
    08/11/2005 to 08/10/200937,500
    (1)
    
    
    1.01
    
    
    05/03/2006 to 05/02/201037,500
    (1)
    
    
    0.925
    
    
    10/31/2006 to 10/30/201045,000
    (1)
    
    
    1.08
    
    
    05/29/2007 to 05/28/2011Richard J. Agnich
    
    
    50,000
    
    
    
    2.885
    
    
    04/29/2003 to 04/28/200750,000
    
    
    
    1.99
    
    
    08/06/2004 to 08/05/200825,000
    
    
    
    1.91
    
    
    02/17/2005 to 02/16/200925,000
    (1)
    
    
    1.06
    
    
    08/11/2005 to 08/10/200942,500
    (1)
    
    
    1.01
    
    
    05/03/2006 to 05/02/201042,500
    (1)
    
    
    0.925
    
    
    10/31/2006 to 10/30/201045,000
    (1)
    
    
    1.08
    
    
    05/29/2007 to 05/28/2011Robert W. Conn
    
    
    174,000
    (2)
    
    
    1.88
    
    
    04/15/2003 to 08/04/2009130,500
    (2)
    
    
    1.36
    
    
    02/05/2005 to 08/04/200937,500
    (1)
    
    
    1.01
    
    
    05/03/2006 to 05/02/201037,500
    (1)
    
    
    0.925
    
    
    10/31/2006 to 10/30/201040,000
    (1)
    
    
    1.08
    
    
    05/29/2007 to 05/28/2011R. Douglas Norby
    
    
    174,000
    (2)
    
    
    1.88
    
    
    04/15/2003 to 08/04/2009130,500
    (2)
    
    
    0.50
    
    
    03/17/2004 to 08/04/2009130,500
    (2)
    
    
    1.36
    
    
    02/05/2005 to 08/04/200937,500
    (1)
    
    
    1.01
    
    
    05/03/2006 to 05/02/201037,500
    (1)
    
    
    0.925
    
    
    10/31/2006 to 10/30/201045,000
    (1)
    
    
    1.08
    
    
    05/29/2007 to 05/28/2011Park Chong Sup
    
    
    130,500
    (2)
    
    
    1.57
    
    
    10/20/2001 to 08/04/200943,500
    (2)
    
    
    0.38
    
    
    09/27/2002 to 08/04/2009130,500
    (2)
    
    
    0.50
    
    
    03/17/2004 to 08/04/2009130,500
    (2)
    
    
    1.36
    
    
    02/05/2005 to 08/04/200937,500
    (1)
    
    
    1.01
    
    
    05/03/2006 to 05/02/201037,500
    (1)
    
    
    0.925
    
    
    10/31/2006 to 10/30/201040,000
    (1)
    
    
    1.08
    
    
    05/29/2007 to 05/28/2011Teng Cheong Kwee (3)
    
    
    50,000
    
    
    
    2.885
    
    
    04/29/2003 to 04/28/200770,000
    
    
    
    1.99
    
    
    08/06/2004 to 08/05/200835,000
    
    
    
    1.91
    
    
    02/17/2005 to 02/16/2009
 
 (1)
    
    The exercise prices for these options are denominated in U.S. dollars and are presented here
in Singapore dollars for comparability purposes using the exchange rate based on the Bloomberg
Close Quote on the respective dates of grant.(2)
    
    The exercise prices for these options are denominated in U.S. dollars and presented here in
Singapore dollars for comparability purposes using the exchange rate based on Bloomberg Close
Quote on August 5, 2004 of S$1.7214 per $1.00.(3)
    
    Appointed as a director on October 1, 2006. 71




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##### Table of Contents



Employees Share Ownership Scheme
 re-evaluation
 One-half three-year
 three-year
  Equity Incentive Plans
 STATS ChipPAC Ltd. Substitute Purchase and Option Plan (Substitute Option Plan) and STATS
ChipPAC Ltd. Substitute Equity Incentive Plan (the Substitute EIP, and together with the Substitute
Option Plan, the Substitute Plans).
 STATS ChipPAC Ltd. Share Option Plan, as amended. re-named
  anti-dilution
 72




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##### Table of Contents



four-year non-employee
   STATS ChipPAC Ltd. Employee Share Purchase Plan 2004
   six-month
  anti-dilution
  STATS ChipPAC Ltd. Restricted Share Plan
  73




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##### Table of Contents



anti-dilution
  STATS ChipPAC Ltd. Performance Share Plan
      
 ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
 wholly-owned wholly-owned
 74




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##### Table of Contents




    
    the election of directors;
    
    the merger or consolidation of us with any other entity;
    
    any sale of all or substantially all of our assets; and
    
    the timing and payment of dividends.
  Number of Shares
    
    PercentageName of Beneficial Owner
    
    Beneficially Owned
    
    Beneficially OwnedTemasek Holdings(1)
    
    
    712,228,050
    
    
    
    35.35
    %FMR Corp.(2)
    
    
    240,096,700
    
    
    
    11.92
    %
 
 (1)
    
    As provided by Temasek Holdings, a private limited company incorporated in Singapore, wholly-owned by the
Minister for Finance (Incorporated) of Singapore, a body corporate constituted by the Minister
for Finance (Incorporation) Act (Cap. 183), which owns 100% of the ordinary shares of STSPL. Temasek
Holdings is therefore deemed to beneficially own 712,228,050 of our
ordinary shares, which are owned directly by STSPL as of
March 1, 2007. The percentage beneficially owned is based on
an aggregate 2,014,574,554 ordinary shares outstanding as of
March 7, 2007.(2)
    
    As provided in a notice by FMR Corp. and Fidelity International Limited (FIL) to our Company
dated March 7, 2007. Based on Amendment No. 4 to the Schedule 13G filed by FMR Corp. and
Edward C. Johnson III, Chairman of FMR Corp., with the SEC on February 14, 2007, the shares are owned by
institutional accounts managed by direct or indirect wholly-owned subsidiaries of FMR Corp. and FIL, respectively,
in varying amounts. Members of the family of Edward C. Johnson, III, Chairman of FMR Corp.,
through their ownership, directly or through trusts, of equity shares of FMR Corp. representing 49%
of the voting power of FMR Corp. and a shareholders voting agreement, form a controlling group with
respect to FMR Corp. Partnerships controlled predominantly by members of the family of Edward C. Johnson, III,
Chairman of FMR Corp. and FIL, or trusts for their benefit, own shares of FIL voting stock representing approximately
47% of the total voting power of FIL. The percentage benefically
owned is based on an aggregate 2,014,574,554 ordinary shares outstanding
as of March 7, 2007. Take-Over take-over Take-Over
  SGX-ST
  75




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##### Table of Contents



SGX-ST
  B. Related Party Transactions
 three-year
  Regulation S-K
 C. Interest of Experts and Counsel
  
 ITEM 8.
    
    FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  76




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##### Table of Contents



Legal Proceedings
   Dividend Policy
  B. Significant Changes
  77




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##### Table of Contents



ITEM 9.
    
    THE OFFER AND LISTING
 A. Offer and Listing Details
 Price range of our ordinary shares and ADSs
  Price per Ordinary Share
    
    Price per ADS onon the SGX-ST
    
    NASDAQ Stock Market(1)(in S$)
    
    (in US$)High
    
    Low
    
    High
    
    LowAnnual for 2002
    
    
    3.16
    
    
    
    0.87
    
    
    
    17.25
    
    
    
    4.89Annual for 2003
    
    
    2.73
    
    
    
    1.05
    
    
    
    15.75
    
    
    
    6.16Annual for 2004
    
    
    2.45
    
    
    
    0.92
    
    
    
    14.74
    
    
    
    5.40Annual for 2005
    
    
    1.34
    
    
    
    0.88
    
    
    
    8.16
    
    
    
    5.30Annual for 2006
    
    
    1.42
    
    
    
    0.84
    
    
    
    8.85
    
    
    
    4.91Quarterly highs and lows: quarter ended March 27, 2005
    
    
    1.16
    
    
    
    0.88
    
    
    
    7.25
    
    
    
    5.37 quarter ended June 26, 2005
    
    
    1.26
    
    
    
    0.97
    
    
    
    7.43
    
    
    
    5.75 quarter ended September 25, 2005
    
    
    1.34
    
    
    
    1.00
    
    
    
    8.16
    
    
    
    6.11 quarter ended December 25, 2005
    
    
    1.21
    
    
    
    0.90
    
    
    
    7.02
    
    
    
    5.30 quarter ended March 26, 2006
    
    
    1.25
    
    
    
    1.01
    
    
    
    7.77
    
    
    
    6.19 quarter ended June 25, 2006
    
    
    1.42
    
    
    
    0.90
    
    
    
    8.85
    
    
    
    5.53 quarter ended September 24, 2006
    
    
    1.05
    
    
    
    0.84
    
    
    
    6.65
    
    
    
    4.91 quarter ended December 31, 2006
    
    
    1.33
    
    
    
    0.93
    
    
    
    8.42
    
    
    
    5.74Monthly highs and lows:August 2006
    
    
    1.05
    
    
    
    0.87
    
    
    
    6.65
    
    
    
    5.48September 2006
    
    
    1.04
    
    
    
    0.96
    
    
    
    6.65
    
    
    
    5.98October 2006
    
    
    1.00
    
    
    
    0.93
    
    
    
    6.54
    
    
    
    5.74November 2006
    
    
    1.33
    
    
    
    0.97
    
    
    
    8.42
    
    
    
    6.08December 2006
    
    
    1.31
    
    
    
    1.13
    
    
    
    8.33
    
    
    
    7.31January 2007
    
    
    1.32
    
    
    
    1.14
    
    
    
    8.59
    
    
    
    7.26February 2007
    
    
    1.64
    
    
    
    1.26
    
    
    
    10.20
    
    
    
    8.19
 
 (1)
    
    Prior to July 2006, on the Nasdaq National Market. B. Plan of Distribution
  C. Markets
 SGX-ST (SGX-ST: STATSChP)
 D. Selling Shareholders
  E. Dilution
  78




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##### Table of Contents



F. Expenses of the Issue
  
 ITEM 10.
    
    ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
  Objects
  Form F-1 333-93661
 Board of Directors
     re-election one-third re-election re-election
  Ordinary Shares
  79




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##### Table of Contents



SGX-ST
 New Ordinary Shares
 pre-emptive
 Shareholders
  Transfer of Ordinary Shares
  General Meetings of Shareholders
  80




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##### Table of Contents



Voting Rights
 book-entry 1 fully-paid one-tenth paid-up
 Dividends
 book-entry
 Bonus and Rights Issue
 paid-up
 Take-Overs
 Take-Over take-over six-month take-over Take-Over
 co-operate
 81




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##### Table of Contents



take-over
 Take-Over take-over
 Liquidation or Other Return of Capital
  Indemnity
  Limitations on Rights to Hold or Vote Shares
  Substantial Shareholdings
 SGX-ST
   82




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##### Table of Contents



Minority Rights
   C. Material Contracts
 long-term 30-year
    83




---



##### Table of Contents



interest-free re-transferred interest-free non-standing re-transferred
  semi-annually
 84




---



##### Table of Contents



wholly-owned semi-annually make-whole
 wholly-owned semi-annually make-whole
  wholly-owned
 Oversea-Chinese three-year
  85




---



##### Table of Contents



D. Exchange Controls
  Exchange Rates
 SGX-ST
  Singapore Dollars per US$1.00 Noon Buying RateAverage(1)
    
    Low
    
    High
    
    Period EndFiscal Year2002
    
    
    1.79
    
    
    
    1.73
    
    
    
    1.85
    
    
    
    1.742003
    
    
    1.74
    
    
    
    1.70
    
    
    
    1.78
    
    
    
    1.702004
    
    
    1.69
    
    
    
    1.63
    
    
    
    1.73
    
    
    
    1.632005
    
    
    1.66
    
    
    
    1.62
    
    
    
    1.71
    
    
    
    1.672006
    
    
    1.58
    
    
    
    1.67
    
    
    
    1.53
    
    
    
    1.53MonthAugust 2006
    
    
    
    
    
    
    1.57
    
    
    
    1.58
    
    
    
    1.57September 2006
    
    
    
    
    
    
    1.57
    
    
    
    1.59
    
    
    
    1.59October 2006
    
    
    
    
    
    
    1.56
    
    
    
    1.59
    
    
    
    1.56November 2006
    
    
    
    
    
    
    1.54
    
    
    
    1.57
    
    
    
    1.54December 2006
    
    
    
    
    
    
    1.55
    
    
    
    1.53
    
    
    
    1.53January 2007
    
    
    
    
    
    
    1.53
    
    
    
    1.54
    
    
    
    1.54February 2007
    
    
    
    
    
    
    1.53
    
    
    
    1.54
    
    
    
    1.53
 
 (1)
    
    The average of the daily noon buying rates on the last business day of each month during the
year. E. Taxation
 Singapore Taxation
  86




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##### Table of Contents



Income Tax
 General
 Non-resident non-resident
 non-resident
  Dividend Distributions
 non-resident
 Dividends paid out of Tax-Exempt Income or Income subject to Concessionary Tax Rate
  Dividends paid out of Income subject to Normal Corporate Taxation
 Imputation System
 one-tier One-Tier
 non-resident non-resident non-resident
 New One-tier Corporate Tax System
 one-tier
 87




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##### Table of Contents



one-tier
 five-year
 co-exists one-tier one-tier one-tier one-tier one-tier one-tier one-tier
  Tax on Capital Gains
  opt-out
 Stamp Duty
  Estate Duty
 non-domiciled
 88




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##### Table of Contents



United States Federal Income Taxation
 non-United
 Distributions on Ordinary Shares or ADSs
 non-corporate
 long-term
   89




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##### Table of Contents



Sale or Exchange of the Ordinary Shares or ADSs
 long-term Long-term non-corporate
 Passive Foreign Investment Company
  mark-to-market
 United States Information Reporting and Backup Withholding
 Form W-9
  F. Dividends and Paying Agents
  G. Statements by Experts
  H. Documents on Display
 #05-17/20
 90




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##### Table of Contents



I. Subsidiary Information
  
 ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Investment and Interest Rates
 government-linked short-term short-term long-term
 Currency Exchange Rates
    91




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##### Table of Contents



short-term long-term
 Commodity Price
  Limitations
  
 ITEM 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 ITEM 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Rules 13a-15 15d-15
  Managements Annual Report on Internal Control over Financial Reporting
  92




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##### Table of Contents




    
    pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of
our assets;
    
    provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made only in accordance
with authorizations of our management and members of our board of
directors; and
    
    provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of our
assets that could have a material effect on our financial
statements.
    Changes to Internal Controls
  
 ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
 Form 20-F
 
 ITEM 16B.
    
    CODE OF ETHICS
 Sarbanes-Oxley non-employee company-wide
 93




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##### Table of Contents



ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
   Year EndedDecember 25,
    
    
    December 31,2005
    
    
    2006(In thousands)Audit fees
    
    $
    849
    
    
    $
    1,935Audit-related fees
    
    
    33
    
    
    
    45Tax fees
    
    
    124
    
    
    
    140All other fees
    
    
    229
    
    
    
    36Total
    
    $
    1,235
    
    
    $
    2,156
 Audit Fees. non-U.S.
 Audit-Related Fees.
 Tax Fees.
 All Other Fees.
 Audit Committee Pre-approval Process
 pre-approves de
minimus
 
 ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
  
 ITEM 16E.
    
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 ITEM 17.
    
    FINANCIAL STATEMENTS
  94




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##### Table of Contents



ITEM 18.
    
    FINANCIAL STATEMENTS
        
 ITEM 19.
    
    EXHIBITS
  1.1**
    
    Memorandum of Association of STATS ChipPAC Ltd.1.2.
    
