----

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**UNITED        STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      20-F/A**

**(AMENDMENT      NO. 1)**

| o      | REGISTRATION                STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE                ACT OF 1934           |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|
| OR     |
| x      | ANNUAL                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934        |
|   | For                the fiscal year ended December 31, 2006                                                                               |
| OR     |
| o      | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934    |
| OR     |
| o      | SHELL                COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES                EXCHANGE                ACT OF 1934 |

**ASE      TEST LIMITED**

**NOT      APPLICABLE**

**REPUBLIC      OF SINGAPORE**

**10      WEST FIFTH STREET**

**NANTZE      EXPORT PROCESSING ZONE**

**KAOHSIUNG,      TAIWAN**

**REPUBLIC      OF CHINA**

| Title                of Each ClassOrdinary                Shares | Name                of Each Exchange on which RegisteredThe                Nasdaq Global Market* |
|------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|

| Large                accelerated filer ___ | Accelerated                filer   Ö  | Non-accelerated                filer ___ |
|--------------------------------------------|----------------------------------------------------------------|------------------------------------------|

----

----

**EXPLANATORY        NOTE**

----

**PART      III**

**Item      17.  Financial      Statements.**

**Item      18.  Financial      Statements.**

|  | (a) | Report                of Independent Registered Public Accounting Firm dated April 30,                2007                (page F-1). |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | Consolidated                Balance Sheets of the Company and subsidiaries as of December 31,                2005 and                2006 (page F-3). |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (c) | Consolidated                Statements of Income of the Company and subsidiaries for the years                ended                December 31, 2004, 2005 and 2006 (page                F-4). |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (d) | Consolidated                Statements of Changes in Shareholders’ Equity of the Company and                subsidiaries for the years ended December 31, 2004, 2005 and 2006                (page                F-6). |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (e) | Consolidated                Statements of Cash Flows of the Company and subsidiaries for the                years                ended December 31, 2004, 2005 and 2006 (page                F-7). |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | (f) | Notes                to Consolidated Financial Statements of the Company and subsidiaries                (page                F-10). |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------|

**Item      19.  Exhibits.**

|                          1. | (a) | Memorandum                    and Articles of Association of the Registrant (incorporated by                    reference                    to Exhibit 1(a) to the Company’s annual report on Form 20-F for the year                    ended December 31, 2003). |
|----------------------------------------------------------------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            4. | (a) | Asset                      Purchase Agreement by and among Flextronics Manufacturing (M)                      Sdn Bhd, as                      Buyer, ASE Electronics (M) Sdn. Bhd. as Company, dated as of                      October 3,                      2005 (incorporated by reference to Exhibit 4(a) to the Company's                      annual                      report on Form 20-F for the year ended December 31,                      2005). |
|------------------------------------------------------------------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Commission                Agreement dated as of August 1, 2005 between ASE Electronics (M)                Sdn. Bhd.                and Gardex International Limited (incorporated by reference to Exhibit                4(d) to the Company’s annual report on Form 20-F for the year ended                December 31, 2005). |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Commission                Agreement dated as of August 1, 2005 between ASE Test, Inc. and Gardex                International Limited (incorporated by reference to Exhibit 4(e)                to the                Company’s annual report on Form 20-F for the year ended December 31,                2005). |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Commission                Agreement dated as of January 1, 2006 between ASE Electronics (M)                Sdn.                Bhd. and Gardex International Limited (incorporated by reference                to                Exhibit 4(f) to the Company’s annual report on Form 20-F for the year                ended December 31, 2005). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | Commission                Agreement dated as of January 1, 2006 between ASE Test, Inc. and                Gardex                International Limited (incorporated by reference to Exhibit 4(g)                to the                Company’s annual report on Form 20-F for the year ended December 31,                2005). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | Land                Lease Agreement dated as of January 1, 1997 between ASE Test Taiwan                and                Nantze Export Processing Zone Administration of Ministry of Economic                Affairs (incorporated by reference to Exhibit 4(h) to the Company’s annual                report on Form 20-F for the year ended December 31,                2003). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (g) | Land                Lease Agreement dated as of January 1, 2002 between ASE Test Taiwan                and                Nantze Export Processing Zone Administration of Ministry of Economic                Affairs (incorporated by reference to Exhibit 4(i) to the Company’s annual                report on Form 20-F for the year ended December 31,                2003). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (h) | Land                Lease Agreement dated as of April 16, 2000 between ASE Test Taiwan                and                Nantze Export Processing Zone Administration of Ministry of Economic                Affairs (incorporated by reference to Exhibit 4(j) to the Company’s annual                report on Form 20-F for the year ended December 31,                2003). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Land                Lease Agreement dated as of May 1, 2000 between ASE Test Taiwan and                Nantze                Export Processing Zone Administration of Ministry of Economic Affairs                (incorporated by reference to Exhibit 4(k) to the Company’s annual report                on Form 20-F for the year ended December 31,                2003). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (j) | Land                Lease Agreement dated as of April 1, 2004 between ASE Test Taiwan                and                Nantze Export Processing Zone Administration of Ministry of Economic                Affairs (incorporated by reference to Exhibit 4(l) to the Company’s annual                report on Form 20-F for the year ended December 31,                2003). |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (k) | First                Amendment to Lease Agreement dated June 7, 2000 between ISE Labs,                Inc. and                RND Funding Company, Inc. (incorporated by reference to Exhibit 4(j)                to                the Company’s annual report on Form 20-F for the year ended December                31, 2000). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (l) | Sublease                Agreement dated June 2000 between ISE Labs, Inc. and Cirrus Logic,                Inc.                (incorporated by reference to Exhibit 4(n) to the Company’s annual report                on Form 20-F for the year ended December 31,                2000). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (m) | Land                Lease Agreement dated as of April 27, 2005 between ASE Test Taiwan                and                Nantze Export Processing Zone Administration of Ministry of Economics                Affairs (incorporated by reference to Exhibit 4(o) to the Company’s annual                report on Form 20-F for the year ended December 31,                2005). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (n) | Land                Lease Agreement dated as of March 1, 2006 between ASE Test Taiwan                and                Nantze Export Processing Zone Administration of Ministry of Economics                Affairs (incorporated by reference to Exhibit 4(p) to the Company’s annual                report on Form 20-F for the year ended December 31,                2005). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (o) | Office                Building Lease Agreement between ISE Labs, Inc. and JER/BRE Austin                Tech                L.P. dated October 4, 2001 (incorporated by reference to Exhibit                10.46 to                ASE Inc.’s Registration Statement on Form F-3 filed on May 30,                2002). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (p) | Sublease                Agreement dated May 5, 2004 between Apple Computer Limited and ASE                Singapore Pte. Ltd. (incorporated by reference to Exhibit 4(s) to                the                Company’s annual report on Form 20-F for the year ended December 31,                2003). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|         8. | (a) | List                      of Subsidiaries.* |
|----------------------------------------------------|-----|---------------------------------------------|

|                        12. | (a) | Certification                    of Jason C.S. Chang, Chief Executive Officer of ASE Test Limited,                    as                    required by Rule 13a-14(a) of the Securities Exchange Act of                    1934. |
|---------------------------------------------------------------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Certification                    of Kenneth Hsiang, Chief Financial Officer of ASE Test Limited,                    as                    required by Rule 13a-14(a)                    of the Securities Exchange Act of                    1934. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            13. | (a) | Certification                        of the Chief Executive Officer and the Chief Financial Officer                        of ASE Test                        Limited for the purpose of complying with Section 1350 of                        Chapter 63 of                        Title 18 of the United States                        Code. |
|-------------------------------------------------------------------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|   | ASE              TEST LIMITED |                                             |
|--------|-------------------------------|--------------------------------------------------|
|   |                          |                                             |   |
|   |                          |                                             |   |
|   | By:                           |  /s/                Jason C.S. Chang        |   |
|   |                          | Name:              Jason C.S. Chang         |   |
|   |                          | Title: Chief              Executive Officer |   |
|   |                          |                                             |   |

----

**INDEX      TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                        | **Page** |
|-------------------------------------------------------------------------------------------------------------|----------|
| **Consolidated                Financial Statements of ASE Test Limited****and                Subsidiaries** |     |
| Independent                Registered Public Accounting                Firm’s Report                  | F-1      |
| Consolidated                Balance Sheets                                                                  | F-3      |
| Consolidated                Statements of                Income                                             | F-4      |
| Consolidated                Statements of Changes in                Shareholders’ Equity              | F-6      |
| Consolidated                Statements of Cash                Flows                                         | F-7      |
| Notes                to Consolidated Financial                Statements                                    | F-10     |

----

**ASE      Test      Limited and Subsidiaries**

**Consolidated      Financial Statements for the**

**Years      Ended      December 31, 2004, 2005 and 2006 and**

**Report      of      Independent Registered**

**Public      Accounting Firm**

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING      FIRM**

December
31,
2005      and 
2006, and the related consolidated      statements of income, changes      in shareholders’ equity and cash flows for each of the three years ended      December 31, 2006, expressed in U.S. dollars.  These consolidated      financial statements are the responsibility of the Company’s      management.  Our responsibility is to express an opinion on these      financial statements based on our audits.

December 
31,
2005      and 
2006, and the consolidated      results of their operations and their cash flows for each of the three years      ended December 31, 2006, in conformity with the requirements of the Business      Accounting Law and Guidelines Governing Business Accounting relevant to      financial accounting standards, and accounting principles generally accepted      in      the Republic of China.

----

----

**ASE      TEST LIMITED AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEETS**

**DECEMBER      31, 2005 AND 2006**

**(In        Thousands of U.S. Dollars, Except Par Value)**

----

| **ASSETS**                                                        |   | **2005** |    |   | **2006** |   | **LIABILITIES                AND SHAREHOLDERS’ EQUITY** |   | **2005**                                                           |   |   | **2006** |   |
|-------------------------------------------------------------------|--------|----------|---------|--------|----------|--------|---------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------|----------|--------|
|                                                              |   |     |    |   |     |   |                                                          |   |                                                               |   |   |     |   |
| CURRENT                ASSETS                                     |   |     |    |   |     |   | CURRENT                LIABILITIES                            |   |                                                               |   |   |     |   |
| Cash                (Notes 2 and 4)                               |   | $        | 138,211 |   |     | $      | 89,715                                                        |   | Financial                liabilities at fair value through profit  |   |   |     |   |   |   |
| Financial                assets at fair value through profit or   |   |     |    |   |     |   |                                                          |   |  or                loss (Notes 2, 3, 5 and 17)              |   | $      | 172      |   |   | $ | 262 |   |
|  loss                (Notes 2, 3, 5 and 17)                |   |     | 176     |   |     |   | -                                                             |   | Notes                and accounts payable                          |   |   | 12,758   |   |   |   | 12,251 |   |
| Available-for-sale                financial assets - current      |   |     |    |   |     |   |                                                          |   | Payable                to related parties (Note 18)                |   |   | 10,347   |   |   |   | 5,137 |   |
|  (Notes                2, 6 and 17)                        |   |     | -       |   |     |   | 89,341                                                        |   | Payable                for property, plant and equipment           |   |   | 10,737   |   |   |   | 8,769 |   |
| Notes                and accounts receivable, net (Notes 2 and 7) |   |     | 77,334  |   |     |   | 57,875                                                        |   | Income                tax payable (Note 2)                         |   |   | 635      |   |   |   | 8,316 |   |
| Receivables                from related parties (Note 18)         |   |     | 20,277  |   |     |   | 14,618                                                        |   | Current                portion of long-term debts (Notes 12, 17,   |   |   |     |   |   |   |   |   |
| Inventories,                net (Notes 2 and 8)                   |   |     | 21,239  |   |     |   | 16,935                                                        |   |  19                and 20)                                  |   |   | 49,743   |   |   |   | 34,418 |   |
| Deferred                income tax assets, net (Notes 2 and 16)   |   |     | 8,933   |   |     |   | 23,561                                                        |   | Accrued                expenses (Note 14)                          |   |   | 37,986   |   |   |   | 21,725 |   |
| Pledged                time deposit (Note 19)                     |   |     | 1,902   |   |     |   | -                                                             |   | Other                (Note 3)                                      |   |   | 5,841    |   |   |   | 11,838 |   |
| Prepayments                and other (Note 3)                     |   |     | 17,415  |   |     |   | 13,509                                                        |   |                                                               |   |   |     |   |   |   |   |   |
|                                                              |   |     |    |   |     |   |                                                          |   | Total                current liabilities                           |   |   | 128,219  |   |   |   | 102,716 |   |
| Total                current assets                               |   |     | 285,487 |   |     |   | 305,554                                                       |   |                                                               |   |   |     |   |   |   |   |   |
|                                                              |   |     |    |   |     |   |                                                          |   | LONG-TERM                DEBTS (Notes 12, 17, 19 and 20)           |   |   | 245,303  |   |   |   | 85,706 |   |
| LONG-TERM                INVESTMENTS                              |   |     |    |   |     |   |                                                          |   |                                                               |   |   |     |   |   |   |   |   |
| Available-for-sale                financial assets (Notes 2, 3, 6 |   |     |    |   |     |   |                                                          |   | ACCRUED                PENSION COST (Notes 2 and 14)               |   |   | 6,412    |   |   |   | 6,648 |   |
|  and                17)                                    |   |     | 81,251  |   |     |   | 204,851                                                       |   |                                                               |   |   |     |   |   |   |   |   |
| Equity                method investments (Notes 2, 3 and 9)       |   |     | 57,974  |   |     |   | 75,979                                                        |   | DEFERRED                INCOME TAX LIABILITIES (Notes 2 and 16)    |   |   | -        |   |   |   | 608 |   |
| Financial                assets carried at cost (Notes 2 and 3)   |   |     | 1,000   |   |     |   | 1,000                                                         |   |                                                               |   |   |     |   |   |   |   |   |
|                                                              |   |     |    |   |     |   |                                                          |   | OTHER                LIABILITIES                                   |   |   | 2,200    |   |   |   | 5,622 |   |
|                                                              |   |     | 140,225 |   |     |   | 281,830                                                       |   |                                                               |   |   |     |   |   |   |   |   |
|                                                              |   |     |    |   |     |   |                                                          |   |     Total                liabilities           |   |   | 382,134  |   |   |   | 201,300 |   |
| PROPERTY,                PLANT AND EQUIPMENT, NET                 |   |     |    |   |     |   |                                                          |   |                                                               |   |   |     |   |   |   |   |   |
| (Notes                2, 10, 15, 18, 19, 20, 21, 22 and 23)       |   |     | 430,079 |   |     |   | 389,435                                                       |   | SHAREHOLDERS'                EQUITY (Notes 1, 2 and 13)            |   |   |     |   |   |   |   |   |
|                                                              |   |     |    |   |     |   |                                                          |   | Capital                stock - $0.25 par value                     |   |   |     |   |   |   |   |   |
| GOODWILL                (Notes 2, 3 and 11)                       |   |     | 20,646  |   |     |   | 20,646                                                        |   | Authorized                - 600,000 thousand shares                |   |   |     |   |   |   |   |   |
|                                                              |   |     |    |   |     |   |                                                          |   | Issued                and outstanding - 100,059 thousand shares    |   |   |     |   |   |   |   |   |
| OTHER                ASSETS                                       |   |     |    |   |     |   |                                                          |   |  in                2005 and 100,138 thousand shares in 2006 |   |   | 25,015   |   |   |   | 25,035 |   |
| Deferred                income tax assets, net (Notes 2 and 16)   |   |     | 30,964  |   |     |   | 13,123                                                        |   | Additional                paid-in capital                          |   |   | 455,059  |   |   |   | 455,717 |   |
| Deferred                charges, net (Note 2)                     |   |     | 10,492  |   |     |   | 5,733                                                         |   | Retained                earnings                                   |   |   | 125,954  |   |   |   | 276,723 |   |
| Other                (Notes 17 and 19)                            |   |     | 22,446  |   |     |   | 28,107                                                        |   | Unrealized                gain on financial instruments            |   |   | -        |   |   |   | 123,962 |   |
|                                                              |   |     |    |   |     |   |                                                          |   | Cumulative                translation adjustments                  |   |   | (47,823  | )      |   |   | (38,309 | ) |
| Total                other assets                                 |   |     | 63,902  |   |     |   | 46,963                                                        |   |                                                               |   |   |     |   |   |   |   |   |
|                                                              |   |     |    |   |     |   |                                                          |   | Total                shareholders’ equity                    |   |   | 558,205  |   |   |   | 843,128 |   |
|                                                              |   |     |    |   |     |   |                                                          |   |                                                               |   |   |     |   |   |   |   |   |
| TOTAL                                                             |   | $        | 940,339 |   |     | $      | 1,044,428                                                     |   | TOTAL                                                              |   | $      | 940,339  |   |   | $ | 1,044,428 |   |

----

**ASE      TEST LIMITED AND      SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF INCOME**

**YEARS      ENDED DECEMBER 31, 2004, 2005 AND      2006**

**(In        Thousands of U.S. Dollars, Except Per Share Data)**

----

|                                                                                               |   | **2004** |    |   | **2005** |   |    | **2006** |   |
|----------------------------------------------------------------------------------------------------|--------|----------|---------|--------|----------|--------|---------|----------|--------|
|                                                                                               |   |     |    |   |     |   |    |     |   |
| NET                REVENUES (Notes 2, 18 and 22)                                                   |   | $        | 427,763 |   |     | $      | 420,929 |     |   | $ | 517,706 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| COST                OF REVENUES (Notes 15, 18 and 20)                                              |   |     | 340,663 |   |     |   | 330,786 |     |   |   | 322,654 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| GROSS                PROFIT                                                                        |   |     | 87,100  |   |     |   | 90,143  |     |   |   | 195,052 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| OPERATING                EXPENSES (Notes 15, 18 and 20)                                            |   |     |    |   |     |   |    |     |   |   |   |   |
| Selling                (Note 2)                                                                    |   |     | 11,393  |   |     |   | 11,235  |     |   |   | 8,149 |   |
| General                and administrative                                                          |   |     | 42,474  |   |     |   | 39,891  |     |   |   | 33,931 |   |
| Research                and development (Note 2)                                                   |   |     | 23,223  |   |     |   | 24,993  |     |   |   | 20,714 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| Total                operating expenses                                                            |   |     | 77,090  |   |     |   | 76,119  |     |   |   | 62,794 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| INCOME                FROM OPERATIONS                                                              |   |     | 10,010  |   |     |   | 14,024  |     |   |   | 132,258 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| NON-OPERATING                INCOME (EXPENSES)                                                     |   |     |    |   |     |   |    |     |   |   |   |   |
| Interest                income                                                                     |   |     | 578     |   |     |   | 1,598   |     |   |   | 3,369 |   |
| Interest                expense (Notes 2 and 10)                                                   |   |     | (6,765  | )      |     |   | (12,744 | )        |   |   | (13,165 | ) |
| Equity                in earnings of equity method investees (Notes 2 and 9)                       |   |     | 9,844   |   |     |   | 6,637   |     |   |   | 18,005 |   |
| Impairment                loss on assets (Notes 2, 3 and 11)                                       |   |     | (26,500 | )      |     |   | -       |     |   |   | - |   |
| Gain                (Loss) on valuation of financial assets, net (Notes 2, 3 and                5) |   |     | 314     |   |     |   | 685     |     |   |   | (961 | ) |
| Loss                on valuation of financial liabilities, net (Notes 2, 3 and                5)   |   |     | -       |   |     |   | -       |     |   |   | (770 | ) |
| Foreign                exchange gain (loss), net (Notes 2 and 3)                                   |   |     | (139    | )      |     |   | 703     |     |   |   | 294 |   |
| Gain                on insurance settlement and impairment recovery (Note 21)                      |   |     | -       |   |     |   | -       |     |   |   | 32,145 |   |
| Loss                on fire damage (Note 21)                                                       |   |     | -       |   |     |   | (51,224 | )        |   |   | - |   |
| Other                                                                                              |   |     | (380    | )      |     |   | (3,465  | )        |   |   | (7,839 | ) |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| Net                non-operating income (expenses)                                                 |   |     | (23,048 | )      |     |   | (57,810 | )        |   |   | 31,078 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| INCOME                (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX                          |   |     | (13,038 | )      |     |   | (43,786 | )        |   |   | 163,336 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| INCOME                TAX EXPENSE (BENEFIT) (Notes 2 and 16)                                       |   |     | (21,209 | )      |     |   | 2,537   |     |   |   | 12,567 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
| INCOME                (LOSS) FROM CONTINUING OPERATIONS                                            |   |     | 8,171   |   |     |   | (46,323 | )        |   |   | 150,769 |   |
|                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |

----

**ASE      TEST LIMITED AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF INCOME**

**YEARS      ENDED DECEMBER 31, 2004, 2005 AND 2006**

**(In        Thousands of U.S. Dollars, Except Per Share Data)**

----

|                                                                                                                                       |   | **2004** |   |   | **2005** |   |    | **2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|---------|----------|--------|
|                                                                                                                                       |   |     |   |   |     |   |    |     |   |
| DISCONTINUED                OPERATIONS (Note 23)                                                                                           |   |     |   |   |     |   |    |     |   |
| Income                from discontinued operations, net of income tax expense of $21 in                2004 and                $66 in 2005 |   | $        | 16,968 |   |     | $      | 3,929   |     |   | $ | - |   |
| Gain                on disposal of discontinued operations, net of income tax expense                of $59                in 2005         |   |     | -      |   |     |   | 6,910   |     |   |   | - |   |
|                                                                                                                                       |   |     |   |   |     |   |    |     |   |   |   |   |
|                                                                                                                                       |   |     | 16,968 |   |     |   | 10,839  |     |   |   | - |   |
|                                                                                                                                       |   |     |   |   |     |   |    |     |   |   |   |   |
| NET                INCOME (LOSS)                                                                                                           |   | $        | 25,139 |   |     | $      | (35,484 | )        |   | $ | 150,769 |   |

|                                                                |   |   |        |   |   |   |        |   |   |
|---------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|--------|
|                                                                |   |   |        |   |   |   |        |   |   |
| EARNINGS                (LOSS) PER SHARE                            |   |   |        |   |   |   |        |   |   |
| Basic                                                               |   |   |        |   |   |   |        |   |   |
| Earnings                (loss) from continuing operations           |   | $      | 0.08        |   |   | $      | (0.46       | )      |   | $ | 1.51 |   |
| Earnings                from discontinued operations                |   |   | 0.17        |   |   |   | 0.11        |   |   |   | - |   |
|                                                                |   | $      | 0.25        |   |   | $      | (0.35       | )      |   | $ | 1.51 |   |
|                                                                |   |   |        |   |   |   |        |   |   |   |   |   |
| Diluted                                                             |   | $      | 0.25        |   |   | $      | (0.35       | )      |   | $ | 1.50 |   |
|                                                                |   |   |        |   |   |   |        |   |   |   |   |   |
| WEIGHTED-AVERAGE                NUMBER OF COMMON SHARES OUTSTANDING |   |   |        |   |   |   |        |   |   |   |   |   |
| Basic                                                               |   |   | 100,037,524 |   |   |   | 100,059,031 |   |   |   | 100,081,418 |   |
| Diluted                                                             |   |   | 100,111,113 |   |   |   | 100,059,031 |   |   |   | 100,338,261 |   |