    Amended Articles of Association of STATS ChipPAC Ltd.  incorporated by reference to Exhibit 2 of Amendment
No. 2 to the Registration Statement on Form 8-A (File No. 000-29103) of STATS ChipPAC Ltd., as filed with the Securities
and Exchange Commission on May 9, 20062.1
    
    Specimen ordinary share certificate of STATS ChipPAC Ltd. issued on and after January 30,
2006 in respect of transfers of shares issued before January 30, 2006  incorporated by
reference to Exhibit 3.1 of Amendment No. 2 to the Registration Statement on Form 8-A (File
No. 000-29103) of STATS ChipPAC Ltd., as filed with the Securities and Exchange Commission on
May 9, 20062.1.1
    
    Specimen ordinary share certificate of STATS ChipPAC Ltd. issued on and after January 30,
2006 in respect of new issuances of shares issued after January 30, 2006  incorporated by
reference to Exhibit 3.2 of Amendment No. 2 to the Registration Statement on Form 8-A (File
No. 000-29103) of STATS ChipPAC Ltd., as filed with the Securities and Exchange Commission on
May 9, 20062.2
    
    Deposit Agreement dated February 8, 2000 among ST Assembly Test Services Ltd, Citibank, N.A.,
as depositary, and the holders from time to time of American Depositary Receipts (ADRs) issued thereunder (including the form
of ADR)  incorporated by reference to Exhibit 2.2 of Form 20-F (File No. 333-93661) of ST
Assembly Test Services Ltd filed with the Securities and Exchange Commission on March 30, 20014.1
    
    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 (File No. 333-93661) of ST Assembly Test Services Ltd filed with the Securities
and Exchange Commission on January 3, 20004.2
    
    Program Agreement dated January 10, 2002 by and between Citicorp Investment Bank (Singapore)
Limited and ST Assembly Test Services Ltd establishing a S$500,000,000 Multicurrency Medium
Term Note Program  incorporated by reference to Exhibit 4.6 of Form 20-F (File No. 333-75080)
of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission
on February 28, 20024.3
    
    Trust Deed dated January 10, 2002 by and between British and Malayan Trustees Limited and ST Assembly Test Services Ltd establishing a S$500,000,000 Multicurrency Medium Term Note
Program incorporated by reference to Exhibit 4.7 of Form 20-F (File No. 333-75080)
of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission on February 28,
20024.4
    
    Agency Agreement dated January 10, 2002 by and between British and Malayan Trustees Limited,
Citicorp Investment Bank (Singapore) Limited and ST Assembly Test Services Ltd establishing a
S$500,000,000 Multicurrency Medium Term Note
 95




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##### Table of Contents



Program  incorporated by reference to Exhibit
4.8 of Form 20-F (File No. 333-75080) of ST Assembly Test Services Ltd filed with the
Securities and Exchange Commission on February 28, 20024.5
    
    Indenture dated March 18, 2002 by and between ST Assembly Test Services Ltd and the Bank of
New York relating to the 1.75% Convertible Notes Due 2007  incorporated by reference to
Exhibit 4.10 of Form 20-F (File No. 333-75080) of ST Assembly Test Services Ltd filed with the
Securities and Exchange Commission on March 31, 20034.6
    
    US$168 Million Reg S Global Note issued by ST Assembly Test Services Ltd in relation to the
1.75% Convertible Notes Due 2007  incorporated by reference to Exhibit 4.11 of Form 20-F
(File No. 333-75080) of ST Assembly Test Services Ltd filed with the Securities and Exchange
Commission on March 31, 20034.7
    
    US$25 Million Reg S Global Note issued by ST Assembly Test Services Ltd in relation to the
1.75% Convertible Notes Due 2007  incorporated by reference to Exhibit 4.12 of Form 20-F
(File No. 333-75080) of ST Assembly Test Services Ltd filed with the Securities and Exchange
Commission on March 31, 20034.8
    
    US$7 Million Restricted Global Note issued by ST Assembly Test Services Ltd in relation to
the 1.75% Convertible Notes Due 2007  incorporated by reference to Exhibit 4.13 of Form 20-F
(File No. 333-75080) of ST Assembly Test Services Ltd filed with the Securities and Exchange
Commission on March 31, 20034.9
    
    ChipPAC, Inc. Employee Retention and Severance Plan  incorporated by reference to Exhibit 10.41 to the annual report on Form 10-K (File No. 000-31173) of ChipPAC, Inc. for the fiscal
year ended December 31, 2003, as filed with the Securities and Exchange Commission on March 12, 20044.10#
    
    Amendment Agreement dated April 22, 2003 renewing the Immunity Agreement dated October 18,
1996 by and between Motorola Inc. and ST Assembly Test Services Ltd  incorporated by
reference to Exhibit 4.12 of Form 20-F (File No. 333-75080) of ST Assembly
Test Services Ltd filed with the Securities and Exchange Commission on March 19, 20044.11
    
    Agreement and Plan of Merger and Reorganization dated February 10, 2004 by and between ST Assembly Test
Services Ltd, ChipPAC, Inc. and Camelot Merger, Inc.  incorporated by
reference to Exhibit 4.15 of Form 20-F (File No. 333-75080) of ST Assembly
Test Services Ltd filed with the Securities and Exchange Commission on March 19, 20044.12
    
    Strategic Assistance Loan Agreement dated June 20, 2003 by and between ST Assembly Test
Services Ltd and Simmtech Co. Ltd  incorporated by reference to Exhibit 4.16 of Form 20-F
(File No. 333-75080) of ST Assembly Test Services Ltd filed with the Securities and Exchange
Commission on March 19, 20044.13
    
    The Yangdo Tambo Agreement dated June 20, 2003 by and between ST Assembly Test Services Ltd
and Simmtech Co. Ltd  incorporated by reference to Exhibit 4.17 of Form 20-F (File No. 333-75080) of ST Assembly
Test Services Ltd filed with the Securities and Exchange Commission on March 19, 20044.14
    
    Pledge Agreement dated June 20, 2003 by and between ST Assembly Test Services Ltd and
Simmtech Co. Ltd  incorporated by reference to Exhibit 4.18 of Form 20-F (File No. 333-75080) of ST Assembly
Test Services Ltd filed with the Securities and Exchange Commission
on March 19, 20044.15
    
    Loan Agreement dated December 26, 2003 by and between ST Assembly Test Services Ltd and
Simmtech Co. Ltd and Se-Ho Chun  incorporated by reference to Exhibit 4.19 of Form 20-F
(File No. 333-75080) of ST Assembly Test Services Ltd filed with the Securities and Exchange
Commission on March 19, 20044.16
    
    Yangdo Tambo Agreement dated December 26, 2003 by and between ST Assembly Test Services Ltd
and Simmtech Co. Ltd  incorporated by reference to Exhibit 4.20 of Form 20-F (File No. 333-75080) of ST Assembly Test
Services Ltd filed with the Securities and Exchange Commission
on March 19, 20044.17
    
    Share Pledge Agreement dated December 26, 2003 by and between ST Assembly Test Services Ltd
and Mr. Se-Ho Chun  incorporated by reference to Exhibit 4.21 of Form 20-F
(File No. 333-75080) of ST Assembly Test Services Ltd filed with the Securities and Exchange Commission
on March 19, 2004
 96




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##### Table of Contents



4.18
    
    Factory Kun-Mortgage Agreement dated December 26, 2003 by and between ST Assembly Test
Services Ltd and Simmtech Co. Ltd  incorporated by reference to Exhibit 4.22 of Form 20-F
(File No. 333-75080) of ST Assembly Test Services Ltd filed with the Securities and Exchange
Commission on March 19, 20044.19
    
    Base Capacity and Continuing Support Agreement dated December 26, 2003 by and between ST Assembly
Test Services Ltd and Simmtech Co. Ltd  incorporated by reference to Exhibit 4.23
of Form 20-F (File No. 333-75080) of ST Assembly Test Services Ltd filed with the Securities
and Exchange Commission on March 19, 20044.20
    
    Indenture dated November 7, 2003 by and between ST Assembly Test Services Ltd and the Bank of
New York relating to the $115 million zero-rated Convertible Notes Due 2008  incorporated by
reference to Exhibit 4.24 of Form 20-F (File No. 333-75080) of ST Assembly Test Services Ltd
filed with the Securities and Exchange Commission on March 19, 20044.21
    
    US$115 Million Reg S Global Note issued by ST Assembly Test Services Ltd under the Indenture
relating to the US$115 million zero-rated Convertible Notes Due 2008  incorporated by
reference to Exhibit 4.25 of Form 20-F (File No. 333-75080) of ST Assembly Test Services Ltd
filed with the Securities and Exchange Commission on March 19, 20044.22
    
    Indenture dated as of May 28, 2003 by and between ChipPAC, Inc. and U.S. Bank National
Association, as trustee relating to the 2.50% Convertible Subordinated Notes Due 2008 
incorporated by reference to Exhibit 10.40 to the Quarterly Report on Form 10-Q (File No.
000-31173) of ChipPAC, Inc. filed with the Securities and Exchange Commission on August 8,
2003 for the three months ended June 30, 20034.23
    
    Employment Agreement dated as of March 17, 2004 among ST Assembly Test Services Ltd, ChipPAC,
Inc. and Michael G. Potter  incorporated by reference to Exhibit 4.8 of Form F-4 (File No. 333-114232) of STATS ChipPAC Ltd., as filed with the Securities and Exchange Commission on
April 6, 20044.24
    
    First Supplemental Indenture dated August 4, 2004 to the Indenture dated as of May 28, 2003
among ChipPAC Inc., ST Assembly Test Services Ltd and U.S. Bank National Association relating
to the 2.50% Convertible Subordinated Securities Due 2008  incorporated by reference to
Exhibit 4.2 of Form F-3 (File No. 333-119705) of
STATS ChipPAC, Inc. filed with the Securities
and Exchange Commission on October 13, 20044.25
    
    STATS ChipPAC Ltd. Substitute Equity Incentive Plan  incorporated by reference to Exhibit
4.4 to Post-Effective Amendment No. 1 on Form S-8 (File No. 333-114232)
of STATS ChipPAC Ltd., as filed with the Securities and Exchange Commission on August 25, 20044.26
    
    STATS ChipPAC Ltd. Substitute Share Purchase and Option Plan  incorporated by reference to
Exhibit 4.5 to Post-Effective Amendment No. 1 on Form S-8 (File No. 333-114232) of STATS
ChipPAC Ltd., as filed with the Securities and Exchange Commission on August 25, 20044.27
    
    STATS ChipPAC Ltd. Employee Share Purchase Plan 2004  incorporated by reference to Appendix 1 to STATS ChipPAC
Ltd.s Proxy Statement which was filed as Exhibit 99.1 on Form 6-K (File
No. 333-75080) of STATS ChipPAC Ltd., as filed with the Securities and Exchange Commission on
March 30, 20064.28**
    
    STATS ChipPAC Ltd. Share Option Plan4.29
    
    STATS ChipPAC Ltd. Restricted Share Plan  incorporated by reference to Appendix 2 to STATS
ChipPAC Ltd.s Proxy Statement which was filed as Exhibit 99.1 on Form 6-K (File No. 333-75080) of STATS ChipPAC Ltd., as filed with the Securities and Exchange Commission on
March 30, 20064.30**
    
    STATS ChipPAC Ltd. Performance Share Plan4.31
    
    Indenture dated November 18, 2004 by and between STATS ChipPAC Ltd. and U.S. Bank National
Association relating to the 6.75% Senior Notes Due 2011  incorporated by reference to
Exhibit 4.40 of Form 20-F (File No. 333-75080) of STATS ChipPAC Ltd., as filed with the
Securities and Exchange Commission on March 18, 2005
 97




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##### Table of Contents



4.32
    
    Subsidiary Guarantee Agreement dated November 18, 2004 by and between STATS ChipPAC Ltd., the
Subsidiary Guarantors party thereto and U.S. Bank National Association relating to the 6.75%
Senior Notes Due 2011  incorporated by reference to Exhibit 4.43 of Form 20-F (File No. 333-75080) of
STATS ChipPAC Ltd., as filed with the Securities and Exchange Commission on
March 18, 20054.33
    
    Second Supplemental Indenture dated October 7, 2004 to the Indenture dated as of November 18,
2004 among ChipPAC International Company Limited, ChipPAC, Inc. and U.S. Bank National
Association relating to the 6.75% Senior Notes Due 2011 incorporated by reference to Exhibit 4.44 of Form 20-F
(File No. 333-75080) of STATS ChipPAC Ltd., as filed with the Securities and
Exchange Commission on March 18, 20054.34
    
    Second Supplemental Indenture dated October 11, 2004 to the Indenture dated as of May 28,
2003 among ChipPAC Inc., STATS ChipPAC Ltd. and U.S. Bank National Association relating to the
2.50% Convertible Subordinated Notes Due 2008  incorporated by reference to Exhibit 4.45 of
Form 20-F (File No. 333-75080) of STATS ChipPAC Ltd., as filed with the Securities and
Exchange Commission on March 18, 20054.35
    
    Third Supplemental Indenture dated November 2, 2004 to the Indenture dated as of May 28, 2003
among ChipPAC Inc., STATS ChipPAC Ltd. and U.S. Bank National Association relating to the
2.50% Convertible Subordinated Notes Due 2008  incorporated by reference to Exhibit 4.46 of
Form 20-F (File No. 333-75080) of STATS ChipPAC Ltd., as filed with the Securities and
Exchange Commission on March 18, 20054.36
    
    Indenture dated as of July 19, 2005 by and between STATS ChipPAC Ltd. and U.S. Bank National
Association relating to the 7.5% Senior Notes Due 2010  incorporated by reference to Exhibit 4.1 of Form 6-K (File No. 333-75080) of STATS ChipPAC Ltd., as filed with the Securities and
Exchange Commission on August 25, 20054.37
    
    Terms and Conditions of Appointment of Tan Lay Koon as President and Chief Executive Officer
of STATS ChipPAC Ltd. dated August 5, 2004 by and between Tan Lay Koon and STATS ChipPAC Ltd.
 incorporated by reference to Exhibit 4.46 of Form 20-F (File No. 333-75080) of STATS
ChipPAC Ltd., as filed with the Securities and Exchange Commission on February 28, 20064.38
    
    Subsidiary Guarantee Agreement dated as of July 19, 2005 by and between STATS ChipPAC Ltd.,
the Subsidiary Guarantors party thereto and U.S. Bank National Association relating to the
7.5% Senior Notes Due 2010  incorporated by reference to Exhibit 4.3 of Form 6-K (File No. 333-75080) of STATS ChipPAC Ltd., as filed with the Securities and Exchange Commission on
August 25, 20054.39
    
    Supplemental Subsidiary Guarantee Agreement dated as of February 21, 2006 by and between
STATS ChipPAC Ltd., the Subsidiary Guarantors party thereto and U.S. Bank National Association
with respect to the 7.5% Senior Notes Due 2010  incorporated by reference to Exhibit 4.48 of
Form 20-F (File No. 333-75080) of STATS ChipPAC Ltd., as filed with the Securities and
Exchange Commission on February 28, 20064.40
    
    Supplemental Subsidiary Guarantee Agreement dated as of February 21, 2006 by and between
STATS ChipPAC Ltd., the Subsidiary Guarantors party thereto and U.S. Bank National Association
with respect to the 63/4% Senior Notes due 2011  incorporated by reference to Exhibit 4.49
of Form 20-F (File No. 333-75080) of STATS ChipPAC Ltd., as filed with the Securities and
Exchange Commission on February 28, 20064.41**
    
    Subscription Agreement dated June 22, 2006 between STATS ChipPAC Ltd., China Resources Logic
Limited, Micro Assembly Technologies Limited and Wuxi China Resources Microelectronics
(Holdings) Limited4.42**
    
    Deed of Indemnity dated June 22, 2006 between STATS ChipPAC Ltd., China Resources Logic
Limited, Micro Assembly Technologies Limited and Wuxi China Resources Microelectronics
(Holdings) Limited4.43**
    
    Joint Venture Agreement dated June 22, 2006 between STATS ChipPAC Ltd., China Resources
Logic Limited, Wuxi China Resources Microelectronics (Holdings) Limited, Micro Assembly
Technologies Limited and Wuxi CR Micro-Assembly Technology Ltd.
 98




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##### Table of Contents



4.44**
    
    Asset Sale and Purchase Agreement dated June 22, 2006 between STATS ChipPAC Shanghai Co.,
Ltd., STATS ChipPAC Ltd., Wuxi CR
Micro-Assembly Technology Ltd. and China Resources Logic
Limited4.45**
    
    Amendment Number One dated July 14, 2006 to the Asset Sale and Purchase Agreement dated June
22, 2006 between STATS ChipPAC Shanghai Co., Ltd., STATS ChipPAC
Ltd., Wuxi CR Micro-Assembly
Technology Ltd. and China Resources Logic Limited4.46**
    
    Manufacturers Representative
Agreement dated June 22, 2006 between Wuxi CR
Micro-Assembly
Technology Ltd., China Resources Logic Limited, STATS ChipPAC (BVI) Limited and STATS ChipPAC
Ltd.4.47**##
    
    US$125,000,000 Syndicated Facility Agreement dated August 10, 2006 between STATS ChipPAC
Ltd. and Oversea-Chinese Banking Corporation Limited4.48**##
    
    English language translation of
Korean language US$25,000,000 Term Loan Agreement dated May 29, 2006 between STATS ChipPAC Korea Ltd. and Hana Bank4.49**
    
    English language summary of Chinese
language NT$1.8 Billion Syndicated Loan
Agreement dated March 2, 2004 between Winstek Semiconductor Corporation and Mega Bank4.50**
    
    English language summary of Chinese
language NT$3.6 Billion Syndicated Loan
Agreement dated August 18, 2006 between Winstek Semiconductor Corporation and Taishin Bank8.1
    
    List of subsidiaries  incorporated
by reference to Exhibit 8.1 of
Form 20-F (File
no. 333-75080) of STATS ChipPAC Ltd., as filed with the
Securities and Exchange Commission on February 28, 200612.1**
    
    Certification by the Chief
Executive Officer pursuant to 17 CFR 240.
15d-14(a), as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 200212.2**
    
    Certification by the Chief
Financial Officer pursuant to 17 CFR 240.
15D-14(a), as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 200213.1**
    
    Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 200213.2**
    
    Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 200215.1**
    
    Consent of Pricewaterhouse Coopers, Singapore, independent registered public accounting firm
 
 #
    
    Certain portions of this exhibit have been omitted pursuant
to a confidential treatment order of the SEC. The
omitted portions have been filed separately with the SEC.##
    
    Certain portions of this exhibit have been omitted pursuant
to a request for confidential treatment filed with the SEC. The
omitted portions have been filed separately with the SEC.**
    
    Filed herewith. 99




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##### Table of Contents



SIGNATURES
 20-F
  STATS CHIPPAC LTD.By:
    /s/ Tan
Lay KoonName:
    Tan Lay KoonTitle:
    President and Chief Executive OfficerBy:

/s/ Michael
G. PotterName:
    Michael G. PotterTitle:
    Senior Vice President, Chief Financial Officer 100




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 
 INDEX TO FINANCIAL STATEMENTS
  
 PageFINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets
    
    F-4Consolidated Statements of Operations
    
    F-5Consolidated
Statements of Comprehensive Income (Loss)
    
    F-6Consolidated Statements of Shareholders Equity
    
    F-7Consolidated Statements of Cash Flows
    
    F-8Notes to the Consolidated Financial Statements
    
    F-9
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  Consolidated financial statements
  share-based
 Internal control over financial reporting
   F-2




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##### Table of Contents



F-3




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 In thousands of U.S. Dollars (except per share data)
 December 25,
    
    
    December 31,Note
    
    2005
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    3
    
    $
    224,720
    
    
    $
    171,457Short-term marketable securities
    
    4
    
    
    17,648
    
    
    
    45,126Accounts receivable, net
    
    5
    
    
    240,990
    
    
    
    243,779Amounts due from affiliates
    
    2
    
    
    6,810
    
    
    
    2,506Other receivables
    
    6
    
    
    11,336
    
    
    
    6,975Inventories
    
    7
    
    
    79,483
    
    
    
    111,614Short-term restricted cash
    
    
    
    
    376
    
    
    
    Prepaid expenses and other current assets
    
    8
    
    
    26,351
    
    
    
    18,364Total current assets
    
    
    
    
    607,714
    
    
    
    599,821Long-term marketable securities
    
    4
    
    
    17,803
    
    
    
    15,358Property, plant and equipment, net
    
    9
    
    
    1,107,031
    
    
    
    1,192,830Investment in equity investee
    
    2
    
    
    
    
    
    
    10,292Intangible assets
    
    10
    
    
    72,780
    
    
    
    41,846Goodwill
    
    11
    
    
    522,625
    
    
    
    513,512Long-term restricted cash
    
    
    
    
    2,232
    
    
    
    981Prepaid
expenses and other
non-current assets
    
    8
    
    
    63,197
    
    
    
    83,640Total assets
    
    
    
    $
    2,393,382
    
    
    $
    2,458,280LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts and other payable
    
    
    
    $
    136,058
    
    
    $
    167,722Payables related to property, plant and equipment purchases
    
    
    
    
    79,425
    
    
    
    34,277Accrued operating expenses
    
    13
    
    
    96,932
    
    
    
    97,627Income taxes payable
    
    
    
    
    2,235
    
    
    
    6,810Short-term
borrowings
    
    15
    
    
    16,891
    
    
    
    592Amounts due to affiliates
    
    2
    
    
    62
    
    
    
    45Current obligations under capital leases
    
    16
    
    
    7,091
    
    
    
    3,680Current
installments of long-term debts
    
    17
    
    
    18,651
    
    
    
    61,101Total current liabilities
    
    
    
    
    357,345
    
    
    
    371,854Obligations under capital leases, excluding current installments
    
    16
    
    
    3,680
    
    
    
    Long-term debts, excluding current installments
    
    17
    
    
    775,425
    
    
    
    697,523Other
non-current liabilities
    
    19
    
    
    66,611
    
    
    
    84,807Total liabilities
    
    
    
    
    1,203,061
    
    
    
    1,154,184Minority interest
    
    
    
    
    48,669
    
    
    
    57,946Share capital:Ordinary shares  2005: Authorized 3,200,000,000 shares, par value
S$0.25; 2006: Unlimited shares with no par valueIssued ordinary shares  1,976,292,025 in 2005 and 2,002,814,117 in 2006
    
    20, 21
    
    
    303,052
    
    
    
    1,847,002Additional
paid-in capital
    
    20
    
    
    1,517,118
    
    
    
    Accumulated other comprehensive loss
    
    22
    
    
    (8,572
    )
    
    
    (7,714
    )Accumulated deficit
    
    
    
    
    (669,946
    )
    
    
    (593,138
    )Total shareholders equity
    
    
    
    
    1,141,652
    
    
    
    1,246,150Commitments and contingencies
    
    24Total liabilities and shareholders equity
    
    
    
    $
    2,393,382
    
    
    $
    2,458,280
  F-4




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 In thousands of U.S. Dollars (except per share data)
 Year EndedDecember 31,
    
    
    December 25,
    
    
    December 31,Note
    
    2004
    
    
    2005
    
    
    2006Net revenues
    
    
    
    $
    769,121
    
    
    $
    1,157,253
    
    
    $
    1,616,933Cost of revenues
    
    
    
    
    (643,540
    )
    
    
    (968,023
    )
    
    
    (1,290,773
    )Gross profit
    
    
    
    
    125,581
    
    
    
    189,230
    
    
    
    326,160Operating expenses:Selling, general and administrative
    
    
    
    
    84,501
    
    
    
    135,751
    
    
    
    139,466Research and development
    
    
    
    
    17,637
    
    
    
    26,071
    
    
    
    30,446Restructuring charges
    
    25
    
    
    
    
    
    
    830
    
    
    
    1,938Goodwill impairment
    
    11
    
    
    453,000
    
    
    
    
    
    
    
    Total operating expenses
    
    
    
    
    555,138
    
    
    
    162,652
    
    
    
    171,850Operating income (loss)
    
    
    
    
    (429,557
    )
    
    
    26,578
    
    
    
    154,310Other income (expense), net:Interest income
    
    
    
    
    4,430
    
    
    
    6,414
    
    
    
    5,401Interest expense
    
    
    
    
    (28,816
    )
    
    
    (42,629
    )
    
    
    (45,816
    )Foreign currency exchange gain (loss)
    
    
    
    
    (1,122
    )
    
    
    531
    
    
    
    (1,578
    )Equity income from investment in equity investee
    
    
    
    
    
    
    
    
    
    
    
    
    152Other
non-operating income (expense), net
    
    26
    
    
    (936
    )
    
    
    (1,076
    )
    
    
    108Total other income (expense), net
    
    
    
    
    (26,444
    )
    
    
    (36,760
    )
    
    
    (41,733
    )Income (loss) before income taxes
    
    
    
    
    (456,001
    )
    
    
    (10,182
    )
    
    
    112,577Income tax expense
    
    14
    
    
    (7,894
    )
    
    
    (9,689
    )
    
    
    (25,759
    )Income (loss) before minority interest
    
    
    
    
    (463,895
    )
    
    
    (19,871
    )
    
    
    86,818Minority interest
    
    
    
    
    (3,828
    )
    
    
    (6,440
    )
    
    
    (10,010
    )Net income (loss)
    
    
    
    $
    (467,723
    )
    
    $
    (26,311
    )
    
    $
    76,808Net income (loss) per ordinary share: basic
    
    
    
    $
    (0.33
    )
    
    $
    (0.01
    )
    
    $
    0.04 diluted
    
    
    
    $
    (0.33
    )
    
    $
    (0.01
    )
    
    $
    0.04Net income (loss) per ADS: basic
    
    
    
    $
    (3.27
    )
    
    $
    (0.13
    )
    
    $
    0.39 diluted
    
    
    
    $
    (3.27
    )
    
    $
    (0.13
    )
    
    $
    0.37Ordinary shares (in thousands) used in per
ordinary share calculation: basic
    
    
    
    
    1,428,954
    
    
    
    1,961,950
    
    
    
    1,991,110 diluted
    
    
    
    
    1,428,954
    
    
    
    1,961,950
    
    
    
    2,161,545ADS (in thousands) used in per ADS calculation: basic
    
    
    
    
    142,895
    
    
    
    196,195
    
    
    
    199,111 diluted
    
    
    
    
    142,895
    
    
    
    196,195
    
    
    
    216,154
  F-5




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 In thousands of U.S. Dollars
 Year EndedDecember 31,
    
    
    December 25,
    
    
    December 31,2004
    
    
    2005
    
    
    2006Net income (loss)
    
    $
    (467,723
    )
    
    $
    (26,311
    )
    
    $
    76,808Other comprehensive income (loss):Unrealized
loss on available-for-sale marketable securities
    
    
    (548
    )
    
    
    (247
    )
    
    
    (5
    )Realized
(gain) loss on
available-for-sale marketable securities included in net income (loss)
    
    
    537
    
    
    
    
    
    
    
    (5
    )Unrealized gain on hedging instruments
    
    
    3,953
    
    
    
    133
    
    
    
    3,058Realized gain on hedging instruments included in
net income (loss)
    
    
    (168
    )
    
    
    (3,143
    )
    
    
    (3,157
    )Foreign currency translation adjustment
    
    
    3,287
    
    
    
    (2,455
    )
    
    
    967Comprehensive income (loss)
    
    $
    (460,662
    )
    
    $
    (32,023
    )
    
    $
    77,666
  F-6




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 In thousands of U.S. Dollars
 AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    TotalPaid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    ShareholdersOrdinary Shares
    
    
    Capital
    
    
    Loss
    
    
    Deficit
    
    
    EquityNo.(In thousands)Balances at January 1, 2004
    
    
    1,076,620
    
    
    $
    172,434
    
    
    $
    489,355
    
    
    $
    (9,921
    )
    
    $
    (175,912
    )
    
    $
    475,956Share issuances
    
    
    5,802
    
    
    
    856
    
    
    
    1,112
    
    
    
    
    
    
    
    
    
    
    
    1,968Share issuances and assumption
of share options in connection
with acquisition
    
    
    861,908
    
    
    
    124,943
    
    
    
    1,016,549
    
    
    
    
    
    
    
    
    
    
    
    1,141,492Share-based
compensation
    
    
    
    
    
    
    
    
    
    
    658
    
    
    
    
    
    
    
    
    
    
    
    658Effect of subsidiarys equity
transaction
    
    
    
    
    
    
    
    
    
    
    (62
    )
    
    
    
    
    
    
    
    
    
    
    (62
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (467,723
    )
    
    
    (467,723
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,061
    
    
    
    
    
    
    
    7,061Balances at December 31, 2004
    
    
    1,944,330
    
    
    
    298,233
    
    
    
    1,507,612
    
    
    
    (2,860
    )
    
    
    (643,635
    )
    
    
    1,159,350Share issuances
    
    
    31,962
    
    
    
    4,819
    
    
    
    8,702
    
    
    
    
    
    
    
    
    
    
    
    13,521Share-based
compensation
    
    
    
    
    
    
    
    
    
    
    743
    
    
    
    
    
    
    
    
    
    
    
    743Effect of subsidiarys equity
transaction
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    61Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,311
    )
    
    
    (26,311
    )Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,712
    )
    
    
    
    
    
    
    (5,712
    )Balances at December 25, 2005
    
    
    1,976,292
    
    
    
    303,052
    
    
    
    1,517,118
    
    
    
    (8,572
    )
    
    
    (669,946
    )
    
    
    1,141,652Share issuances
    
    
    26,522
    
    
    
    13,197
    
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    13,254Share-based
compensation
    
    
    
    
    
    
    13,688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,688Effect of abolition of the
share par value
    
    
    
    
    
    
    1,517,175
    
    
    
    (1,517,175
    )
    
    
    
    
    
    
    
    
    
    
    Effect of subsidiarys equity
transaction
    
    
    
    
    
    
    (110
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,808
    
    
    
    76,808Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    858
    
    
    
    
    
    
    
    858Balances at December 31, 2006
    
    
    2,002,814
    
    
    $
    1,847,002
    
    
    $
    
    
    
    $
    (7,714
    )
    
    $
    (593,138
    )
    
    $
    1,246,150
  F-7




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 In thousands of U.S. Dollars
 Year EndedDecember 31,
    
    
    December 25,
    
    
    December 31,2004
    
    
    2005
    
    
    2006Cash Flows From Operating ActivitiesNet income (loss)
    
    $
    (467,723
    )
    
    $
    (26,311
    )
    
    $
    76,808Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    188,683
    
    
    
    254,138
    
    
    
    266,317Goodwill impairment
    
    
    453,000
    
    
    
    
    
    
    
    Amortization of leasing prepayments
    
    
    25,718
    
    
    
    25,790
    
    
    
    7,386Debt issuance cost amortization
    
    
    1,913
    
    
    
    1,961
    
    
    
    2,371(Gain) loss on sale of property, plant and equipment
    
    
    (656
    )
    
    
    1,529
    
    
    
    1,251Accretion of discount on convertible notes
    
    
    11,437
    
    
    
    7,414
    
    
    
    6,618Loss from repurchase and redemption of senior and convertible notes
    
    
    797
    
    
    
    1,653
    
    
    
    500Foreign currency exchange (gain) loss
    
    
    (830
    )
    
    
    (134
    )
    
    
    758Share-based
compensation expense
    
    
    658
    
    
    
    743
    
    
    
    13,688Deferred income taxes
    
    
    15,005
    
    
    
    9,351
    
    
    
    19,853Minority interest in income of subsidiary
    
    
    3,828
    
    
    
    6,440
    
    
    
    10,010Equity income from investment in equity investee
    
    
    
    
    
    
    
    
    
    
    (152
    )(Gain) loss on sale of marketable securities
    
    
    537
    
    
    
    
    
    
    
    (5
    )Others
    
    
    371
    
    
    
    535
    
    
    
    1,009Changes in operating working capital:Accounts receivable
    
    
    8,149
    
    
    
    (91,340
    )
    
    
    (2,789
    )Amounts due from affiliates
    
    
    4,427
    
    
    
    (4,187
    )
    
    
    4,304Inventories
    
    
    (1,171
    )
    
    
    (24,793
    )
    
    
    (32,268
    )Other receivables, prepaid expenses and other assets
    
    
    (64,421
    )
    
    
    3,516
    
    
    
    7,355Accounts payable, accrued operating expenses and other
payables
    
    
    (41,406
    )
    
    
    104,499
    
    
    
    44,774Amounts due to affiliates
    
    
    (1,699
    )
    
    
    (75
    )
    
    
    (17
    )Net cash provided by operating activities
    
    
    136,617
    
    
    
    270,729
    
    
    
    427,771Cash Flows From Investing ActivitiesProceeds from sales of marketable securities
    
    $
    130,497
    
    
    $
    15,726
    
    
    $
    35,391Proceeds from maturity of marketable securities
    
    
    46,687
    
    
    
    787
    
    
    
    20,841Purchases of marketable securities
    
    
    (160,943
    )
    
    
    (32,017
    )
    