----

**ASE      TEST LIMITED AND      SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

**YEARS      ENDED DECEMBER 31, 2004, 2005 AND 2006**

**(In        Thousands of U.S. Dollars, Except Share Data)**

----

|                                                                          |   | **Capital                  Stock** |        |   |            |   |   |                                               |   |   |                          |   |   |                                                                                                    |    |   |                                                                                                                        |   |    |                                              |   |
|-------------------------------------------------------------------------------|--------|------------------------------------|-------------|--------|------------|--------|--------|----------------------------------------------------|--------|--------|--------------------------|--------|--------|----------------------------------------------------------------------------------------------------|---------|--------|------------------------------------------------------------------------------------------------------------------------|--------|---------|----------------------------------------------|--------|
|                                                                          |   | **Shares**                         |        |   | **Amount** |   |   | **Additional****Paid-in                  Capital** |   |   | **Retained****Earnings** |   |   | **Unrealized****Gain                    (Loss)****on                    Financial****Instruments** |    |   | **Net                    Loss not****Recognized                    in****Periodic****Pension                    Cost** |   |    | **Cumulative****Translation****Adjustments** |   |   | **Total****Shareholders'****Equity** |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |
| BALANCE,                  JANUARY 1, 2004                                     |   |                               | 99,546,216  |   |       | $      | 24,887 |                                               |   | $      | 450,635                  |   |   | $                                                                                                  | 136,299 |   |                                                                                                                   | $      | (400    | )                                            |   | $ | (578 | ) |   | $ | (64,856 | ) |   | $ | 545,987 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of shares under stock option plans                  |   |                               | 512,815     |   |       |   | 128    |                                               |   |   | 4,424                    |   |   |                                                                                               | -       |   |                                                                                                                   |   | -       |                                         |   |   | - |   |   |   | - |   |   |   | 4,552 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income in 2004                                           |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | 25,139  |   |                                                                                                                   |   | -       |                                         |   |   | - |   |   |   | - |   |   |   | 25,139 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Reversal                  of unrealized loss on financial instruments         |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | -       |   |                                                                                                                   |   | 340     |                                         |   |   | - |   |   |   | - |   |   |   | 340 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Reversal                  of net loss not recognized in periodic pension cost |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | -       |   |                                                                                                                   |   | -       |                                         |   |   | 578 |   |   |   | - |   |   |   | 578 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Translation                  adjustments                                      |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | -       |   |                                                                                                                   |   | -       |                                         |   |   | - |   |   |   | 22,995 |   |   |   | 22,995 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE,                  DECEMBER 31, 2004                                   |   |                               | 100,059,031 |   |       |   | 25,015 |                                               |   |   | 455,059                  |   |   |                                                                                               | 161,438 |   |                                                                                                                   |   | (60     | )                                            |   |   | - |   |   |   | (41,861 | ) |   |   | 599,591 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss in 2005                                             |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | (35,484 | )      |                                                                                                                   |   | -       |                                         |   |   | - |   |   |   | - |   |   |   | (35,484 | ) |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Reversal                  of unrealized loss on financial instruments         |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | -       |   |                                                                                                                   |   | 60      |                                         |   |   | - |   |   |   | - |   |   |   | 60 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Translation                  adjustments                                      |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | -       |   |                                                                                                                   |   | -       |                                         |   |   | - |   |   |   | (5,962 | ) |   |   | (5,962 | ) |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE,                  DECEMBER 31, 2005                                   |   |                               | 100,059,031 |   |       |   | 25,015 |                                               |   |   | 455,059                  |   |   |                                                                                               | 125,954 |   |                                                                                                                   |   | -       |                                         |   |   | - |   |   |   | (47,823 | ) |   |   | 558,205 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect                  of initial adoption of ROC SFAS No. 34                |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | -       |   |                                                                                                                   |   | 83,751  |                                         |   |   | - |   |   |   | - |   |   |   | 83,751 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of shares under stock option plans                  |   |                               | 79,201      |   |       |   | 20     |                                               |   |   | 658                      |   |   |                                                                                               | -       |   |                                                                                                                   |   | -       |                                         |   |   | - |   |   |   | - |   |   |   | 678 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income in 2006                                           |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | 150,769 |   |                                                                                                                   |   | -       |                                         |   |   | - |   |   |   | - |   |   |   | 150,769 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                  gain on financial instruments                     |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | -       |   |                                                                                                                   |   | 40,211  |                                         |   |   | - |   |   |   | - |   |   |   | 40,211 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Translation                  adjustments                                      |   |                               | -           |   |       |   | -      |                                               |   |   | -                        |   |   |                                                                                               | -       |   |                                                                                                                   |   | -       |                                         |   |   | - |   |   |   | 9,514 |   |   |   | 9,514 |   |
|                                                                          |   |                               |        |   |       |   |   |                                               |   |   |                     |   |   |                                                                                               |    |   |                                                                                                                   |   |    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE,                  DECEMBER 31, 2006                                   |   |                               | 100,138,232 |   |       | $      | 25,035 |                                               |   | $      | 455,717                  |   |   | $                                                                                                  | 276,723 |   |                                                                                                                   | $      | 123,962 |                                         |   | $ | - |   |   | $ | (38,309 | ) |   | $ | 843,128 |   |

----

**ASE      TEST LIMITED AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**YEARS      ENDED DECEMBER 31, 2004, 2005 AND 2006**

**(In        Thousands of U.S. Dollars)**

----

|                                                                                                                   |   | **2004** |     |   | **2005** |   |    | **2006** |   |
|------------------------------------------------------------------------------------------------------------------------|--------|----------|----------|--------|----------|--------|---------|----------|--------|
|                                                                                                                   |   |     |     |   |     |   |    |     |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES                                                                    |   |     |     |   |     |   |    |     |   |
| Net                income (loss)                                                                                       |   | $        | 25,139   |   |     | $      | (35,484 | )        |   | $ | 150,769 |   |
| Adjustments                to reconcile net income (loss) to net cash provided by operating                activities: |   |     |     |   |     |   |    |     |   |   |   |   |
| Depreciation                and amortization                                                                           |   |     | 164,908  |   |     |   | 154,302 |     |   |   | 120,638 |   |
| Impairment                loss on assets                                                                               |   |     | 26,500   |   |     |   | -       |     |   |   | - |   |
| Loss                on fire damage (gain on insurance settlement and impairment                recovery)               |   |     | -        |   |     |   | 42,086  |     |   |   | (32,145 | ) |
| Provision                (reversal) for doubtful accounts and sales allowances                                         |   |     | 2,491    |   |     |   | 1,422   |     |   |   | (2,081 | ) |
| Allowance                for inventory obsolescence                                                                    |   |     | 914      |   |     |   | 959     |     |   |   | 4,845 |   |
| Equity                in earnings of equity method investees                                                           |   |     | (9,844   | )      |     |   | (6,637  | )        |   |   | (18,005 | ) |
| Gain                on disposal of discontinued operations                                                             |   |     | -        |   |     |   | (6,910  | )        |   |   | - |   |
| Loss                (gain) on disposal of assets                                                                       |   |     | 34       |   |     |   | 3,542   |     |   |   | (960 | ) |
| Deferred                income taxes                                                                                   |   |     | (20,597  | )      |     |   | 3,947   |     |   |   | 3,821 |   |
| Other                                                                                                                  |   |     | (219     | )      |     |   | 2,450   |     |   |   | 7,389 |   |
| Changes                in operating assets and liabilities                                                             |   |     |     |   |     |   |    |     |   |   |   |   |
| Financial                instruments at fair value through profit or loss                                              |   |     | (104     | )      |     |   | 166     |     |   |   | 266 |   |
| Notes                and accounts receivable                                                                           |   |     | (9,123   | )      |     |   | 10,446  |     |   |   | 21,540 |   |
| Receivable                from related parties                                                                         |   |     | 1,565    |   |     |   | (11,758 | )        |   |   | 2,185 |   |
| Inventories                                                                                                            |   |     | (23,161  | )      |     |   | 16,009  |     |   |   | (541 | ) |
| Prepayments                and other                                                                                   |   |     | (6,723   | )      |     |   | (1,695  | )        |   |   | (6,853 | ) |
| Notes                and accounts payable                                                                              |   |     | (4,123   | )      |     |   | (5,733  | )        |   |   | (507 | ) |
| Payable                to related parties                                                                              |   |     | 3,841    |   |     |   | (268    | )        |   |   | (3,627 | ) |
| Income                tax payable                                                                                      |   |     | (971     | )      |     |   | (2,571  | )        |   |   | 7,681 |   |
| Accrued                pension cost                                                                                    |   |     | 1,868    |   |     |   | 1,293   |     |   |   | 236 |   |
| Accrued                expenses and other                                                                              |   |     | 1,317    |   |     |   | 4,498   |     |   |   | (1,876 | ) |
|                                                                                                                   |   |     |     |   |     |   |    |     |   |   |   |   |
| Net                cash provided by operating activities                                                               |   |     | 153,712  |   |     |   | 170,064 |     |   |   | 252,775 |   |
|                                                                                                                   |   |     |     |   |     |   |    |     |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES                                                                    |   |     |     |   |     |   |    |     |   |   |   |   |
| Acquisitions                of available-for-sale financial assets-current                                             |   |     | (24,524  | )      |     |   | (3,117  | )        |   |   | (154,865 | ) |
| Proceeds                from sale of available-for-sale financial assets-current                                       |   |     | 10,524   |   |     |   | 23,562  |     |   |   | 65,924 |   |
| Acquisition                of property, plant and equipment                                                            |   |     | (228,610 | )      |     |   | (66,116 | )        |   |   | (76,005 | ) |
| Proceeds                from sale of property, plant and equipment                                                     |   |     | 28,671   |   |     |   | 48,174  |     |   |   | 22,135 |   |
| Acquisition                of long-term investments in shares of stock                                                 |   |     | (19,613  | )      |     |   | -       |     |   |   | - |   |
| Increase                in pledged time deposits                                                                       |   |     | (288     | )      |     |   | (332    | )        |   |   | (1,368 | ) |
| Proceeds                from disposal of discontinued operations                                                       |   |     | -        |   |     |   | 17,316  |     |   |   | 1,800 |   |
| Increase                in other assets                                                                                |   |     | (19,781  | )      |     |   | (6,077  | )        |   |   | (6,137 | ) |

----

**ASE      TEST LIMITED AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**YEARS      ENDED DECEMBER 31, 2004, 2005 AND 2006**

**(In        Thousands of U.S. Dollars)**

----

|                                                                      |   | **2004** |     |   | **2005** |   |     | **2006** |   |
|---------------------------------------------------------------------------|--------|----------|----------|--------|----------|--------|----------|----------|--------|
|                                                                      |   |     |     |   |     |   |     |     |   |
| Proceeds                from insurance claims                             |   | $        | -        |   |     | $      | 369      |     |   | $ | 26,920 |   |
|                                                                      |   |     |     |   |     |   |     |     |   |   |   |   |
| Net                cash provided by (used in) investing activities        |   |     | (253,621 | )      |     |   | 13,779   |     |   |   | (121,596 | ) |
|                                                                      |   |     |     |   |     |   |     |     |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES                       |   |     |     |   |     |   |     |     |   |   |   |   |
| Proceeds                from issuance of shares                           |   |     | 5,488    |   |     |   | -        |     |   |   | 678 |   |
| Increase                (decrease) in short-term borrowings               |   |     | 18,693   |   |     |   | (35,789  | )        |   |   | - |   |
| Increase                (decrease) in commercial paper                    |   |     | 9,935    |   |     |   | (28,474  | )        |   |   | - |   |
| Proceeds                from long-term debts                              |   |     | 121,511  |   |     |   | 138,113  |     |   |   | - |   |
| Repayments                of long-term debts                              |   |     | (86,252  | )      |     |   | (162,694 | )        |   |   | (188,104 | ) |
| Collection                of accounts receivable sold                     |   |     | -        |   |     |   | 4,397    |     |   |   | 516 |   |
| Increase                in other liabilities                              |   |     | -        |   |     |   | -        |     |   |   | 2,523 |   |
|                                                                      |   |     |     |   |     |   |     |     |   |   |   |   |
| Net                cash provided by (used in) financing activities        |   |     | 69,375   |   |     |   | (84,447  | )        |   |   | (184,387 | ) |
|                                                                      |   |     |     |   |     |   |     |     |   |   |   |   |
| EFFECT                OF EXCHANGE RATE CHANGES ON CASH                    |   |     | (926     | )      |     |   | (674     | )        |   |   | 4,712 |   |
|                                                                      |   |     |     |   |     |   |     |     |   |   |   |   |
| NET                INCREASE (DECREASE) IN CASH                            |   |     | (31,460  | )      |     |   | 98,722   |     |   |   | (48,496 | ) |
|                                                                      |   |     |     |   |     |   |     |     |   |   |   |   |
| CASH                , BEGINNING OF YEAR                                   |   |     | 70,949   |   |     |   | 39,489   |     |   |   | 138,211 |   |
|                                                                      |   |     |     |   |     |   |     |     |   |   |   |   |
| CASH                , END OF YEAR                                         |   | $        | 39,489   |   |     | $      | 138,211  |     |   | $ | 89,715 |   |
|                                                                      |   |     |     |   |     |   |     |     |   |   |   |   |
| SUPPLEMENTAL                INFORMATION                                   |   |     |     |   |     |   |     |     |   |   |   |   |
| Interest                paid (excluding capitalized interest)             |   | $        | 6,795    |   |     | $      | 12,267   |     |   | $ | 14,403 |   |
| Income                tax paid                                            |   | $        | 243      |   |     | $      | 219      |     |   | $ | 1,708 |   |
| Cash                paid for acquisition of property, plant and equipment |   |     |     |   |     |   |     |     |   |   |   |   |
| Acquisition                of property, plant and equipment               |   | $        | 210,656  |   |     | $      | 47,875   |     |   | $ | 87,408 |   |
| Decrease                in payable                                        |   |     | 25,338   |   |     |   | 21,410   |     |   |   | 990 |   |
| Increase                in capital lease obligation                       |   |     | (7,384   | )      |     |   | (3,169   | )        |   |   | (12,393 | ) |
|                                                                      |   | $        | 228,610  |   |     | $      | 66,116   |     |   | $ | 76,005 |   |
| Cash                received from sales of property, plant and equipment  |   |     |     |   |     |   |     |     |   |   |   |   |
| Sales                price                                                |   | $        | 31,530   |   |     | $      | 50,795   |     |   | $ | 20,002 |   |
| Decrease                (increase) in receivable                          |   |     | (2,859   | )      |     |   | 3,018    |     |   |   | 2,133 |   |
| Proceeds                from disposal of discontinued operations          |   |     | -        |   |     |   | (5,639   | )        |   |   | - |   |
|                                                                      |   | $        | 28,671   |   |     | $      | 48,174   |     |   | $ | 22,135 |   |

----

**ASE      TEST LIMITED AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**YEARS      ENDED DECEMBER 31, 2004, 2005 AND 2006**

**(In        Thousands of U.S. Dollars)**

----

|                                                                  |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|-----------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
| Cash                received from disposal of discontinued operations |   |     |   |   |     |   |   |     |   |
| Sales                price                                            |   | $        | -      |   |     | $      | 19,116 |     |   | $ | - |   |
| Decrease                (increase) in receivable                      |   |     | -      |   |     |   | (1,800 | )        |   |   | 1,800 |   |
|                                                                  |   | $        | -      |   |     | $      | 17,316 |     |   | $ | 1,800 |   |
|                                                                  |   |     |   |   |     |   |   |     |   |   |   |   |
| Cash                received from issuance of ordinary shares         |   |     |   |   |     |   |   |     |   |   |   |   |
| Issuance                of ordinary shares, net of issuance cost      |   | $        | 4,552  |   |     | $      | -      |     |   | $ | 678 |   |
| Decrease                in receivable for issuance of ordinary shares |   |     | 936    |   |     |   | -      |     |   |   | - |   |
|                                                                  |   | $        | 5,488  |   |     | $      | -      |     |   | $ | 678 |   |

----

**ASE      TEST LIMITED AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**YEARS      ENDED DECEMBER 31, 2004, 2005 AND 2006**

**(In        Thousands of U.S. Dollars, Except Share Data and Unless Stated        Otherwise)**

----

**1.        **
**ORGANIZATION      AND OPERATION**

|   | **Overview** |
|--------|--------------|

|   | ASE                Test Limited (“ASE Test” or the “Company”) is a Singapore holding company                which, through an exchange of its shares with its parent company,                Advanced                Semiconductor Engineering, Inc. (“ASE Inc.”), and other individuals,                acquired substantially all of the shares of ASE Test, Inc. in May                1996.  The exchange was accounted for as a reorganization of                companies under common control.  Since June 1996, the Company’s                shares have been traded on the NASDAQ Global Market in the United                States                under the symbol “ASTSF”. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | J                & R Holding Limited, a shareholder of the Company, offered 6,000,000                and 5,000,000 shares of the Company’s common stock in December 1997 and                February 1999, respectively, in the form of Taiwan Depositary Receipts                (“TDRs”).  The TDRs are traded on the Taiwan Stock Exchange                under the symbol “9101” and each TDR represents 0.0125 share of the                Company’s stock. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Set                forth below is a brief overview of the Company’s organization                structure. |
|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | The                Company has four direct                subsidiaries: |
|--------|-------------------------------------------------------------------------|

|   | ASE                Holdings (Singapore) Pte Ltd. has a wholly-owned subsidiary, ASE                Electronics (M) Sdn. Bhd. (“ASE Test Malaysia”) (incorporated in Malaysia                in February 1991), which is engaged in the packaging and testing                of                semiconductors.  ASE Test Malaysia disposed of its camera module                operations on October 3, 2005 (See Note                23). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ASE                Test Holdings has a wholly-owned subsidiary, ISE Labs, Inc. (“ISE Labs”)                (incorporated in California, United States in November                1983).  ISE Labs and its wholly-owned subsidiaries, ISE Labs                Hong Kong Limited, which was dissolved in 2005, ASE Singapore Pte                Ltd.,                ISE Technology, Inc. and Digital Testing Services Inc., are engaged                in the                front-end engineering testing and final testing of                semiconductors. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As                of December 31, 2005 and 2006, the Company had approximately 5,600                and                5,300 employees, respectively. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**2.        **
**SIGNIFICANT      ACCOUNTING POLICIES**

|   | The                accompanying consolidated financial statements have been prepared                in                conformity with the Business Accounting Law, Guidelines Governing                Business                Accounting, and accounting principles generally accepted in the Republic                of China (“ROC GAAP”).  Under these law, guidelines and                principles, the Company should reasonably estimate the amounts of                allowances for doubtful accounts, allowance for sales discounts,                inventory                obsolescence, depreciation of property, plant, and equipment, loss                on                impairment of assets, pension costs, gain (loss) on valuation of                financial                instruments and valuation allowance for deferred income tax                assets.  Actual results may differ from these estimates.                Significant accounting policies are summarized as                follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Basis                of Presentation** |
|--------|------------------------------------------|

|   | The                Company prepares its consolidated financial statements using the                aforementioned law, guidelines and principles with a reconciliation                to                accounting principles generally accepted in the United States of                America                (“U.S. GAAP”) (See Note 24) to be consistent with the basis of                presentation of the consolidated financial statements of ASE                Inc.  The accompanying consolidated balance sheets are presented                as of December 31, 2005 and 2006 and the accompanying consolidated                statements of income, changes in shareholders’ equity and cash flows are                presented for the three years ended December 31, 2004, 2005 and                2006. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Basis                of Consolidation** |
|--------|-------------------------------------------|

|   | The                consolidated financial statements include the accounts of the Company                and                all of the aforementioned                subsidiaries. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | All                significant intercompany accounts and transactions have been                eliminated. |
|--------|------------------------------------------------------------------------------------------------------------|

|   | **Current                and Noncurrent Assets and                Liabilities** |
|--------|---------------------------------------------------------------------------------|

|   | Current                assets include cash, financial assets held for trading purposes and                assets                expected to be converted to cash, sold or consumed within one year                from                the balance sheet date.  Current liabilities are obligations                incurred for trading purposes and obligations expected to be settled                within one year from the balance sheet date.  Assets and                liabilities that are not classified as current are noncurrent assets                and                liabilities, respectively. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Financial                Assets / Liabilities at Fair Value Through Profit or                Loss** |
|--------|-------------------------------------------------------------------------------------------------------|

|   | Financial                instruments at fair value through profit or loss consist of financial                assets or financial liabilities held or incurred for trading                purposes.  These financial instruments are initially recognized                at fair value, with associated transaction costs expensed as                incurred.  The financial instruments are subsequently remeasured                at fair value, and changes in fair value are recognized in current                income                (loss).  A regular way purchase or sale of financial assets is                recognized and derecognized using settlement date                accounting. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Derivatives                which do not qualify for hedge accounting are recorded as financial                assets                or liabilities at fair value through profit or loss.  Fair values                of derivatives with no active market are estimated using valuation                techniques. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Available-for-Sale                Financial Assets** |
|--------|--------------------------------------------------------|

|   | Available-for-sale                financial assets are initially recognized at fair value plus transaction                costs that are directly attributable to the                acquisition.  Changes in fair value of financial assets are                reported in a separate component of shareholders’ equity.  The                corresponding accumulated gains or losses are recognized in earnings                when                the financial asset is derecognized from the balance sheet.  A                regular way purchase or sale of financial assets is accounted for                using                settlement date accounting. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Fair                values of beneficiary certificates of open-end mutual funds and publicly                traded stocks are determined                using the net asset value and closing-price at the balance sheet                date,                respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | If                certain objective evidence indicates that such available-for-sale                financial asset is impaired, a loss is recognized                currently.  If, in a subsequent period, the amount of the                impairment loss decreases, for equity securities, the previously                recognized impairment loss is reversed to the extent of the decrease                and                recorded as an adjustment to shareholders’                equity. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Revenue                Recognition, Accounts Receivable and Allowances for Doubtful Accounts                and                Sales Allowances** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Revenues                from semiconductor packaging services are recognized upon                shipment.  Revenues from semiconductor testing services are                recognized upon completion of the services or shipment.  The                Company does not take ownership of:  (i) bare semiconductor                wafers received from customers that the Company packages into finished                semiconductors, and (ii) packaged semiconductors received from customers                that the Company tests as to whether they meet certain performance                specifications.  The title and risk of loss remain with the                customer for those bare semiconductors and/or packaged                semiconductors.  Accordingly, costs of customer-supplied                semiconductor materials are not included in the accompanying consolidated                financial statements.  Other criteria the Company uses to                determine when to recognize revenue are:  (i) existence of                persuasive evidence of an arrangement,  (ii) the selling price                is fixed or determinable and  (iii) collectibility is reasonably                assured. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Revenues                are determined using the fair value taking into account related sales                discounts agreed to by the Company and customers.  Since the                receivables from sales are collectible within one year and such                transactions are frequent, the fair value of receivables is equivalent                to                the nominal amount of cash                received. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Allowance                for doubtful accounts is provided based on an evaluation of the                collectibility of receivables.  The Company determines the                amount of allowance for doubtful accounts by examining the aging                analysis                of the outstanding accounts receivable and current trends in the                credit                quality of its customers.  An appropriate sales allowance, based                on historical experience, is also recognized in the same period the                sale                is recognized. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Accounts                Receivable Securitization** |
|--------|-------------------------------------------------------|