    
    (80,866
    )Investment in equity investee
    
    
    
    
    
    
    
    
    
    
    (10,154
    )Acquisition of intangible assets
    
    
    (1,428
    )
    
    
    (4,853
    )
    
    
    (6,419
    )Acquisition of subsidiary, net of cash acquired
    
    
    7,208
    
    
    
    
    
    
    
    Purchases of property, plant and equipment
    
    
    (287,574
    )
    
    
    (245,775
    )
    
    
    (393,643
    )Others, net
    
    
    729
    
    
    
    3,139
    
    
    
    9,067Net cash used in investing activities
    
    
    (264,824
    )
    
    
    (262,993
    )
    
    
    (425,783
    )Cash Flows From Financing ActivitiesRepayment
of short-term debts
    
    $
    (72,006
    )
    
    $
    (143,276
    )
    
    $
    (42,290
    )Repayment
of long-term debts
    
    
    (8,982
    )
    
    
    (37,670
    )
    
    
    (27,627
    )Proceeds from issuance of shares, net of expenses
    
    
    1,968
    
    
    
    13,521
    
    
    
    13,254Proceeds from issuance of senior and convertible notes, net of expenses
    
    
    210,458
    
    
    
    146,535
    
    
    
    Repurchase and redemption of senior and convertible notes
    
    
    (193,647
    )
    
    
    (167,263
    )
    
    
    (50,500
    )Proceeds from bank borrowings
    
    
    107,620
    
    
    
    188,085
    
    
    
    60,308(Increase) decrease in restricted cash
    
    
    2,927
    
    
    
    (1,487
    )
    
    
    1,627Grants received
    
    
    
    
    
    
    246
    
    
    
    Capital lease payments
    
    
    (7,210
    )
    
    
    (11,737
    )
    
    
    (7,091
    )Distribution to minority interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    (2,542
    )Contribution by minority interest in subsidiary, net
    
    
    
    
    
    
    3,623
    
    
    
    Net cash provided by financing activities
    
    
    41,128
    
    
    
    (9,423
    )
    
    
    (54,861
    )Net decrease in cash and cash equivalents
    
    
    (87,079
    )
    
    
    (1,687
    )
    
    
    (52,873
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    1,425
    
    
    
    (1,102
    )
    
    
    (390
    )Cash and cash equivalents at beginning of the year
    
    
    313,163
    
    
    
    227,509
    
    
    
    224,720Cash and cash equivalents at end of the year
    
    $
    227,509
    
    
    $
    224,720
    
    
    $
    171,457Supplementary Cash Flow InformationInterest paid
    
    $
    21,974
    
    
    $
    40,738
    
    
    $
    28,307Income taxes paid
    
    
    1,023
    
    
    
    185
    
    
    
    1,418Non-cash
itemsIssuance of shares and assumption of share options in connection
with acquisition
    
    
    1,066,994
    
    
    
    
    
    
    
    Equipment acquired under capital leases
    
    $
    
    
    
    $
    4,150
    
    
    $
    
  F-8




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 In thousands of U.S. Dollars (except per share data)
 1.
    
    Background and Summary of Significant Accounting Policies
 (a) Business and Organization
 wholly-owned
 over-the-counter
  wholly-owned wholly-owned
 (b) Fiscal Year
 52-53 week 53-week 52-week
 (c) Accounting Principles
  (d) Principles of Consolidation
 majority-owned
 (e) Issuances of Stock by Subsidiaries
  F-9




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 (f) Use of Estimates
 risk-adjusted
 (g) Reclassifications
  (h) Foreign Currency Transactions
   (i) Certain Risks and Concentrations
 time-to-market
  F-10




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 non-performance
  (j) Cash and Cash Equivalents
  (k) Restricted Cash
 short-term long-term
 (l) Derivative Instruments and Hedging Activities
    (m) Marketable Securities
 available-for-sale held-to-maturity Held-to-maturity held-to-maturity available-for-sale
 F-11




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 available-for-sale Held-to-maturity available-for-sale available-for-sale
 available-for-sale held-to-maturity held-to-maturity
 (n) Inventories
  (o) Equity Method Investments
  (p) Business Combination
  (q) Goodwill
  long-term
 F-12




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 (r) Intangible Assets
   Tradenames
    
    7 yearsTechnology and intellectual property
    
    10 yearsCustomer relationships
    
    2 yearsSoftware and licenses
    
    3 to 5 years
 (s) Property, Plant and Equipment
 straight-line
 Land use rights
    
    50 to 99 yearsBuilding, mechanical and electrical installation
    
    3 to 25 yearsEquipment
    
    2 to 8 years
  straight-line
 (t) Long-Lived Assets
 long-lived long-lived long-lived
 long-lived Long-lived
 (u) Comprehensive
Income (Loss)
 available-for-sale
 F-13




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 (v) Revenue Recognition
   multiple-element pre-production post-production
    Year EndedDecember 31,
    
    December 25,
    
    December 31,2004
    
    2005
    
    2006Revenue packaging  array
    
    
    40.6
    %
    
    
    50.2
    %
    
    
    55.5
    % packaging  leaded
    
    
    20.9
    
    
    
    22.0
    
    
    
    18.3 test and other services
    
    
    38.5
    
    
    
    27.8
    
    
    
    26.2Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 credit-worthiness
 (w) Grants
 Asset-related Asset-related straight-line
 Income-related Income-related
 F-14




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  (x) Share-Based Compensation
 Share-based share-based Share-Based share-based share-based grant-date share-based share-based Stock-Based  Stock-Based
 Share-Based share-based share-based
 (y) Employee Benefit Plans
   lump-sum
 F-15




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  (z) Operating Leases
 straight-line
 (aa) Product Warranties
  (bb) Research and Development
  (cc) Income Taxes
  (dd) Net Income (Loss) Per Share
  anti-dilutive
  December 31,
    
    December 25,
    
    December 31,2004
    
    2005
    
    2006Convertible debt
    
    
    369,235
    
    
    
    287,999
    
    
    
    82,454Share options
    
    
    131,997
    
    
    
    124,175
    
    
    
    103,508
  F-16




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
   Year EndedDecember 31,
    
    December 25,
    
    December 31,2004
    
    2005
    
    2006Net income (loss)
    
    $
    (467,723
    )
    
    $
    (26,311
    )
    
    $
    76,808Adjusted net income (loss)
    
    
    (467,723
    )
    
    
    (26,311
    )
    
    
    79,058Weighted average number
of ordinary shares
outstanding (basic)
    
    
    1,428,954
    
    
    
    1,961,950
    
    
    
    1,991,110Weighted average dilutive
shares from share plans
    
    
    
    
    
    
    
    
    
    
    8,564Weighted average dilutive
convertible notes
    
    
    
    
    
    
    
    
    
    
    161,871Weighted average number
of ordinary shares and
equivalent ordinary
shares outstanding
(diluted)
    
    
    1,428,954
    
    
    
    1,961,950
    
    
    
    2,161,545
 (ee) New Accounting Pronouncements
 Share-Based Stock-Based fair-value share-based Share-Based share-based share-based
    F-17




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 year-end
 2.
    
    Related Party Transactions
 wholly-owned
 long-term 30-year
     December 25,
    
    
    December 31,2005
    
    
    2006Amounts due from affiliatesAccounts receivable, net of allowance for sales returns
    
    $
    6,810
    
    
    $
    2,506Amounts due to affiliatesAccounts payable
    
    $
    (62
    )
    
    $
    (45
    )
 Micro-Assembly performance-based earn-out non-current
 F-18




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  3.
    
    Cash and Cash Equivalents
  December 25,
    
    
    December 31,2005
    
    
    2006Cash at banks and on hand
    
    $
    29,126
    
    
    $
    62,551Cash equivalentsBank fixed deposits
    
    
    153,991
    
    
    
    77,309Money market funds
    
    
    39,891
    
    
    
    30,039Foreign government treasury bills
    
    
    1,712
    
    
    
    1,558$
    224,720
    
    
    $
    171,457
 4.
    
    Marketable Securities
  December 25, 2005
    
    
    December 31, 2006Gross
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-salecorporate debt securities
    
    $
    27,562
    
    
    $
    
    
    
    $
    (1,027
    )
    
    $
    26,535
    
    
    $
    61,521
    
    
    $
    35
    
    
    $
    (1,072
    )
    
    $
    60,484Held-to-maturitycertificates of deposit
    
    $
    8,916
    
    
    $
    
    
    
    $
    
    
    
    $
    8,916
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  December 25,
    
    
    December 31,2005
    
    
    2006Marketable securities:Due in one year or less
    
    $
    17,648
    
    
    $
    45,126Due after one year through five years
    
    
    17,803
    
    
    
    15,358$
    35,451
    
    
    $
    60,484
 available-for-sale
 5.
    
    Accounts Receivable
  December 25,
    
    
    December 31,2005
    
    
    2006Accounts receivable  third parties
    
    $
    243,830
    
    
    $
    247,185Allowance for sales returns
    
    
    (2,840
    )
    
    
    (3,406
    )$
    240,990
    
    
    $
    243,779
 F-19




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  Year EndedDecember 31,
    
    
    December 25,
    
    
    December 31,2004
    
    
    2005
    
    
    2006Beginning
    
    $
    1,362
    
    
    $
    1,899
    
    
    $
    2,840Utilized during the year
    
    
    (4,511
    )
    
    
    (1,094
    )
    
    
    Charged during the year
    
    
    5,048
    
    
    
    2,517
    
    
    
    3,034Writeback during the year
    
    
    
    
    
    
    (482
    )
    
    
    (2,468
    )Ending
    
    $
    1,899
    
    
    $
    2,840
    
    
    $
    3,406
 6.
    
    Other Receivables
  December 25,
    
    
    December 31,2005
    
    
    2006Deposits and staff advances
    
    $
    1,229
    
    
    $
    718Grants receivable
    
    
    1,313
    
    
    
    Forward contract receivable
    
    
    1,051
    
    
    
    196Taxes receivable
    
    
    3,796
    
    
    
    2,533Other receivables
    
    
    3,947
    
    
    
    3,528$
    11,336
    
    
    $
    6,975
 7.
    
    Inventories
  December 25,
    
    
    December 31,2005
    
    
    2006Raw materials
    
    $
    63,079
    
    
    $
    88,339Work-in-progress
    
    
    15,727
    
    
    
    19,395Finished goods
    
    
    677
    
    
    
    3,880$
    79,483
    
    
    $
    111,614
 8.
    
    Prepaid Expenses and Other Assets
  December 25,
    
    
    December 31,2005
    
    
    2006Leasing prepayments
    
    $
    10,054
    
    
    $
    11Other prepayments and assets
    
    
    9,543
    
    
    
    14,035Deferred income tax assets
    
    
    1,425
    
    
    
    289Loans to a vendor
    
    
    5,329
    
    
    
    4,029$
    26,351
    
    
    $
    18,364
  December 25,
    
    
    December 31,2005
    
    
    2006Leasing prepayments
    
    $
    2,623
    
    
    $
    Deferred income tax assets
    
    
    38,879
    
    
    
    39,028Other deposits
    
    
    289
    
    
    
    285Loans to a vendor
    
    
    8,441
    
    
    
    4,412Debt issuance cost, net of
accumulated amortization of
$3,026 and $5,397
    
    
    10,895
    
    
    
    9,510Assets held for sale
    
    
    
    
    
    
    26,259Others
    
    
    2,070
    
    
    
    4,146$
    63,197
    
    
    $
    83,640
 F-20




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 lease-back
 interest-free
 9.
    
    Property, Plant and Equipment
  December 25,
    
    
    December 31,2005
    
    
    2006Cost:Freehold land
    
    $
    5,857
    
    
    $
    5,972Land and land use rights
    
    
    19,864
    
    
    
    19,864Buildings, mechanical and electrical installation
    
    
    170,206
    
    
    
    236,179Equipment
    
    
    1,660,504
    
    
    
    1,880,982Total cost
    
    $
    1,856,431
    
    
    $
    2,142,997Total accumulated depreciation
    
    $
    749,400
    
    
    $
    950,167Property, plant and equipment, net
    
    $
    1,107,031
    
    
    $
    1,192,830
  straight-line
  fully-paid 30-year 30-year Hsin-Chu
  F-21




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 10.
    
    Intangible Assets
  December 25, 2005
    
    
    December 31, 2006Gross
    
    
    Accumulated
    
    
    Net
    
    
    Gross
    
    
    Accumulated
    
    
    NetAssets
    
    
    Amortization
    
    
    Assets
    
    
    Assets
    
    
    Amortization
    
    
    AssetsTradenames
    
    $
    7,700
    
    
    $
    (1,558
    )
    
    $
    6,142
    
    
    $
    7,700
    
    
    $
    (2,658
    )
    
    $
    5,042Technology and
intellectual property
    
    
    32,000
    
    
    
    (4,533
    )
    
    
    27,467
    
    
    
    32,000
    
    
    
    (7,733
    )
    
    
    24,267Customer relationships
    
    
    99,300
    
    
    
    (70,338
    )
    
    
    28,962
    
    
    
    99,300
    
    
    
    (99,300
    )
    
    
    Software, licenses
and others
    
    
    18,528
    
    
    
    (8,319
    )
    
    
    10,209
    
    
    
    24,855
    
    
    
    (12,318
    )
    
    
    12,537$
    157,528
    
    
    $
    (84,748
    )
    
    $
    72,780
    
    
    $
    163,855
    
    
    $
    (122,009
    )
    
    $
    41,846
 finite-lived
 Year EndedDecember 31,2004
    
    
    December 25,2005
    
    
    December 31,2006Tradenames
    
    $
    458
    
    
    $
    1,100
    
    
    $
    1,100Technology and intellectual property
    
    
    1,333
    
    
    
    3,200
    
    
    
    3,200Customer relationships
    
    
    20,688
    
    
    
    49,650
    
    
    
    28,962Software, licenses and others
    
    
    2,229
    
    
    
    4,265
    
    
    
    3,988$
    24,708
    
    
    $
    58,215
    
    
    $
    37,250
  2007
    
    $
    7,5922008
    
    
    7,0692009
    
    
    6,2372010
    
    
    4,9952011
    
    
    4,281Thereafter
    
    
    11,672Total
    
    $
    41,846
 11.
    
    Goodwill
  December 25,2005
    
    
    December 31,2006Beginning
    
    $
    523,598
    
    
    $
    522,625Purchase adjustments
    
    
    (973
    )
    
    
    (9,113
    )Ending
    
    $
    522,625
    
    
    $
    513,512
    F-22




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  (a)
    
    longer than expected
slow-down in the industry beginning late 2004 as customers corrected
excess inventory position. This reduction in demand, coupled with the competitive pressures in
the packaging and testing business had affected the
short-term earnings expectation of the
Company; and(b)
    
    a revision of the industry outlook beyond 2005 as compared to the time the merger was
announced.
 non-cash
 12.
    
    Business Combination
 wholly-owned end-to-end
  risk-free
   Value of STATS ChipPAC ADSs issued
    
    $
    1,068,955Value of STATS ChipPAC substitute options
    
    
    74,548Total value of STATS ChipPAC securities
    
    
    1,143,503Estimated direct transaction costs
    
    
    9,369Total estimated purchase price
    
    $
    1,152,872
  Current and other assets
    
    $
    170,332Property, plant and equipment
    
    
    447,568Current liabilities
    
    
    (161,203
    )
 F-23




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 Long-term
debts
    
    
    (375,519
    )Other
long-termliabilities
    
    
    (51,924
    )Net assets
    
    
    29,254Amortizable intangible assets:Tradenames
    
    
    7,700Technology and intellectual property
    
    
    32,000Customer relationships
    
    
    99,300Software and licenses
    
    
    8,218Unearned compensation on unvested options
    
    
    2,011Goodwill
    
    
    974,389$
    1,152,872
     straight-line lead-frame straight-line
 straight-line
   F-24




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
   Year EndedDecember 31,2004Revenues
    
    $
    1,084,165Net loss
    
    
    (484,695
    )Net loss per ordinary share:Basic and diluted
    
    $
    (0.25
    )Net loss per ADS:Basic and diluted
    
    $
    (2.52
    )
 non-recurring
 13.
    
    Accrued Operating Expenses
  December 25,2005
    
    
    December 31,2006Staff costs
    
    $
    31,324
    
    
    $
    33,957Purchase of raw materials
    
    
    25,082
    
    
    
    10,875Maintenance fees, license fees and royalties
    
    
    5,378
    
    
    
    2,828Interest expense
    
    
    7,780
    
    
    
    7,553Provision for vacation liability
    
    
    4,732
    
    
    
    3,299Others
    
    
    22,636
    
    
    
    39,115$
    96,932
    
    
    $
    97,627
 14.
    
    Income Taxes
  Year EndedDecember 31,2004
    
    
    December 25,2005
    
    
    December 31,2006Singapore
    
    $
    6,674
    
    
    $
    6,698
    
    
    $
    951Foreign
    
    
    (462,675
    )
    
    
    (16,880
    )
    
    
    111,626$
    (456,001
    )
    
    $
    (10,182
    )
    
    $
    112,577
 F-25




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  Year EndedDecember 31,2004
    
    
    December 25,2005
    
    
    December 31,2006Current tax:Singapore
    
    $
    7,283
    
    
    $
    (72
    )
    
    $
    Foreign
    
    
    (172
    )
    
    
    (373
    )
    
    
    (5,935
    )Total current tax
    
    $
    7,111
    
    
    $
    (445
    )
    
    $
    (5,935
    )Deferred tax:Singapore
    
    $
    (9,145
    )
    
    $
    (617
    )
    
    $
    (1,400
    )Foreign
    
    
    (5,860
    )
    
    
    (8,627
    )
    
    
    (18,424
    )Total deferred tax
    
    $
    (15,005
    )
    
    $
    (9,244
    )
    
    $
    (19,824
    )$
    (7,894
    )
    
    $
    (9,689
    )
    
    $
    (25,759
    )
  Year EndedDecember 31,2004
    
    
    December 25,2005
    
    
    December 31,2006Income tax expense (benefit) computed at Singapore
statutory rate of 20.0% (2005 and 2004: 20.0%)
    
    $
    (91,200
    )
    
    $
    (2,036
    )
    
    $
    22,515Non-deductibleexpenses, including goodwill
impairment charges
    
    
    91,488
    
    
    
    1,989
    
    
    
    4,892Non-taxable
income
    
    
    (1,212
    )
    
    
    (2,194
    )
    
    
    (461
    )Differences in tax rates
    
    
    6,898
    
    
    
    15,434
    
    
    
    5,550Effect of recognizing deferred tax assets at
concessionary tax rate and tax credits
    
    
    (13,199
    )
    
    
    (6,539
    )
    
    
    (13,926
    )Change in statutory tax rate
    
    
    
    
    
    
    
    
    
    
    (651
    )Tax benefits from employee share option plans
    
    
    
    
    
    
    (2,084
    )
    
    
    (665
    )Reinvestment allowance
    
    
    (10,415
    )
    
    
    (5,755
    )
    
    
    (5,632
    )Change in valuation allowance
    
    
    23,137
    
    
    
    30,133
    
    
    
    9,114Effect of tax loss carryforwards and unutilized
capital allowance previously not recognized
    
    
    
    
    
    
    (21,685
    )
    
    
    Benefit of tax status change
    
    
    (935
    )
    
    
    
    
    
    
    Taxable foreign exchange adjustment
    
    
    2,639
    
    
    
    1,283
    
    
    
    4,575All other items, net
    
    
    693
    
    
    
    1,143
    
    
    
    448Income tax expense
    
    $
    7,894
    
    
    $
    9,689
    
    
    $
    25,759
  December 25,2005
    
    
    December 31,2006Deferred income tax assets:Operating loss carryforwards
    
    $
    34,787
    
    
    $
    27,079Investment, and research and development tax credits
    
    
    50,136
    
    
    
    57,804Reinvestment allowance
    
    
    29,336
    
    
    
    34,968Property, plant and equipment
    
    
    32,551
    
    
    
    32,185Others
    
    
    4,165
    
    
    
    7,066150,975
    
    
    
    159,102Valuation allowance
    
    
    (110,671
    )
    
    
    (119,785
    )$
    40,304
    
    
    $
    39,317Deferred income tax liabilities:Property, plant and equipment
    
    $
    26,386
    
    
    $
    34,147Allowances and reserves
    
    
    20,618
    
    
    
    22,61047,004
    
    
    
    56,757Net deferred income tax assets (liabilities)
    
    $
    (6,700
    )
    
    $
    (17,440
    )
 F-26




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
     set-off non-qualifying set-off
 F-27




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 15.
    
    Short-Term Borrowings
 short-term short-term
 16.
    
    Capital Leases
  Payable in year2007
    
    $
    3,7292008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total minimum obligations
    
    
    3,729Less amounts representing interest at rates ranging from 4.4% to
4.7% per annum
    
    
    (49
    )Present value of minimum obligations and current installments of
obligations under capital lease
    
    $
    3,680
 3-year
 17.
    
    Long-term Debts
 Long-term
 December 25,2005
    
    
    December 31,20061.75% convertible senior fixed-rate notes
    
    $
    31,500
    
    
    $
    31,5000% convertible senior fixed-rate notes
    
    
    115,000
    
    
    
    115,0002.5% convertible subordinated fixed-rate notes
    
    
    150,000
    
    
    
    150,0008% convertible subordinated fixed-rate notes
    
    
    50,000
    
    
    
    6.75% senior fixed-rate notes
    
    
    215,000
    
    
    
    215,0007.5% senior fixed-rate notes
    
    
    150,000
    
    
    
    150,000U.S. dollars bank loan at floating rates
    
    
    2,760
    
    
    
    14,070Taiwan dollar loans at floating rates
    
    
    53,987
    
    
    
    58,615Taiwan dollar loans and commercial papers at fixed rates
    
    
    10,866
    
    
    
    2,859Accrued yield-to-maturity interest on convertible notes
    
    
    14,963
    
    
    
    21,580794,076
    
    
    
    758,624Less current amounts
    
    
    (18,651
    )
    
    
    (61,101
    )$
    775,425
    
    
    $
    697,523
 semi-annually
 F-28




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 short-term
  spin-off
  semi-annually
 F-29




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  Year
    
    Percentage2004
    
    
    104.00
    %2005
    
    
    103.33
    %2006
    
    
    102.67
    %2007
    
    
    102.00
    %2008
    
    
    101.33
    %2009
    
    
    101.67
    %2010 and thereafter
    
    
    100.00
    %
  semi-annually
 non-cash
 F-30




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  F-3/S-3
 out-of-the-money
 semi-annually
 semi-annually short-term Overseas-Chinese
  F-31




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
    long-term
 Payable in year2007
    
    $
    61,1012008
    
    
    312,5752009
    
    
    18,0502010
    
    
    150,6902011
    
    
    215,690Thereafter
    
    
    518$
    758,624
 non-guarantor cross-defaulted
 18.
    
    Unutilized Credit Facilities
 3-year Oversea-Chinese 3-year
 long-term
  F-32




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 19.
    
    Other Non-Current Liabilities
 non-current
 December 25,2005
    
    
    December 31,2006Deferred tax liabilities
    
    $
    46,654
    
    
    $
    56,747Accrued severance benefits
    
    
    19,957
    
    
    
    26,892Others
    
    
    
    
    
    
    1,168$
    66,611
    
    
    $
    84,807
  Year EndedDecember 31,2004
    
    
    December 25,2005
    
    
    December 31,2006Beginning
    
    $
    
    
    
    $
    16,587
    
    
    $
    20,210Increase due to acquisition
    
    
    13,819
    
    
    
    
    
    
    
    Provision for severance benefits
    
    
    1,793
    
    
    
    6,334
    
    
    
    9,119Severance payments
    
    
    (704
    )
    
    
    (3,138
    )
    
    
    (4,172
    )Foreign currency loss
    
    
    1,679
    
    
    
    427
    
    
    
    1,997Ending
    
    $
    16,587
    
    
    $
    20,210
    
    
    $
    27,154Payments on deposits with Korean
National Pension Fund
    
    
    (262
    )
    
    
    (253
    )
    
    
    (262
    )Ending, net of payments on deposits
    
    $
    16,325
    
    
    $
    19,957
    
    
    $
    26,892
 20.
    
    Share Capital and Additional Paid-in Capital
   paid-in
 paid-in
 21.
    
    Share Repurchase
  F-33




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  22.
    
    Accumulated Other Comprehensive Loss
  December 25,2005
    
    
    December 31,2006Currency translation loss
    
    $
    (8,320
    )
    
    $
    (7,353
    )Unrealized gain on hedging instruments
    
    
    775
    
    
    
    676Unrealized loss on available-for-sale marketable securities
    
    
    (1,027
    )
    
    
    (1,037
    )$
    (8,572
    )
    
    $
    (7,714
    )
 23.
    
    Share Options and Incentive Plans
    F-34




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  six-month
  share-based Stock-Based
 modified-prospective modified-prospective share-based share-based grant-date share-based grant-date share-based
 Year EndedDecember 31,2006Cost of revenues
    
    $
    5,965Selling, general and administrative
    
    
    6,143Research and development
    
    
    1,580$
    13,688
 share-based
  F-35




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  share-based
 Year EndedDecember 31,2004
    
    
    December 25,2005Net loss as reported
    
    $
    (467,723
    )
    
    $
    (26,311
    )Add: Total share-based employee
compensation expenses included in
reported net loss, net of related
tax effects
    
    
    658
    
    
    
    743Deduct: Total share-based employee
compensation expenses determined
under fair value method for all
awards, net of related tax effects
    
    
    (18,492
    )
    
    
    (19,612
    )Pro forma net loss
    
    $
    (485,557
    )
    
    $
    (45,180
    )Basic and diluted net loss per share:As reported
    
    $
    (0.33
    )
    
    $
    (0.01
    )Pro forma
    
    $
    (0.34
    )
    
    $
    (0.02
    )Basic and diluted net loss per ADS:As reported
    
    $
    (3.27
    )
    
    $
    (0.13
    )Pro forma
    
    $
    (3.40
    )
    
    $
    (0.23
    )
 grant-date Black-Scholes option-pricing Black-Scholes option-pricing
  Black-Scholes option-pricing
 Year EndedDecember 31,2004
    
    December 25,2005
    
    December 31,2006Expected term
    
    5  10 years
    
    5  9 years
    
    3  7 yearsDividend yield
    

    0.0%
    

    0.0%

    
    0.0%Risk free interest rate
    
    0.8%  4.3%
    

    2.6%  3.3%

    

    3.0%  3.4%Weighted average volatility
    

    61.0%

    

    55.9%

    

    39.1%
  F-36




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  WeightedAverage
    
    
    AggregateOptions
    
    
    Exercise Price
    
    
    Intrinsic Value(In thousands)
    
    
    
    
    
    
    (In thousands)Options outstanding at January 1, 2004
    
    
    61,022
    
    
    $
    1.58Assumed through ChipPAC acquisition
    
    
    76,493
    
    
    
    0.55Granted
    
    
    11,523
    
    
    
    0.87Lapsed and forfeited
    
    
    (11,239
    )
    
    
    1.16Exercised
    
    
    (5,802
    )
    
    
    0.33Options outstanding at December 31, 2004
    
    
    131,997
    
    
    
    1.01Granted
    
    
    27,299
    
    
    
    0.59Lapsed and forfeited
    
    
    (16,972
    )
    
    
    1.03Exercised
    
    
    (18,149
    )
    
    
    0.35Options outstanding at December 25, 2005
    
    
    124,175
    
    
    
    1.01Granted
    
    
    16,498
    
    
    
    0.68Lapsed and forfeited
    
    
    (17,596
    )
    
    
    1.11Exercised
    
    
    (6,277
    )
    
    
    0.41Options outstanding at December 31, 2006
    
    
    116,800
    
    
    $
    0.99
    
    
    $
    11,670Exercisable at December 31, 2004
    
    
    66,097
    
    
    $
    1.13Exercisable at December 25, 2005
    
    
    62,785
    
    
    $
    1.30Exercisable at December 31, 2006
    
    
    70,732
    
    
    $
    1.19
    
    
    $
    6,136
   Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    Average
    
    
    WeightedNumber
    
    
    Remaining
    
    
    Average
    
    
    Number
    
    
    Remaining
    
    
    AverageRange of Exercise
    
    Outstanding at
    
    
    Contractual
    
    
    Exercise
    
    
    Exercisable at
    
    
    Contractual
    
    
    ExercisePrices
    
    12/31/2006
    
    
    Life
    
    
    Price
    
    
    12/31/2006
    
    
    Life
    
    
    Price(In thousands)
    
    
    
    
    
    
    
    
    
    
    (In thousands)$0.14 to $0.15
    
    
    89
    
    
    2.8 years
    
    $
    0.15
    
    
    
    89
    
    
    2.8 years
    
    $
    0.15$0.21 to $0.29
    
    
    8,751
    
    
    5.6 years
    
    $
    0.27
    
    
    
    6,299
    
    
    5.4 years
    
    $
    0.26$0.33 to $0.47
    
    
    3,740
    
    
    4.3 years
    
    $
    0.43
    
    
    
    3,709
    
    
    4.3 years
    
    $
    0.43$0.53 to $0.89
    
    
    66,764
    
    
    6.9 years
    
    $
    0.69
    
    
    
    26,547
    
    
    6.1 years
    
    $
    0.74$0.91 to $1.09
    
    
    1,606
    
    
    4.9 years
    
    $
    0.96
    
    
    
    1,189
    
    
    4.1 years
    
    $
    0.97$1.16 to $1.66
    
    
    28,321
    
    
    5.1 years
    
    $
    1.37
    
    
    
    25,370
    
    
    4.9 years
    
    $
    1.39$2.01 to $2.61
    
    
    2,692
    
    
    2.9 years
    
    $
    2.05
    
    
    
    2,692
    
    
    2.9 years
    
    $
    2.05$3.99
    
    
    4,837
    
    
    3.3 years
    
    $
    3.99
    
    
    
    4,837
    
    
    3.3 years
    
    $
    3.99116,800
    
    
    6.0 years
    
    
    
    
    
    
    70,732
    
    
    5.2 years
 Black-Scholes option-pricing
 Year EndedDecember 25,2005
    
    December 31,2006Expected term
    
    0.5 years
    
    0.5 yearsDividend yield
    


    0.0%

    


    0.0%Risk free interest rate
    

    1.3  1.9%

    


    2.7%Weighted average volatility
    

    39.4%

    

    35.4%
 share-based weighted-average
 F-37




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 grant-date
 24.
    
    Commitments and Contingencies
 (a) Commitments
  December 25,
    
    
    December 31,2005
    
    
    2006Capital commitmentsBuilding, mechanical and electrical installation
    
    $
    3,204
    
    
    $
    4,039Plant and equipment
    
    
    144,169
    
    
    
    20,893Other commitmentsInventories
    
    $
    121,822
    
    
    $
    80,049
    lease-back
 non-cancelable
 Payable in year2007
    
    $
    29,9452008
    
    
    28,4732009
    
    
    13,7532010
    
    
    8,5342011
    
    
    8,027Thereafter
    
    
    43,261$
    131,993
 (b) Contingent Liabilities
  F-38




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 multi-chip
   25.
    
    Restructuring Charges
  F-39




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 26.
    
    Other Non-Operating Income (Expense)
 Year EndedDecember 31,
    
    
    December 25,
    
    
    December 31,2004
    
    
    2005
    
    
    2006Gain (loss) on sale and maturity of marketable securities
    
    $
    (537
    )
    
    $
    
    
    
    $
    5Loss from repurchase and redemption of senior and
convertible notes
    
    
    (797
    )
    
    
    (1,653
    )
    
    
    (500
    )Other income, net
    
    
    398
    
    
    
    577
    
    
    
    603$
    (936
    )
    
    $
    (1,076
    )
    
    $
    108
 27.
    
    Fair Value of Financial Instruments
 December 25, 2005
    
    
    December 31, 2006Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial Assets:Cash and cash equivalents
    
    $
    224,720
    
    
    $
    224,720
    
    
    $
    171,457
    
    
    $
    171,457Marketable securities
    
    
    35,451
    
    
    
    35,451
    
    
    
    60,484
    
    
    
    60,484Restricted cash
    
    
    2,608
    
    
    
    2,608
    
    
    
    981
    
    
    
    981Financial Liabilities:Short-term borrowings
    
    
    16,891
    
    
    
    16,891
    
    
    
    592
    
    
    
    592Long-term debts, excluding
senior and convertible
notes
    
    
    67,613
    
    
    
    67,476
    
    
    
    75,544
    
    
    
    75,414Senior and convertible notes
    
    $
    726,463
    
    
    $
    708,110
    
    
    $
    683,080
    
    
    $
    690,217
   Cash and cash equivalents
  Marketable securities
  Restricted cash
  Short-term borrowings and long-term debts
  F-40




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 Senior and convertible notes
  Limitations
  28.
    