|   | Accounts                receivable securitization is the transfer of a designated pool of                accounts                receivable to a bank, which in turn issues beneficial securities                or                asset-backed securities based on the accounts receivable.  Under                ROC Statement of Financial Accounting Standards (“ROC SFAS”) No. 33,                “Accounting for Transfers of Financial Assets and Extinguishments                of                Liabilities”, such transfer of financial assets in which the transferor                surrenders control over those assets is accounted for as a sale to                the                extent that consideration other than beneficial interests in the                transferred assets is received in exchange.  The difference                between the book value of accounts receivable and total proceeds                received                is recorded as a gain or loss on disposal of financial                assets. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Inventories** |
|--------|-----------------|

|   | Inventories                including raw materials (materials received from customers for processing,                mainly semiconductor wafers are excluded from inventories as title                and                risk of loss remain with the customers), supplies and spare parts,                finished goods and work in process are stated at the lower of cost                or                market value. Market value represents net realizable value for finished                goods and work in process, and replacement cost for raw materials,                supplies and spare parts. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Raw                materials, supplies and spare parts are recorded at moving average                cost or                weighted average cost; others are recorded at standard cost and adjusted                to the approximate weighted average cost at the balance sheet                date.  Estimated losses on scrap and slow-moving items are                recognized and included in the allowance for                losses. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | **Equity                Method Investments** |
|--------|----------------------------------------------|

|   | Investments                in companies of which the Company owns at least 20% of the outstanding                voting shares or where the Company exercises significant influence                over                the investee company’s operating and financial policy decisions are                accounted for using the equity method.  Prior to January 1,                2006, the difference, if any, between the cost of investment and                the                Company’s proportionate equity in the fair value of the net assets of the                investees at the time of investments or at the time the equity method                of                accounting is first applied to a particular investment, was amortized                on                the straight-line method over 10 years.  Effective January 1,                2006, pursuant to the revised ROC SFAS No. 5, “Long-term Investments under                Equity Method” (“ROC SFAS No. 5”), the cost of an investment shall be                analyzed and the difference between the cost of investment and the                fair                value of identifiable net assets acquired, representing goodwill,                shall                not be amortized and instead shall be tested for impairment                annually.  The accounting treatment for the investment premiums                acquired before January 1, 2006 is the same as that for goodwill                which is                no longer being amortized.  When an indication of impairment is                identified, the carrying amount of the investment is reduced, with                the                related impairment loss recognized in                earnings. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Financial                Assets Carried at Cost** |
|--------|-----------------------------------------------------|

|   | Investments                that do not have a quoted market price in an active market and whose                fair                value cannot be reliably measured are carried at their original cost,                such                as non-publicly traded stocks.  The costs of financial assets                sold are determined using the weighted-average method.  If there                is objective evidence which indicates that a financial asset is impaired,                a loss is recognized.  A subsequent reversal of such impairment                loss is not allowed. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Property,                Plant and Equipment** |
|--------|--------------------------------------------------|

|   | Property,                plant and equipment, except for machinery and equipment under operating                leases, are stated at cost less accumulated depreciation and accumulated                impairment.  Machinery and equipment held under capital leases                are recorded as an asset and an obligation at an amount equal to                the lower                of:  (i) present value at the beginning of the lease term of the                minimum lease payments during the lease term (including the payment                called                for under any bargain purchase option); or  (ii) fair value of                the leased machinery and equipment at the inception of the                lease.  Machinery in transit, construction in progress and                prepayments under construction are stated at cost.  These                include the cost of machinery, construction, down payments and other                direct costs plus interest charges attributable to the borrowings                used to                finance the acquisitions of these assets.  Major overhauls and                improvements are capitalized, while maintenance and repairs are expensed                as incurred. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Depreciation                is computed using the straight-line method over estimated service                lives,                which range as follows:  buildings and improvements, 2 to 40                years; machinery and equipment, 2 to 6 years; furniture and fixtures,                2 to                8 years; and leased assets, 2 to 6 years.  Leasehold                improvements and improvements on building and business flats are                amortized                on a straight-line basis over the shorter of the useful life of the                improvements or the lease term of the building.  In the event                that an asset depreciated to its residual value is still in service,                its                residual value is depreciated over its re-estimated service                life. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | When                property, plant and equipment are retired or disposed of, their costs                and                accumulated depreciation are removed from the accounts and any gain                or                loss is credited or charged to                income. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Asset****Impairment** |
|--------|-------------------------|

|   | The                Company evaluates whether or not there are indications that assets                (primarily property, plant and equipment, deferred charges and goodwill)                may be impaired on the balance sheet date.  If there are                indications, the Company estimates the recoverable amount for the                asset.                If an asset’s recoverable amount is lower than its carrying amount, the                carrying amount of the asset is reduced to its recoverable amount                by                recording a charge to the accumulated impairment account of the asset                and                such a reduction is recognized as impairment loss in current period                income.  When the recoverable amount subsequently increases,                then the impairment loss previously recognized would be reversed                and                recorded as a gain.  However, the carrying |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |   |
|--------|--------|
|   | **Deferred                Charges** |
|--------|-------------------------------------|

|   | Deferred                charges consist of certain intangibles and other assets, including                tools,                utility, telecommunications and computer network systems.  The                amounts are amortized over the following periods:  tools, 2                years; utility, telecommunications and computer network systems,                2 - 5                years; and others, 2 - 5 years. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Goodwill** |
|--------|--------------|

|   | Goodwill                represents the excess of the consideration paid for an acquisition                over                the fair value of identifiable net assets acquired.  Prior to                January 1, 2006, goodwill was amortized using the straight-line method                over the estimated life of 10 years.  Effective January 1, 2006,                pursuant to the newly revised SFAS No. 25, “Business                Combinations-Accounting Treatment under Purchase Method” (“ROC SFAS No.                25”), goodwill is no longer amortized and instead is tested for impairment                annually. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Employee                Stock Options** |
|--------|-------------------------------------------|

|   | All                stock-based compensation for awards granted or modified after January                1,                2004 is accounted for by an interpretation issued by the Accounting                Research and Development Foundation (“ARDF”)                of the ROC.  The compensation cost is measured based on the                intrinsic value method, for which the compensation cost for stock                options                is measured as the excess, if any, of the quoted market price of                the                Company’s stock at the date of the grant over the amount an employee must                pay to acquire the stock.  Total compensation cost is recognized                over the requisite service or vesting                period. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Pension                Costs** |
|--------|----------------------------------|

|   | For                employees under defined benefit pension plans, pension costs are                recorded                based on actuarial calculations.  Pension costs include service                cost, interest, amortization of unrecognized net obligation and expected                return on plan assets. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For                employees under defined contribution pension plans, pension costs                are                recorded based on the actual contribution made to employees’ personal                pension accounts. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Shipping                and Handling Costs** |
|--------|------------------------------------------------|

|   | Shipping                and handling costs are recorded as selling expenses and the amounts                in                2004, 2005 and 2006 were $1,705 thousand, $1,382 thousand and $1,498                thousand, respectively. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Research                and Development Costs** |
|--------|---------------------------------------------------|

|   | Research                and development costs are charged to expense as                incurred. |
|--------|--------------------------------------------------------------------------------------------------|

|   | **Income                Taxes** |
|--------|---------------------------------|

|   | The                Company uses an inter-period tax allocation method for income                tax.  Tax effects of deductible temporary differences, unused                tax credits and operating loss carryforward are recognized as deferred                income tax assets, while taxable temporary differences are recognized                as                deferred income tax liabilities.  A valuation allowance is                provided to the extent that it is more likely than not that deferred                income tax assets will not be                realized. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Tax                credits of ASE Test, Inc. from investments in machinery and equipment,                research and development and employees’ training costs are recognized in                the year acquired and expensed.  Capital allowances of ASE Test                Malaysia from investment in industrial buildings, machinery and equipment                are recognized in the year in which they are                acquired. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Adjustments                of prior years’ income taxes are added to or deducted from the current                year’s tax provision. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Income                taxes on undistributed earnings (10%) of ASE Test, Inc., the Company’s                Taiwan based subsidiary, are recorded as an expense in the year of                shareholders’ approval. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Foreign                Currency Transactions and Translation of Foreign-currency Financial                Statements** |
|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | The                functional and reporting currency of ASE Test is U.S. dollar, while                the                functional currencies of its major subsidiaries, ASE Test, Inc.,                ASE Test                Malaysia and ISE Labs, Inc. are their local currencies, namely, New                Taiwan                dollar, Malaysia Ringgit and U.S. dollar, respectively.  Foreign                currency transactions, except for derivative transactions, are recorded                in                the local currencies at the rates of exchange in effect when the                transactions occur.  Gains or losses resulting from the                application of different foreign exchange rates when foreign-currency                assets and liabilities denominated in foreign-currencies are settled                are                credited or charged to income in the year of settlement.  At the                end of year, monetary assets and liabilities denominated in                foreign-currencies are revalued at the prevailing exchange rates                and the                resulting gains or losses are recognized in current period                income. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                financial statements of the Company’s subsidiaries are translated into                U.S. dollars at the end of year using the following                rates:  Assets and liabilities, current rates at the balance                sheet date; shareholders’ equity, historical rates; and income and                expenses, average rates during the year.  The net resulting                translation adjustment is reported as a separate component of                shareholders’ equity. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Recent                Accounting Pronouncements** |
|--------|-----------------------------------------------------|

|   | In                July 2006, the ROC ARDF issued ROC SFAS No. 37, “Intangible Assets”, which                is required to be applied by the Company on January 1,                2007.  The standard                provides                guidance on initial recognition and measurement, amortization,                presentation and disclosure of intangible assets.  An                intangible asset should be measured initially at cost.  For an                intangible asset of a finite useful life; the carrying amount shall                be                amortized over its useful life. On the other hand, for an intangible                asset                with an indefinite useful life, the carrying amount shall not be                amortized.  Intangible assets shall be evaluated for impairment                at least annually as required by ROC SFAS No. 35, “Accounting                for                Impairment of Assets” (“ROC                SFAS                No. 35”).  The Company does not expect the adoption of the                standard on January 1, 2007 to have a significant impact on its results                of                operations and financial position. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In                November 2006, the ROC ARDF issued ROC SFAS No. 38, “Non-current Assets                Held for Sale and Discontinued Operations” (“ROC SFAS No. 38”), which is                also required to be applied by the Company on January 1, 2007. Under                ROC                SFAS No. 38, assets classified as held-for-sale shall be measured                at the                lower of carrying amounts or fair values and ceased to be depreciated                or                amortized.  Any impairment loss shall be recognized in current                earnings.  Assets classified as held-for-sale shall be presented                separately on the balance sheet.  ROC SFAS No. 38 also requires                the Company to disclose information of discontinued operations separately                on the statements of income and cash flows or in a                footnote.** **The Company does not expect the adoption                of the standard on January 1, 2007 to have a significant impact on                its                results of operations and financial                position. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In                March 2007, the ROC ARDF issued an interpretation which requires                ROC                companies to recognize compensation expenses for bonuses paid to                employees, directors and supervisors beginning January 1,                2008.  Such bonuses are currently recorded as appropriations of                earnings under ROC GAAP. On March 30, 2007, the ROC Financial Supervisory                Commission also issued an interpretation which requires that bonuses                granted to employees, directors and supervisors in the form of shares                be                valued at fair market value for purposes of compensation                expenses. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | **Reclassifications** |
|--------|-----------------------|

|   | Certain                accounts in the consolidated financial statements as of December                31, 2005                and for the years ended December 31, 2004 and 2005 have been reclassified                to conform to the consolidated financial statements as of and for                the year                ended December 31, 2006. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**3.        **
**ACCOUNTING      CHANGES**

|   | On                January 1, 2006, the Company adopted the newly released ROC SFAS                No. 34,                “Financial Instruments: Recognition and Measurement” (“ROC SFAS No. 34”)                and No. 36, “Financial Instruments: Disclosure and Presentation” (“ROC                SFAS No. 36”) and other revisions of previously released                SFASs. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company had categorized its financial assets and liabilities upon                initial                adoption of the newly released SFASs.  The adjustments made to                the carrying amounts of the financial instruments categorized as                financial                assets or liabilities at fair value through profit or loss were included                in the cumulative effect of changes in accounting principles; on                the other                hand, the adjustments made to the carrying amounts of those categorized                as                available-for-sale financial assets were recognized as adjustments                to                shareholders’ equity. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Upon                adoption of ROC SFAS No. 34 and No. 36 in January, carrying amounts                of the                available-for-sale financial assets were adjusted to fair value,                and the                Company recognized $83,751 thousand of unrealized gains as a separate                component of shareholders’ equity as at January 1,                2006.  Besides, there was no effect on net income for the year                ended December 31, 2006. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Effective                January 1, 2006, the Company adopted the newly revised ROC SFAS No.                5 and                No. 25, which prescribe that investment premiums, representing goodwill,                be assessed for impairment at least on an annual basis instead of                being                amortized.  Such a change in accounting principle resulted in an                increase in net income of $4,966 thousand and basic earnings per                share                (after income tax) of $0.05 for the year ended December 31,                2006. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Upon                the adoption of ROC SFAS No. 34, certain accounts in the consolidated                financial statements as of December 31, 2005 and for the years ended                December 31, 2004 and 2005 were reclassified to conform to the                consolidated financial statements as of and for the year ended December                31, 2006.  The previously issued consolidated financial                statements as of December 31, 2005 and for the years ended December                31,                2004 and 2005 were not required to be                restated. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Certain                accounting policies prior to the adoption of the newly released SFASs                are                summarized as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 1) | Short-term                investments |
|--|----|---------------------------------------|

|   | Short-term                investments were recorded at historical cost and were carried at                the lower                of cost or market value as of the balance sheet date.  An                allowance or decline in value was provided and is charged to current                income when the aggregate carrying amount of the investments exceeded                the                aggregate market value.  A reversal of the allowance was                recorded for a subsequent recovery in the aggregate market                value. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2) | Long-term                Investments |
|--|----|--------------------------------------|

|   | Investments                in companies wherein the Company did not exercise significant influence                were carried at the lower of cost or market value.  Allowances                for decline in market value and unrealized loss on long-term investments                in shares of stock (a deduction account in shareholders’ equity) were |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |   |   |
|--------|--------|--------|
|  | 3) | Derivative                financial instruments |
|--|----|-------------------------------------------------|

|  | (a) | Forward                exchange contracts |
|--|-----|-------------------------------------------|

|   | Premiums                or discounts on foreign currency forward exchange contracts which                had been                acquired to manage the risk associated with assets and liabilities                denominated in foreign currencies arising from the difference between                the                forward rate and the spot rate at the date of each contract were                deferred                and amortized using the straight-line method over the contract                periods.  At year end, balances of the forward exchange                receivables or payables were restated based on prevailing exchange                rates                and the resulting gain or loss was credited or charged to                income.  Any exchange gain or loss when the contract was settled                was also credited or charged to income.  In addition, the                receivables and payables related to the forward contracts are netted                with                the resulting amount presented as either an other current asset or                other                current liability. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | Option                contracts |
|--|-----|---------------------------------|

|   | Written                option contracts to purchase or sell foreign currencies entered into                for                hedging purposes are not recorded as assets or liabilities on the                contract                dates.  Gains or losses upon settlement were credited or charged                to income.  Amounts received or paid were amortized over each                contract period.  At year end, the outstanding written option                contracts were marked to market with charges to current                income. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | When                the Company had a legally enforceable right to set off the recognized                amount and intends either to settle on a net basis, or to realize                the                asset and the liability simultaneously, the difference between receivables                and payables was accounted for as either a current asset or current                liability; otherwise, the receivables and payables should be accounted                for                as an other current asset and other current liability,                respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Certain                accounts in the consolidated financial statements as of December                31, 2005                and for the years ended December 31, 2004 and 2005 have been reclassified                to conform to the classifications prescribed by the newly released                SFASs.  The reclassifications of the account balances of certain                accounts are summarized as follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                     |   | **Before****Reclassification** |    |   | **After****Reclassification** |   |
|------------------------------------------------------------------------------------------|--------|--------------------------------|---------|--------|-------------------------------|--------|
| Balance                sheet as of December                31, 2005                      |   |                           |    |   |                          |   |
| Prepayments                and other current                assets                       |   | $                              | 17,591  |   |                          | $      | 17,415 |   |
| Long-term                investments                                                     |   |                           | 140,225 |   |                          |   | - |   |
| Other                current                liabilities                                  |   |                           | 6,013   |   |                          |   | 5,841 |   |
| Financial                assets at fair value                through profit or loss      |   |                           | -       |   |                          |   | 176 |   |
| Available-for-sale                financial                assets – noncurrent     |   |                           | -       |   |                          |   | 81,251 |   |
| Equity                method                investments                                  |   |                           | -       |   |                          |   | 57,974 |   |
| Financial                assets carried at                cost-noncurrent                |   |                           | -       |   |                          |   | 1,000 |   |
| Financial                liabilities at fair                value through profit or loss |   |                           | -       |   |                          |   | 172 |   |
|                                                                                     |   |                           |    |   |                          |   |   |   |
| Statement                of income for                2005                               |   |                           |    |   |                          |   |   |   |
| Foreign                exchange gain,                net                                 |   |                           | 1,388   |   |                          |   | 703 |   |
| Gain                on valuation of financial                assets, net                 |   |                           | -       |   |                          |   | 685 |   |
|                                                                                     |   |                           |    |   |                          |   |   |   |

----

|                                                                     |   | **Before****Reclassification** |   |   | **After****Reclassification** |   |
|--------------------------------------------------------------------------|--------|--------------------------------|--------|--------|-------------------------------|--------|
| Statement                of income for                2004               |   |                           |   |   |                          |   |
| Foreign                exchange gain (loss),                net          |   | $                              | 175    |   |                          | $      | (139 | ) |
| Gain                on valuation of financial                assets, net |   |                           | -      |   |                          |   | 314 |   |

**4.        **
**CASH**

|                                                       |   | **December                31** |    |
|------------------------------------------------------------|--------|--------------------------------|---------|
|                                                       |   | **2005**                       |    |   | **2006** |   |
|                                                       |   |                           |    |   |   |   |
| Cash                on hand                                |   | $                              | 22      |   |   | $ | 21 |   |
| Checking                and saving                accounts |   |                           | 77,382  |   |   |   | 62,162 |   |
| Time                deposits                               |   |                           | 60,807  |   |   |   | 27,532 |   |
|                                                       |   |                           |    |   |   |   |   |   |
|                                                       |   | $                              | 138,211 |   |   | $ | 89,715 |   |

**5.        **
**FINANCIAL      INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS**

|                                                                     |   | **December                31** |   |
|--------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                     |   | **2005**                       |   |   | **2006** |   |
|                                                                     |   |                           |   |   |   |   |
| Financial                assets held for                trading          |   |                           |   |   |   |   |
| Forward                exchange                contracts                 |   | $                              | 176    |   |   | $ | - |   |
|                                                                     |   |                           |   |   |   |   |   |   |
| Financial                liabilities incurred                for trading |   |                           |   |   |   |   |   |   |
| Forward                exchange                contracts                 |   | $                              | 172    |   |   | $ | 262 |   |

|   | The                Company entered into derivative contracts during the years ended                December                31, 2005 and 2006 to manage exposures to foreign exchange rate                risk.  The derivative contracts entered into by the Company did                not qualify for hedge accounting prescribed by ROC SFAS No. 34 and                therefore were classified as financial instruments at fair value                through                profit or loss. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Outstanding                put forward contracts as of December 31, 2005 and                2006: |
|--------|---------------------------------------------------------------------------------------------------|

| **Currency**                     | **Maturity                Date** | **Contract                Amount****(in                Thousands)** |
|----------------------------------|----------------------------------|---------------------------------------------------------------------|
|                             |                             |                                                                |
| December                31, 2005 |                             |                                                                |
| USD/JPY                          | 2006/03/02                       | USD                172 / JPY 20,000                                 |
|                             |                             |                                                                |
| December                31, 2006 |                             |                                                                |
| USD/NTD                          | 2007/01/22~2007/03/01            | USD                42,000/NTD 1,352,500                             |
|                             |                             |                                                                |

|   | For                the years ended December 31, 2005 and 2006, financial instruments                held or                incurred for trading purposes resulted in net gains of $685 thousand                and                net losses of $1,731 thousand,                respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**6.        **
**AVAILABLE-FOR-SALE      FINANCIAL ASSETS**

|                                                |   | **December                31** |   |
|-----------------------------------------------------|--------|--------------------------------|--------|
|                                                |   | **2005**                       |   |   | **2006** |   |
| Current                                             |   |                           |   |   |   |   |
| Open-end                mutual                funds |   | $                              | -      |   |   | $ | 89,341 |   |
|                                                |   |                           |   |   |   |   |   |   |
| Noncurrent                                          |   |                           |   |   |   |   |   |   |
| Publicly-traded                stocks               |   | $                              | 81,251 |   |   | $ | 204,851 |   |

|   | As                of December 31, 2005 and 2006, the Company held 180,132,187 shares                of                common stock of ASE Inc. With respect to the trust arrangement, in                order                to comply with applicable Singapore laws, which provide that the                Company                may not acquire, directly or indirectly, shares in its parent company,                ASE                Inc., a trust was established jointly by ASE Inc. and the Company                to hold                and dispose of the ASE Inc. shares acquired by the Company in connection                with the merger (Note 9).  Pursuant to the trust agreement, the                Company’s rights with respect to the ASE Inc. shares held in trust are                limited to the right to receive the proceeds from the sale of the                shares                and any cash dividends declared while the shares remain in                trust.  The trustee is authorized to sell the shares, subject to                market conditions, when such shares become available for resale under                ROC                law and in accordance with volume limitations under ROC law, at its                sole                discretion; provided such shares are sold  (i) in compliance                with ROC laws and regulations,  (ii) in an orderly manner in                order to minimize the impact on the trading price of the shares,                and  (iii) in a manner consistent with its fiduciary duties owed                to the Company. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**7.        **
**NOTES      AND ACCOUNTS RECEIVABLE, NET**

|                                                                   |   | **December                31** |   |
|------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                   |   | **2005**                       |   |   | **2006** |   |
|                                                                   |   |                           |   |   |   |   |
| Notes                receivable                                        |   | $                              | 68     |   |   | $ | 180 |   |
| Accounts                receivable                                     |   |                           | 82,744 |   |   |   | 60,017 |   |
| Allowance                for doubtful accounts                (Note 2) |   |                           | (5,023 | ) |   |   | (2,175 | ) |
| Allowance                for sales allowances                (Note 2)  |   |                           | (455   | ) |   |   | (147 | ) |
|                                                                   |   |                           |   |   |   |   |   |   |
|                                                                   |   | $                              | 77,334 |   |   | $ | 57,875 |   |

|   | The                changes in allowances for sales allowances and doubtful accounts                are as                follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|                                                       |   | **Doubtful** |   |   | **Sales**      |   |
|------------------------------------------------------------|--------|--------------|--------|--------|----------------|--------|
|                                                       |   | **Accounts** |   |   | **Allowances** |   |
|                                                       |   |         |   |   |           |   |
| Balance                at January 1,                2004   |   | $            | 2,386  |   |           | $      | 880 |   |
| Additions                                                  |   |         | 2,391  |   |           |   | 100 |   |
| Write-offs                                                 |   |         | (233   | )      |           |   | (111 | ) |
| Balance                at December 31,                2004 |   |         | 4,544  |   |           |   | 869 |   |
| Additions                                                  |   |         | 1,109  |   |           |   | 313 |   |
| Write-offs                                                 |   |         | (630   | )      |           |   | (727 | ) |
| Balance                at December 31,                2005 |   |         | 5,023  |   |           |   | 455 |   |
| Additions                                                  |   |         | 56     |   |           |   | - |   |
| Reversal                                                   |   |         | (1,932 | )      |           |   | (205 | ) |
| Write-offs                                                 |   |         | (972   | )      |           |   | (103 | ) |
|                                                       |   |         |   |   |           |   |   |   |
| Balance                at December 31,                2006 |   | $            | 2,175  |   |           | $      | 147 |   |

----

|   | In                November 2005, ASE Test, Inc. and its parent company, ASE Inc., entered                into a $100 million, three-year revolving accounts receivable                securitization agreement with a bank and the credit line was increased                to                $200 million in June, 2006. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under                the agreement, ASE Test, Inc. and ASE Inc. transferred a pool of                accounts                receivable to the bank, who issued securities backed by these accounts                receivable.  Proceeds received from the bank were the net                carrying value of the pool of accounts receivable, less a deferred                purchase price receivable at 20% of accounts receivable sold, guarantee                deposit, program fee and other related expenses.  The Company                lost control of these accounts receivable at the time of transfer                to the                bank, and therefore the transaction was accounted for as a sale of                accounts receivable, for which the book value of the accounts receivable                was derecognized and the difference between the book value and the                proceeds received was recorded as a non-operating loss.  The                loss on sale of accounts receivable was $74 thousand and $1,028 thousand                for the years ended December 31, 2005 and 2006,                respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | After                the transfer of the accounts receivable, the Company continues to                service,                administer, and collect these accounts receivable on behalf of the                bank.  The Company collects on the initial receivables and                transfers certain new accounts receivable having similar value to                replace                the collected receivables.  Collected receivables not yet                replaced by new accounts receivable due to timing difference are                recorded                as other current liability on the balance sheet, which amounted to                $4,397                thousand and $4,913 thousand as of December 31, 2005 and 2006,                respectively.  Total accounts receivable sold was $9,525                thousand and $12,463 thousand as of December 31, 2005 and 2006,                respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**8.        **
**INVENTORIES**

|                                                     |   | **December                31** |   |
|----------------------------------------------------------|--------|--------------------------------|--------|
|                                                     |   | **2005**                       |   |   | **2006** |   |
|                                                     |   |                           |   |   |   |   |
| Raw                materials                             |   | $                              | 9,334  |   |   | $ | 10,304 |   |
| Work                in process                           |   |                           | 4,272  |   |   |   | 2,333 |   |
| Finished                goods                            |   |                           | 2,393  |   |   |   | 1,831 |   |
| Supplies                and spare                parts   |   |                           | 6,460  |   |   |   | 5,810 |   |
| Supplies                in                transit        |   |                           | 434    |   |   |   | 694 |   |
|                                                     |   |                           | 22,893 |   |   |   | 20,972 |   |
| Allowance                for                obsolescence |   |                           | (1,654 | ) |   |   | (4,037 | ) |
|                                                     |   |                           |   |   |   |   |   |   |
|                                                     |   | $                              | 21,239 |   |   | $ | 16,935 |   |

|   | The                changes in allowance for obsolescence are as                follows: |
|--------|-----------------------------------------------------------------------------------------|

| Balance                at January 1,                2004   |   | $      | 876    |   |
|------------------------------------------------------------|--------|--------|--------|--------|
| Additions                                                  |   |   | 914    |   |
| Write-offs                                                 |   |   | (1,150 | )      |
| Balance                at December 31,                2004 |   |   | 640    |   |
| Additions                                                  |   |   | 2,204  |   |
| Write-offs                                                 |   |   | (1,190 | )      |
| Balance                at December 31,                2005 |   |   | 1,654  |   |
| Additions                                                  |   |   | 4,845  |   |
| Write-offs                                                 |   |   | (2,462 | )      |
|                                                       |   |   |   |   |
| Balance                at December 31,                2006 |   | $      | 4,037  |   |

----

**9.**
**EQUITY      METHOD      INVESTMENTS**

|  |   | The                investment in ASE Investment (Labuan) Inc. (incorporated in Malaysia                in                June 1999) was made in connection with the acquisition of the operation                of                the Motorola Semiconductor Products Sector Businesses in Paju,                Korea.  As of December 31, 2005 and 2006, the Company held a 30%                ownership interest in ASE Investment (Labuan) Inc. at a carrying                amount of                $57,974 thousand and $75,979 thousand,                respectively. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | Investment                income under the equity method was as                follows: |
|--|--------|-----------------------------------------------------------------------------------------|

|                                                       |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                                       |   |     |   |   |     |   |   |     |   |
| ASE                Investment (Labuan)                Inc. |   | $        | 3,569  |   |     | $      | 6,637  |     |   | $ | 18,005 |   |
| ASE                Material                Inc.            |   |     | 1,068  |   |     |   | -      |     |   |   | - |   |
| ASE                (Chung Li)                Inc.          |   |     | 5,207  |   |     |   | -      |     |   |   | - |   |
|                                                       |   |     |   |   |     |   |   |     |   |   |   |   |
|                                                       |   | $        | 9,844  |   |     | $      | 6,637  |     |   | $ | 18,005 |   |

|  |   | ASE                Material Inc. and ASE (Chung Li) Inc. were merged into ASE Inc. and                the                Company received ASE Inc.’s shares in exchange for its ownership interest                in the two companies. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**10.**
**PROPERTY,      PLANT AND EQUIPMENT, NET**

|                                                                  |   | **December                31** |      |
|-----------------------------------------------------------------------|--------|--------------------------------|-----------|
|                                                                  |   | **2005**                       |      |   | **2006** |   |
| Cost                                                                  |   |                           |      |   |   |   |
| Buildings                and                improvements              |   | $                              | 113,688   |   |   | $ | 114,296 |   |
| Machinery                and                equipment                 |   |                           | 1,001,430 |   |   |   | 927,249 |   |
| Furniture                and                fixtures                  |   |                           | 19,091    |   |   |   | 18,964 |   |
| Leased                assets - machinery and                equipment |   |                           | 10,464    |   |   |   | 23,259 |   |
| Machinery                in transit and                prepayments    |   |                           | 15,137    |   |   |   | 8,515 |   |
| Construction                in                progress                |   |                           | 372       |   |   |   | 12 |   |
|                                                                  |   |                           | 1,160,182 |   |   |   | 1,092,295 |   |
| Accumulated                depreciation                               |   |                           |      |   |   |   |   |   |
| Buildings                and                improvements              |   |                           | 46,713    |   |   |   | 52,700 |   |
| Machinery                and                equipment                 |   |                           | 634,835   |   |   |   | 630,496 |   |
| Furniture                and                fixtures                  |   |                           | 13,310    |   |   |   | 14,581 |   |
| Leased                assets - machinery and                equipment |   |                           | 2,074     |   |   |   | 5,083 |   |
|                                                                  |   |                           | 696,932   |   |   |   | 702,860 |   |
| Accumulated                impairment                                 |   |                           |      |   |   |   |   |   |
| Buildings                and                improvements              |   |                           | 402       |   |   |   | - |   |
| Machinery                and                equipment                 |   |                           | 28,549    |   |   |   | - |   |
| Furniture                and                fixtures                  |   |                           | 271       |   |   |   | - |   |
| Machinery                in transit and                prepayments    |   |                           | 3,834     |   |   |   | - |   |
| Construction                in                progress                |   |                           | 115       |   |   |   | - |   |
|                                                                  |   |                           | 33,171    |   |   |   | - |   |
|                                                                  |   |                           |      |   |   |   |   |   |
|                                                                  |   | $                              | 430,079   |   |   | $ | 389,435 |   |

----

|   | Capitalized                interest consists of the following: |
|--------|----------------------------------------------------------------|

|                                                                                |   | **2004** |      |   | **2005** |   |      | **2006** |   |
|-------------------------------------------------------------------------------------|--------|----------|-----------|--------|----------|--------|-----------|----------|--------|
|                                                                                |   |     |      |   |     |   |      |     |   |
| Total                interest expense                including capitalized interest |   | $        | 9,609     |   |     | $      | 13,622    |     |   | $ | 13,568 |   |
| Less:  capitalized                interest                                |   |     | 2,844     |   |     |   | 878       |     |   |   | 403 |   |
|                                                                                |   |     |      |   |     |   |      |     |   |   |   |   |
| Interest                expense                                                     |   | $        | 6,765     |   |     | $      | 12,744    |     |   | $ | 13,165 |   |
|                                                                                |   |     |      |   |     |   |      |     |   |   |   |   |
| Capitalization                rate                                                  |   |     | 2.46-3.93 | %      |     |   | 2.32-3.94 | %        |   |   | 1.75-5.67 | % |

**11.**
**GOODWILL**

|  |   | The                Company adopted ROC SFAS No. 35 on December 31, 2004, and recognized                an                impairment loss on goodwill of $26,500 thousand, which was determined                based on the amount by which the carrying amount of the cash-generating                unit exceeded its recoverable amount.  The Company identified                the goodwill related to the cash generating unit of ISE                Labs.  The recoverable amount was the “value-in-use” of ISE                Labs, which was determined based on six-years of projected cash flows,                discounted at a rate of 9.58%.  The Company attributed the                impairment of goodwill associated with the acquisition of ISE Labs                primarily to a downward revision in the forecasted revenue of ISE                Labs.  The reduction in forecasted revenues was made in response                to company estimates and industry trend data that suggested the outlook                for semiconductor industry, and ISE Labs in particular, was less                favorable                than in prior years, including the year in which the Company acquired                its                interest in ISE Labs.  The Company performed its annual goodwill                impairment test on December 31, 2005 and 2006, and found no                impairment.  As described in Note 2, the goodwill was no longer                amortized under ROC SFAS No. 25 after January 1, 2006. Amortization                of the                goodwill is reflected in general and administrative expenses in the                consolidated statements of income and was $10,105 thousand and $4,966                thousand for each of the years ended December 31, 2004 and                2005. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**12.**
**LONG-TERM      DEBTS**

|                                                             |   | **December                31** |    |
|------------------------------------------------------------------|--------|--------------------------------|---------|
|                                                             |   | **2005**                       |    |   | **2006** |   |
|                                                             |   |                           |    |   |   |   |
| Bank                loans                                        |   | $                              | 288,094 |   |   | $ | 105,039 |   |
| Capital                lease obligation (Note                20) |   |                           | 6,952   |   |   |   | 15,085 |   |
|                                                             |   |                           | 295,046 |   |   |   | 120,124 |   |
| Less:  Current                portion                  |   |                           | (49,743 | ) |   |   | (34,418 | ) |
|                                                             |   |                           |    |   |   |   |   |   |
|                                                             |   | $                              | 245,303 |   |   | $ | 85,706 |   |

|  | a. | Bank                loans |
|--|----|---------------------------|

|                                                                                                                                                                                                    |   | **December                31** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                                                                                                                                                    |   | **2005**                       |   |   | **2006** |   |
| ASE                Test, Inc.                                                                                                                                                                           |   |                           |   |   |   |   |
| Repayment                at maturity in August                2007, interest at 1.98% and  2.25%                as of                December 31, 2005 and 2006, respectively                 |   | $                              | 15,216 |   |   | $ | 15,339 |   |
| Repayable                by December 2009 in                quarterly installments, interest at  2.50%                and 2.69% as                of December 31, 2005 and 2006, respectively |   |                           | 7,273  |   |   |   | 5,640 |   |
| Repayable                by May 2008 in                semi-annual installments, interest at  3.10%                as of                December 31, 2005 and 2006, respectively              |   |                           | 7,303  |   |   |   | 3,682 |   |
| Others,                repaid in 2006,                interest from 2.50% to 3.70% as of December 31,2005                                                                                               |   |                           | 48,107 |   |   |   | - |   |
|                                                                                                                                                                                                    |   |                           | 77,899 |   |   |   | 24,661 |   |

----

|                                                                                                                                                                                          |   | **December                31** |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|---------|
|                                                                                                                                                                                          |   | **2005**                       |    |   | **2006** |   |
| ISE                Labs                                                                                                                                                                       |   |                           |    |   |   |   |
| Repayable                by March 2009 in quarterly installments, interest at 4.70%and                6.10% as of December 31, 2005 and 2006, respectively                                    |   | $                              | 1,745   |   |   | $ | 1,235 |   |
| Repayable                by July 2009 in quarterly installments, interest at 4.20%and                6.10% as of December 31, 2005 and 2006, respectively                                     |   |                           | 1,523   |   |   |   | 1,143 |   |
| Repaid                in September 2006, interest at 5.25% as of December 31,                2005                                                                                             |   |                           | 607     |   |   |   | - |   |
|                                                                                                                                                                                          |   |                           | 3,875   |   |   |   | 2,378 |   |
| ASE                Test Malaysia                                                                                                                                                              |   |                           |    |   |   |   |   |   |
| Repaid                in March 2006, interest from 5.00% to 5.29% as of December                31,2005                                                                                       |   |                           | 13,320  |   |   |   | - |   |
|                                                                                                                                                                                          |   |                           |    |   |   |   |   |   |
| ASE                Test Finance                                                                                                                                                               |   |                           |    |   |   |   |   |   |
| Repayable                in semi-annual installments from August 2008 to August 2010,interest                at 5.45% and 6.23% as of December 31, 2005 and 2006,                respectively |   |                           | 78,000  |   |   |   | 78,000 |   |
| Repaid                in December 2006, interest at 5.73% as of December 31,                2005                                                                                              |   |                           | 115,000 |   |   |   | - |   |
|                                                                                                                                                                                          |   |                           | 193,000 |   |   |   | 78,000 |   |
|                                                                                                                                                                                          |   |                           |    |   |   |   |   |   |
|                                                                                                                                                                                          |   | $                              | 288,094 |   |   | $ | 105,039 |   |

|  |   | Bank                loans obtained by ASE Test Finance were restricted for the use in                the                redemption of ASE Test Finance’s and the Company’s loans.  The                Company and ASE Inc. provided guarantees for ASE Test Finance’s payment                obligations under the $78,000 thousand loan.  Under the                guaranty, the Company is required to maintain certain financial ratios                and                the tangible net worth of the Company shall not be less than $450                million                at any time. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | Several                loan agreements specify the following non-financial                covenants: |
|--|--------|------------------------------------------------------------------------------------------------------|

|  |   | Without                the prior written consent from the majority of the banks, the Company                should not: |
|--|--------|-------------------------------------------------------------------------------------------------------------------------|

|   | a) | Pledge                its assets, assume liabilities or dispose of assets in excess of                20% of                total assets, unless the transaction involves a transfer of assets                between                affiliates.  Assets in exchange for other comparable or superior                as to type are excluded from this covenant;                or |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | Merge                with any other entity or make investments in excess of $100 million                or                acquire material assets from another                entity. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | The                abovementioned bank loan contracts have variable interest rates and                are                subject to adjustments by banks or changes in prime rate.  In                addition, several of the loan agreements have default provisions,                whereby                a default under one loan agreement may also trigger cross-defaults                under                other loan agreements. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | As                of December 31, 2005 and 2006, the Company was in compliance with                its                financial and non-financial                covenants. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | Long-term                debt by currencies other than U.S. dollars as of December 31, 2005                and                2006 is as follows: |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|                                             |   | **December                31**                               |
|--------------------------------------------------|--------|--------------------------------------------------------------|
|                                             |   | **2005**                                                     | **2006** |
|                                             |   | (In                thousands)                                | (In                thousands) |
|                                             |   |                                                         |   |
| New                Taiwan                dollars |   | NT$        2,559,760 | NT$       803,845 |

----

|  |   | Such                amounts have been translated into U.S. dollars at the spot rates                quoted by                the Bank of Taiwan of NT$32.86 to US$1 and NT$32.596 to US$1 as of                December 31, 2005 and 2006,                respectively. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | As                of December 31, 2006, the maturities of long-term debts are as                follows: |
|--|--------|----------------------------------------------------------------------------------------------------------|

| 2007   |   | $      | 34,418  |   |
|--------|--------|--------|---------|--------|
| 2008   |   |   | 20,564  |   |
| 2009   |   |   | 33,940  |   |
| 2010   |   |   | 31,202  |   |
|   |   |   |    |   |
|   |   | $      | 120,124 |   |

**13.**
**SHAREHOLDERS’      EQUITY**

|  |   | As                stipulated by the Company Law of the ROC, the Company's subsidiary                in the                ROC is required to make an appropriation for legal capital reserve                at 10%                of net income as determined in accordance with ROC GAAP.  Use of                the legal capital reserve is restricted to certain purposes, including                the                offset of a deficit, and the transfer of up to 50% of the legal capital                reserve to capital stock when the legal capital reserve has reached                50% of                total capital stock.  As of December 31, 2006, the legal capital                reserve approximated US$26,770 thousand and was not available for                distribution. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | As                of December 31, 2006, the Company had three stock option plans, the                1999,                2000 and 2004 Option Plans.  Stock options granted under these                plans are exercisable for ordinary shares of the Company and vest                ratably                over a period of three or five years.  The options expire five                or ten years from the date of                grant. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | Information                regarding stock options granted or modified after January 1, 2004                is                presented below: |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | ASE                Test |
|--|--------|-------------------------|

|                                        |   | **2004**                     |    |   | **2005**                     |   |   | **2006**                      |   |
|---------------------------------------------|--------|------------------------------|---------|--------|------------------------------|--------|--------|-------------------------------|--------|
|                                        |   |                         |    |   | **Weighted**                 |   |   |                          |   |   |   |   |   | **Weighted** |   |   |   |   |   |   |   |   | **Weighted** |   |   |   |   |
|                                        |   |                         |    |   | **Average**                  |   |   | **Weighted**                  |   |   |   |   |   | **Average** |   |   | **Weighted** |   |   |   |   |   | **Average** |   |   | **Weighted** |   |
|                                        |   |                         |    |   | **Exercise**                 |   |   | **Average**                   |   |   |   |   |   | **Exercise** |   |   | **Average** |   |   |   |   |   | **Exercise** |   |   | **Average** |   |
|                                        |   | **Number                of** |    |   | **Price**                    |   |   | **Grant                Date** |   |   | **Number                of** |   |   | **Price** |   |   | **Grant                Date** |   |   | **Number                of** |   |   | **Price** |   |   | **Grant                Date** |   |
|                                        |   | **Shares**                   |    |   | **Per                Share** |   |   | **Fair                Value** |   |   | **Shares** |   |   | **Per                Share** |   |   | **Fair                Value** |   |   | **Shares** |   |   | **Per                Share** |   |   | **Fair                Value** |   |
|                                        |   |                         |    |   |                         |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning                outstandingbalance |   |                         | -       |   |                         | $      | -      |                          |   |   |   |   |   | 260,000 |   |   | $ | 6.18 |   |   |   |   |   |   | 292,500 |   |   | $ | 6.21 |   |   |   |   |
| Options                granted              |   |                         | 260,000 |   |                         |   | 6.18   |                          |   | $ | 6.18 |   |   |   | 32,500 |   |   |   | 6.50 |   |   | $ | 6.50 |   |   |   | 130,000 |   |   |   | 9.60 |   |   | $ | 9.60 |   |
| Options                exercised            |   |                         | -       |   |                         |   | -      |                          |   |   |   |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | (9,000 | ) |   |   | 6.10 |   |   |   |   |   |
| Options                forfeited            |   |                         | -       |   |                         |   | -      |                          |   |   |   |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   |   |   |
| Options                expired              |   |                         | -       |   |                         |   | -      |                          |   |   |   |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   |   |   |
|                                        |   |                         |    |   |                         |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending                outstandingbalance    |   |                         | 260,000 |   |                         |   | 6.18   |                          |   |   |   |   |   |   | 292,500 |   |   |   | 6.21 |   |   |   |   |   |   |   | 413,500 |   |   |   | 7.28 |   |   |   |   |   |

|  |   | Options                outstanding on December 31, 2006, the related weighted average exercise                price and remaining contractual life information are as                follows: |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                          |   |   | **Outstanding                Shares** |   |    | **Exercisable                Shares** |   |   | **Weighted****Average****Remaining****Life                (Years)** |   |
|---------------------------------------------------------------|--------|--------|---------------------------------------|--------|---------|---------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                                                          |   |   |                                  |   |    |                                  |   |   |                                                                |   |
| Options                with exercise price                of: |   |   |                                  |   |    |                                  |   |   |                                                                |   |
| $5.50                                                         |        |   |                                  |   | 60,000  |                                  |   |   | 24,000                                                              |   |   |   | 7.6 |   |
| $6.10                                                         |        |   |                                  |   | 51,000  |                                  |   |   | 15,000                                                              |   |   |   | 7.8 |   |
| $6.50                                                         |        |   |                                  |   | 172,500 |                                  |   |   | 76,500                                                              |   |   |   | 7.6 |   |
| $9.79                                                         |        |   |                                  |   | 115,000 |                                  |   |   | 11,500                                                              |   |   |   | 9.3 |   |
| $8.10                                                         |        |   |                                  |   | 15,000  |                                  |   |   | 7,500                                                               |   |   |   | 9.6 |   |
|                                                          |   |   |                                  |   |    |                                  |   |   |                                                                |   |   |   |   |   |
|                                                          |   |   |                                  |   | 413,500 |                                  |   |   | 134,500                                                             |   |   |   |   |   |