    Business Segment, Geographic and Major Customer Data
   Year EndedDecember 31,
    
    
    December 25,
    
    
    December 31,2004
    
    
    2005
    
    
    2006United States packaging  array
    
    
    253,595
    
    
    
    444,066
    
    
    
    648,258 packaging  leaded
    
    
    145,511
    
    
    
    230,462
    
    
    
    265,012 test and other services
    
    
    195,082
    
    
    
    210,511
    
    
    
    269,939594,188
    
    
    
    885,039
    
    
    
    1,183,209Asia packaging  array
    
    
    49,506
    
    
    
    129,082
    
    
    
    231,946 packaging  leaded
    
    
    9,415
    
    
    
    17,227
    
    
    
    21,861 test and other services
    
    
    80,905
    
    
    
    98,736
    
    
    
    132,720139,826
    
    
    
    245,045
    
    
    
    386,527Europe packaging  array
    
    
    9,264
    
    
    
    7,672
    
    
    
    17,585 packaging  leaded
    
    
    6,172
    
    
    
    6,750
    
    
    
    9,610 test and other services
    
    
    19,671
    
    
    
    12,747
    
    
    
    20,00235,107
    
    
    
    27,169
    
    
    
    47,197Total packaging  array
    
    
    312,365
    
    
    
    580,820
    
    
    
    897,789 packaging  leaded
    
    
    161,098
    
    
    
    254,439
    
    
    
    296,483 test and other services
    
    
    295,658
    
    
    
    321,994
    
    
    
    422,661$
    769,121
    
    
    $
    1,157,253
    
    
    $
    1,616,933
 Long-lived
 Year EndedDecember 25,
    
    
    December 31,2005
    
    
    2006Singapore
    
    $
    350,960
    
    
    $
    332,784United States
    
    
    25,574
    
    
    
    24,310Rest of Asia
    
    
    730,497
    
    
    
    835,736Total
    
    $
    1,107,031
    
    
    $
    1,192,830
 F-41




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
  Year EndedDecember 25,
    
    
    December 31,2005
    
    
    2006Singapore
    
    $
    531,141
    
    
    $
    411,340United States
    
    
    6,843
    
    
    
    96,162Rest of Asia
    
    
    603,668
    
    
    
    738,648Total
    
    $
    1,141,652
    
    
    $
    1,246,150
  Year EndedDecember 31,
    
    December 25,
    
    December 31,2004
    
    2005
    
    2006Customer A
    
    
    20.6
    %
    
    
    11.6
    %
    
    
    10.7
    %Customer B
    
    
    11.1
    
    
    
    10.4
    
    
    
    10.1Customer C
    
    
    8.5
    
    
    
    10.1
    
    
    
    8.7Others
    
    
    59.8
    
    
    
    67.9
    
    
    
    70.5100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 29.
    
    Recent Event
 wholly-owned
   30.
    
    Condensed Consolidating Financial Information
  Non-Guarantor
 Non-Guarantor
 non-guarantor Non-Guarantor
 F-42




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##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2004
 STATS
    
    
    
    
    
    
    Non-STATS
    
    
    
    
    
    
    ChipPAC
    
    
    Guarantor
    
    
    GuarantorChipPAC
    
    
    ChipPAC
    
    
    Korea
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    462,697
    
    
    $
    9,703
    
    
    $
    148,382
    
    
    $
    259,785
    
    
    $
    83,382
    
    
    $
    (194,828
    )
    
    $
    769,121Cost of revenues
    
    
    (390,673
    )
    
    
    (203
    )
    
    
    (130,630
    )
    
    
    (243,295
    )
    
    
    (73,690
    )
    
    
    194,951
    
    
    
    (643,540
    )Gross profit
    
    
    72,024
    
    
    
    9,500
    
    
    
    17,752
    
    
    
    16,490
    
    
    
    9,692
    
    
    
    123
    
    
    
    125,581Operating expenses:Selling, general and administrative
    
    
    42,259
    
    
    
    7,803
    
    
    
    3,271
    
    
    
    25,895
    
    
    
    5,229
    
    
    
    44
    
    
    
    84,501Research and development
    
    
    10,811
    
    
    
    1,047
    
    
    
    2,933
    
    
    
    1,952
    
    
    
    894
    
    
    
    
    
    
    
    17,637Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    271,734
    
    
    
    89,135
    
    
    
    92,131
    
    
    
    
    
    
    
    453,000Total operating expenses
    
    
    53,070
    
    
    
    8,850
    
    
    
    277,938
    
    
    
    116,982
    
    
    
    98,254
    
    
    
    44
    
    
    
    555,138Operating income (loss)
    
    
    18,954
    
    
    
    650
    
    
    
    (260,186
    )
    
    
    (100,492
    )
    
    
    (88,562
    )
    
    
    79
    
    
    
    (429,557
    )Other income (expense), net:Interest income
    
    
    7,774
    
    
    
    9
    
    
    
    59
    
    
    
    3,596
    
    
    
    123
    
    
    
    (7,131
    )
    
    
    4,430Interest expense
    
    
    (19,173
    )
    
    
    (2,875
    )
    
    
    (1,399
    )
    
    
    (10,944
    )
    
    
    (1,556
    )
    
    
    7,131
    
    
    
    (28,816
    )Foreign currency exchange gain (loss)
    
    
    (206
    )
    
    
    
    
    
    
    (1,915
    )
    
    
    881
    
    
    
    118
    
    
    
    
    
    
    
    (1,122
    )Equity loss from investment in subsidiaries
    
    
    (472,535
    )
    
    
    (67,882
    )
    
    
    
    
    
    
    (87,677
    )
    
    
    
    
    
    
    628,094
    
    
    
    Other non-operating income (expense), net
    
    
    (675
    )
    
    
    12
    
    
    
    11
    
    
    
    (542
    )
    
    
    258
    
    
    
    
    
    
    
    (936
    )Total other income (expense), net
    
    
    (484,815
    )
    
    
    (70,736
    )
    
    
    (3,244
    )
    
    
    (94,686
    )
    
    
    (1,057
    )
    
    
    628,094
    
    
    
    (26,444
    )Loss before income taxes
    
    
    (465,861
    )
    
    
    (70,086
    )
    
    
    (263,430
    )
    
    
    (195,178
    )
    
    
    (89,619
    )
    
    
    628,173
    
    
    
    (456,001
    )Income tax benefit (expense)
    
    
    (1,862
    )
    
    
    (14
    )
    
    
    (6,500
    )
    
    
    (515
    )
    
    
    997
    
    
    
    
    
    
    
    (7,894
    )Loss before minority interest
    
    
    (467,723
    )
    
    
    (70,100
    )
    
    
    (269,930
    )
    
    
    (195,693
    )
    
    
    (88,622
    )
    
    
    628,173
    
    
    
    (463,895
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,828
    )
    
    
    (3,828
    )Net loss
    
    $
    (467,723
    )
    
    $
    (70,100
    )
    
    $
    (269,930
    )
    
    $
    (195,693
    )
    
    $
    (88,622
    )
    
    $
    624,345
    
    
    $
    (467,723
    )
 F-43




---



##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2004
 STATS
    
    
    
    
    
    
    Non-STATS
    
    
    
    
    
    
    ChipPAC
    
    
    Guarantor
    
    
    GuarantorChipPAC
    
    
    ChipPAC
    
    
    Korea
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash Flows From Operating ActivitiesNet income loss
    
    $
    (467,723
    )
    
    $
    (70,100
    )
    
    $
    (269,930
    )
    
    $
    (195,693
    )
    
    $
    (88,622
    )
    
    $
    624,345
    
    
    $
    (467,723
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    104,141
    
    
    
    628
    
    
    
    17,008
    
    
    
    37,312
    
    
    
    29,638
    
    
    
    (44
    )
    
    
    188,683Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    271,734
    
    
    
    89,135
    
    
    
    92,131
    
    
    
    
    
    
    
    453,000Amortization of leasing prepayments
    
    
    25,718
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,718Debt issuance cost amortization
    
    
    1,741
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    
    
    
    
    1,913Loss (gain) on sale of property, plant and equipment
    
    
    (631
    )
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    (30
    )
    
    
    
    
    
    
    (656
    )Accretion of discount on convertible notes
    
    
    11,923
    
    
    
    
    
    
    
    
    
    
    
    (486
    )
    
    
    
    
    
    
    
    
    
    
    11,437Loss from repurchase and redemption of senior and
convertible notes
    
    
    266
    
    
    
    
    
    
    
    
    
    
    
    531
    
    
    
    
    
    
    
    
    
    
    
    797Foreign currency exchange gain
    
    
    (516
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (314
    )
    
    
    
    
    
    
    (830
    )Share-based compensation expense
    
    
    582
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    658Deferred income taxes
    
    
    9,145
    
    
    
    
    
    
    
    6,204
    
    
    
    461
    
    
    
    (805
    )
    
    
    
    
    
    
    15,005Minority interest in income of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,828
    
    
    
    3,828Equity loss from investment in subsidiaries
    
    
    472,535
    
    
    
    67,882
    
    
    
    
    
    
    
    87,677
    
    
    
    
    
    
    
    (628,094
    )
    
    
    Gain on sale and maturity of marketable securities
    
    
    503
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    537Others
    
    
    580
    
    
    
    127
    
    
    
    
    
    
    
    (193
    )
    
    
    (108
    )
    
    
    (35
    )
    
    
    371Changes in operating working capital:Accounts receivable
    
    
    3,670
    
    
    
    
    
    
    
    
    
    
    
    8,789
    
    
    
    (4,310
    )
    
    
    
    
    
    
    8,149Amounts due from affiliates
    
    
    (242,237
    )
    
    
    26,486
    
    
    
    (1,171
    )
    
    
    6,976
    
    
    
    15,986
    
    
    
    198,387
    
    
    
    4,427Inventories
    
    
    (77
    )
    
    
    
    
    
    
    (632
    )
    
    
    (314
    )
    
    
    (148
    )
    
    
    
    
    
    
    (1,171
    )Other receivables, prepaid expenses and other assets
    
    
    (64,078
    )
    
    
    (1,442
    )
    
    
    (2,459
    )
    
    
    2,683
    
    
    
    875
    
    
    
    
    
    
    
    (64,421
    )Accounts payable, accrued operating expenses and other
payables
    
    
    (2,709
    )
    
    
    (23,934
    )
    
    
    3,506
    
    
    
    (14,644
    )
    
    
    (3,625
    )
    
    
    
    
    
    
    (41,406
    )Amounts due to affiliates
    
    
    (2,918
    )
    
    
    (85
    )
    
    
    94
    
    
    
    191,182
    
    
    
    8,415
    
    
    
    (198,387
    )
    
    
    (1,699
    )Net cash provided by (used in) operating activities
    
    
    (150,085
    )
    
    
    (438
    )
    
    
    24,354
    
    
    
    213,421
    
    
    
    49,365
    
    
    
    
    
    
    
    136,617Cash Flows From Investing ActivitiesProceeds from sales of marketable securities
    
    $
    101,323
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    29,174
    
    
    $
    
    
    
    $
    130,497Proceeds from maturity of marketable securities
    
    
    46,687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,687Purchases of marketable securities
    
    
    (137,124
    )
    
    
    
    
    
    
    
    
    
    
    222
    
    
    
    (24,041
    )
    
    
    
    
    
    
    (160,943
    )Acquisition of intangible assets
    
    
    
    
    
    
    (399
    )
    
    
    (45
    )
    
    
    (510
    )
    
    
    (474
    )
    
    
    
    
    
    
    (1,428
    )Acquisition of subsidiary, net of cash acquired
    
    
    (9,369
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,577
    
    
    
    7,208Cash injection in subsidiary
    
    
    (4,680
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,680
    
    
    
    Purchases of property, plant and equipment
    
    
    (172,320
    )
    
    
    (1,090
    )
    
    
    (35,893
    )
    
    
    (24,434
    )
    
    
    (81,225
    )
    
    
    27,388
    
    
    
    (287,574
    )Others, net
    
    
    20,926
    
    
    
    33
    
    
    
    133
    
    
    
    3,011
    
    
    
    4,014
    
    
    
    (27,388
    )
    
    
    729Net cash used in investing activities
    
    
    (154,557
    )
    
    
    (1,456
    )
    
    
    (35,805
    )
    
    
    (21,711
    )
    
    
    (72,552
    )
    
    
    21,257
    
    
    
    (264,824
    )Cash Flows From Financing ActivitiesRepayment of short-term debts
    
    $
    (50,000
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (22,006
    )
    
    $
    
    
    
    $
    (72,006
    )Repayment of long-term debts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,982
    )
    
    
    
    
    
    
    (8,982
    )Proceeds from issuance of shares, net of expenses
    
    
    1,968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,680
    
    
    
    (4,680
    )
    
    
    1,968Proceeds from issuance of senior notes, net of expenses
    
    
    210,458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210,458Repurchase and redemption of senior and convertible
notes
    
    
    (18,083
    )
    
    
    
    
    
    
    
    
    
    
    (175,564
    )
    
    
    
    
    
    
    
    
    
    
    (193,647
    )Proceeds from bank borrowings
    
    
    50,000
    
    
    
    
    
    
    
    8,016
    
    
    
    
    
    
    
    49,604
    
    
    
    
    
    
    
    107,620Decrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,927
    
    
    
    
    
    
    
    2,927Capital lease payments
    
    
    (2,042
    )
    
    
    
    
    
    
    (1,727
    )
    
    
    (2,663
    )
    
    
    (778
    )
    
    
    
    
    
    
    (7,210
    )Net cash provided by (used in) financing activities
    
    
    192,301
    
    
    
    
    
    
    
    6,289
    
    
    
    (178,227
    )
    
    
    25,445
    
    
    
    (4,680
    )
    
    
    41,128Net increase (decrease) in cash and cash equivalents
    
    
    (112,341
    )
    
    
    (1,894
    )
    
    
    (5,162
    )
    
    
    13,483
    
    
    
    2,258
    
    
    
    16,577
    
    
    
    (87,079
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,425
    
    
    
    
    
    
    
    1,425Cash and cash equivalents at beginning of the year
    
    
    297,165
    
    
    
    2,427
    
    
    
    7,138
    
    
    
    5,519
    
    
    
    17,491
    
    
    
    (16,577
    )
    
    
    313,163Cash and cash equivalents at end of the year
    
    $
    184,824
    
    
    $
    533
    
    
    $
    1,976
    
    
    $
    19,002
    
    
    $
    21,174
    
    
    $
    
    
    
    $
    227,509
 F-44




---



##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 25, 2005
 STATS
    
    
    
    
    
    
    Non-STATS
    
    
    
    
    
    
    ChipPAC
    
    
    Guarantor
    
    
    GuarantorChipPAC
    
    
    ChipPAC
    
    
    Korea
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    144,841
    
    
    $
    635
    
    
    $
    32,291
    
    
    $
    9,865
    
    
    $
    37,088
    
    
    $
    
    
    
    $
    224,720Short-term marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,648
    
    
    
    
    
    
    
    17,648Accounts receivable, net
    
    
    90,825
    
    
    
    
    
    
    
    
    
    
    
    130,129
    
    
    
    20,036
    
    
    
    
    
    
    
    240,990Amounts due from affiliates
    
    
    360,343
    
    
    
    202,224
    
    
    
    8,575
    
    
    
    96,148
    
    
    
    13,612
    
    
    
    (674,092
    )
    
    
    6,810Other receivables
    
    
    3,936
    
    
    
    245
    
    
    
    6,047
    
    
    
    204
    
    
    
    904
    
    
    
    
    
    
    
    11,336Inventories
    
    
    25,365
    
    
    
    
    
    
    
    32,024
    
    
    
    4,621
    
    
    
    17,473
    
    
    
    
    
    
    
    79,483Short-term restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    376
    
    
    
    
    
    
    
    376Prepaid expenses and other current assets
    
    
    15,096
    
    
    
    1,357
    
    
    
    3,468
    
    
    