----

|  |   | The                Company has computed, for pro forma disclosure purposes, the fair                value of                options granted using the Black-Scholes option pricing model with                the                following assumptions: |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  | **2004**               | **2005**               | **2006**                 |
|-------------------------------------------------------|------------------------|------------------------|--------------------------|
|                                                  |                   |                   |                     |
| Risk-free                interest                rate | 3.50%-3.88%            | 3.88%                  | 4.88%                    |
| Expected                life                          | 5                years | 5                years | 3-5                years |
| Expected                volatility                    | 78.28%                 | 59.06%                 | 59.95-62.03%             |
| Expected                dividend                      | 0%                     | 0%                     | 0%                       |

|  |   | ASE                Inc. |
|--|--------|-------------------------|

|  |   | ASE                Inc., the parent company, has two option plans, which were adopted                in 2002                and 2004.  Under the terms of the plans, stock options are                granted to employees including those of the Company.  The option                rights expire ten years from the date of grant.  On the second                anniversary of the grant date, 40% of the options become vested and                the                remaining options vest ratably over a period of three years                thereafter. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | Information                regarding the ASE Inc.’s stock option plans for the Company and its                subsidiaries is as follows: |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|                                        |   | **2004**                     |       |   | **2005**                     |   |   | **2006**                      |   |
|---------------------------------------------|--------|------------------------------|------------|--------|------------------------------|--------|--------|-------------------------------|--------|
|                                        |   |                         |       |   | **Weighted**                 |   |   |                          |   |   |   |   |   | **Weighted** |   |   |   |   |   |   |   |   | **Weighted** |   |   |   |   |
|                                        |   |                         |       |   | **Average**                  |   |   | **Weighted**                  |   |   |   |   |   | **Average** |   |   | **Weighted** |   |   |   |   |   | **Average** |   |   | **Weighted** |   |
|                                        |   |                         |       |   | **Exercise**                 |   |   | **Average**                   |   |   |   |   |   | **Exercise** |   |   | **Average** |   |   |   |   |   | **Exercise** |   |   | **Average** |   |
|                                        |   | **Number                of** |       |   | **Price**                    |   |   | **Grant                Date** |   |   | **Number                of** |   |   | **Price** |   |   | **Grant                Date** |   |   | **Number                of** |   |   | **Price** |   |   | **Grant                Date** |   |
|                                        |   | **Shares**                   |       |   | **Per                Share** |   |   | **Fair                Value** |   |   | **Shares** |   |   | **Per                Share** |   |   | **Fair                Value** |   |   | **Shares** |   |   | **Per                Share** |   |   | **Fair                Value** |   |
|                                        |   |                         |       |   |                         |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning                outstandingbalance |   |                         | 38,852,400 |   |                         | $      | 0.58   |                          |   |   |   |   |   | 61,752,100 |   |   | $ | 0.60 |   |   |   |   |   |   | 52,926,580 |   |   | $ | 0.60 |   |   |   |   |
| Options                granted              |   |                         | 25,499,500 |   |                         |   | 0.79   |                          |   | $ | 0.79 |   |   |   | 3,000,000 |   |   |   | 0.57 |   |   | $ | 0.57 |   |   |   | - |   |   |   | - |   |   | $ | - |   |
| Options                forfeited            |   |                         | (2,261,800 | )      |                         |   | 0.58   |                          |   |   |   |   |   |   | (5,126,800 | ) |   |   | 0.58 |   |   |   |   |   |   |   | (2,489,000 | ) |   |   | 0.62 |   |   |   |   |   |
| Options                expired              |   |                         | -          |   |                         |   | -      |                          |   |   |   |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   |   |   |
| Options                exercised            |   |                         | (338,000   | )      |                         |   | 0.56   |                          |   |   |   |   |   |   | (6,698,720 | ) |   |   | 0.49 |   |   |   |   |   |   |   | (9,908,710 | ) |   |   | 0.58 |   |   |   |   |   |
|                                        |   |                         |       |   |                         |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending                outstandingbalance    |   |                         | 61,752,100 |   |                         |   | 0.67   |                          |   |   |   |   |   |   | 52,926,580 |   |   |   | 0.60 |   |   |   |   |   |   |   | 40,528,870 |   |   |   | 0.61 |   |   |   |   |   |

|  |   | Options                outstanding on December 31, 2006, the related weighted average exercise                price and remaining contractual life information are as                follows: |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                      |   |   | **Outstanding                Shares** |   |       | **Exercisable                Shares** |   |   | **Weighted****Average****Remaining****Life                (Years)** |   |
|-----------------------------------------------------------|--------|--------|---------------------------------------|--------|------------|---------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
| Options                with exercise                price |   |   |                                  |   |       |                                  |   |   |                                                                |   |
| $0.49                                                     |        |   |                                  |   | 15,222,300 |                                  |   |   | 9,936,500                                                           |   |   |   | 6.0 |   |
| $0.64                                                     |        |   |                                  |   | 4,327,170  |                                  |   |   | 2,302,690                                                           |   |   |   | 6.6 |   |
| $0.70                                                     |        |   |                                  |   | 18,564,400 |                                  |   |   | 7,372,700                                                           |   |   |   | 7.5 |   |
| $0.57                                                     |        |   |                                  |   | 2,415,000  |                                  |   |   | -                                                                   |   |   |   | 8.4 |   |
|                                                      |   |   |                                  |   |       |                                  |   |   |                                                                |   |   |   |   |   |
|                                                      |   |   |                                  |   | 40,528,870 |                                  |   |   | 19,611,890                                                          |   |   |   |   |   |

|  |   | The                fair value of the common stock options issued was determined using                a                Black-Scholes option pricing model with the following                assumptions: |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  | **2004**               | **2005**               |
|-------------------------------------------------------|------------------------|------------------------|
|                                                  |                   |                   |
| Risk-free                interest                rate | 2.50%                  | 1.80%                  |
| Expected                life                          | 5                years | 5                years |
| Expected                volatility                    | 59%                    | 47%                    |
| Expected                dividend                      | 3%                     | 3%                     |

----

|  |   | For                purposes of pro forma disclosure, the estimated fair values of the                options                are amortized to expense ratably over the option vesting                periods.  Had the Company recorded compensation costs based on                the estimated grant date fair value, the Company’s net income (loss) and                earnings (loss) per share (in U.S. dollars) would have been as                follows: |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                           |   | **2004** |   |   | **2005** |   |    | **2006** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|---------|----------|--------|
|                                                                                                                                                                                                           |   |     |   |   |     |   |    |     |   |
| Net                income                (loss)                                                                                                                                                                |   | $        | 25,139 |   |     | $      | (35,484 | )        |   | $ | 150,769 |   |
| Stock-based                compensation                expense (net of related tax effect)                                                                                                                     |   |     |   |   |     |   |    |     |   |   |   |   |
| From                the                Company                                                                                                                                                                 |   |     | (97    | )      |     |   | (209    | )        |   |   | (317 | ) |
| From                ASE Inc.                                                                                                                                                                                   |   |     | (2,407 | )      |     |   | (9,084  | )        |   |   | (8,486 | ) |
|                                                                                                                                                                                                           |   |     |   |   |     |   |    |     |   |   |   |   |
| Pro                forma net income                (loss)                                                                                                                                                      |   | $        | 22,635 |   |     | $      | (44,777 | )        |   | $ | 141,966 |   |
|                                                                                                                                                                                                           |   |     |   |   |     |   |    |     |   |   |   |   |
| Basic                EPS                          As                reported |   | $        | 0.25   |   |     | $      | (0.35   | )        |   | $ | 1.51 |   |
| Pro                forma                                                                                                                                                                                       |   | $        | 0.23   |   |     | $      | (0.45   | )        |   | $ | 1.42 |   |
|                                                                                                                                                                                                           |   |     |   |   |     |   |    |     |   |   |   |   |
| Diluted                EPS                       As                reported                 |   | $        | 0.25   |   |     | $      | (0.35   | )        |   | $ | 1.50 |   |
| Pro                forma                                                                                                                                                                                       |   | $        | 0.23   |   |     | $      | (0.45   | )        |   | $ | 1.41 |   |

**14.**
**PENSION      PLAN**

|  |   | The                Labor Pension Act (the “Act”), which took effect in the ROC on July 1,                2005, provides for a pension mechanism that is deemed a defined                contribution pension plan.  The employees who were subject to                the Labor Standards Law of the ROC before the enforcement of this                Act may                choose to be subject to the pension mechanism under this Act or may                continue to be subject to the pension mechanism under the Labor Standards                Law.  For those employees who were subject to the Labor                Standards Law before July 1, 2005, work for the same company after                July 1,                2005 and choose to be subject to the pension mechanism under the                Act,                their service years as of July 1, 2005 will be retained.  Under                the Act, the rate of an employer’s monthly contribution to the employees’                personal pension accounts should not be less than 6% of each employee’s                monthly salary or wage.  Thus, since July 1, 2005, ASE Test,                Inc. has made monthly contributions based on each employee’s salary or                wage to personal pension accounts, and recognized pension costs of                $885                thousand and $1,984 thousand for each year ended December 31, 2005                and                2006. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | ASE                Test, Inc. has a defined benefit pension plan for its regular                employees.  Retirement benefits are based on the length of                service and average salaries or wages of the last six months before                retirement.  ASE Test, Inc. makes monthly contributions, at 2%                of salaries and wages, to plan assets which are in the name of, and                are                administered by, the employee pension plan committee and are deposited                in                the Central Trust of China (the “CTC”), an ROC government                agency.  Besides, ASE Test, Inc. also accrued pension cost of                executive managers.  Pension cost for executive managers was $11                thousand and $288 thousand in 2005 and 2006, respectively.  As                of December 31, 2005 and 2006, accrued pension cost of aforementioned                plan                was $11 thousand and $299 thousand,                respectively. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | ISE                Labs, Inc. has a defined contribution plan (“401k plan”) for eligible                employees.  This plan permits employees to make contributions up                to the maximum limits allowable under the U.S. Internal Revenue Code                Section 401k.  ASE Test Malaysia and ASE Singapore Pte Ltd. also                have a defined contribution plan.  The Company has no other                post-retirement or post-employment benefit                plans. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | As                of December 31, 2006, allocations by investment type of the plan                assets                deposited in the CTC are as                follows: |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **Type                of                Investment** |   | **Allocation                (%)** |                    |
|------------------------------------------------------|--------|-----------------------------------|-------------------------|
|                                                 |   |                              |                    |
| Cash                                                 |   |                              | 46                      |   |
| Notes                                                |   |                              | 18                      |   |
| Equity                                               |   |                              | 17                      |   |
| Bond                                                 |   |                              | 10                      |   |
| Other                                                |   |                              |                  9 |   |
|                                                 |   |                              |                    |   |
|                                                 |   |                              | 100                     |   |

|  |   | Information                about the defined benefit plans for ASE Test Inc. is summarized as                follows: |
|--|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | a. | Components                of net periodic pension cost for the                year: |
|--------|----|-------------------------------------------------------------------------------------|

|                                           |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                           |   |     |   |   |     |   |   |     |   |
| Service                cost                    |   | $        | 1,906  |   |     | $      | 1,705  |     |   | $ | 301 |   |
| Interest                                       |   |     | 349    |   |     |   | 373    |     |   |   | 308 |   |
| Projected                return on plan assets |   |     | (78    | )      |     |   | (117   | )        |   |   | (109 | ) |
| Amortization                                   |   |     | 172    |   |     |   | 69     |     |   |   | 11 |   |
|                                           |   |     |   |   |     |   |   |     |   |   |   |   |
| Net                periodic pension cost       |   | $        | 2,349  |   |     | $      | 2,030  |     |   | $ | 511 |   |

|   | b. | Reconciliation                of funded status of the plan and accrued pension cost at December                31,                2004, 2005 and 2006: |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | **December                31** |   |
|-------------------------------------------------------------|--------|--------------------------------|--------|
|                                                        |   | **2004**                       |   |   | **2005** |   |   | **2006** |   |
|                                                        |   |                           |   |   |   |   |   |   |   |
| Vested                benefit obligation                    |   | $                              | 38     |   |   | $ | 16 |   |   | $ | 98 |   |
| Non-vested                benefit obligation                |   |                           | 6,978  |   |   |   | 6,424 |   |   |   | 7,255 |   |
| Accumulated                benefit obligation               |   |                           | 7,016  |   |   |   | 6,440 |   |   |   | 7,353 |   |
| Additional                benefits based on future salaries |   |                           | 5,644  |   |   |   | 4,638 |   |   |   | 5,140 |   |
| Projected                benefit obligation                 |   |                           | 12,660 |   |   |   | 11,078 |   |   |   | 12,493 |   |
| Fair                value of plan assets                    |   |                           | (3,154 | ) |   |   | (3,668 | ) |   |   | (4,318 | ) |
| Funded                status                                |   |                           | 9,506  |   |   |   | 7,410 |   |   |   | 8,175 |   |
| Unrecognized                net transition obligation       |   |                           | (163   | ) |   |   | (148 | ) |   |   | (138 | ) |
| Unrecognized                actuarial loss                  |   |                           | (4,172 | ) |   |   | (814 | ) |   |   | (1,646 | ) |
| Accrued                expense                              |   |                           | (52    | ) |   |   | (47 | ) |   |   | (42 | ) |
|                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |
| Accrued                pension cost                         |   | $                              | 5,119  |   |   | $ | 6,401 |   |   | $ | 6,349 |   |

| Vested                obligation |   | $      | 42     |   |   | $      | 17     |   |   | $      | 98     |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                             |   |   |   |   |   |   |   |   |   |   |   |   |

|                             c.   Actuarial assumption |   |     |     |
|----------------------------------------------------------------------------------------------------------------------------------|--------|----------|----------|
|                                                                                                                             |   |     |     |
| Discount                rate                                                                                                     | 3.25%  | 2.75%    | 2.25%    |
| Increase                in future salary level                                                                                   | 3.00%  | 2.5-3.0% | 2.5-3.0% |
| Expected                rate of return on plan assets                                                                            | 3.25%  | 2.75%    | 2.50%    |

|   | d. | ASE                Test, Inc. expects to make contributions of $554 thousand to its                defined                pension plan in 2007. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | e | Expected                benefit payments: |
|--------|---|-------------------------------------------|

| **Year                of                Payments** |   |   |   |
|----------------------------------------------------|--------|--------|--------|
|                                               |   |   |   |
| 2007                                               |   | $      | 105    |   |
| 2008                                               |   |   | 8      |   |
| 2009                                               |   |   | 58     |   |
| 2010                                               |   |   | 42     |   |
| 2011                                               |   |   | 52     |   |
| 2012                and                thereafter  |   |   | 1,483  |   |

|   | Plan                assets and obligations reflected herein were measured as of December                31,                2006. |
|--------|----------------------------------------------------------------------------------------------------------------------------------|

**15.**
**EMPLOYEES      BENEFITS, DEPRECIATION AND AMORTIZATION**

|                              |   | **2004**                   |    |   | **2005**      |   |   | **2006**  |   |
|-----------------------------------|--------|----------------------------|---------|--------|---------------|--------|--------|-----------|--------|
|                              |   | **Cost                of** |    |   | **Operating** |   |   |      |   |   | **Cost                of** |   |   | **Operating** |   |   |   |   |   | **Cost                of** |   |   | **Operating** |   |   |   |   |
|                              |   | **Revenues**               |    |   | **Expenses**  |   |   | **Total** |   |   | **Revenues** |   |   | **Expenses** |   |   | **Total** |   |   | **Revenues** |   |   | **Expenses** |   |   | **Total** |   |
|                              |   |                       |    |   |          |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Employees                benefits |   |                       |    |   |          |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salary                            |   | $                          | 63,555  |   |          | $      | 19,393 |      |   | $ | 82,948 |   |   | $ | 51,573 |   |   | $ | 20,350 |   |   | $ | 71,923 |   |   | $ | 58,183 |   |   | $ | 22,111 |   |   | $ | 80,294 |   |
| Insurance                         |   |                       | 4,281   |   |          |   | 1,575  |      |   |   | 5,856 |   |   |   | 3,561 |   |   |   | 1,360 |   |   |   | 4,921 |   |   |   | 4,129 |   |   |   | 1,826 |   |   |   | 5,955 |   |
| Pension                costs      |   |                       | 4,019   |   |          |   | 1,397  |      |   |   | 5,416 |   |   |   | 3,864 |   |   |   | 1,477 |   |   |   | 5,341 |   |   |   | 3,584 |   |   |   | 1,500 |   |   |   | 5,084 |   |
| Other                             |   |                       | 5,829   |   |          |   | 1,668  |      |   |   | 7,497 |   |   |   | 7,619 |   |   |   | 2,009 |   |   |   | 9,628 |   |   |   | 5,831 |   |   |   | 1,314 |   |   |   | 7,145 |   |
|                              |   |                       |    |   |          |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              |   | $                          | 77,684  |   |          | $      | 24,033 |      |   | $ | 101,717 |   |   | $ | 66,617 |   |   | $ | 25,196 |   |   | $ | 91,813 |   |   | $ | 71,727 |   |   | $ | 26,751 |   |   | $ | 98,478 |   |
|                              |   |                       |    |   |          |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                      |   | $                          | 141,839 |   |          | $      | 2,441  |      |   | $ | 144,280 |   |   | $ | 138,084 |   |   | $ | 2,691 |   |   | $ | 140,775 |   |   | $ | 110,830 |   |   | $ | 2,732 |   |   | $ | 113,562 |   |
|                              |   |                       |    |   |          |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                      |   |                       | 9,339   |   |          |   | 11,289 |      |   |   | 20,628 |   |   |   | 6,875 |   |   |   | 6,652 |   |   |   | 13,527 |   |   |   | 5,276 |   |   |   | 1,800 |   |   |   | 7,076 |   |

| **16.** | **INCOME                TAX** |
|---------|-------------------------------|

|  | a. | Income                tax expense (benefit) attributable to continuing operations is summarized                as follows: |
|--|----|----------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                                                                                                                                                                |   |     |   |   |     |   |   |     |   |
| Tax                expense (benefit) based on                pre-tax accounting income  (loss)                from                continuing operations at statutory rate |   | $        | 10,478 |   |     | $      | (4,169 | )        |   | $ | 38,973 |   |
| Add                (deduct) tax effects                of:                                                                                                                          |   |     |   |   |     |   |   |     |   |   |   |   |
| Permanent                differences                                                                                                                                                |   |     |   |   |     |   |   |     |   |   |   |   |
| Tax-exempt                income - tax                holiday                                                                                                                       |   |     | (6,146 | )      |     |   | -      |     |   |   | (6,450 | ) |
| Other                                                                                                                                                                               |   |     | (937   | )      |     |   | 181    |     |   |   | (40 | ) |
| Temporary                differences                                                                                                                                                |   |     |   |   |     |   |   |     |   |   |   |   |
| Depreciation                and capital                allowance                                                                                                                    |   |     | (1,501 | )      |     |   | 1,035  |     |   |   | (11,569 | ) |
| Depreciation                                                                                                                                                                        |   |     | (945   | )      |     |   | (597   | )        |   |   | 5,995 |   |
| Other                                                                                                                                                                               |   |     | 3,028  |   |     |   | 53     |     |   |   | 2,089 |   |
|                                                                                                                                                                                |   |     | 3,977  |   |     |   | (3,497 | )        |   |   | 28,998 |   |

----

|                                                                                                                                     |   | **2004** |    |   | **2005** |   |   | **2006** |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|--------|----------|--------|--------|----------|--------|
|                                                                                                                                     |   |     |    |   |     |   |   |     |   |
| Loss                carryforward                                                                                                         |   | $        | -       |   |     | $      | 7,101  |     |   | $ | (5,356 | ) |
| Income                taxes on undistributed                earnings                                                                     |   |     | 2,244   |   |     |   | 2,369  |     |   |   | - |   |
| Credits                for investments,                investment in machinery andequipment,                and research and development |   |     | (4,494  | )      |     |   | (5,637 | )        |   |   | (14,802 | ) |
| Net                change in deferred income tax                for the year                                                             |   |     | (22,936 | )      |     |   | 4,991  |     |   |   | 3,821 |   |
| Adjustment                of prior years’ income                tax                                                                |   |     | -       |   |     |   | (2,790 | )        |   |   | (94 | ) |
|                                                                                                                                     |   |     |    |   |     |   |   |     |   |   |   |   |
| Income                tax expense                (benefit)                                                                               |   | $        | (21,209 | )      |     | $      | 2,537  |     |   | $ | 12,567 |   |

|   | (Concluded) |
|--------|-------------|

|                                                                                |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|-------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                                                                |   |     |   |   |     |   |   |     |   |
| Domestic                entity                                                      |   | $        | 509    |   |     | $      | 1,079  |     |   | $ | 3,580 |   |
| Foreign                entities                                                     |   |     |   |   |     |   |   |     |   |   |   |   |
| ASE                Test, Inc. (25% statutory                rate)                   |   |     | 8,708  |   |     |   | (4,314 | )        |   |   | 32,090 |   |
| ASE                Test Malaysia (28%                statutory rate)                |   |     | 1,765  |   |     |   | 745    |     |   |   | 3,646 |   |
| ISE                Labs (federal tax rate 35%                and state tax rate 6%) |   |     | (504   | )      |     |   | (1,679 | )        |   |   | (343 | ) |
|                                                                                |   |     |   |   |     |   |   |     |   |   |   |   |
|                                                                                |   | $        | 10,478 |   |     | $      | (4,169 | )        |   | $ | 38,973 |   |

|  | b. | Deferred                income tax assets and liabilities are summarized as                follows: |
|--|----|-----------------------------------------------------------------------------------------------------|

|                                                     |   | **December                31** |   |
|----------------------------------------------------------|--------|--------------------------------|--------|
|                                                     |   | **2005**                       |   |   | **2006** |   |
|                                                     |   |                           |   |   |   |   |
| Current                deferred income tax assets        |   |                           |   |   |   |   |
| Unused                tax                credits         |   | $                              | 9,267  |   |   | $ | 22,639 |   |
| Loss                carryforward                         |   |                           | 4,067  |   |   |   | - |   |
| Other                                                    |   |                           | 1,880  |   |   |   | 1,241 |   |
|                                                     |   |                           | 15,214 |   |   |   | 23,880 |   |
| Less                : valuation                allowance |   |                           | (6,281 | ) |   |   | (319 | ) |
|                                                     |   |                           |   |   |   |   |   |   |
|                                                     |   | $                              | 8,933  |   |   | $ | 23,561 |   |

----

|                                                                     |   | **December                31** |    |
|--------------------------------------------------------------------------|--------|--------------------------------|---------|
|                                                                     |   | **2005**                       |    |   | **2006** |   |
| Noncurrent                deferred income tax                assets      |   |                           |    |   |   |   |
| Unused                tax                credits                         |   | $                              | 29,528  |   |   | $ | 9,706 |   |
| Tax                effect of unabsorbed                capital allowance |   |                           | 10,263  |   |   |   | 6,284 |   |
| Loss                carryforward                                         |   |                           | 9,294   |   |   |   | 8,196 |   |
| Other                                                                    |   |                           | (2,818  | ) |   |   | (17 | ) |
|                                                                     |   |                           | 46,267  |   |   |   | 24,169 |   |
| Less                : valuation                allowance                 |   |                           | (15,303 | ) |   |   | (11,046 | ) |
|                                                                     |   |                           |    |   |   |   |   |   |
|                                                                     |   | $                              | 30,964  |   |   | $ | 13,123 |   |
|                                                                     |   |                           |    |   |   |   |   |   |
| Noncurrent                deferred income tax                liabilities |   | $                              | -       |   |   | $ | 608 |   |

|  | c. | As                of December 31, 2006, unused tax credits which can be utilized to                offset                future income tax, are set forth                below: |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **                   Year of Expiry** |   |   |   |
|------------------------------------------------------|--------|--------|--------|
|                                                 |   |   |   |
| 2007                                                 |   | $      | 10,045 |   |
| 2008                                                 |   |   | 9,883  |   |
| 2009                                                 |   |   | 2,392  |   |
| 2010                                                 |   |   | 2,578  |   |
| 2011                and thereafter                   |   |   | 7,447  |   |
|                                                 |   |   |   |   |
|                                                 |   | $      | 32,345 |   |

----

**17.**
**DISCLOSURES      FOR FINANCIAL INSTRUMENTS**

|  | a. | Fair                values of financial instruments were as                follows: |
|--|----|-------------------------------------------------------------------------------------|

|                                                                            |   | **December                31** |    |
|---------------------------------------------------------------------------------|--------|--------------------------------|---------|
|                                                                            |   | **2005**                       |    |   | **2006** |   |
|                                                                            |   | **Carrying**                   |    |   | **Fair** |   |   | **Carrying** |   |   | **Fair** |   |
|                                                                            |   | **Amount**                     |    |   | **Value** |   |   | **Amount** |   |   | **Value** |   |
| Non-derivative                financial                instruments              |   |                           |    |   |   |   |   |   |   |   |   |   |
|                                                                            |   |                           |    |   |   |   |   |   |   |   |   |   |
| Assets                                                                          |   |                           |    |   |   |   |   |   |   |   |   |   |
| Available-for-sale                financial                assets-current       |   | $                              | -       |   |   | $ | - |   |   | $ | 89,341 |   |   | $ | 89,341 |   |
| Available-for-sale                financial                assets-noncurrent    |   |                           | 81,251  |   |   |   | 165,002 |   |   |   | 204,851 |   |   |   | 204,851 |   |
| Pledged                time deposit ( included                in other assets ) |   |                           | 2,006   |   |   |   | 2,006 |   |   |   | 5,276 |   |   |   | 5,276 |   |
|                                                                            |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                     |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term                debts (including                current portion)       |   |                           | 295,046 |   |   |   | 295,046 |   |   |   | 120,124 |   |   |   | 120,124 |   |
|                                                                            |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Derivative                financial                instruments                  |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial                currency forward                contracts              |   |                           | 4       |   |   |   | 4 |   |   |   | (262 | ) |   |   | (262 | ) |

|  | b. | Methods                  and assumptions used in the determination of fair values of financial                  instruments were as below: |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1) | The                aforementioned financial instruments do not include cash, notes and                accounts receivable, receivables from related parties, pledged time                deposit-current, notes and accounts payable, payable to related parties,                accrued expenses and payables for property, plant and                equipment.  These financial instruments’ carrying amounts                approximate their fair values. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2) | Fair                values of available-for-sale financial assets are determined based                on                their quoted market prices.  Fair values of derivatives were                determined using valuation techniques incorporating estimates and                assumptions that were consistent with prevailing market                conditions. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3) | The                carrying amount of pledged time deposit reflects its fair                value. |
|--------|----|----------------------------------------------------------------------------------------------------|

|   | 4) | Fair                values of long-term debts were based on the present value of expected                cash                flows discounted at current interest rates of similar long-term                debts.  The carrying amount of long-term debts approximates                their fair value. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c. | The                Company recognized $314 thousand and $685 thousand of gains for the                years                ended December 31, 2004 and 2005, respectively, and $1,731 thousand                of                losses for the year ended December 31, 2006 for the changes in fair                value                of derivatives determined using valuation                techniques. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | d. | As                of December 31, 2005 and 2006, financial assets exposed to fair value                interest rate risk were $5,031 thousand and $6,081 thousand, respectively,                financial liabilities exposed to fair value interest rate risk were                $20,644 thousand and $1,781 thousand, respectively.  Financial                assets exposed to cash flow interest rate risk were $77,439 thousand                and                $62,088 thousand, respectively, and financial liabilities exposed                to cash                flow interest rate risk were $267,096 thousand and $101,358 thousand,                respectively. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | e. | For                the years ended December 31, 2004, 2005 and 2006, the Company recognized                interest income of $578 thousand, $1,598 thousand and $3,369 thousand,                and                interest expense (including capitalized interest) of $9,609 thousand,                $13,622 thousand and $13,568 thousand, respectively, for those financial                assets or liabilities that are not categorized as financial assets                or                liabilities at fair value through profit and                loss. |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | f. | The                derivative instruments employed by the Company is to mitigate risks                arising from the ordinary business operation.  All derivative                transactions engaged by the Company should be designated into two                purposes: hedging and speculating which are governed by separated                internal                guidelines and controls.  Derivative transactions enter for                hedging purposes must hedge the risk against fluctuation in foreign                exchange and interest rates arising from operating                activities.  The currency and the amount of derivative                instruments held by the Company must match the Company’s assets and                liabilities. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | g. | Information                about financial risk |
|--|----|-------------------------------------------------|

|   | 1) | Market                risk |
|--------|----|----------------------------|

|   | 2) | Credit                risk |
|--------|----|----------------------------|

|   | 3) | Liquidity                risk |
|--------|----|-------------------------------|

|  | 4) | Cash                    flow interest rate                    risk |
|--|----|--------------------------------------------------------------------|

**18.**
**RELATED      PARTY TRANSACTIONS**

|  | a. | Related                parties |
|--|----|--------------------------------|

|   | **                   Related                Parties                                                                                      ** |   | **         Relationship**                    |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                                      |
|   | ASE                Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | Parent                company                                                             |
|   | ASE                Korea, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Affiliate                                                                                 |
|   | Hung                Ching Development & Construction Co. (“HCDC”)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | Affiliate                                                                                 |
|   | ASE                (Shanghai) Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | Affiliate                                                                                 |
|   | ASE                (U.S.) Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Affiliate                (starting August, 2004)                                          |
|   | ASE                Japan Co., Ltd. (“ASE Japan”)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Affiliate                (starting May, 2004)                                             |
|   | ASE                Material Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | Affiliate                (merged into ASE Inc. in  August,                2004) |
|   | ASE                Electronics, Inc. (“ASEE”)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | Affiliate                (starting August, 2006)                                          |

----

|  | b. | Significant                related party transactions: |
|--|----|--------------------------------------------------------|

|                          |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|-------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
| 1)  Revenue         |   |     |   |   |     |   |   |     |   |
|                          |   |     |   |   |     |   |   |     |   |
|  ASE                Inc. |   | $        | 16,760 |   |     | $      | 44,552 |     |   | $ | 45,086 |   |
|  Other                   |   |     | 446    |   |     |   | -      |     |   |   | - |   |
|                          |   |     |   |   |     |   |   |     |   |   |   |   |
|                          |   | $        | 17,206 |   |     | $      | 44,552 |     |   | $ | 45,086 |   |

|                                                                              |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|-----------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
| 2)  Purchase                of                machinery and equipment   |   |     |   |   |     |   |   |     |   |
|                                                                              |   |     |   |   |     |   |   |     |   |
|  ASE                Korea, Inc.                                              |   | $        | 146    |   |     | $      | 990    |     |   | $ | 7,144 |   |
|  ASE                Inc.                                                     |   |     | -      |   |     |   | 1,124  |     |   |   | 4,716 |   |
|  ASE                (Chung Li) Inc.                                          |   |     | 1,235  |   |     |   | -      |     |   |   | - |   |
|  Other                                                                       |   |     | 4      |   |     |   | -      |     |   |   | - |   |
|                                                                              |   |     |   |   |     |   |   |     |   |   |   |   |
|                                                                              |   | $        | 1,385  |   |     | $      | 2,114  |     |   | $ | 11,860 |   |
|                                                                              |   |     |   |   |     |   |   |     |   |   |   |   |
| 3)  Purchase                of                buildings - HCDC          |   | $        | 2,995  |   |     | $      | 7,293  |     |   | $ | - |   |
|                                                                              |   |     |   |   |     |   |   |     |   |   |   |   |
| 4) Purchase                of raw                materials                   |   |     |   |   |     |   |   |     |   |   |   |   |
|                                                                              |   |     |   |   |     |   |   |     |   |   |   |   |
|  ASE                Inc.                                                     |   | $        | 2,650  |   |     | $      | 5,577  |     |   | $ | 3,123 |   |
|  ASE                Material Inc.                                            |   |     | 3,353  |   |     |   | -      |     |   |   | - |   |
|  Other                                                                       |   |     | -      |   |     |   | 4      |     |   |   | 1,041 |   |
|                                                                              |   |     |   |   |     |   |   |     |   |   |   |   |
|                                                                              |   | $        | 6,003  |   |     | $      | 5,581  |     |   | $ | 4,164 |   |
|                                                                              |   |     |   |   |     |   |   |     |   |   |   |   |
| 5)  Sale                of property,                plant and equipment |   |     |   |   |     |   |   |     |   |   |   |   |
|                                                                              |   |     |   |   |     |   |   |     |   |   |   |   |
|  ASE                Korea, Inc.                                              |   | $        | 2,943  |   |     | $      | 14,119 |     |   | $ | 5,067 |   |
|  ASE                Inc.                                                     |   |     | 9,790  |   |     |   | 1,598  |     |   |   | 337 |   |
|  ASE                Japan                                                    |   |     | -      |   |     |   | 1,540  |     |   |   | 1,194 |   |
|  Other                                                                       |   |     | 1,046  |   |     |   | 55     |     |   |   | - |   |
|                                                                              |   |     |   |   |     |   |   |     |   |   |   |   |
|                                                                              |   | $        | 13,779 |   |     | $      | 17,312 |     |   | $ | 6,598 |   |

----

|  | c. | Balances                  at year end: |
|--|----|----------------------------------------|

|                           |   | **December                31** |   |
|--------------------------------|--------|--------------------------------|--------|
|                           |   | **2005**                       |   |   | **2006** |   |
| Receivable                     |   |                           |   |   |   |   |
| ASE                Inc.        |   | $                              | 16,394 |   |   | $ | 13,811 |   |
| ASE                Korea, Inc. |   |                           | 3,416  |   |   |   | 73 |   |
| Other                          |   |                           | 467    |   |   |   | 734 |   |
|                           |   |                           |   |   |   |   |   |   |
|                           |   | $                              | 20,277 |   |   | $ | 14,618 |   |
|                           |   |                           |   |   |   |   |   |   |
| Payable                        |   |                           |   |   |   |   |   |   |
| ASE                Inc.        |   | $                              | 9,082  |   |   | $ | 4,207 |   |
| ASEE                           |   |                           | -      |   |   |   | 565 |   |
| Other                          |   |                           | 1,265  |   |   |   | 365 |   |
|                           |   |                           |   |   |   |   |   |   |
|                           |   | $                              | 10,347 |   |   | $ | 5,137 |   |

**19.**
**ASSETS      PLEDGED**

|   | The                following assets have been pledged or mortgaged as collaterals for                bank                loans and as guarantees for the employment of foreign labor and the                lease                of office buildings: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                       |   | **December                31** |   |
|------------------------------------------------------------|--------|--------------------------------|--------|
|                                                       |   | **2005**                       |   |   | **2006** |   |
|                                                       |   |                           |   |   |   |   |
| Machinery                and equipment,                net |   | $                              | 28,021 |   |   | $ | 7,326 |   |
| Pledged                time                deposit         |   |                           | 3,908  |   |   |   | 5,276 |   |
|                                                       |   |                           |   |   |   |   |   |   |
|                                                       |   | $                              | 31,929 |   |   | $ | 12,602 |   |

|   | Included                in other assets-other are $2,006 thousand and $5,276 thousand of                time                deposit which have been pledged as collateral as of December 31,                2005 and                2006, respectively. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**20.**
**COMMITMENTS      AND CONTINGENCIES**

|  | a. | Lease                commitments |
|--|----|----------------------------------|

|   | 1) | Operating                leases |
|--------|----|---------------------------------|

----

| 2007                                              |   | $      | 20,081 |   |
|---------------------------------------------------|--------|--------|--------|--------|
| 2008                                              |   |   | 7,701  |   |
| 2009                                              |   |   | 5,144  |   |
| 2010                                              |   |   | 3,215  |   |
| 2011                and                thereafter |   |   | 655    |   |
|                                              |   |   |   |   |
| Total                minimum lease payments       |   | $      | 36,796 |   |

|  | 2) | Capital                leases |
|--|----|-------------------------------|

| 2007                                                                    |   | $      | 14,591  |   |
|-------------------------------------------------------------------------|--------|--------|---------|--------|
| 2008                                                                    |   |   | 847     |   |
| 2009                                                                    |   |   | 36      |   |
| 2010                                                                    |   |   | 3       |   |
| Total                minimum lease                payments              |   |   | 15,477  |   |
| Less:  Imputed                interest                        |   |   | (392    | )      |
| Present                value of future lease                obligations |   |   | 15,085  |   |
| Capital                lease obligation,                current         |   |   | (14,225 | )      |
|                                                                    |   |   |    |   |
| Capital                lease obligation,                long-term       |   | $      | 860     |   |

|  | b. | The                Company had unused letters of credit of $43 thousand as of December                31,                2006. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------|

|  | c. | The                Company had commitments to certain vendors to purchase property,                plant and                equipment of approximately $52,000 thousand, and had prepaid $360                thousand                as of December 31, 2006. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | d. | At                  December 31, 2006, the Company did not have any significant unasserted                  claims or pending                  litigations. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

**21.        **
**LOSS      ON FIRE DAMAGE**

**Significant        Unusual Loss**

----

**22.  **
**SEGMENT      INFORMATION**

|         | a. |  Geographical                information, net revenues |
|--------------------------------------------|----|-------------------------------------------------------------|

|                                                           |   | **2004**   |    |   | **2005** |   |   | **2006**   |   |
|----------------------------------------------------------------|--------|------------|---------|--------|----------|--------|--------|------------|--------|
| **         Area** |   | **Amount** |    |   | **%**    |   |   | **Amount** |   |   | **%** |   |   | **Amount** |   |   | **%** |   |
|                                                           |   |       |    |   |     |   |   |       |   |   |   |   |   |   |   |   |   |   |
| North                America                                   |   | $          | 236,527 |   |     |   | 55     |       |   | $ | 260,224 |   |   |   | 62 |   |   | $ | 320,895 |   |   |   | 62 |   |
| Asia                                                           |   |       | 152,485 |   |     |   | 36     |       |   |   | 104,179 |   |   |   | 25 |   |   |   | 114,235 |   |   |   | 22 |   |
| Europe                                                         |   |       | 38,740  |   |     |   | 9      |       |   |   | 56,526 |   |   |   | 13 |   |   |   | 82,558 |   |   |   | 16 |   |
| Australia                                                      |   |       | 11      |   |     |   | -      |       |   |   | - |   |   |   | - |   |   |   | 18 |   |   |   | - |   |
|                                                           |   |       |    |   |     |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   | $          | 427,763 |   |     |   | 100    |       |   | $ | 420,929 |   |   |   | 100 |   |   | $ | 517,706 |   |   |   | 100 |   |

|  | b. | Geographical                information- long-lived assets |
|--|----|------------------------------------------------------------|

|                         |   | **December                31** |    |
|------------------------------|--------|--------------------------------|---------|
|                         |   | **2005**                       |    |   | **2006** |   |
|                         |   | **Amount**                     |    |   | **%** |   |   | **Amount** |   |   | **%** |   |
| Asia                         |   |                           |    |   |   |   |   |   |   |   |   |   |
| Taiwan                       |   | $                              | 306,060 |   |   |   | 71 |   |   | $ | 282,309 |   |   |   | 73 |   |
| Malaysia                     |   |                           | 76,194  |   |   |   | 18 |   |   |   | 56,300 |   |   |   | 14 |   |
| Singapore                    |   |                           | 36,847  |   |   |   | 8 |   |   |   | 38,222 |   |   |   | 10 |   |
| United                States |   |                           | 10,978  |   |   |   | 3 |   |   |   | 12,604 |   |   |   | 3 |   |
|                         |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         |   | $                              | 430,079 |   |   |   | 100 |   |   | $ | 389,435 |   |   |   | 100 |   |

|  | c. | Major                  customers |
|--|----|----------------------------------|

|  | d. | Operating                    segment information |
|--|----|--------------------------------------------------|

|                                                          |   | **Testing** |    |   | **Packaging** |   |    | **Other** |   |   | **Total** |   |
|---------------------------------------------------------------|--------|-------------|---------|--------|---------------|--------|---------|-----------|--------|--------|-----------|--------|
| 2004                                                          |   |        |    |   |          |   |    |      |   |   |      |   |
|                                                          |   |        |    |   |          |   |    |      |   |   |      |   |
| Revenue                from external                customers |   | $           | 343,116 |   |          | $      | 84,647  |      |   | $      | -         |   |   | $ | 427,763 |   |
| Interest                income                                |   |        | 154     |   |          |   | 83      |      |   |   | 341       |   |   |   | 578 |   |
| Interest                expense                               |   |        | (1,069  | )      |          |   | (255    | )         |   |   | (5,441    | )      |   |   | (6,765 | ) |
| Net                interest                expense            |   |        | (915    | )      |          |   | (172    | )         |   |   | (5,100    | )      |   |   | (6,187 | ) |
| Depreciation                and                amortization   |   |        | 138,328 |   |          |   | 18,601  |      |   |   | -         |   |   |   | 156,929 |   |
| Impairment                loss on                assets       |   |        | (26,500 | )      |          |   | -       |      |   |   | -         |   |   |   | (26,500 | ) |
| Segment                profit                (loss)           |   |        | (6,248  | )      |          |   | (10,456 | )         |   |   | 3,666     |   |   |   | (13,038 | ) |
| Segment                assets                                 |   |        | 782,089 |   |          |   | 149,820 |      |   |   | 151,200   |   |   |   | 1,083,109 |   |
| Expenditures                for segment                assets |   |        | 174,382 |   |          |   | 36,274  |      |   |   | -         |   |   |   | 210,656 |   |
| Goodwill                                                      |   |        | 25,612  |   |          |   | -       |      |   |   | -         |   |   |   | 25,612 |   |
|                                                          |   |        |    |   |          |   |    |      |   |   |      |   |   |   |   |   |

----

|                                                                               |   | **Testing** |    |   | **Packaging** |   |    | **Other** |   |   | **Total** |   |
|------------------------------------------------------------------------------------|--------|-------------|---------|--------|---------------|--------|---------|-----------|--------|--------|-----------|--------|
| 2005                                                                               |   |        |    |   |          |   |    |      |   |   |      |   |
|                                                                               |   |        |    |   |          |   |    |      |   |   |      |   |
| Revenue                from external                customers                      |   | $           | 346,639 |   |          | $      | 74,290  |      |   | $      | -         |   |   | $ | 420,929 |   |
| Interest                income                                                     |   |        | 868     |   |          |   | 574     |      |   |   | 156       |   |   |   | 1,598 |   |
| Interest                expense                                                    |   |        | (3,418  | )      |          |   | (427    | )         |   |   | (8,899    | )      |   |   | (12,744 | ) |
| Net                interest revenue                (expense)                       |   |        | (2,550  | )      |          |   | 147     |      |   |   | (8,743    | )      |   |   | (11,146 | ) |
| Depreciation                and                amortization                        |   |        | 134,383 |   |          |   | 15,239  |      |   |   | -         |   |   |   | 149,622 |   |
| Loss                on fire                damage                                  |   |        | (51,224 | )      |          |   | -       |      |   |   | -         |   |   |   | (51,224 | ) |
| Segment                loss                                                        |   |        | (31,709 | )      |          |   | (9,372  | )         |   |   | (2,705    | )      |   |   | (43,786 | ) |
| Segment                assets                                                      |   |        | 669,190 |   |          |   | 125,561 |      |   |   | 145,588   |   |   |   | 940,339 |   |
| Expenditures                for segment                assets                      |   |        | 48,844  |   |          |   | 1,842   |      |   |   | -         |   |   |   | 50,686 |   |
| Goodwill                                                                           |   |        | 20,646  |   |          |   | -       |      |   |   | -         |   |   |   | 20,646 |   |
|                                                                               |   |        |    |   |          |   |    |      |   |   |      |   |   |   |   |   |
| 2006                                                                               |   |        |    |   |          |   |    |      |   |   |      |   |   |   |   |   |
|                                                                               |   |        |    |   |          |   |    |      |   |   |      |   |   |   |   |   |
| Revenue                from external                customers                      |   |        | 423,341 |   |          |   | 94,365  |      |   |   | -         |   |   |   | 517,706 |   |
| Interest                income                                                     |   |        | 1,379   |   |          |   | 1,432   |      |   |   | 558       |   |   |   | 3,369 |   |
| Interest                expense                                                    |   |        | (2,302  | )      |          |   | (117    | )         |   |   | (10,746   | )      |   |   | (13,165 | ) |
| Net                interest                expense                                 |   |        | (923    | )      |          |   | 1,315   |      |   |   | (10,188   | )      |   |   | (9,796 | ) |
| Depreciation                and                amortization                        |   |        | 108,410 |   |          |   | 12,228  |      |   |   | -         |   |   |   | 120,638 |   |
| Gain                on insurance settlement and                impairment recovery |   |        | 32,145  |   |          |   | -       |      |   |   | -         |   |   |   | 32,145 |   |
| Segment                profit                                                      |   |        | 149,369 |   |          |   | 8,040   |      |   |   | 5,927     |   |   |   | 163,336 |   |
| Segment                assets                                                      |   |        | 682,364 |   |          |   | 83,605  |      |   |   | 278,459   |   |   |   | 1,044,428 |   |
| Expenditures                for segment                assets                      |   |        | 85,038  |   |          |   | 2,370   |      |   |   | -         |   |   |   | 87,408 |   |
| Goodwill                                                                           |   |        | 20,646  |   |          |   | -       |      |   |   | -         |   |   |   | 20,646 |   |

|   | (Concluded) |
|--------|-------------|

**23.        **
**DISCONTINUED      OPERATIONS**

|                                                                               |   | **2004** |    |   | **From****January                1, 2005 to****October                3, 2005** |   |
|------------------------------------------------------------------------------------|--------|----------|---------|--------|---------------------------------------------------------------------------------|--------|
|                                                                               |   |     |    |   |                                                                            |   |
| Net                revenues                                                        |   | $        | 193,375 |   |                                                                            | $      | 66,493 |   |
| Cost                of revenues                                                    |   |     | 173,389 |   |                                                                            |   | 59,819 |   |
| Gross                profit                                                        |   |     | 19,986  |   |                                                                            |   | 6,674 |   |
| Operating                expenses                                                  |   |     | 2,229   |   |                                                                            |   | 1,422 |   |
| Non-operating                expenses                                              |   |     | 768     |   |                                                                            |   | 1,257 |   |
| Income                from discontinued operations beforeincome                tax |   |     | 16,989  |   |                                                                            |   | 3,995 |   |
| Income                tax expense                                                  |   |     | 21      |   |                                                                            |   | 66 |   |
| Income                from discontinued operations                                 |   |     | 16,968  |   |                                                                            |   | 3,929 |   |
|                                                                               |   |     |    |   |                                                                            |   |   |   |