    1,216
    
    
    
    5,214
    
    
    
    
    
    
    
    26,351Total current assets
    
    
    640,406
    
    
    
    204,461
    
    
    
    82,405
    
    
    
    242,183
    
    
    
    112,351
    
    
    
    (674,092
    )
    
    
    607,714Long-term marketable securities
    
    
    17,803
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,803Property, plant and equipment, net
    
    
    350,960
    
    
    
    4,800
    
    
    
    261,650
    
    
    
    218,202
    
    
    
    271,504
    
    
    
    (85
    )
    
    
    1,107,031Investment in subsidiaries
    
    
    738,852
    
    
    
    12,186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (751,038
    )
    
    
    Intangible assets
    
    
    1,998
    
    
    
    2,281
    
    
    
    1,615
    
    
    
    63,990
    
    
    
    2,896
    
    
    
    
    
    
    
    72,780Goodwill
    
    
    
    
    
    
    
    
    
    
    312,337
    
    
    
    102,385
    
    
    
    105,694
    
    
    
    2,209
    
    
    
    522,625Long-term restricted cash
    
    
    
    
    
    
    
    
    
    
    745
    
    
    
    
    
    
    
    1,487
    
    
    
    
    
    
    
    2,232Prepaid expenses and other non-current
assets
    
    
    28,850
    
    
    
    369
    
    
    
    28,186
    
    
    
    202
    
    
    
    5,590
    
    
    
    
    
    
    
    63,197Total assets
    
    $
    1,778,869
    
    
    $
    224,097
    
    
    $
    686,938
    
    
    $
    626,962
    
    
    $
    499,522
    
    
    $
    (1,423,006
    )
    
    $
    2,393,382LIABILITIES AND SHAREHOLDERS
EQUITYCurrent liabilities:Accounts and other payables
    
    $
    23,665
    
    
    $
    477
    
    
    $
    63,150
    
    
    $
    11,302
    
    
    $
    37,464
    
    
    $
    
    
    
    $
    136,058Payables related to property, plant
and equipment purchases
    
    
    22,404
    
    
    
    
    
    
    
    23,980
    
    
    
    12,694
    
    
    
    20,347
    
    
    
    
    
    
    
    79,425Accrued operating expenses
    
    
    56,620
    
    
    
    10,377
    
    
    
    10,317
    
    
    
    9,334
    
    
    
    10,284
    
    
    
    
    
    
    
    96,932Income taxes payable
    
    
    
    
    
    
    68
    
    
    
    1,555
    
    
    
    612
    
    
    
    
    
    
    
    
    
    
    
    2,235Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    16,891
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,891Amounts due to affiliates
    
    
    8,065
    
    
    
    1,882
    
    
    
    89,351
    
    
    
    542,979
    
    
    
    31,877
    
    
    
    (674,092
    )
    
    
    62Current obligations under capital leases
    
    
    
    
    
    
    
    
    
    
    7,091
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,091Current installments of long-term debts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,651
    
    
    
    
    
    
    
    18,651Total current liabilities
    
    
    110,754
    
    
    
    12,804
    
    
    
    212,335
    
    
    
    576,921
    
    
    
    118,623
    
    
    
    (674,092
    )
    
    
    357,345Obligations under capital leases,
excluding current installments
    
    
    
    
    
    
    
    
    
    
    3,680
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,680Long-term debts, excluding current installments
    
    
    526,463
    
    
    
    200,000
    
    
    
    2,760
    
    
    
    
    
    
    
    46,202
    
    
    
    
    
    
    
    775,425Other non-current liabilities
    
    
    
    
    
    
    
    
    
    
    50,112
    
    
    
    11,763
    
    
    
    4,736
    
    
    
    
    
    
    
    66,611Total liabilities
    
    
    637,217
    
    
    
    212,804
    
    
    
    268,887
    
    
    
    588,684
    
    
    
    169,561
    
    
    
    (674,092
    )
    
    
    1,203,061Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,669
    
    
    
    48,669Total shareholders equity
    
    
    1,141,652
    
    
    
    11,293
    
    
    
    418,051
    
    
    
    38,278
    
    
    
    329,961
    
    
    
    (797,583
    )
    
    
    1,141,652Total liabilities and shareholders equity.
    
    $
    1,778,869
    
    
    $
    224,097
    
    
    $
    686,938
    
    
    $
    626,962
    
    
    $
    499,522
    
    
    $
    (1,423,006
    )
    
    $
    2,393,382
 F-45




---



##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 25, 2005
 STATS
    
    
    
    
    
    
    Non-STATS
    
    
    
    
    
    
    ChipPAC
    
    
    Guarantor
    
    
    GuarantorChipPAC
    
    
    ChipPAC
    
    
    Korea
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    435,630
    
    
    $
    40,268
    
    
    $
    387,830
    
    
    $
    684,290
    
    
    $
    163,870
    
    
    $
    (554,635
    )
    
    $
    1,157,253Cost of revenues
    
    
    (363,092
    )
    
    
    (384
    )
    
    
    (347,964
    )
    
    
    (612,676
    )
    
    
    (142,909
    )
    
    
    499,002
    
    
    
    (968,023
    )Gross profit
    
    
    72,538
    
    
    
    39,884
    
    
    
    39,866
    
    
    
    71,614
    
    
    
    20,961
    
    
    
    (55,633
    )
    
    
    189,230Operating expenses:Selling, general and administrative
    
    
    44,488
    
    
    
    24,862
    
    
    
    9,007
    
    
    
    94,754
    
    
    
    9,635
    
    
    
    (46,995
    )
    
    
    135,751Research and development
    
    
    10,779
    
    
    
    5,556
    
    
    
    6,986
    
    
    
    10,015
    
    
    
    1,452
    
    
    
    (8,717
    )
    
    
    26,071Restructuring charges
    
    
    734
    
    
    
    
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    830Total operating expenses
    
    
    56,001
    
    
    
    30,418
    
    
    
    15,993
    
    
    
    104,865
    
    
    
    11,087
    
    
    
    (55,712
    )
    
    
    162,652Operating income (loss)
    
    
    16,537
    
    
    
    9,466
    
    
    
    23,873
    
    
    
    (33,251
    )
    
    
    9,874
    
    
    
    79
    
    
    
    26,578Other income (expense), net:
Interest income
    
    
    24,292
    
    
    
    17
    
    
    
    226
    
    
    
    2,531
    
    
    
    229
    
    
    
    (20,881
    )
    
    
    6,414Interest expense
    
    
    (31,358
    )
    
    
    (8,240
    )
    
    
    (3,372
    )
    
    
    (18,827
    )
    
    
    (1,713
    )
    
    
    20,881
    
    
    
    (42,629
    )Foreign currency exchange gain (loss)
    
    
    (1,125
    )
    
    
    (3
    )
    
    
    (535
    )
    
    
    1,529
    
    
    
    665
    
    
    
    
    
    
    
    531Equity gain (loss) from investment in
subsidiaries
    
    
    (32,320
    )
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,906
    
    
    
    Other non-operating income (expense), net
    
    
    (1,648
    )
    
    
    (91
    )
    
    
    (19
    )
    
    
    93
    
    
    
    589
    
    
    
    
    
    
    
    (1,076
    )Total other income (expense), net
    
    
    (42,159
    )
    
    
    (7,903
    )
    
    
    (3,700
    )
    
    
    (14,674
    )
    
    
    (230
    )
    
    
    31,906
    
    
    
    (36,760
    )Income (loss) before income taxes
    
    
    (25,622
    )
    
    
    1,563
    
    
    
    20,173
    
    
    
    (47,925
    )
    
    
    9,644
    
    
    
    31,985
    
    
    
    (10,182
    )Income tax benefit (expense)
    
    
    (689
    )
    
    
    (56
    )
    
    
    (7,767
    )
    
    
    (1,909
    )
    
    
    732
    
    
    
    
    
    
    
    (9,689
    )Income (loss) before minority interest
    
    
    (26,311
    )
    
    
    1,507
    
    
    
    12,406
    
    
    
    (49,834
    )
    
    
    10,376
    
    
    
    31,985
    
    
    
    (19,871
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,440
    )
    
    
    (6,440
    )Net income (loss)
    
    $
    (26,311
    )
    
    $
    1,507
    
    
    $
    12,406
    
    
    $
    (49,834
    )
    
    $
    10,376
    
    
    $
    25,545
    
    
    $
    (26,311
    )
 F-46




---



##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 25, 2005
 STATS
    
    
    
    
    
    
    Non-STATS
    
    
    
    
    
    
    ChipPAC
    
    
    Guarantor
    
    
    GuarantorChipPAC
    
    
    ChipPAC
    
    
    Korea
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash Flows From Operating ActivitiesNet income (loss)
    
    $
    (26,311
    )
    
    $
    1,507
    
    
    $
    12,406
    
    
    $
    (49,834
    )
    
    $
    10,376
    
    
    $
    25,545
    
    
    $
    (26,311
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    81,823
    
    
    
    2,073
    
    
    
    41,982
    
    
    
    86,275
    
    
    
    42,064
    
    
    
    (79
    )
    
    
    254,138Amortization of leasing prepayments
    
    
    25,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,790Debt issuance cost amortization
    
    
    1,848
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,961Loss (gain) on sale of property, plant and equipment
    
    
    445
    
    
    
    
    
    
    
    220
    
    
    
    (62
    )
    
    
    926
    
    
    
    
    
    
    
    1,529Accretion of discount on convertible notes
    
    
    7,414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,414Loss from repurchase and redemption of convertible notes
    
    
    1,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,653Foreign currency exchange loss (gain)
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    168
    
    
    
    (350
    )
    
    
    
    
    
    
    (134
    )Share-based compensation expense
    
    
    703
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    743Deferred income taxes
    
    
    617
    
    
    
    
    
    
    
    7,767
    
    
    
    1,574
    
    
    
    (607
    )
    
    
    
    
    
    
    9,351Minority interest in income of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,440
    
    
    
    6,440Equity loss (gain) from investment in subsidiaries
    
    
    32,320
    
    
    
    (414
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,906
    )
    
    
    Others
    
    
    (5
    )
    
    
    134
    
    
    
    344
    
    
    
    311
    
    
    
    (249
    )
    
    
    
    
    
    
    535Changes in operating working capital:Accounts receivable
    
    
    (23,950
    )
    
    
    
    
    
    
    
    
    
    
    (59,685
    )
    
    
    (7,705
    )
    
    
    
    
    
    
    (91,340
    )Amounts due from affiliates
    
    
    (109,865
    )
    
    
    (4,564
    )
    
    
    4,426
    
    
    
    (16,358
    )
    
    
    (9,893
    )
    
    
    132,067
    
    
    
    (4,187
    )Inventories
    
    
    (5,449
    )
    
    
    
    
    
    
    (8,156
    )
    
    
    (49
    )
    
    
    (11,139
    )
    
    
    
    
    
    
    (24,793
    )Other receivables, prepaid expenses and other assets
    
    
    7,357
    
    
    
    315
    
    
    
    (1,667
    )
    
    
    (153
    )
    
    
    (2,336
    )
    
    
    
    
    
    
    3,516Accounts payable, accrued operating expenses and other
payables
    
    
    35,737
    
    
    
    89
    
    
    
    30,918
    
    
    
    12,200
    
    
    
    25,555
    
    
    
    
    
    
    
    104,499Amounts due to affiliates
    
    
    3,124
    
    
    
    1,709
    
    
    
    39,146
    
    
    
    89,352
    
    
    
    (1,339
    )
    
    
    (132,067
    )
    
    
    (75
    )Net cash provided by operating activities
    
    
    33,299
    
    
    
    962
    
    
    
    127,386
    
    
    
    63,739
    
    
    
    45,343
    
    
    
    
    
    
    
    270,729Cash Flows From Investing ActivitiesProceeds from sales of marketable securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    15,726
    
    
    $
    
    
    
    $
    15,726Proceeds from maturity of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    787
    
    
    
    
    
    
    
    
    
    
    
    787Purchases of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,017
    )
    
    
    
    
    
    
    (32,017
    )Cash injection in subsidiary
    
    
    (25,587
    )
    
    
    
    
    
    
    
    
    
    
    (25,500
    )
    
    
    
    
    
    
    51,087
    
    
    
    Acquisition of intangible assets
    
    
    (787
    )
    
    
    (698
    )
    
    
    (812
    )
    
    
    (837
    )
    
    
    (1,719
    )
    
    
    
    
    
    
    (4,853
    )Purchases of property, plant and equipment
    
    
    (53,718
    )
    
    
    (187
    )
    
    
    (94,163
    )
    
    
    (78,419
    )
    
    
    (61,648
    )
    
    
    42,360
    
    
    
    (245,775
    )Others, net
    
    
    18,726
    
    
    
    10
    
    
    
    4,927
    
    
    
    9,629
    
    
    
    12,207
    
    
    
    (42,360
    )
    
    
    3,139Net cash used in investing activities
    
    
    (61,366
    )
    
    
    (875
    )
    
    
    (90,048
    )
    
    
    (94,340
    )
    
    
    (67,451
    )
    
    
    51,087
    
    
    
    (262,993
    )Cash Flows From Financing ActivitiesRepayment of short-term debts
    
    $
    (100,464
    )
    
    $
    
    
    
    $
    (35,779
    )
    
    $
    
    
    
    $
    (7,033
    )
    
    $
    
    
    
    $
    (143,276
    )Repayment of long-term debts
    
    
    
    
    
    
    
    
    
    
    (7,101
    )
    
    
    
    
    
    
    (30,569
    )
    
    
    
    
    
    
    (37,670
    )Proceeds from issuance of shares, net of expenses
    
    
    13,521
    
    
    
    
    
    
    
    
    
    
    
    21,479
    
    
    
    33,231
    
    
    
    (54,710
    )
    
    
    13,521Proceeds from issuance of convertible notes, net of
expenses
    
    
    146,535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,535Repurchase and redemption of convertible notes
    
    
    (167,263
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (167,263
    )Proceeds from bank borrowings
    
    
    100,464
    
    
    
    
    
    
    
    42,657
    
    
    
    
    
    
    
    44,964
    
    
    
    
    
    
    
    188,085Increase in restricted cash
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    (1,469
    )
    
    
    
    
    
    
    (1,487
    )Grants received
    
    
    246
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    246Capital lease payments
    
    
    (4,955
    )
    
    
    
    
    
    
    (6,782
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,737
    )Contribution by minority interest in subsidiary, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,623
    
    
    
    3,623Net cash provided by (used in) financing activities
    
    
    (11,916
    )
    
    
    
    
    
    
    (7,023
    )
    
    
    21,479
    
    
    
    39,124
    
    
    
    (51,087
    )
    
    
    (9,423
    )Net increase (decrease) in cash and cash equivalents
    
    
    (39,983
    )
    
    
    87
    
    
    
    30,315
    
    
    
    (9,122
    )
    
    
    17,016
    
    
    
    
    
    
    
    (1,687
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,102
    )
    
    
    
    
    
    
    (1,102
    )Cash and cash equivalents at beginning of the year
    
    
    184,824
    
    
    
    548
    
    
    
    1,976
    
    
    
    18,987
    
    
    
    21,174
    
    
    
    
    
    
    
    227,509Cash and cash equivalents at end of the year
    
    $
    144,841
    
    
    $
    635
    
    
    $
    32,291
    
    
    $
    9,865
    
    
    $
    37,088
    
    
    $
    
    
    
    $
    224,720
 F-47




---



##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2006
 STATS
    
    
    
    
    
    
    Non-STATS
    
    
    
    
    
    
    ChipPAC
    
    
    Guarantor
    
    
    GuarantorChipPAC
    
    
    ChipPAC
    
    
    Korea
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    69,057
    
    
    $
    177
    
    
    $
    22,503
    
    
    $
    55,608
    
    
    $
    24,112
    
    
    $
    
    
    
    $
    171,457Short-term marketable securities
    
    
    2,619
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,507
    
    
    
    
    
    
    
    45,126Accounts receivable, net
    
    
    75,655
    
    
    
    
    
    
    
    
    
    
    
    153,427
    
    
    
    14,697
    
    
    
    
    
    
    
    243,779Amounts due from affiliates
    
    
    480,580
    
    
    
    152,734
    
    
    
    14,973
    
    
    
    93,602
    
    
    
    25,833
    
    
    
    (765,216
    )
    
    
    2,506Other receivables
    
    
    2,249
    
    
    