----

|                                                       |   | **2004** |   |   | **From****January                1, 2005 to****October                3, 2005** |   |
|------------------------------------------------------------|--------|----------|--------|--------|---------------------------------------------------------------------------------|--------|
| Gain                on disposal of assets                  |   | $        | -      |   |                                                                            | $      | 6,969 |   |
| Income                tax expense                          |   |     | -      |   |                                                                            |   | 59 |   |
| Gain                on disposal of discontinued operations |   |     | -      |   |                                                                            |   | 6,910 |   |
|                                                       |   |     |   |   |                                                                            |   |   |   |
| Total                                                      |   | $        | 16,968 |   |                                                                            | $      | 10,839 |   |

|   | (Concluded) |
|--------|-------------|

| **24.** | **SUMMARY                OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED                BY THE                COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED                STATES                OF AMERICA** |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | a. | Pension                  benefits |
|--|----|-----------------------------------|

|  | b. | Marketable                  securities |
|--|----|----------------------------------------|

----

|  | c. | Bonuses                  to employees, directors and                  supervisors |
|--|----|-----------------------------------------------------------------------------------|

|                                                                       |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|----------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                                                       |   |     |   |   |     |   |   |     |   |
| Cost                of revenues                                            |   | $        | 2,591  |   |     | $      | (1,546 | )        |   | $ | 8,079 |   |
| Selling,                general and                administrative expenses |   |     | 1,080  |   |     |   | (1,420 | )        |   |   | 3,872 |   |
| Research                and                development                     |   |     | 418    |   |     |   | (236   | )        |   |   | 1,235 |   |
|                                                                       |   |     |   |   |     |   |   |     |   |   |   |   |
|                                                                       |   | $        | 4,089  |   |     | $      | (3,202 | )        |   | $ | 13,186 |   |

|  | d. | Depreciation                  of buildings |
|--|----|--------------------------------------------|

----

|  | e. | Depreciation                  on the excess of book value on transfer of buildings between related                  parties |
|--|----|-----------------------------------------------------------------------------------------------------------------------------|

|  | f. | Impairment                  of long-lived assets |
|--|----|--------------------------------------------------|

|  | g. | Derivative financial                  instruments |
|--|----|---------------------------------------------------|

----

|  | h. | Stock-based                compensation |
|--|----|-----------------------------------------|

|  | i. | Goodwill |
|--|----|----------|

----

|  | j. | Undistributed                  earnings tax |
|--|----|---------------------------------------------|

|  | k. | Investments                  in parent company accounted for as treasury                  stock |
|--|----|-------------------------------------------------------------------------------------------------|

|  | l. | Earnings                per share |
|--|----|-----------------------------------|

----

|                                                                                                                                                                                                  |   | **2004** |        |   | **2005** |   |        | **2006** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|--------|----------|--------|-------------|----------|--------|
| Net                income                (loss)                                                                                                                                                       |   |     |        |   |     |   |        |     |   |
|                                                                                                                                                                                                  |   |     |        |   |     |   |        |     |   |
| Net                income (loss) based on ROC                GAAP                                                                                                                                     |   | $        | 25,139      |   |     | $      | (35,484     | )        |   | $ | 150,769 |   |
| Adjustments:                                                                                                                                                                                          |   |     |        |   |     |   |        |     |   |   |   |   |
| a.         Pension                benefits                                                                                                               |   |     | 7           |   |     |   | 7           |     |   |   | 11 |   |
| c.         Bonuses                to employees, directors and supervisors                                                                                |   |     | (4,089      | )      |     |   | 3,202       |     |   |   | (13,186 | ) |
| d.         Depreciation                of buildings                                                                                                      |   |     | (489        | )      |     |   | (582        | )        |   |   | (664 | ) |
|                  e.         Depreciation on the                excess of book value of buildings transferred                between related parties |   |     | 13          |   |     |   | 13          |     |   |   | 13 |   |
| f.                         Impairment loss reversal                                                                                                      |   |     |        |   |     |   |        |     |   |   |   |   |
| Recoverable                amount                                                                                                                                                                     |   |     | -           |   |     |   | -           |     |   |   | (5,641 | ) |
| Depreciation                on recoverable                amount                                                                                                                                      |   |     | -           |   |     |   | -           |     |   |   | 791 |   |
| Income                tax                effect                                                                                                                                                       |   |     | -           |   |     |   | -           |     |   |   | 1,212 |   |
| h.                         Stock option compensation                                                                                                     |   |     |        |   |     |   |        |     |   |   |   |   |
| Stock                option compensation from                ASE Inc.                                                                                                                                 |   |     | 1,856       |   |     |   | (7,423      | )        |   |   | (3,750 | ) |
| Stock                option compensation from                the Company                                                                                                                              |   |     | -           |   |     |   | -           |     |   |   | (3,682 | ) |
|                      Cumulative                effect of a change in accounting principle for adopting U.S. SFAS                No.                123R                      |   |     | -           |   |     |   | -           |     |   |   | 381 |   |
| i.                          Goodwill                                                                                                                |   |     |        |   |     |   |        |     |   |   |   |   |
|                  Amortization                                                                                                                                                                    |   |     |        |   |     |   |        |     |   |   |   |   |
| -                Consolidated                subsidiary                                                                                                                                               |   |     | 10,105      |   |     |   | 4,966       |     |   |   | - |   |
| -                Equity-method                investee                                                                                                                                                |   |     | 348         |   |     |   | 348         |     |   |   | - |   |
|                  Impairment                                                                                                                                                                      |   |     | (15,000     | )      |     |   | -           |     |   |   | - |   |
| j.                        Undistributed earnings tax                                                                                                          |   |     | -           |   |     |   | -           |     |   |   | (8,936 | ) |
| k.                       Cash dividend from investment in parent company accounted for as                treasury                stock                             |   |     | -           |   |     |   | (493        | )        |   |   | - |   |
|                                                                                                                                                                                                  |   |     | (7,249      | )      |     |   | 38          |     |   |   | (33,451 | ) |
| Net                income (loss) based on                U.S. GAAP                                                                                                                                    |   | $        | 17,890      |   |     | $      | (35,446     | )        |   | $ | 117,318 |   |
|                                                                                                                                                                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| Earnings                (loss) per share                based on U.S. GAAP  (in                U.S. dollars)                                                                                |   |     |        |   |     |   |        |     |   |   |   |   |
| Basic                and                diluted                                                                                                                                                       |   | $        | 0.18        |   |     | $      | (0.35       | )        |   | $ | 1.17 |   |
|                                                                                                                                                                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| Number                of shares based on U.S.                GAAP (Note 25d)                                                                                                                          |   |     |        |   |     |   |        |     |   |   |   |   |
| Basic                                                                                                                                                                                                 |   |     | 100,037,524 |   |     |   | 100,059,031 |     |   |   | 100,081,418 |   |
| Diluted                                                                                                                                                                                               |   |     | 100,111,113 |   |     |   | 100,059,031 |     |   |   | 100,234,402 |   |
|                                                                                                                                                                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| Shareholders’                equity                                                                                                                                                             |   |     |        |   |     |   |        |     |   |   |   |   |
|                                                                                                                                                                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| Shareholders’equity                based on                ROC GAAP                                                                                                                             |   | $        | 599,591     |   |     | $      | 558,205     |     |   | $ | 843,128 |   |
|                                                                                                                                                                                                  |   |     |        |   |     |   |        |     |   |   |   |   |
| Adjustments:                                                                                                                                                                                          |   |     |        |   |     |   |        |     |   |   |   |   |
| a.        Pension                benefits and additional liability                                                                                            |   |     |        |   |     |   |        |     |   |   |   |   |
| Pension                benefits                                                                                                                                                                       |   |     | (44         | )      |     |   | (37         | )        |   |   | (26 | ) |
|   Unrecognized                pension                cost on adoption of U.S. SFAS No. 158                                                                                                  |   |     | -           |   |     |   | -           |     |   |   | (1,712 | ) |
| c.         Bonuses                to employees, directors and supervisors                                                                                |   |     | (4,758      | )      |     |   | -           |     |   |   | (8,843 | ) |
| d.         Depreciation                of buildings                                                                                                      |   |     | (2,118      | )      |     |   | (2,700      | )        |   |   | (3,364 | ) |

----

|                                                                                                                                                                                 |   | **2004** |    |   | **2005** |   |    | **2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|--------|----------|--------|---------|----------|--------|
|                                                                                                                                                                                 |   |     |    |   |     |   |    |     |   |
| e.         Depreciation                on the excess of book value of buildings transferred                between related parties |   | $        | (518    | )      |     | $      | (505    | )        |   | $ | (492 | ) |
| f.         Impairment                loss reversal, net                                                                                 |   |     | -       |   |     |   | -       |     |   |   | (3,638 | ) |
| i.                         Goodwill                                                                                                     |   |     |    |   |     |   |    |     |   |   |   |   |
|                  Amortization                                                                                                                                                   |   |     |    |   |     |   |    |     |   |   |   |   |
| -                Consolidated                subsidiary                                                                                                                              |   |     | 30,315  |   |     |   | 35,281  |     |   |   | 35,281 |   |
| -                Equity-method                investee                                                                                                                               |   |     | 1,044   |   |     |   | 1,392   |     |   |   | 1,392 |   |
|                  Impairment                                                                                                                                                     |   |     | (15,000 | )      |     |   | (15,000 | )        |   |   | (15,000 | ) |
| j.                         Undistributed earnings tax                                                                                   |   |     | -       |   |     |   | -       |     |   |   | (8,936 | ) |
| k.         Investment                in parent company accounted for                as treasury stock                              |   |     | (81,362 | )      |     |   | (81,422 | )        |   |   | (81,422 | ) |
| k.         Unrealized                gain on investment in parent company accounted                for as treasury stock           |   |     | -       |   |     |   | -       |     |   |   | (123,429 | ) |
| Cumulative                translation                adjustments on U.S. GAAP adjustments                                                                                       |   |     | 60      |   |     |   | 242     |     |   |   | 172 |   |
| Net                decrease in shareholders’                equity                                                                                                             |   |     | (72,381 | )      |     |   | (62,749 | )        |   |   | (210,017 | ) |
|                                                                                                                                                                                 |   |     |    |   |     |   |    |     |   |   |   |   |
| Shareholders’equity                based on                U.S. GAAP                                                                                                           |   | $        | 527,210 |   |     | $      | 495,456 |     |   | $ | 633,111 |   |
|                                                                                                                                                                                 |   |     |    |   |     |   |    |     |   |   |   |   |
| Changes                in shareholders’                equity based on U.S. GAAP                                                                                               |   |     |    |   |     |   |    |     |   |   |   |   |
|                                                                                                                                                                                 |   |     |    |   |     |   |    |     |   |   |   |   |
| Balance,                beginning of                year                                                                                                                             |   | $        | 562,499 |   |     | $      | 527,210 |     |   | $ | 495,456 |   |
| Net                income (loss) for the                year                                                                                                                         |   |     | 17,890  |   |     |   | (35,446 | )        |   |   | 117,318 |   |
| Issuance                of new shares under                stock option plans                                                                                                        |   |     | 4,552   |   |     |   | -       |     |   |   | 678 |   |
| Unrecognized                pension                cost                                                                                                                              |   |     | 646     |   |     |   | -       |     |   |   | - |   |
| Adjustment                of pension cost                upon adoption of U.S. SFAS                No. 158                                                                      |   |     | -       |   |     |   | -       |     |   |   | (1,712 | ) |
| ASE                Inc. shares to be                distributed as bonus to employees                                                                                                |   |     | 1,525   |   |     |   | 1,556   |     |   |   | 4,343 |   |
| Stock                option                compensation                                                                                                                              |   |     | (1,856  | )      |     |   | 7,423   |     |   |   | 7,051 |   |
| Cumulative                translation                adjustments for subsidiaries                                                                                                    |   |     | 22,976  |   |     |   | (5,780  | )        |   |   | 9,444 |   |
| Unrealized                gain on financial                instruments                                                                                                               |   |     | 400     |   |     |   | -       |     |   |   | 533 |   |
| Long-term                investment in parent                company accounted for as treasury                stock                                                             |   |     | (81,422 | )      |     |   | -       |     |   |   | - |   |
| Cash                dividend income from the                parent company                                                                                                           |   |     | -       |   |     |   | 493     |     |   |   | - |   |
|                                                                                                                                                                                 |   |     |    |   |     |   |    |     |   |   |   |   |
| Balance,                end of                year                                                                                                                                   |   | $        | 527,210 |   |     | $      | 495,456 |     |   | $ | 633,111 |   |

|                                                            |   | **2005** |    |   | **2006** |   |
|-----------------------------------------------------------------|--------|----------|---------|--------|----------|--------|
| Available-for-sale                financial assets - noncurrent |   |     |    |   |     |   |
|                                                            |   |     |    |   |     |   |
| As                reported                                      |   | $        | 81,251  |   |     | $      | 204,851 |   |
| U.S.                GAAP                adjustments             |   |     |    |   |     |   |   |   |
| Treasury                stock                                   |   |     | (81,422 | )      |     |   | (81,422 | ) |

----

|                                                                                                 |   | **2005** |    |   | **2006** |   |
|------------------------------------------------------------------------------------------------------|--------|----------|---------|--------|----------|--------|
|                                                                                                 |   |     |    |   |     |   |
| Effect                of change in exchange                rate                                      |   | $        | 171     |   |     | $      | - |   |
| Unrealized                gain on financial                instruments                               |   |     | -       |   |     |   | (123,429 | ) |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                adjusted                                                                           |   | $        | -       |   |     | $      | - |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| Equity                method                investments                                              |   |     |    |   |     |   |   |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                reported                                                                           |   | $        | 57,974  |   |     | $      | 75,979 |   |
| U.S.                GAAP                adjustment                                                   |   |     |    |   |     |   |   |   |
| Goodwill                amortization                                                                 |   |     | 1,392   |   |     |   | 1,392 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                adjusted                                                                           |   | $        | 59,366  |   |     | $      | 77,371 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| Building                and                improvements                                              |   |     |    |   |     |   |   |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                reported                                                                           |   | $        | 66,573  |   |     | $      | 61,596 |   |
| U.S.                GAAP                adjustments                                                  |   |     |    |   |     |   |   |   |
| Effect                of adjustments on                depreciation of buildings                     |   |     | (2,700  | )      |     |   | (3,364 | ) |
| Excess                of adjustments on                buildings transferred between related parties |   |     | (505    | )      |     |   | (492 | ) |
| Effect                of change in exchange                rate                                      |   |     | 131     |   |     |   | 134 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                adjusted                                                                           |   | $        | 63,499  |   |     | $      | 57,874 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| Machinery                and                equipment                                                |   |     |    |   |     |   |   |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                reported                                                                           |   | $        | 338,046 |   |     | $      | 296,753 |   |
| U.S.                GAAP                adjustment                                                   |   |     |    |   |     |   |   |   |
| Impairment                recovery                                                                   |   |     | -       |   |     |   | (5,641 | ) |
| Depreciation                                                                                         |   |     | -       |   |     |   | 791 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                adjusted                                                                           |   | $        | 338,046 |   |     | $      | 291,903 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| Goodwill                                                                                             |   |     |    |   |     |   |   |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                reported                                                                           |   | $        | 20,646  |   |     | $      | 20,646 |   |
| U.S.                GAAP                adjustments                                                  |   |     |    |   |     |   |   |   |
| Goodwill                impairment                                                                   |   |     | (15,000 | )      |     |   | (15,000 | ) |
| Goodwill                amortization                                                                 |   |     | 35,281  |   |     |   | 35,281 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                adjusted                                                                           |   | $        | 40,927  |   |     | $      | 40,927 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| Deferred                income tax assets                - noncurrent                                |   |     |    |   |     |   |   |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                reported                                                                           |   | $        | 30,964  |   |     | $      | 13,123 |   |
| U.S.                GAAP                adjustments                                                  |   |     |    |   |     |   |   |   |
| Undistributed                earnings                tax                                             |   |     | -       |   |     |   | (8,936 | ) |
| Effect                of impairment                recovery                                          |   |     | -       |   |     |   | 1,212 |   |
| Effect                of change in exchange                rate                                      |   |     | -       |   |     |   | 36 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |
| As                adjusted                                                                           |   | $        | 30,964  |   |     | $      | 5,435 |   |
|                                                                                                 |   |     |    |   |     |   |   |   |

----

|                                                                                     |   | **2005** |   |   | **2006** |   |
|------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|
|                                                                                     |   |     |   |   |     |   |
| Accrued                expenses                                                          |   |     |   |   |     |   |
|                                                                                     |   |     |   |   |     |   |
| As                reported                                                               |   | $        | 37,986 |   |     | $      | 21,725 |   |
| U.S.                GAAP                adjustments                                      |   |     |   |   |     |   |   |   |
| Bonus                to employees, directors                and supervisors              |   |     | -      |   |     |   | 8,843 |   |
| Effect                of change in exchange                rate                          |   |     | 9      |   |     |   | (53 | ) |
|                                                                                     |   |     |   |   |     |   |   |   |
| As                adjusted                                                               |   | $        | 37,995 |   |     | $      | 30,515 |   |
|                                                                                     |   |     |   |   |     |   |   |   |
| Accrued                pension                cost                                       |   |     |   |   |     |   |   |   |
| As                reported                                                               |   | $        | 6,412  |   |     | $      | 6,648 |   |
| U.S.                GAAP                adjustments                                      |   |     |   |   |     |   |   |   |
| Pension                benefits                                                          |   |     | 37     |   |     |   | 26 |   |
| Unrecognized                pension cost on                adoption of U.S. SFAS No. 158 |   |     | -      |   |     |   | 1,712 |   |
| Effect                of change in exchange                rate                          |   |     | 51     |   |     |   | 51 |   |
|                                                                                     |   |     |   |   |     |   |   |   |
| As                adjusted                                                               |   | $        | 6,500  |   |     | $      | 8,437 |   |

**25.        **
**ADDITIONAL      DISCLOSURES REQUIRED BY U.S. GAAP**

|  | a. | Recently                issued accounting standards |
|--|----|-----------------------------------------------------|

----

Marc

|  | b. | Pension |
|--|----|---------|

----

|                                                                                     |   | **2004** |   |   | **2005** |   |     | **2006** |   |
|------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|----------|----------|--------|
| Components                of net periodic pension cost                                   |   |     |   |   |     |   |     |     |   |
| Service                cost                                                              |   | $        | 1,906  |   |     | $      | 1,705    |     |   | $ | 301 |   |
| Interest                cost                                                             |   |     | 349    |   |     |   | 373      |     |   |   | 308 |   |
| Expected                return on plan                assets                             |   |     | (78    | )      |     |   | (117     | )        |   |   | (109 | ) |
| Amortization                of prior service                cost                         |   |     | 165    |   |     |   | 59       |     |   |   | - |   |
|                                                                                     |   |     |   |   |     |   |     |     |   |   |   |   |
| Net                periodic pension                cost                                  |   | $        | 2,342  |   |     | $      | 2,020    |     |   | $ | 500 |   |
|                                                                                     |   |     |   |   |     |   |     |     |   |   |   |   |
| Change                in benefit                obligation                               |   |     |   |   |     |   |     |     |   |   |   |   |
| Benefit                obligation at beginning                of year                    |   | $        | 10,855 |   |     | $      | 12,660   |     |   | $ | 11,078 |   |
| Service                cost                                                              |   |     | 1,906  |   |     |   | 1,705    |     |   |   | 301 |   |
| Interest                cost                                                             |   |     | 349    |   |     |   | 373      |     |   |   | 308 |   |
| Actuarial                gain                (loss)                                      |   |     | (1,038 | )      |     |   | (3,325   | )        |   |   | 815 |   |
| Benefits                paid                                                             |   |     | (163   | )      |     |   | -        |     |   |   | (95 | ) |
| Exchange                difference                                                       |   |     | 751    |   |     |   | (335     | )        |   |   | 86 |   |
| Benefit                obligation at end of                year                          |   |     | 12,660 |   |     |   | 11,078   |     |   |   | 12,493 |   |
| Change                in plan                assets                                      |   |     |   |   |     |   |     |     |   |   |   |   |
| Fair                value of plan assets at                beginning of year             |   |     | 2,386  |   |     |   | 3,154    |     |   |   | 3,668 |   |
| Employer                contribution                                                     |   |     | 554    |   |     |   | 570      |     |   |   | 620 |   |
| Actual                return on plan                assets                               |   |     | 32     |   |     |   | 49       |     |   |   | 97 |   |
| Benefits                paid                                                             |   |     | -      |   |     |   | -        |     |   |   | (95 | ) |
| Exchange                difference                                                       |   |     | 182    |   |     |   | (105     | )        |   |   | 28 |   |
|                                                                                     |   |     | 3,154  |   |     |   | 3,668    |     |   |   | 4,318 |   |
| Funded                status                                                             |   |     | 9,506  |   |     |   | 7,410    |     |   |   | 8,175 |   |
| Unrecognized                actuarial                loss                                |   |     | (4,240 | )      |     |   | (874     | )        |   |   | - |   |
| Accrued                expense                                                           |   |     | (52    | )      |     |   | (47      | )        |   |   | (37 | ) |
|                                                                                     |   |     |   |   |     |   |     |     |   |   |   |   |
| Net                amount recognized (recognized                as accrued pension cost) |   | $        | 5,214  |   |     | $      | 6,489    |     |   | $ | 8,138 |   |
|                                                                                     |   |     |   |   |     |   |     |     |   |   |   |   |
| Actuarial                assumptions:                                                    |   |     |   |   |     |   |     |     |   |   |   |   |
|                                                                                     |   |     |   |   |     |   |     |     |   |   |   |   |
| Discount                rate                                                             |   |     | 3.25   | %      |     |   | 2.75     | %        |   |   | 2.25 | % |
| Rate                of compensation                increase                              |   |     | 3.00   | %      |     |   | 2.5%-3.0 | %        |   |   | 2.5%-3.0 | % |
| Expected                return on plan                assets                             |   |     | 3.25   | %      |     |   | 2.75     | %        |   |   | 2.50 | % |

|  | c. | Income                  tax (benefit) |
|--|----|---------------------------------------|

|                                                                                                                                                          |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                                                                                                                                          |   |     |   |   |     |   |   |     |   |
| Tax                expense (benefit) based on                pre-tax accounting income (loss)                from continuingoperations at statutory rate |   | $        | 9,920  |   |     | $      | (4,481 | )        |   | $ | 33,818 |   |
| Add                (deduct) tax effects of:                                                                                                                   |   |     |   |   |     |   |   |     |   |   |   |   |
| Permanent                differences                                                                                                                          |   |     |   |   |     |   |   |     |   |   |   |   |
| Bonuses                to directors, supervisors and employees                                                                                                |   |     | 1,022  |   |     |   | (801   | )        |   |   | 3,297 |   |
| Stock                option compensation                                                                                                                      |   |     | (464   | )      |     |   | 1,113  |     |   |   | 1,858 |   |
| Tax-exempt                income - tax holiday                                                                                                                |   |     | (6,146 | )      |     |   | -      |     |   |   | (6,450 | ) |
| Other                                                                                                                                                         |   |     | (937   | )      |     |   | 181    |     |   |   | (40 | ) |