    219
    
    
    
    3,092
    
    
    
    672
    
    
    
    743
    
    
    
    
    
    
    
    6,975Inventories
    
    
    36,996
    
    
    
    
    
    
    
    41,871
    
    
    
    6,514
    
    
    
    26,233
    
    
    
    
    
    
    
    111,614Prepaid expenses and other current assets
    
    
    6,805
    
    
    
    1,158
    
    
    
    6,600
    
    
    
    1,473
    
    
    
    2,328
    
    
    
    
    
    
    
    18,364Total current assets
    
    
    673,961
    
    
    
    154,288
    
    
    
    89,039
    
    
    
    311,296
    
    
    
    136,453
    
    
    
    (765,216
    )
    
    
    599,821Long-term marketable securities
    
    
    15,358
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,358Property, plant and equipment, net
    
    
    332,786
    
    
    
    4,261
    
    
    
    285,582
    
    
    
    237,688
    
    
    
    332,523
    
    
    
    (10
    )
    
    
    1,192,830Investment in equity investee
    
    
    10,292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,292Investment in subsidiaries
    
    
    830,366
    
    
    
    14,706
    
    
    
    
    
    
    
    86,433
    
    
    
    
    
    
    
    (931,505
    )
    
    
    Intangible assets
    
    
    3,630
    
    
    
    2,039
    
    
    
    1,997
    
    
    
    31,716
    
    
    
    2,464
    
    
    
    
    
    
    
    41,846Goodwill
    
    
    
    
    
    
    
    
    
    
    304,557
    
    
    
    102,129
    
    
    
    104,617
    
    
    
    2,209
    
    
    
    513,512Long-term restricted cash
    
    
    
    
    
    
    
    
    
    
    629
    
    
    
    
    
    
    
    352
    
    
    
    
    
    
    
    981Prepaid expenses and other non-current
assets
    
    
    22,256
    
    
    
    258
    
    
    
    25,956
    
    
    
    319
    
    
    
    34,851
    
    
    
    
    
    
    
    83,640Total assets
    
    $
    1,888,649
    
    
    $
    175,552
    
    
    $
    707,760
    
    
    $
    769,581
    
    
    $
    611,260
    
    
    $
    (1,694,522
    )
    
    $
    2,458,280LIABILITIES AND SHAREHOLDERS
EQUITYCurrent liabilities:Accounts and other payables
    
    $
    38,967
    
    
    $
    20
    
    
    $
    62,945
    
    
    $
    10,537
    
    
    $
    55,253
    
    
    $
    
    
    
    $
    167,722Payables related to property, plant
and equipment purchases
    
    
    8,048
    
    
    
    
    
    
    
    12,340
    
    
    
    8,176
    
    
    
    5,713
    
    
    
    
    
    
    
    34,277Accrued operating expenses
    
    
    44,287
    
    
    
    9,347
    
    
    
    13,210
    
    
    
    9,171
    
    
    
    21,612
    
    
    
    
    
    
    
    97,627Income taxes payable
    
    
    
    
    
    
    187
    
    
    
    1,663
    
    
    
    3,326
    
    
    
    1,634
    
    
    
    
    
    
    
    6,810Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    544
    
    
    
    
    
    
    
    592Amounts due to affiliates
    
    
    18,117
    
    
    
    1,252
    
    
    
    75,398
    
    
    
    633,912
    
    
    
    36,582
    
    
    
    (765,216
    )
    
    
    45Current obligations under capital leases
    
    
    
    
    
    
    
    
    
    
    3,680
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,680Current installments of long-term debts
    
    
    36,800
    
    
    
    
    
    
    
    5,070
    
    
    
    
    
    
    
    19,231
    
    
    
    
    
    
    
    61,101Total current liabilities
    
    
    146,219
    
    
    
    10,806
    
    
    
    174,354
    
    
    
    665,122
    
    
    
    140,569
    
    
    
    (765,216
    )
    
    
    371,854Long-term debts, excluding current
installments installments
    
    
    496,280
    
    
    
    150,000
    
    
    
    9,000
    
    
    
    
    
    
    
    42,243
    
    
    
    
    
    
    
    697,523Other non-current liabilities
    
    
    
    
    
    
    
    
    
    
    68,518
    
    
    
    9,694
    
    
    
    6,595
    
    
    
    
    
    
    
    84,807Total liabilities
    
    
    642,499
    
    
    
    160,806
    
    
    
    251,872
    
    
    
    674,816
    
    
    
    189,407
    
    
    
    (765,216
    )
    
    
    1,154,184Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,946
    
    
    
    57,946Total shareholders equity
    
    
    1,246,150
    
    
    
    14,746
    
    
    
    455,888
    
    
    
    94,765
    
    
    
    421,853
    
    
    
    (987,252
    )
    
    
    1,246,150Total liabilities and shareholders equity
    
    $
    1,888,649
    
    
    $
    175,552
    
    
    $
    707,760
    
    
    $
    769,581
    
    
    $
    611,260
    
    
    $
    (1,694,522
    )
    
    $
    2,458,280
 F-48




---



##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2006
 STATS
    
    
    
    
    
    
    Non-STATS
    
    
    
    
    
    
    ChipPAC
    
    
    Guarantor
    
    
    GuarantorChipPAC
    
    
    ChipPAC
    
    
    Korea
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    501,660
    
    
    $
    39,870
    
    
    $
    573,502
    
    
    $
    1,070,609
    
    
    $
    289,434
    
    
    $
    (858,142
    )
    
    $
    1,616,933Cost of revenues
    
    
    (400,330
    )
    
    
    (75
    )
    
    
    (490,533
    )
    
    
    (950,922
    )
    
    
    (240,838
    )
    
    
    791,925
    
    
    
    (1,290,773
    )Gross profit
    
    
    101,330
    
    
    
    39,795
    
    
    
    82,969
    
    
    
    119,687
    
    
    
    48,596
    
    
    
    (66,217
    )
    
    
    326,160Operating expenses:Selling, general and administrative
    
    
    57,018
    
    
    
    26,970
    
    
    
    12,453
    
    
    
    86,268
    
    
    
    12,030
    
    
    
    (55,273
    )
    
    
    139,466Research and development
    
    
    10,253
    
    
    
    5,781
    
    
    
    10,408
    
    
    
    13,692
    
    
    
    1,334
    
    
    
    (11,022
    )
    
    
    30,446Restructuring charges
    
    
    1,938
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,938Total operating expenses
    
    
    69,209
    
    
    
    32,751
    
    
    
    22,861
    
    
    
    99,960
    
    
    
    13,364
    
    
    
    (66,295
    )
    
    
    171,850Operating income (loss)
    
    
    32,121
    
    
    
    7,044
    
    
    
    60,108
    
    
    
    19,727
    
    
    
    35,232
    
    
    
    78
    
    
    
    154,310Other income (expense), net:
Interest income
    
    
    3,468
    
    
    
    27
    
    
    
    389
    
    
    
    2,776
    
    
    
    811
    
    
    
    (2,070
    )
    
    
    5,401Interest expense
    
    
    (35,198
    )
    
    
    (7,145
    )
    
    
    (3,507
    )
    
    
    
    
    
    
    (2,036
    )
    
    
    2,070
    
    
    
    (45,816
    )Foreign currency exchange gain (loss)
    
    
    89
    
    
    
    (1
    )
    
    
    (2,874
    )
    
    
    2,304
    
    
    
    (1,142
    )
    
    
    46
    
    
    
    (1,578
    )Equity gain from investment in equity
investee
    
    
    152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152Equity gain from investment in
subsidiaries
    
    
    74,478
    
    
    
    2,520
    
    
    
    
    
    
    
    12,741
    
    
    
    
    
    
    
    (89,739
    )
    
    
    Dividend income from subsidiary
    
    
    2,903
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,903
    )
    
    
    Other non-operating income (expense), net.
    
    
    195
    
    
    
    (600
    )
    
    
    (2
    )
    
    
    219
    
    
    
    296
    
    
    
    
    
    
    
    108Total other income (expense), net
    
    
    46,087
    
    
    
    (5,199
    )
    
    
    (5,994
    )
    
    
    18,040
    
    
    
    (2,071
    )
    
    
    (92,596
    )
    
    
    (41,733
    )Income before income taxes
    
    
    78,208
    
    
    
    1,845
    
    
    
    54,114
    
    
    
    37,767
    
    
    
    33,161
    
    
    
    (92,518
    )
    
    
    112,577Income tax expense
    
    
    (1,400
    )
    
    
    (1,451
    )
    
    
    (19,624
    )
    
    
    (1,840
    )
    
    
    (1,444
    )
    
    
    
    
    
    
    (25,759
    )Income before minority interest
    
    
    76,808
    
    
    
    394
    
    
    
    34,490
    
    
    
    35,927
    
    
    
    31,717
    
    
    
    (92,518
    )
    
    
    86,818Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,010
    )
    
    
    (10,010
    )Net income
    
    $
    76,808
    
    
    $
    394
    
    
    $
    34,490
    
    
    $
    35,927
    
    
    $
    31,717
    
    
    $
    (102,528
    )
    
    $
    76,808
 F-49




---



##### Table of Contents



STATS CHIPPAC LTD. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands of U.S. Dollars (except per share data)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2006
 STATS
    
    
    
    
    
    
    Non-ChipPAC
    
    
    Guarantor
    
    
    GuarantorSTATS ChipPAC
    
    
    ChipPAC
    
    
    Korea
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash Flows From Operating ActivitiesNet income (loss)
    
    $
    76,808
    
    
    $
    394
    
    
    $
    34,490
    
    
    $
    35,927
    
    
    $
    31,717
    
    
    $
    (102,528
    )
    
    $
    76,808Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    86,748
    
    
    
    1,698
    
    
    
    53,207
    
    
    
    75,173
    
    
    
    49,570
    
    
    
    (79
    )
    
    
    266,317Amortization of leasing prepayments
    
    
    7,386
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,386Debt issuance cost amortization
    
    
    2,262
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,371Loss (gain) on sale of property, plant and equipment
    
    
    852
    
    
    
    
    
    
    
    (16
    )
    
    
    (58
    )
    
    
    473
    
    
    
    
    
    
    
    1,251Accretion of discount on convertible notes
    
    
    6,618
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,618Loss on redemption of convertible notes
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500Foreign currency exchange loss (gain)
    
    
    (220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,024
    
    
    
    (46
    )
    
    
    758Share-based compensation
    
    
    4,150
    
    
    
    1,762
    
    
    
    5,244
    
    
    
    1,429
    
    
    
    1,103
    
    
    
    
    
    
    
    13,688Deferred income taxes
    
    
    1,400
    
    
    
    1,300
    
    
    
    19,515
    
    
    
    (2,069
    )
    
    
    (293
    )
    
    
    
    
    
    
    19,853Minority interest in income of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,010
    
    
    
    10,010Equity (income) loss from investment in subsidiaries
    
    
    (74,479
    )
    
    
    (2,520
    )
    
    
    
    
    
    
    (12,741
    )
    
    
    
    
    
    
    89,740
    
    
    
    Equity (income) loss from investment in equity investee
    
    
    (152
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (152
    )Gain on sale of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Others
    
    
    487
    
    
    
    1
    
    
    
    175
    
    
    
    136
    
    
    
    210
    
    
    
    
    
    
    
    1,009Changes in operating working capital:Accounts receivable
    
    
    15,170
    
    
    
    
    
    
    
    
    
    
    
    (23,298
    )
    
    
    5,339
    
    
    
    
    
    
    
    (2,789
    )Amounts due from affiliates
    
    
    (120,238
    )
    
    
    49,490
    
    
    
    (6,398
    )
    
    
    2,547
    
    
    
    (12,221
    )
    
    
    91,124
    
    
    
    4,304Inventories
    
    
    (11,631
    )
    
    
    
    
    
    
    (9,984
    )
    
    
    (1,893
    )
    
    
    (8,760
    )
    
    
    
    
    
    
    (32,268
    )Other receivables, prepaid expenses and other assets
    
    
    6,358
    
    
    
    220
    
    
    
    (451
    )
    
    
    (518
    )
    
    
    1,746
    
    
    
    
    
    
    
    7,355Accounts payable, accrued operating expenses and other
payables
    
    
    2,973
    
    
    
    (1,366
    )
    
    
    10,070
    
    
    
    1,781
    
    
    
    31,316
    
    
    
    
    
    
    
    44,774Amounts due to affiliates
    
    
    10,052
    
    
    
    (630
    )
    
    
    (13,953
    )
    
    
    90,932
    
    
    
    4,706
    
    
    
    (91,124
    )
    
    
    (17
    )Net cash provided by operating activities
    
    
    14,544
    
    
    
    50,958
    
    
    
    91,899
    
    
    
    167,348
    
    
    
    105,925
    
    
    
    (2,903
    )
    
    
    427,771Cash Flows From Investing ActivitiesProceeds from sales of marketable securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    35,391
    
    
    $
    
    
    
    $
    35,391Proceeds from maturity of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,841
    
    
    
    
    
    
    
    20,841Purchases of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80,866
    )
    
    
    
    
    
    
    (80,866
    )Cash injection in subsidiaries
    
    
    (7,517
    )
    
    
    
    
    
    
    
    
    
    
    (54,500
    )
    
    
    
    
    
    
    62,017
    
    
    
    Investment in equity investee
    
    
    (10,154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,154
    )Acquisition of intangible assets
    
    
    (1,835
    )
    
    
    (698
    )
    
    
    (1,151
    )
    
    
    (2,314
    )
    
    
    (421
    )
    
    
    
    
    
    
    (6,419
    )Purchases of property, plant and equipment
    
    
    (96,176
    )
    
    
    (219
    )
    
    
    (94,167
    )
    
    
    (71,989
    )
    
    
    (157,913
    )
    
    
    26,821
    
    
    
    (393,643
    )Others, net
    
    
    12,100
    
    
    
    1
    
    
    
    6,139
    
    
    
    7,198
    
    
    
    10,450
    
    
    
    (26,821
    )
    
    
    9,067Net cash used in investing activities
    
    
    (103,582
    )
    
    
    (916
    )
    
    
    (89,179
    )
    
    
    (121,605
    )
    
    
    (172,518
    )
    
    
    62,017
    
    
    
    (425,783
    )Cash Flows From Financing ActivitiesRepayment of short-term debts
    
    $
    
    
    
    $
    
    
    
    $
    (21,496
    )
    
    $
    
    
    
    $
    (20,794
    )
    
    $
    
    
    
    $
    (42,290
    )Repayment of long-term debts
    
    
    
    
    
    
    
    
    
    
    (690
    )
    
    
    
    
    
    
    (26,937
    )
    
    
    
    
    
    
    (27,627
    )Proceeds from issuance of shares, net of expenses
    
    
    13,254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,017
    
    
    
    (62,017
    )
    
    
    13,254Repurchase and redemption of senior and convertible notes
    
    
    
    
    
    
    (50,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,500
    )Proceeds from bank borrowings
    
    
    
    
    
    
    
    
    
    
    16,653
    
    
    
    
    
    
    
    43,655
    
    
    
    
    
    
    
    60,308Decrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    1,511
    
    
    
    
    
    
    
    1,627Capital lease payments
    
    
    
    
    
    
    
    
    
    
    (7,091
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,091
    )Distribution to minority interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,445
    )
    
    
    2,903
    
    
    
    (2,542
    )Net cash provided by (used in) financing activities
    
    
    13,254
    
    
    
    (50,500
    )
    
    
    (12,508
    )
    
    
    
    
    
    
    54,007
    
    
    
    (59,114
    )
    
    
    (54,861
    )Net increase (decrease) in cash and cash equivalents
    
    
    (75,784
    )
    
    
    (458
    )
    
    
    (9,788
    )
    
    
    45,743
    
    
    
    (12,586
    )
    
    
    
    
    
    
    (52,873
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (390
    )
    
    
    
    
    
    
    (390
    )Cash and cash equivalents at beginning of the year
    
    
    144,841
    
    
    
    635
    
    
    
    32,291
    
    
    
    9,865
    
    
    
    37,088
    
    
    
    
    
    
    
    224,720Cash and cash equivalents at end of the year
    
    $
    69,057
    
    
    $
    177
    
    
    $
    22,503
    
    
    $
    55,608
    
    
    $
    24,112
    
    
    $
    
    
    
    $
    171,457
 F-50