----

|                                                       |   | **2004** |    |   | **2005** |   |   | **2006** |   |
|------------------------------------------------------------|--------|----------|---------|--------|----------|--------|--------|----------|--------|
|                                                       |   |     |    |   |     |   |   |     |   |
| Deferred                                                   |   | $        | (26,848 | )      |     | $      | (155   | )        |   | $ | (15,678 | ) |
| Loss                carryforward                           |   |     | -       |   |     |   | 7,101  |     |   |   | (5,356 | ) |
| Income                taxes on undistributed earnings      |   |     | 2,244   |   |     |   | 2,369  |     |   |   | 8,936 |   |
| Adjustment                of prior years’ income tax |   |     | -       |   |     |   | (2,790 | )        |   |   | (94 | ) |
|                                                       |   |     |    |   |     |   |   |     |   |   |   |   |
| Income                tax expense (benefit)                |   | $        | (21,209 | )      |     | $      | 2,537  |     |   | $ | 20,291 |   |

|                                                                                |   | **2004** |   |   | **2005** |   |   | **2006** |   |
|-------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                                                                |   |     |   |   |     |   |   |     |   |
| Domestic                entity                                                      |   | $        | 509    |   |     | $      | 1,079  |     |   | $ | 3,580 |   |
| Foreign                entities                                                     |   |     |   |   |     |   |   |     |   |   |   |   |
| ASE                Test, Inc. (25% statutory                rate)                   |   |     | 8,150  |   |     |   | (4,626 | )        |   |   | 26,935 |   |
| ASE                Test Malaysia (28%                statutory rate)                |   |     | 1,765  |   |     |   | 745    |     |   |   | 3,646 |   |
| ISE                Labs (federal tax rate 35%                and state tax rate 6%) |   |     | (504   | )      |     |   | (1,679 | )        |   |   | (343 | ) |
|                                                                                |   |     |   |   |     |   |   |     |   |   |   |   |
|                                                                                |   | $        | 9,920  |   |     | $      | (4,481 | )        |   | $ | 33,818 |   |

|                                                                     |   | **2005** |    |   | **2006** |   |
|--------------------------------------------------------------------------|--------|----------|---------|--------|----------|--------|
|                                                                     |   |     |    |   |     |   |
| Current                deferred income tax                assets         |   |     |    |   |     |   |
| Unused                tax                credits                         |   | $        | 9,267   |   |     | $      | 22,639 |   |
| Loss                carryforward                                         |   |     | 4,067   |   |     |   | - |   |
| Other                                                                    |   |     | 1,880   |   |     |   | 1,241 |   |
|                                                                     |   |     | 15,214  |   |     |   | 23,880 |   |
| Less:                valuation                allowance                  |   |     | (6,281  | )      |     |   | (319 | ) |
|                                                                     |   |     |    |   |     |   |   |   |
|                                                                     |   | $        | 8,933   |   |     | $      | 23,561 |   |
|                                                                     |   |     |    |   |     |   |   |   |
| Noncurrent                deferred income tax                assets      |   |     |    |   |     |   |   |   |
| Unused                tax                credits                         |   | $        | 29,528  |   |     | $      | 2,018 |   |
| Tax                effect of unabsorbed                capital allowance |   |     | 10,263  |   |     |   | 6,284 |   |
| Loss                carryforward                                         |   |     | 9,294   |   |     |   | 8,196 |   |
| Other                                                                    |   |     | (2,818  | )      |     |   | (17 | ) |
|                                                                     |   |     | 46,267  |   |     |   | 16,481 |   |
| Less:                valuation                allowance                  |   |     | (15,303 | )      |     |   | (11,046 | ) |
|                                                                     |   |     |    |   |     |   |   |   |
|                                                                     |   | $        | 30,964  |   |     | $      | 5,435 |   |
|                                                                     |   |     |    |   |     |   |   |   |
| Noncurrent                deferred income tax                liabilities |   | $        | -       |   |     | $      | 608 |   |

|  | d. | Earnings                  (loss) per share |
|--|----|--------------------------------------------|

----

|                                                                                              |   | **2004** |        |   | **2005** |   |        | **2006** |   |
|---------------------------------------------------------------------------------------------------|--------|----------|-------------|--------|----------|--------|-------------|----------|--------|
|                                                                                              |   |     |        |   |     |   |        |     |   |
| Net                income (loss) under U.S.                GAAP                                   |   |     |        |   |     |   |        |     |   |
| Income                (loss) from continuing operations                                           |   | $        | 922         |   |     | $      | (46,285     | )        |   | $ | 116,937 |   |
| Discontinued                operations                                                            |   |     | 16,968      |   |     |   | 10,839      |     |   |   | - |   |
| Cumulative                effect of a change in accounting principle, net of tax                  |   |     | -           |   |     |   | -           |     |   |   | 381 |   |
|                                                                                              |   | $        | 17,890      |   |     | $      | (35,446     | )        |   | $ | 117,318 |   |
|                                                                                              |   |     |        |   |     |   |        |     |   |   |   |   |
| Weighted                average number of                shares, as adjusted - denominator        |   |     |        |   |     |   |        |     |   |   |   |   |
| Basic                                                                                             |   |     | 100,037,524 |   |     |   | 100,059,031 |     |   |   | 100,081,418 |   |
| Effect                of dilutive                securities                                       |   |     | 73,589      |   |     |   | -           |     |   |   | 152,984 |   |
| Diluted                                                                                           |   |     | 100,111,113 |   |     |   | 100,059,031 |     |   |   | 100,234,402 |   |
|                                                                                              |   |     |        |   |     |   |        |     |   |   |   |   |
| Earnings                (loss) per share (in                U.S. dollars)                         |   |     |        |   |     |   |        |     |   |   |   |   |
| Basic                                                                                             |   |     |        |   |     |   |        |     |   |   |   |   |
| Earnings                (loss) from continuing                operations                          |   | $        | 0.01        |   |     | $      | (0.46       | )        |   | $ | 1.17 |   |
| Earnings                from discontinued                operations                               |   |     | 0.17        |   |     |   | 0.11        |     |   |   | - |   |
| Earnings                from cumulative effect                of a change in accounting principle |   |     | -           |   |     |   | -           |     |   |   | - |   |
|                                                                                              |   | $        | 0.18        |   |     | $      | (0.35       | )        |   | $ | 1.17 |   |
|                                                                                              |   |     |        |   |     |   |        |     |   |   |   |   |
| Diluted                                                                                           |   |     |        |   |     |   |        |     |   |   |   |   |
| Earnings                (loss) from continuing                operations                          |   | $        | 0.01        |   |     | $      | (0.46       | )        |   | $ | 1.17 |   |
| Earnings                from discontinued                operations                               |   |     | 0.17        |   |     |   | 0.11        |     |   |   | - |   |
| Earnings                from cumulative effect                of a change in accounting principle |   |     | -           |   |     |   | -           |     |   |   | - |   |
|                                                                                              |   | $        | 0.18        |   |     | $      | (0.35       | )        |   | $ | 1.17 |   |

|  | e. | Stock                  option plans |
|--|----|-------------------------------------|

----

|                                                                          |   |                         |       |   | **Weighted**                 |   |   |                          |   |   |   |                         |
|-------------------------------------------------------------------------------|--------|------------------------------|------------|--------|------------------------------|--------|--------|-------------------------------|--------|--------|--------|------------------------------|
|                                                                          |   |                         |       |   | **Average**                  |   |   | **Weighted**                  |   |   |   | **Aggregate**                |
|                                                                          |   |                         |       |   | **Exercise**                 |   |   | **Average**                   |   |   |   | **Intrinsic**                |
|                                                                          |   | **Number                of** |       |   | **Price**                    |   |   | **Grant                Date** |   |   |   | **Value                (In** |
|                                                                          |   | **Shares**                   |       |   | **Per                Share** |   |   | **Fair                Value** |   |   |   | **thousands)**               |
|                                                                          |   |                         |       |   |                         |   |   |                          |   |   |   |                         |
| Beginning                outstanding balance -                January 1, 2004 |   |                         | 13,301,418 |   |                         |   | 11.80  |                          |   |   |   |                         |   |   |
| Options                granted                                                |   |                         | 260,000    |   |                         |   | 6.18   |                          |   | $      | 6.18   |                         |   |   |   |
| Options                exercised                                              |   |                         | (512,815   | )      |                         |   | 8.90   |                          |   |   |   |                         |   |   |   |
| Options                forfeited                                              |   |                         | (417,815   | )      |                         |   | 11.82  |                          |   |   |   |                         |   |   |   |
| Options                expired                                                |   |                         | (1,753,340 | )      |                         |   | 20.00  |                          |   |   |   |                         |   |   |   |
| Ending                outstanding balance -                December 31, 2004  |   |                         | 10,877,448 |   |                         |   | 10.48  |                          |   |   |   |                         |   |   |   |
| Options                granted                                                |   |                         | 32,500     |   |                         |   | 6.50   |                          |   | $      | 6.50   |                         |   |   |   |
| Options                exercised                                              |   |                         | -          |   |                         |   | -      |                          |   |   |   |                         |   |   |   |
| Options                forfeited                                              |   |                         | (358,884   | )      |                         |   | 10.97  |                          |   |   |   |                         |   |   |   |
| Options                expired                                                |   |                         | (60,000    | )      |                         |   | 25.00  |                          |   |   |   |                         |   |   |   |
| Ending                outstanding balance -                December 31, 2005  |   |                         | 10,491,064 |   |                         |   | 10.37  |                          |   |   |   |                         |   |   |   |
| Options                granted                                                |   |                         | 130,000    |   |                         |   | 9.60   |                          |   | $      | 9.60   |                         |   |   |   |
| Options                exercised                                              |   |                         | (79,201    | )      |                         |   | 8.56   |                          |   |   |   |                         |   |   |   |
| Options                forfeited                                              |   |                         | (216,825   | )      |                         |   | 11.60  |                          |   |   |   |                         |   |   |   |
| Options                expired                                                |   |                         | -          |   |                         |   | -      |                          |   |   |   |                         |   |   |   |
|                                                                          |   |                         |       |   |                         |   |   |                          |   |   |   |                         |   |   |   |
| Ending                outstanding balance -                December 31, 2006  |   |                         | 10,325,038 |   |                         |   | 10.34  |                          |   |   |   |                         |   | $ | 16,660 |
|                                                                          |   |                         |       |   |                         |   |   |                          |   |   |   |                         |   |   |   |
| Ending                exercisable balance -                December 31, 2006  |   |                         | 9,025,838  |   |                         |   | 10.18  |                          |   |   |   |                         |   | $ | 15,479 |

----

|                                                   |   |   | **Outstanding**                              |       |   | **Exercisable**       |   |
|--------------------------------------------------------|--------|--------|----------------------------------------------|------------|--------|-----------------------------------------------------|--------|
|                                                   |   |   | **Number                  of******Shares**** |       |   | **Weighted****Average****Price**                    |   |   |  ******Weighted**Average******Remaining                  Life****(Years)** |   |   | **Number                  of******Shares**** |   |   | **Weighted****Average****Price** |   |   | **Weighted                    Average****Remaining                      Life****(Years)** |   |
| Options                  with exercise price of:  |   |   |                                         |       |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $20-$25                                                |   |   |                                         | 596,900    |   |                                                | $      | 22.35 |   |   |   | 2.93 |   |   |   | 596,900 |   |   | $ | 22.35 |   |   |   | 2.94 |   |
| $11.5-$12.95                                           |   |   |                                         | 2,139,450  |   |                                                |   | 12.81 |   |   |   | 6.48 |   |   |   | 1,176,450 |   |   |   | 12.70 |   |   |   | 6.69 |   |
| $5.5-$9.79                                             |   |   |                                         | 7,588,688  |   |                                                |   | 8.70 |   |   |   | 4.34 |   |   |   | 7,252,488 |   |   |   | 8.77 |   |   |   | 4.17 |   |
|                                                   |   |   |                                         |       |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |   |                                         | 10,325,038 |   |                                                |   |   |   |   |   | 4.74 |   |   |   | 9,025,838 |   |   |   |   |   |   |   | 4.39 |   |

|                                                  |   | **2004** |                         |   | **2005** |   |                         | **2006** |   |
|-------------------------------------------------------|--------|----------|------------------------------|--------|----------|--------|------------------------------|----------|--------|
|                                                  |   |     |                         |   |     |   |                         |     |   |
| Risk-free                interest                rate |   |     | 3.50-3.88%                   |   |     |   | 3.88%                        |     |   |   | 4.88% |   |
| Expected                life                          |   |     | 5                years  |   |     |   | 5                years  |     |   |   | 3-5                years  |   |
| Expected                volatility                    |   |     | 78.28%                       |   |     |   | 59.06%                       |     |   |   | 59.95%-62.03% |   |
| Expected                dividend                      |   |     | 0%                           |   |     |   | 0%                           |     |   |   | 0% |   |

----

|                                                                          |   |                         |       |   | **Weighted**                 |   |   |                          |   |   |                          |
|-------------------------------------------------------------------------------|--------|------------------------------|------------|--------|------------------------------|--------|--------|-------------------------------|--------|--------|------------------------------------|
|                                                                          |   |                         |       |   | **Average**                  |   |   | **Weighted**                  |   |   |  **Aggregate**                |
|                                                                          |   |                         |       |   | **Exercise**                 |   |   | **Average**                   |   |   |  **Intrinsic**                |
|                                                                          |   | **Number                of** |       |   | **Price**                    |   |   | **Grant                Date** |   |   |  **Value                (In** |
|                                                                          |   | **Shares**                   |       |   | **Per                Share** |   |   | **Fair                Value** |   |   |  **thousands)**               |
|                                                                          |   |                         |       |   |                         |   |   |                          |   |   |                               |   |
| Beginning                outstanding balance -                January 1, 2004 |   |                         | 38,852,400 |   |                         | $      | 0.58   |                          |   |   |                               |   |   |   |
| Options                granted                                                |   |                         | 25,499,500 |   |                         |   | 0.79   |                          |   | $      | 0.79                               |   |   |   |   |
| Options                forfeited                                              |   |                         | (2,261,800 | )      |                         |   | 0.58   |                          |   |   |                               |   |   |   |   |
| Options                expired                                                |   |                         | -          |   |                         |   | -      |                          |   |   |                               |   |   |   |   |
| Options                exercised                                              |   |                         | (338,000   | )      |                         |   | 0.56   |                          |   |   |                               |   |   |   |   |
| Ending                outstanding balance -                December 31, 2004  |   |                         | 61,752,100 |   |                         |   | 0.60   |                          |   |   |                               |   |   |   |   |
| Options                granted                                                |   |                         | 3,000,000  |   |                         |   | 0.57   |                          |   | $      | 0.57                               |   |   |   |   |
| Options                forfeited                                              |   |                         | (5,126,800 | )      |                         |   | 0.58   |                          |   |   |                               |   |   |   |   |
| Options                expired                                                |   |                         | -          |   |                         |   | -      |                          |   |   |                               |   |   |   |   |
| Options                exercised                                              |   |                         | (6,698,720 | )      |                         |   | 0.49   |                          |   |   |                               |   |   |   |   |
| Ending                outstanding balance -                December 31, 2005  |   |                         | 52,926,580 |   |                         |   | 0.60   |                          |   |   |                               |   |   |   |   |
| Options                granted                                                |   |                         | -          |   |                         |   | -      |                          |   | $      | -                                  |   |   |   |   |
| Options                forfeited                                              |   |                         | (2,489,000 | )      |                         |   | 0.62   |                          |   |   |                               |   |   |   |   |
| Options                expired                                                |   |                         | -          |   |                         |   | -      |                          |   |   |                               |   |   |   |   |
| Options                exercised                                              |   |                         | (9,908,710 | )      |                         |   | 0.58   |                          |   |   |                               |   |   |   |   |
| Ending                outstanding balance -                December 31, 2006  |   |                         | 40,528,870 |   |                         |   | 0.61   |                          |   |   |                               |   |   | $ | 21,392 |
|                                                                          |   |                         |       |   |                         |   |   |                          |   |   |                               |   |   |   |   |
| Ending                exercisable balance -                December 31, 2006  |   |                         | 19,611,890 |   |                         |   | 0.59   |                          |   |   |                               |   |   | $ | $10,736 |

|                                       |   | **Outstanding**                     |   | **Exercisable** |                                                                |
|--------------------------------------------|--------|-------------------------------------|--------|-----------------|---------------------------------------------------------------------|
|                                       |   | **Number                of Shares** |   |            | **Weighted****Average****Remaining****Life                (Years)** |   | **Number                of Shares** |   |   | **Weighted****Average****Remaining****Life                (Years)** |   |
| Options                with exercise price |   |                                |   |            |                                                                |   |   |   |   |   |   |   |   |
| $0.49                                      |   |                                |   | 15,222,300      |                                                                |   |   | 6.0 |   |   |   | 9,936,500 |   |   |   | 6.0 |   |
| $0.64                                      |   |                                |   | 4,327,170       |                                                                |   |   | 6.6 |   |   |   | 2,302,690 |   |   |   | 6.6 |   |
| $0.70                                      |   |                                |   | 18,564,400      |                                                                |   |   | 7.5 |   |   |   | 7,372,700 |   |   |   | 7.5 |   |
| $0.57                                      |   |                                |   | 2,415,000       |                                                                |   |   | 8.4 |   |   |   | - |   |   |   | - |   |
|                                       |   |                                |   |            |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |                                |   | 40,528,870      |                                                                |   |   | 6.9 |   |   |   | 19,611,890 |   |   |   | 6.6 |   |

----

|                                                  |   | **2004** |                         |   | **2005** |   |
|-------------------------------------------------------|--------|----------|------------------------------|--------|----------|--------|
|                                                  |   |     |                         |   |     |   |
| Risk-free                interest                rate |   |     | 2.50%                        |   |     |   | 1.80% |   |
| Expected                life                          |   |     | 5                years  |   |     |   | 5                years  |   |
| Expected                dividend                      |   |     | 3.00%                        |   |     |   | 3.00% |   |
| Expected                volatility                    |   |     | 59%                          |   |     |   | 47% |   |

|                                                                                       |   | **2004** |    |   | **2005** |   |
|--------------------------------------------------------------------------------------------|--------|----------|---------|--------|----------|--------|
|                                                                                       |   |     |    |   |     |   |
| Net                income (loss) based on U.S.                GAAP                         |   | $        | 17,890  |   |     | $      | (35,446 | ) |
| Stock-based                compensation expense                (net of related tax effect) |   |     |    |   |     |   |   |   |
| From                the                Company                                             |   |     | (13,998 | )      |     |   | (10,525 | ) |
| From                ASE Inc.                                                               |   |     | (836    | )      |     |   | (1,660 | ) |
|                                                                                       |   |     |    |   |     |   |   |   |
| Pro                forma net income                (loss)                                  |   | $        | 3,056   |   |     | $      | (47,631 | ) |
|                                                                                       |   |     |    |   |     |   |   |   |
| Basic                earnings (loss) per                share                              |   |     |    |   |     |   |   |   |
| As                reported                                                                 |   | $        | 0.18    |   |     | $      | (0.35 | ) |
| Pro                forma                                                                   |   | $        | 0.03    |   |     | $      | (0.48 | ) |
|                                                                                       |   |     |    |   |     |   |   |   |
| Diluted                earnings (loss) per                share                            |   |     |    |   |     |   |   |   |
| As                reported                                                                 |   | $        | 0.18    |   |     | $      | (0.35 | ) |
| Pro                forma                                                                   |   | $        | 0.03    |   |     | $      | (0.48 | ) |

|   | f. | According                to U.S. SFAS No. 130, “Reporting Comprehensive Income”, the statements of                comprehensive income (loss) for the years ended December 31, 2004,                2005                and 2006 are presented below: |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                   |   | **2004** |   |   | **2005** |   |    | **2006** |   |
|------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|---------|----------|--------|
|                                                                   |   |     |   |   |     |   |    |     |   |
| Net                income (loss) based on U.S.                GAAP     |   | $        | 17,890 |   |     | $      | (35,446 | )        |   | $ | 117,318 |   |
| Translation                adjustment on                subsidiaries   |   |     | 22,976 |   |     |   | (5,780  | )        |   |   | 9,444 |   |
| Unrecognized                pension                cost                |   |     | 646    |   |     |   | -       |     |   |   | - |   |
| Unrealized                gain on financial                instruments |   |     | 400    |   |     |   | -       |     |   |   | 533 |   |
|                                                                   |   |     |   |   |     |   |    |     |   |   |   |   |
| Comprehensive                income                (loss)              |   | $        | 41,912 |   |     | $      | (41,226 | )        |   | $ | 127,295 |   |

----

|  | g. | Goodwill |
|--|----|----------|

----